The University maintains a disciplined program for making capital investments and managing its capital resources.
- 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.
- Project Funding
Prior to initiating work or issuing a contract, capital projects must have:
- 100 percent of the funds required to complete the project in the appropriate plant fund; or
- 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.
- 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:
- project has been included in the Board of Regents approved six-year capital plan; and
- 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.
- 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
- 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 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.
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.
- 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
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.