OFFICE OF THE CHIEF FINANCIAL OFFICER
CFOFINANCIAL POLICY AND TRAINING OFFICE
Color of Money:Operating Versus Capital
Presented by
Tim Young
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO2FINANCIAL POLICY AND TRAINING OFFICE
Objectives
• 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
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO3FINANCIAL POLICY AND TRAINING OFFICE
Capitalization Changes
Purchased after October 1, 2005:
• Useful life criteria New Capitalization Threshold• $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
$50K will not be written-off
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO4FINANCIAL POLICY AND TRAINING OFFICE
Why Worry About the Color of Money?
• Financial statements must accurately reflect asset balances
• Heavily audited activity• Funding must be used for its intended purpose• DOE policies prescribe capitalization criteria• Accurate usage of Operating versus Capital funding
at the beginning of a project is essential to accurately report financial statements to DOE, UC, and outside audit firms
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO5FINANCIAL POLICY AND TRAINING OFFICE
Hierarchy of Accounting Rules
• Contract 31
• DOE Accounting Handbook
• Federal Financial Accounting Standards (FFAS)
• Financial Accounting Standard Board – Generally Accepted Accounting Principles (GAAP)
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO6FINANCIAL POLICY AND TRAINING OFFICE
Color of Money
1 >50k$ & Service Life >2 years
2 <50k$ & Service Life <2 years
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO7FINANCIAL POLICY AND TRAINING OFFICE
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
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO8FINANCIAL POLICY AND TRAINING OFFICE
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
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO9FINANCIAL POLICY AND TRAINING OFFICE
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)
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO10FINANCIAL POLICY AND TRAINING OFFICE
• 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
Equipment/Fabrication
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO11FINANCIAL POLICY AND TRAINING OFFICE
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
OFFICE OF THE CHIEF FINANCIAL OFFICER
CFO12FINANCIAL POLICY AND TRAINING OFFICE
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
Top Related