Capital construction uses a variety of terms that are not used regularly on campus.
The capital construction plant fund is used to account for all capital construction projects. A capital construction project is defined as any new building construction regardless of cost, as well as remodeling or renovation projects with an estimated cost of $75,000 or more. These projects result in a new capital asset or the addition to the book value of an existing capital asset for the university. The use of a Fund 71 project speedtype is required in order to capture all the costs of the construction and fairly present the value of these capital assets on the university’s balance sheet (090600 Construction in Progress account) and Statement of Net Position. Capital construction projects are typically managed by Facilities Management (FM) or Housing’s Project Management Group.
The retirement of indebtedness (ROI) plant fund is used to make payments of principal and interest on debt, trustee fees and expenses. The payment of principal from the ROI plant fund results in a matching reduction of the debt actually recorded in the Fund 74 investment in plant (IIP) fund to the related capital asset.
The investment in plant (IIP) fund is used only to record the capital costs of capital assets, accumulated depreciation, related expenses, and any external debt related to the capital assets. The IIP fund balance is the investment in capital assets, net of related debt on the Statement of Net Position (SNP pronounced SNiP, like a balance sheet).
BCIP Allocation is part of the end-of-month close out that CU Systems runs the day after campus month close. The “B” stands for Boulder campus and the “CIP” for Construction in Progress. The allocation has eight built-in steps that it follows but not all are active.
Steps:
Pooled Investment Earnings (PIE) are interest charges based upon the average daily balance over a quarter at a quarterly rate of 1.875%, 7.5% annualized.
Retainage is the withholding of partial payments, typically 5 or 10% of each invoice, to ensure satisfactory completion of the work by a contractor.
Account codes to watch out for in Fund 71 that you may not be used to seeing on your financial statements:
- 355200 Additions to Plant is used as cash equivalent to capitalize purchases of assets in Fund 74: Debit 090400/300/500 and credit 355200.
- 355300 Retirement of Debt is used as cash equivalent to record payments to principal.
- 970100on SCRENP. You can ignore this account code, it is part of a monthly allocation process that sums up eligible capital expenses and moves the amount to 090600 Construction in Process. It acts as a cash offset account code. Also, if a project does not meet the capitalization threshold the costs are moved from 090600 to 970100.
- 070600 on Statement of Revenues, Expenses, and Changes in Net Position (SCRENP – pronounced Schreck-nip or it is like an Income Statement). You can ignore this account code; it is part of the capitalization process that moves costs out of Fund 71 090600/970600 to the appropriate Fund 74 Speedtype and F74 970600. It acts as a cash offset account code.