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Color of Money: Operating Versus Capital

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Color of Money:
Operating Versus Capital
Presented by
Tim Young
FINANCIAL POLICY AND TRAINING OFFICE
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Objectives
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Importance of Color of Money
Equipment – When to Use Operating Funds
Equipment – When to Use Capital Funds
Construction – When to use Operating
Funds
• Construction – When to use Capital Funds
FINANCIAL POLICY AND TRAINING OFFICE
2
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Capitalization Changes
Purchased after October 1, 2005:
• Useful life criteria New Capitalization Threshold
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•
•
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$50K new threshold
Service life remains at 2 years or more
FMSIC requested the change
$5K threshold for property accountability does not change
For property acquired starting in FY06
Equipment purchased before FY06 with a value less than
$50K will not be written-off
FINANCIAL POLICY AND TRAINING OFFICE
3
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Why Worry About the Color of Money?
• Financial statements must accurately reflect asset
balances
• Heavily audited activity
• Funding must be used for its intended purpose
• DOE policies prescribe capitalization criteria
• Accurate usage of Operating versus Capital funding
at the beginning of a project is essential to accurately
report financial statements to DOE, UC, and outside
audit firms
FINANCIAL POLICY AND TRAINING OFFICE
4
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Hierarchy of Accounting Rules
• Contract 31
• DOE Accounting Handbook
• Federal Financial Accounting Standards
(FFAS)
• Financial Accounting Standard Board
– Generally Accepted Accounting Principles (GAAP)
FINANCIAL POLICY AND TRAINING OFFICE
5
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Color of Money
1 >50k$ & Service Life >2 years
2 <50k$ & Service Life <2 years
FINANCIAL POLICY AND TRAINING OFFICE
6
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Construction
Operating Funds:
• Repair – restoration of a deteriorated facility
• Maintenance – day-to-day work to maintain and
preserve the facility
• Alteration – adjustments to the interior
arrangements of a facility
• Experimental and Demonstration (ED) – unique
prototype facility constructed to demonstrate the
feasibility of a particular process
• Operating Lease
FINANCIAL POLICY AND TRAINING OFFICE
7
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Construction
Capital Funds:
• Betterments – improvements that result in better
quality, higher capacity, or extended useful life
• Construction – new plant facility; improvement to
existing facility
• Conversion – major structural revision that
changes functional purpose
• Install or assemble a new utility system
• Capital Lease
FINANCIAL POLICY AND TRAINING OFFICE
8
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Equipment/Fabrication
Operating Funds:
• Cost less than $50K
• Service life less than 2 years
• Prototype, inherently experimental, or
expected to be consumed within 2 years
• Like-for-like replacement (essentially same
performance capabilities)
FINANCIAL POLICY AND TRAINING OFFICE
9
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Equipment/Fabrication
• Capital Funds:
– Equipment that has a service life of two or more
years, and costs $50K or above (invoice price,
transportation charges, modification and
installation costs)
• Fabrication of equipment to accomplish a
special purpose in the performance of a
project
• Betterments to an existing unit
FINANCIAL POLICY AND TRAINING OFFICE
10
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Color of Money Committee
• Purposes:
– Examine proposals for GPP, GPE and Non-Cap $
– Ad hoc issues
• Committee Members
– Facilities - Rich McClure and Emmy Randol
– OCFO – Anne Moore, Michelle Blaha, Sonya Neely
and Tim Young
FINANCIAL POLICY AND TRAINING OFFICE
11
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
Current Process
• Requests for GPP, GPE and Non-Cap –
Annual Call
• Process:
– Divisions submit a proposal to Rich McClure, Facilities
Planning
– Proposals are reviewed by the Color of Money
Committee
– Proposals initially accepted are compiled and sent to
senior management for prioritization and funding
FINANCIAL POLICY AND TRAINING OFFICE
12
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO
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