Printed on: 12/09/2018. Please go to http://policy.umn.edu for the most current version of the Policy or related document.
ADMINISTRATIVE POLICY

Funding and Approvals of Capital Projects

Responsible University Officer(s):

  • Controller
  • Vice President for University Services

Policy Owner(s):

  • Assistant Vice President for Finance, University Services
  • Brian Swanson

Date Revised:

Jul 25, 2018

Effective Date:

Jul 16, 2012

POLICY STATEMENT

The University maintains a disciplined program for making capital investments and managing its capital resources.

  1. Board of Regents Requirements

    Board of Regents Policy: Board Operations and Agenda Guidelines requires the annual approval of an all funds Capital Budget, including both a Six-Year Capital Plan and an all funds Capital Improvement Budget.

    All University capital projects, system-wide and regardless of funding source, that meet or exceed the approval thresholds as defined in Board of Regents Policy: Reservation and Delegation of Authority are required to be included in the annual capital improvement budget.

    Projects being managed by the University on-behalf of non-University entities (e.g. University of Minnesota Physicians, Fairview Health Services, Metropolitan Council) are considered University projects for capital budgeting purposes.

  2. Project Funding

    Prior to initiating work or issuing a contract, capital projects must have:

    1. 100 percent of the funds required to complete the project in the appropriate plant fund; or
    2. if over $1,000,000, a signed finance agreement with University Finance which identifies total project value, funding sources and anticipated cash flow may be utilized.
  3. Fundraising Requirements

    To focus the University's fundraising efforts on the University's highest priority capital projects, fundraising for capital projects is only allowed when the:

    1. project has been included in the Board of Regents approved six-year capital plan; and
    2. a pre-design has been developed by Capital Project Management (CPM) and approved by the Capital Oversight Group (COG.)

    In-Kind Gift - Units cannot include pledges to provide in-kind design or construction services and/or materials toward meeting a project's funding requirements. See also Administrative Procedure: Managing In-Kind Donations on Capital Projects.

  4. Design and Construction Contract Approvals

    Only the Vice President for University Services and specified designees are authorized to  hire architects, engineers and construction contractors.The ability to approve and sign contracts is limited per the President's Delegation of Authority (Signature Authority) under:

    • FN32 - Agreements for predesign, design, consulting services, testing, and commissioning of facilities
    • FN33 - Construction and construction management of facilities
  5. Project Expenses

    Allowable Uses of University and State Bond Proceeds –Bond proceeds may only be used for qualified or eligible capital expenditures as outlined in the definitions section of this policy. Bond proceeds may only be used for direct capital costs and not for depreciation, amortization, overhead, general administration or similar costs. (See also Reporting below)

    Charges for University Personnel and Expenses (including Project Management) – The University allows internal personnel and project-related expenses to be billed to capital projects under very limited conditions. All charges must be made in compliance with Minnesota Management and Budget (MMB) policies including the October 20, 2009 Policy Regarding Use of General Obligation Bond Proceeds to Fund Staff Costs, the use of general obligation bond proceeds, relevant Internal Revenue Code and Treasury regulations, University policies and Generally Accepted Accounting Principles related to capital expenditures. In addition:

    • personnel charges must be done on an individual basis and must be based on actual hours worked on the project by an individual;
    • the hourly rate will not include depreciation or amortization costs, overhead or other general administration expenses not directly related to, or incurred as, a result of project activity. The hourly rate must comply with Administrative Policy: Selling Goods and Services to University Departmentsand OMB Uniform Guidance;
    • for Internal Service Organizations (ISOs), staffing rates require annual review and approval as defined in Administrative Procedure: Establishing Internal Sales Rates; or
    • For non-ISOs, staffing rates are limited to actual cost of salary and fringe unless otherwise approved by the Internal/External Sales department.
  6. Reporting

    Capital appropriations used to pay for the costs of staff directly attributable to capital projects funded with state general obligation bond proceeds must be reported through MMB to the Minnesota Legislature.

    To ensure both the uniformity of the project delivery system and compliance with MMB policy, all capital projects, systemwide and regardless of funding source, are required to keep track of internal staffing costs directly attributable to capital projects on an hourly basis by individual.

  7. Managing Capital Projects

    All capital projects must be managed in the the University's Enterprise Asset Management (EAM) system. Exceptions will be considered in rare circumstances based on business need by the Assistant Vice President of CPM. All state and bond-financed projects must be managed in the EAM system to facilitate compliance reporting.

REASON FOR POLICY

To implement Board of Regents Policies: Board Operations and Agenda Guidelines and Reservation and Delegation of Authority.

The purpose of this policy is to ensure adequate controls are in place around capital project contracting, management and finance. This policy assures that capital projects at the University are appropriately reviewed, that sufficient funding is available and that funds are expended only for eligible and allowable uses. A successful capital program is a key factor in the University’s efforts to earn research grants, raise private funds, and attract investment dollars from the State of Minnesota. This policy also ensures alignment with State of Minnesota Policy Regarding Use of General Obligation Bond Proceeds to Fund Staff Costs.

PROCEDURES

FORMS/INSTRUCTIONS

APPENDICES

FREQUENTLY ASKED QUESTIONS

CONTACTS

SubjectContactPhoneEmail
Primary Contact(s) Brian Swanson 612-625-6665 bswanson@umn.edu
Capital Project Management Bruce Gritters 612-624-7501 gritters@umn.edu

DEFINITIONS

Annual Capital Improvement Budget
Part II of the University's two-part capital program which authorizes individual projects to complete design and move into construction. The Annual Capital Improvement Budget is approved by the Board of Regents each year in June.

The University seeks authorization in the Annual Capital Budget for both pools of funding to complete multiple projects, as well singular authorizations for specific construction projects. Funding pools are used for Higher Education Asset Preservation and Replacement (HEAPR) projects and for Repair and Replacement (R&R) projects. R&R projects, defined as University funded non-programmatic / HEAPR-like projects, are included in funding pools specific to the funding RRC or Department (e.g. Facilities Management, Parking and Transportation Services, Housing and Residential Life.)

Capital Budget Amendment
A mid-year addition or change to the annual capital requiring Board of Regents approval.
Capital Project
For the purposes of this policy, capital projects include:
  • Demolition of existing buildings and infrastructure
  • New construction (whole building, building additions, and infrastructure)
  • Renovation or renewal of existing facilities and infrastructure

The capital project includes all expenses necessary to predesign, design, renovate, construct, furnish, and equip the project required for its intended use. Real Estate acquisitions and major equipment purchases are handled outside of the capital project process.

In-Kind Gift
Non-cash items of value donated to the University.
Predesign
The first phase of the design process that explores project scope, program, site, special requirements, cost, and funding Predesign costs are funded by the unit requesting the project.
Qualified Capital Expenditures (or Eligible Costs)
Eligible costs include land acquisition, predesign, design, construction, major remodeling (if it adds to the value or life of a building and is not of a recurring nature), and other improvements or acquisitions of tangible fixed assets of a capital nature. Equipment may be eligible if purchased and installed upon initial acquisition and construction of a building, expansion or major remodeling.
General operating expenses, overhead, master planning, maintenance, operating costs, software and personal property such as computers are not qualified capital expenses.
Six-Year Capital Plan
Part I of the University's two-part capital program which identifies capital projects approved to proceed withpredesign. The Six-Year Capital Plan is approved by the Board of Regents on an annual basis.

RESPONSIBILITIES

Capital Oversight Group (COG)
Serve as the University's Capital Project Executive Committee. COG is responsible for managing the systematic internal review of major University projects and external projects with an impact on University campuses and properties as well as coordinating routine activities associated with the University's real estate, campus planning, capital project and space management activities.
Capital Project Management (CPM)
Manages all capital projects, systemwide and regardless of funding source, to ensure compliance with local, state and federal laws, guidelines and regulations. CPM has system-wide responsibility for design and construction of capital assets including new and existing buildings, furnishings and equipment, and utility infrastructure for all campuses, properties, and facilities of the University of Minnesota. CPM ensures consistency of projects as well as compliance with local, state, and federal laws, guidelines, and regulations.
Capital Strategy Group (CSG)
Serves as the University’s committee charged with providing overall leadership and strategy development for institutional capital issues, including:
  • Establishing strategic capital goals for the institution
  • Integrating academic planning with physical and financial planning
  • Prioritizing competing requests for capital funding
  • Reviewing the financial parameters of the overall capital plan
  • Developing a six-year capital plan recommendation to the President
  • Establishing capital and space allocation policies
University Finance
As the University’s central financial unit approves finance agreements by campuses, colleges, or administrative units for capital projects, reviews and approves rates for internal personnel expenses charged to capital projects according to procedure, determines and communicates allowable expenditures on capital projects, and ensures compliance with financial reporting requirements.
University Services
Holds overall responsibility for managing the capital improvements process including portfolio planning, space management, campus planning, real estate, design and construction. University Services is responsible for all design and construction contracts and coordinates development of the Annual Capital Improvement Budget and Six-Year Capital Plan. In consultation with academic and financial leadership, University Services reviews and approves fully funded capital projects that fall below Board of Regents approval thresholds; ensures capital planning and resources are used strategically to advance academic programs; and creates and sustains the physical environment and service culture that advances teaching, research, and outreach of the University of Minnesota.
University Services - Finance
Partners with University Finance on the development of the Annual Capital Improvement Budget, Capital Request and Six-Year Capital Plan,providea project accounting system-wide for all state funded and debt financed capital projectsand provides mandated reports on capital projects to Minnesota Management and Budget and the state legislature.
University Tax Management Office
Ensures federal and state tax law compliance through development of policies, procedures, and reporting systems for the University, and advises and conducts research as needed on tax transactions and consequences for the University.

RELATED INFORMATION

HISTORY

Amended:
July 2018 - Changes the threshold on capital projects where 100% of the funding is required up front, from $500,000 to $1 million. This aligns with a Board of Regents changes that occurred in February.
Amended:
December 2014 - References to A-21 changed to OMB Uniform Guidance in Policy Statement and Related Information.
Effective:
July 2012 - Comprehensive Review, New Policy. 1. Consolidates all related capital project and resource information in one policy, and documents current practice. 2. Defines what is an allowable project expense when using bond proceeds. 3. Specifies allowable internal expenses for personnel and project management.
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