The University of Texas at Dallas

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1.0 Purpose

The purpose of this procedure is to provide guidance to staff on the recording and reporting of Equipment, Plant and Investment in Plant Fund transactions and to provide documentation for the audit staff.

2.0 Scope

This procedure covers accounting for transactions in the Unexpended Plant Fund, Investment in Plant fund and capital equipment purchased in all funds.

3.0 Definitions

Capital Equipment - Purchased or donated items with an estimated value or purchase price which meets or exceeds the capitalization threshold (determined by asset class) and has an estimated useful life of one year or greater.

Investment in Plant Fund - The fund consists of capital assets such as land, buildings, facilities and other improvements, capital equipment, vehicles, non-depreciable collections, library books, construction in progress, and infrastructure. This fund excludes assets that have been pledged or transferred to endowments. Such assets are reported in the Endowment Fund. The investment in plant assets are recorded in the general ledger in the following account range: 079XXX-18XX. Please refer to the chart of accounts for details.

Investment in Plant Ledger - A range of six-digit General Ledger accounts starting with 079XX established for the purpose of recording and reporting capitalized assets.

Object Codes - Object codes are four-digit codes which describe the type of transaction.

Property Control System - Spartan is the name of the system used by Property Administration to maintain UT Dallas Capital and Controlled property records that feeds and mirrors property records in the State Property Accounting (SPA) system.

PUF - The Permanent University Fund bond proceeds are a source of Unexpended Plant funding.

RFS - The Revenue Financing System bond proceeds are a source of Unexpended Plant funding.

TRB - The Tuition Revenue Bond proceeds are a source of Unexpended Plant funding.

STF - The Short Term Fund investment account centralized at UTIMCO for all components.

Subsidiary Ledger - The Revenue and Expense Ledger

Unexpended Plant Fund - The Unexpended Plant fund consists of unexpended resources derived from various sources to finance the acquisition of long-lived plant assets. The expenditures for the Unexpended Plant funds are recorded in the following range of accounts:

UTIMCO - The University of Texas Investment Management Company.

4.0 Procedures

4.1 Recording of Unexpended Plant Funding

Office of Finance receives information on the source and amount of funding through correspondence from the University of Texas System, the Budget Office or the Office of Vice President for Business Affairs. The following accounting entries are made to record PUF and RFS funding:

• Dr. 07XXXX-1360 - Where the first six digits of account represent the project general ledger account and the last four digits indicate receivable from System.
• Cr. 07XXXX-4720 - Where the first six digits of account represent the project general ledger account and the last four digits indicate the addition to the fund balance.

Unexpended Plant projects that are funded from sources other than PUF and RFS are funded through a fund transfer transaction. The information for these transactions comes from the Budget Office or from the Vice President for Business Affairs.

4.2 Budgeting of Unexpended Plant Funds Projects

Budgets for Unexpended Plant fund projects are recorded in FRS by the Office of Finance using screen number 10. It is a single entry transaction. To record a budget entry, debit 7XXXXX-6900. All budgets are recorded to the capital budget object code. Budget adjustments also are made on screen number 10 but the entry may include a debit and a credit when a budget is transferred from one account to another. The account is debited to increase a budget and credited when the budget is decreased.

4.3 Processing Expenditures

The authority to expend funds is reflected on the signature authority list. The Purchasing department ensures that signatures on purchase requisitions comply with the signature authority list. Requisitions submitted against accounts that have not been budgeted or accounts with budget deficits are forwarded to General Accounting for review and dispositions.

4.4 Billing

PUF and RFS funds are held at UT System. UT Dallas pays the expenditures that are funded with these funds through local banks. On a monthly basis, Office of Finance bills System for all paid expenditures incurred during the month. The billing information comes from FBMO92 report. The billing summary and invoice forms are maintained on a linked Excel spreadsheet. The invoices are approved and emailed to UT System. UT System transfers the reimbursement on Thursday for reimbursement requests received by Monday of the same week. Once the payment is received, the following entry is made:

• Dr. 016312-1211 STF Short Term Fund account
• Cr. 07XXXX1360 Unexpended Plant Fund Project Receivable (Due from System)

4.5 Reporting - Plant Funds Status Report

4.5.1 Plant Funds Status Report

The report is prepared by Office of Finance on a monthly basis. It reports for each project the S/L account, the authorized amount, total cumulative costs, total outstanding commitments, and balance at month-end, with comments if appropriate. It is available for discussion with Budget and other Business Affairs personnel at periodic Facilities construction status meetings.

4.5.2 Annual Financial Report (AFR)

Refer to the Reporting Requirements for Annual Financial Reports of State Agencies and Universities from the State Comptroller's Office.

4.6 Capitalization and Depreciation Overview

4.6.1 Capitalization Entries for Construction-in-Progress

Capital expenditures (selected 69XX and 70XX object codes) are capitalized in the Construction-in-Progress (CIP) account 1860 annually using the assigned 079XXX G/L accounts. Projects are reviewed and those that are still in progress at fiscal year-end remain in CIP. Projects deemed to be substantially complete at fiscal year-end are transferred from the CIP object code 1860 to the respective fixed asset object codes: Buildings 1810, Facilities & Other 1804, and Infrastructure 1820. Equipment that is partially paid for and not yet placed in service at fiscal year-end is corrected to object code 6905 and treated as CIP as well. Equipment is transferred back to the appropriate Equipment object code when it is deemed to be placed in service, at which point the equipment is subject to the Equipment process described below.

4.6.2 Capitalization of Internal-use Software

This procedure is to outline the regulations set forth by the University of Texas System and the Financial Accounting Standards Board in regard to capitalization of internal-use software. Colleges and Universities are required by the National Association of College and University Business Officers to adopt the AICPA Statement of Position 98-1, Software Developed or Obtained for Internal Use. Details on the characteristics of internal-use software, common phases in the implementation of internal-use software, and the typical treatment of individual costs in the process are described below.

Internal-use software must have the following two characteristics:

• The software is obtained, internally developed, or modified solely to meeting the internal needs of the entity
• During the development or modification of the software, no substantive plan exists or is being developed to market the software externally

The cost of either purchasing or developing computer software cannot be capitalized unless it is for administrative use. Developed administrative software whose total cost exceeds $1,000,000 must be charged to a special capital project (7-XXXXX) and amortized over the useful life of the software. Purchased software has a capitalization threshold of $100,000. In general, costs incurred for either buying or developing the software are capitalized with the exception of training, application maintenance, and data clean-up costs. As such, activities occurring during the application development stage should be capitalized while activities taking place during the preliminary and post-implementation stages should be expensed.

The following table illustrates the various stages and related processes of computer software development.

Preliminary Project Stage

Activities that are likely to occur during this stage include making strategic decisions to allocate resources between alternative projects at a given point in time, determining the performance and system requirements for the computer software project, exploring different means to achieve those requirements, determining that the technology necessary to meet the requirements exists, selection of a vendor, and selecting a consultant to assist in the implementation of the software. Costs that would generally be incurred during this stage should be expensed as they are incurred.

Application Development Stage

Costs to develop or obtain software that allows for access or conversion of old data by the new systems should be capitalized. Training costs are not internal-use software development costs and, if incurred during this stage, should be expensed as incurred. Internal and external costs incurred to develop internal-use software during this stage should be capitalized.

The process of converting from an old system to new system may include purging or cleansing of existing data, reconciliation or balancing of the old data and the data in the new system, creation of new or additional data, and conversion of old data to the new system. These costs should be expensed as incurred.

Post-Implementation and Operation Stage

Internal and external training costs and maintenance costs should be expensed as incurred.

It is understood that the development of internal-use computer software may not follow the order described above. For example, coding and testing are often preformed simultaneously. Regardless, for costs incurred subsequent to completion of the Preliminary Project Stage, the procedure should be applied based on the nature of the cost and not the timing (or stage) in which the cost was incurred. For example, while some training may occur in the Application Development Stage, it should be expensed as incurred.

4.6.3 Recording Capitalization Entries

Equipment capitalization entries are recorded annually by Office of Finance. The effect of the capitalization entry is to increase or decrease the existing General Ledger balances to match the reconciled amounts in the Property system "GL Account" report. The cumulative totals by asset category are compared to the cumulative totals by asset category in the General Ledger (report FBMO94). The difference between the two amounts represents the adjusting entry. Increases to equipment are booked as debits to object code 18XX and credits to fund addition 46XX in the appropriate General Ledger account. Decreases to equipment are booked by crediting object code(s) 18XX and debiting fund deduction, object code 56XX.

4.6.4 Depreciation of Capitalized Costs

Depreciation for equipment and library books are recorded monthly during the fiscal year. Library books are depreciated using 180 months useful life. For portable equipment, annual depreciation will be calculated by subtracting the estimated residual amount (1% of cost) from the cost, dividing the remaining depreciable value (cumulative acquisition cost less cumulative estimated residual amount giving net cumulative acquisition cost, minus accumulated depreciation) by the remaining useful life (based on the original in service date and established useful life). Useful life for each class of equipment is predetermined by the State of Texas Comptroller's Office. Add-ons that extend the useful life of equipment assets will establish a new component of the original asset but with its own in service date and useful life, to be treated independent of the original asset but following the same guidelines. Collections are not depreciated. Residual values for equipment are set at one percent of the total original cost, but no residual values are used for library materials or collections. The UT System's approved method of calculating depreciation for library materials is used. Equipment depreciation is calculated by the Property Control System and reported monthly in system generated Accumulated Depreciation Report 50 (summary by class) and Report 70 (detail by class). Depreciation, adjustments, additions, disposals, transfers and discoveries are recorded based on information provided by the Property Control System. More detailed explanation of Capital Equipment and Library Books depreciation can be found in sections 4.7.3 through 4.7.5. American Appraisal Associates (AAA) is retained to calculate depreciation on constructed assets. An AAA representative visits UT Dallas in early August to analyze, appraise and componentized new additions for completed projects. AAA calculates and reports current fiscal year depreciation and provides a projection for the next fiscal year. Depreciation and disposal of buildings, facilities and infrastructure are calculated using the half-year convention.

4.6.5 Recording Asset Disposals

All surplus, obsolete, and damaged assets are delivered to the Property Administration Surplus Building. Property Administration personnel will identify the asset and determine disposition. Disposal method codes are recorded in the control system for each asset affected. Missing and stolen assets are determined from departmental physical inventories and coded as such in the control system. Missing assets are to be considered lost for at least two years before classified as stolen. The financial impact of the removal of assets can be determined by the Property Accountant using control system data queries to accumulate totals by removal types for use in annual financial reporting.

4.7 Capital Equipment Control & Depreciation Detail

This procedure is to insure that the three systems that contain UT Dallas property records are in balance. Reconciliation processes are followed each month to identify any correcting entries or adjustments needed to keep the systems in balance. This section will also detail monthly depreciation procedures. Below is a list of the procedures discussed in this section:

• Reconciling capital assets as recorded in the property control system and capital accounts
• Reconciling the above systems with State Property Accounting
• Determining depreciation expense for capital assets
• Determining depreciation expense for library books

4.7.1 Definitions and Abbreviations

FRS - Financial Record System
SPA – State Property Accounting
AFR - Annual Financial Report
S11d - The AFR schedule containing the summary of capital property assets

4.7.2 Procedures

Assumptions

The Monthly data transmittal from the Property Control System to SPA has occurred with rejects listed on report SPA200 corrected on line and the SPA data base updated overnight. The month to be reconciled is closed in FRS with generated reports FRM4216x & FRM4267x (FBM095). A new Excel worksheet has been set up by saving the prior month's work sheet (G:\Capital Equip Reconciliations\200X Spartan Additions thru month) with the new month to be reconciled inserted into the name.

Monthly FRS to Property Control System reconciliation

1. Extract the "thru month's" data to be reconciled from Property Control System using Access query: Capital Assets FY Additions and place in first tab (Spartan) of 200X Spartan Additions thru month Excel spread sheet
2. Sort and sub-total by sub-code first, and account number second. Then copy & paste using Word, to the tab (FRS Spartan Compare) for comparison with FRS totals
3. Import FRS month-end report FRM4267E as a text file into the 200X Spartan Additions thru Month Excel spread sheet tab (FRS Spartan Compare) for comparison with the Property Control System's totals in step 2
4. Align by sub-codes and account numbers and obtain differences needing reconciling
5. List the needed changes on the tab (3 Way Reconcile) and then correct with journal entries or funding entries
6. Entries in FRS for assets that do not reach the capitalization threshold at year end are updated with a journal entry to an expense object code and the corresponding funding sub codes in the Property Control System must be changed to match FRS

Monthly Property Control System to SPA Reconciliation

1. Request the following reports in Excel format from SPA by contacting the SPA analyst:
1. SPA15D CAAB101D PRPADDBYMO
2. Copy the data from the SPA reports to the appropriate worksheet tabs
3. Copy the Property Control System data existing in the first tab (Spartan) to the third tab (Spartan by Class) and remove all sub-totals. Sort and sub-total by class, then copy & paste using Word, to the tab (Class Comparison) for comparison with data from SPA
4. Sort the data in the tab (PRPADDBYMO) by class and then paste the subtotals, using Word, to the same tab (Class Comparison) as in step 3
5. Align by class codes and obtain differences for reconciling
6. List the needed changes on the tab (3 Way Reconcile) and make needed SPA corrections (the Property Control System should already be correct from the reconciliation with FRS)

Monthly Three Way Reconciliation

1. This worksheet tab (3 Way Reconcile) is designed to place the comparative information from FRS, SPA and the Property Control System side-by-side including the listing of corrections that need to be made to each to bring the systems into balance
2. A print of this form will be signed by the Property Accountant and the Plant and Property Accounting Manager after review

Schedule S11d

To assist in the AFR process, this schedule is prepared each month for additions, disposals and depreciation to be summarized against the beginning balances by class code. This schedule has its own tab (S11d) in the 200X Spartan Additions thru month (Excel) spread sheet.
The class code totals from the reconciliation between the Property Control System and SPA are entered into the current year's Addition column
The equipment disposal amounts are verified and reconciled to the SPA CAAB101D, write off's should be entered into the Adjust/Restate column as per the 200X Spartan Additions thru month (Disposals) tab
A printed version of this tab's completed contents is to be signed by the Property Accountant and the Plant and Property Accounting Manager after review

4.7.3 Monthly Capital Asset Depreciation

1. The accumulated depreciation amounts for capital assets are obtained from the Property Control System using the Accumulated Depreciation Report 50. The depreciation calculations are made using the method described in paragraph 4.7.3 and the results are summarized by class code in the report column heading Depreciation Expense This Fiscal Year. The current month's depreciation amount is determined by the difference between the current and the previous month's reported depreciation for each class. The FYTD depreciation and the FYTD accumulated depreciation are entered into their appropriate S11d columns and class row fields. The current month's depreciation is entered into FRS via a journal entry
2. The equipment disposal amounts on the 20XX Spartan Additions thru month (Disposals) tab are verified and reconciled to the SPA CAAB101D
3. Accumulated depreciation for the disposed items found in the tab mentioned in step 2 are summarized by class, recorded and totaled monthly on the tab (S11d)in the 20XX Disposals column in the depreciation sectionn

4.7.4 Monthly Library Books Depreciation

1. Depreciation expense for library books is calculated using the Excel depreciation schedule supplied by UT System (DAL Library Depreciation Schedule from UT System With Entries 20XX tab AFR Balances) with the entries for Additions (1) coming from sub-code 7001 off report FRM4216A (FBM095)
2. The Deletions (2) entry is an estimate used until July when the Library Administration can supply an accurate number of discarded volumes to be multiplied by the average cost of volumes from the previous year. The Library Administration also supplies the number of volumes added for the current year to be used to obtain a new average cost
3. The depreciation of current year's additions is inserted by Excel into the currents year's depreciation column on tab (Accum Depr & Current Yr Adds). The current year's deletions are inserted by Excel as a total and are a direct deduction to the same column. This results in the annual total. The annual total is divided by 12; the quotient is then multiplied by the number of expired months for the year. This amount is recorded in the current reporting month's S11d for class 751. Finally, the amount of the depreciation already charged for the current year is deducted to obtain the current month's depreciation entry into the financial system via a journal entry

4.7.5 Fiscal Year End Depreciation Expense

1. When the final version of the August S11d is complete, sub-ledger account 779900-4735 and general ledger account 079900-1899 must be brought into balance with the S11d depreciation total using a journal entry
2. S11d information must be reorganized to satisfy the breakdown of the B11 Schedule for additions, disposals and depreciation. The document Schedules B-11 & S11x Account & Class Code Relationships, gives the account information needed for this data reorganization
3. The final working S11d data must be put into the AFR ready version with formulas, and totals working and verified

4.7.6 Leases of Capital Equipment

Assets obtained through capital leases are set up as property to be identified with a numbered tag for control but using sub account number 4738 in place of the normal 69xx number. Class codes are assigned as appropriate to insure proper placement in schedule S11d rows.

4.8 Accounting for Library Materials

4.8.1 Definitions

Expense: Acquisition costs that do not accumulate to the capitalization threshold throughout one fiscal year or that have a useful life of less than one year.
Capital Expenditure: Acquisition costs that accumulate to the capitalization threshold and have a useful life of more than one year.

4.8.2 Recording Library Purchases

1. Electronic access charges do not have a useful life of more than one year, therefore these costs should be recorded using object code 4279
2. Purchased e-books and permanent access to online archives do have useful lives that exceed one year and the accumulated cost of all library materials purchased in a given fiscal year is expected to exceed $5,000, therefore these costs should be recorded using object code 7001
3. Purchased tangible library books, periodicals and reference materials (excluding special collection titles or items) do have useful lives that exceed one year and the accumulated cost of all library materials purchased in a given fiscal year is expected to exceed $5,000, therefore these costs should be recorded using object code 7001
4. Special collection titles, regardless of the cost or appraised value, should be recorded using object code 7006
5. Special collection items, regardless of the cost or appraised value, should be recorded using one of the following object codes appropriate to the item:
• 7002 – Philatelic Collections
• 7003 – Works of Art
• 7004 – Aerospace Collections
• 7005 – Gild Collections
• 7007 – Holocaust Collections

4.8.3 Rental of Media Equipment, Titles, or Materials

Expenses for the rental of media equipment, titles or materials should be recorded using object code 4421.

5.0 Responsibilities

Property Administration has the responsibility of capturing all data for assets classified by the State of Texas as "controlled", the basic data for "capital property" and for maintaining the integrity of data in the Property Control System as well as transmitting property information to SPA.

Property Administration has the responsibility of insuring the availability of required report programs to enable the reconciliations described above.

The Office of Finance has the responsibility of entering funding information for capital assets into the Property Control System and relies on the integrity of the information for classifications, dispositions and transferred assets.

The Office of Finance has the responsibility for timely resolution of any differences in capital expenditures identified by reconciling the reports identified above by making adjusting journal entries.