Printed on: 08/22/2017. 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):

  • Associate Vice President and Controller
  • Vice President for University Services (Interim)

Policy Owner(s):

  • Assistant Vice President for Finance, University Services

Policy contact(s):

Date Revised:

July 2012

Effective Date:

July 2012

POLICY STATEMENT

The University maintains a disciplined program for making capital investments and managing its capital resources. Capital Planning and Project Management (CPPM) manages all capital projects, systemwide and regardless of funding source, to ensure compliance with local, state and federal laws, guidelines and regulations.

  1. Board of Regents Requirements

    All units are required to comply with the requirements of Board of Regents Policy: Board Operations and Agenda Guidelines.

    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. The Metropolitan Council) are considered University projects for capital budgeting purposes.

  2. Project Funding

    Funding Requirement

    Prior to initiating work or issuing a contract, units with capital projects with a total value of $500,000 or greater must have:

    1. 100 percent of the funds required to complete the project in the appropriate plant fund; or
    2. a signed finance agreement with University Budget and Finance.

    Units with capital projects with a total value of less than $500,000 are required to have 100 percent of the funds required to complete the project in the appropriate plant fund.

    Cash Flow Requirement – Units must maintain sufficient cash in the appropriate plant fund throughout the duration of the project to meet the projected capital project expenditures. Units should not anticipate spending debt proceeds in advance of issuance or donated funds in advance of their receipt at any recognized University foundation, as described in Board of Regents Policy: Foundations at the University.

    Exceptions – The Vice President and Chief Financial Officer will consider exceptions to the cash flow requirement. If approved, the exception must be documented in the project finance agreement.

    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.

  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 approved and included in the six-year capital plan; and
    2. a pre-design has been developed by CPPM and approved by the Capital Oversight Group.

    Projects relying on fundraising as part of their financing plan must meet the following thresholds to advance.

    1. Start schematic design: 25 percent of gift must be received in cash or pledges at the appropriate University foundation.
    2. Start construction: 80 percent of gift must be received in cash or pledges at the appropriate foundation and an acknowledgement from the foundation must be received by University Budget and Finance that the balance of funds can be raised in a reasonable timeframe.
    Exceptions The Vice President and Chief Financial Officer will consider exceptions to the fundraising requirement. If approved, the exception must be documented in the project finance agreement.
  4. Project Approvals

    Only the Vice President for University Services and specified designees are authorized to sign contracts (Signature Authority) related to capital projects, per the President's Delegation of Authority.

  5. Project Expenses

    Allowable Uses of University and State Bond Proceeds – Units may only use bond proceeds 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 the construction activity. The hourly rate must comply with Administrative Policy: Selling Goods and Services to University Departments and 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 CPPM project management system. Exceptions will be considered in rare circumstances based on business need by the AVP of CPPM. All legislatively and bond-financed projects must be managed in the CPPM 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

Subject
Contact
Phone
Fax/Email
Primary Contact(s)
612-625-6665
Capital Planning and Project Management
Suzanne Smith
612-624-8663

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.
Capital Budget Amendment
A mid-year addition or change to the annual capital budget granted in rare exception and with the approval of the Vice President for University Services. Capital budget amendments are reviewed and acted upon by the Board of Regents.
Capital Oversight Group (COG)
Cross functional leadership team (academic, operations & finance) that meets routinely to advance the speed and quality of communications and decision making for the University’s campus development and capital planning efforts. COG membership includes the Executive Vice President and Provost, the Vice President & Chief Financial Officer, and the Vice President for University Services as well as appropriate staff.
Capital Project
Capital projects generally fall into one of three broad categories:
  • Demolition of existing buildings and infrastructure
  • New construction (whole building, building additions, and infrastructure)
  • Renovation or renewal of existing facilities and infrastructure
Capital Planning and Project Management (CPPM)
Department of University Services that works closely with the University community to develop and create space that supports students, faculty and staff to effectively work, create, learn and gather together.
Capital Request
The process by which the University seeks bonding funds from the State of Minnesota legislature for design and construction projects.
Gift
Transaction involving transfer of funds by a third party to the University without any requirement on the University’s part to provide the third party (i) any direct economic benefit, or (ii) a return of any unused funds. Funds include money or property, including real property (e.g., land or buildings) or personal property (e.g., equipment).
Pre-Design
Phase of capital project development that explores project scope, feasibility, estimates, funding and programming. See CPPM Project Phases.
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.
Schematic Design
Phase of capital project development that clearly defines design based upon the client's requirements, as defined during Predesign. Project quality, scope, budget, and schedule will are confirmed and refined. See CPPM Capital Project Phases
Six-Year Capital Plan
Part I of the University’s two-part capital program which identifies capital projects approved to proceed with preliminary project planning but not authorized to proceed beyond schematic design. The six-year capital plan is reviewed and approved by the Board of Regents on an annual basis.

RESPONSIBILITIES

Capital Planning and Project Management (CPPM)
Has system-wide responsibility for planning, designing and constructing of capital assets including new and existing buildings, furnishings and equipment and utility infrastructure. CPPM, part of University Services, provides campus master planning and construction for all campuses, properties and facilities of the University of Minnesota. CPPM ensures consistency of project as well as compliance with local, state and federal laws, guidelines and regulations.
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 the University Develop and review annual capital planning instructions. Develop and present Six Year Capital Plan, Annual Capital Improvement Budget, and Campus development plans.
Chancellors, Deans, Administrative Leadership
Communicate this policy and procedures to affected staff and faculty. Facilitate advanced planning for capital projects as determined by academic needs.
Internal/External Sales department
Responsible to review and, if appropriate, approve internal and external sales processes. Assist departments with internal and external sales documentation. Mediate the approval process to include subject matter experts. Ensure compliance with internal and external requirements including: IRP, Board of Regents Policy; Conflict of Interest; Tax; Risk; Safety; etc.
Executive Vice President and Provost
Serve as a member of the Capital Oversight Group. Provide academic and administrative leadership for system campuses and other statewide and systemwide programs. Provides systemwide oversight of planning, equity and diversity and other academic support functions.
Vice President and Chief Financial Officer
Serve as member of the Capital Oversight Group. Develop financial framework and debt capacity for the Six-Year Capital Plan. Approve finance agreement for capital project. Provide systemwide oversight of University Budget and Finance.
Vice President for University Services
Serve as member of the Capital Oversight Group and sets agendas for COG. Has system-wide responsibility for oversight of the management of planning, design, and implementation of capital projects. Responsible for Presidential Delegations of Authority (signature authority), systemwide, for all contracts for Capital Projects. Coordinate development of the Six-Year Capital Plan. In consultation with academic and financial leadership, review and approve fully funded capital projects that fall below the Board of Regents approval thresholds.
University Budget and Finance
Approve finance agreements by campuses, colleges or administrative units for capital projects. Review and, if appropriate, approves rates for internal personnel expenses charged to capital projects according to procedure. Determine and communicate allowable expenditures on capital projects. Ensure compliance with financial reporting requirements.
University of Minnesota Foundation
Responsible to raise, manage and communicate availability of private funds for capital projects.
University Services
Ensure capital planning and resources are used strategically to advance academic programs. Create and sustain the physical environment and service culture that advances teaching, research and outreach of the University of Minnesota.
University Services - Finance
Partner with University Budget & Finance on the development of the Annual Capital Improvement Budget, Capital Request and Six-Year Capital Plan. Provide project accounting system-wide for all legislative capital projects. Provide purchasing services system-wide for legislative capital projects. Provide mandated reports on capital projects to Minnesota Management and Budget and the state legislature.
University Tax Management Office
Ensure federal and state tax law compliance through development of policies, procedures and reporting systems for the University. Advise and conducts research as needed on tax transactions and consequences for the University.

RELATED INFORMATION

HISTORY

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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