Business Procedures Manual

Fiscal Affairs Division

Current Date: May 5, 2024

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Section 25.0: Capital Liability Management & Public Private Venture (PPV) Reporting

Section 25 Introduction

Last modified: May 14, 2015

Section 9.8 of the 正版bbin平台下载 of Regents (BOR) Policy Manual states that “the 正版bbin平台下载 of Regents considers Public Private Ventures to be essential to implementation of Strategic Capital Planning.” Further, Section 9.8 states that “the USG chief facilities officer and the USG chief financial officer will establish guidelines for USG institutions and cooperative organizations in the conduct of Public Private Ventures.”

Compliance with these procedures will be the subject of periodic audits and each institution should maintain documentation of its compliance. Accordingly, this section addresses capital management strategies by developing guidelines that will:

  • Allow the USG to maintain a strong financial market position and sound credit ratings;
  • Preserve the USG’s financial strength and credit-worthiness by developing system-wide guidelines to manage capital liability obligations incurred by utilizing various available funding mechanisms to acquire or construct capital assets;
  • Limit the use of PPV financing in accordance with the USG Capital Liability Management plan; and
  • Utilize PPV financing only for strategically important projects.

Topics to be covered include:

  • Capital Strategy
  • Capacity and Affordability
  • Capital Liability Structure
  • Project Approval Process
  • Capital Liability Reserve Funding Requirements and Accounting
  • PPV Project Cash Flow Reporting Requirements
  • PPV Project Accounting with Unique Identification Codes
  • PPV Housing Residency Requirements

25.1 Capital Strategy

Last modified: December 11, 2018

To keep pace with enrollment demands and student needs, the USG must have mechanisms to provide additional student support facilities throughout the system. Since the Constitution of the State of Georgia prohibits State agencies, including the USG or any of its institutions, from issuing debt, the USG must rely on alternative financing options to construct facilities when general obligation bond funding from the State is not available. One of the most commonly used financing options has been through the Public Private Venture (PPV) program. PPVs generally are defined as contractual agreements between a public sector authority and a private party, usually a cooperative organization (CO), in which the private party constructs and owns a public project.

While most academic and administrative facilities are funded with general obligation bond proceeds provided from the sale of State of Georgia General Obligation bonds by the Georgia State Financing and Investment Commission, most student support facilities (student housing, student centers, recreation facilities, athletic venues, dining halls and parking) are funded by lease revenue bonds sold on behalf of COs through the PPV program.

The USG’s PPV program generally starts with a working agreement between a third-party (CO/foundation) and a USG institution, whereby the CO agrees to construct and provide a facility to the USG institution. In some cases an entity other than a USG CO may act as the owner/landlord. The CO then secures an agreement with an issuing authority (local development or housing authority or the Georgia Higher Education Facilities Authority (GHEFA)), whereby the issuing authority sells bonds for the construction of facilities on BOR-owned property and subsequently loans the proceeds back to the CO (or CO’s affiliated limited liability corporation) to construct the physical capital asset. The BOR then provides a ground lease of the land to the third-party/CO for the purpose of constructing or improving facilities for the benefit of the USG institution. The term of the ground lease usually is equal to or greater than the term of the bond debt. In some cases, a PPV may be constructed on property owned by the third-party or CO.

The BOR and the third-party/CO then enter into an annually renewable rental agreement whereby the institution is required to make lease payments to the third-party/CO sufficient to cover the principal and interest on the bonds, along with certain associated fees. The lease payment also will include a repair and replacement reserve component that will be held by the trustee on behalf of the third-party/CO. For financial reporting purposes, these leases are considered capital leases and should be structured as direct financing leases. For consistency, the institution should coordinate with the third-party/CO to ensure that the capital lease obligation on the institution’s financial records can be reconciled to the related asset on the CO’s financial records.

When the bonds are paid in full, the rental agreement is satisfied, the ground lease terminates and the facility is transferred to the BOR.

25.2 Capacity and Affordability

Last modified: May 14, 2015

Section 9.8.3 of the BOR Policy Manual addresses capital liability capacity and affordability as follows:

“Capital liability capacity is limited and directly impacts the affordability of education and services provided to USG students. Therefore, resources used to fund capital liability lease payments must be managed strategically from both an overall system and institutional perspective and from an institutional perspective. Capacity is an institution’s ability to service capital liabilities through operations and is driven by strength in income, cash flows, and overall financial leverage.”

Affordability is an institution’s ability to service capital liabilities through operations and is driven by strength in income and cash flows, while capacity relates to an institution’s financial leverage. Capital liability capacity and affordability are most commonly measured by ratio analysis.

25.2.1 Liquidity Ratio

Last modified: July 9, 2020

Before any decisions about capital liability capacity and affordability can be made, the first fundamental financial metric that will be examined is liquidity. An institution encountering liquidity problems with daily operations will have an elevated risk profile when considering the institution’s ability to absorb the additional burden of servicing payments for long-term capital obligations. The basic financial measure for liquidity is the current ratio.

Current assets include cash and cash equivalents, short-term investments, accounts receivable, inventories, prepaid expenses and other liquid assets that reasonably can be expected to be converted to cash within a year in the normal course of business. Conversely, current liabilities include accounts payable, accrued liabilities, short-term debt and other obligations that are due within one year.

A current ratio of 2.0 is preferable; a current ratio of 1.5 is considered the minimum ratio necessary for consideration of expanding capital liability capacity, if the capital liability burden ratio discussed below is at or above the 5 % threshold.

25.2.2 Capital Liability Burden and Debt Service Coverage Ratios

Last modified: July 8, 2016

After liquidity concerns have been addressed, USG will employ primarily two capital liability ratios to measure capacity and affordability: the capital liability burden ratio and the debt service coverage ratio.

The capital liability burden ratio will be the USG’s key measurement ratio in accordance with Section 9.8.3 of the BOR Policy Manual. This ratio measures capital lease payments (rental payments) as a percentage of total revenues.

The numerator should be base rent, which is effectively the principal and interest portion of the annual rental costs. On several projects, base rent has been adjusted to allow the projects to cash flow properly. For those projects, the additional base rent also will need to be included. The renewals and replacements portion of the rental payments are not included in the numerator.

The denominator of the fraction, total revenues, should include operating revenues and non-operating revenues, excluding capital grants and gifts and special item transfers.
Section 9.8.3 of the BOR Policy Manual sets parameters for capital liability capacity as follows:

“The capital liability burden ratio shall not exceed five (5) percent for the USG taken as a whole; therefore, institutions shall strive to ensure that new PPV projects submitted for approval do not exceed five (5) percent. Institutions may, consistent with approved strategic objectives and sound fiscal management, submit proposed PPV projects that result in a capital liability burden ratio that exceeds five (5) percent; however, the proposed PPV project should not result in a capital liability burden ratio greater than seven (7) percent. Finally, institutions may, under extraordinary circumstances, submit projects that exceed the seven (7) percent capital liability burden ratio, but under no circumstances shall an institution submit a project for approval that exceeds a ten (10) percent capital liability burden ratio.”

This ratio measures the institution’s ability to cover annual debt service payments from current year resources and is essential in verifying that annual lease payments do not consume an inordinate amount of current operating income. USG institutions should strive for a Capital Liability Service Coverage Ratio (Coverage Ratio) of at least 2:1.

The numerator comes from the Statement of Revenues Expenditures and Changes in Net Position (SRECNP). It includes operating income (loss) plus depreciation expense plus net non-operating revenues plus interest expense. Depreciation expense is added back because it is a significant non-cash expense and interest expense is added back to reverse the netting effect against non-operating revenues. Capital grants and Gifts are not included in the calculation.

The denominator is the same as the numerator used for the Capital Liability Burden Ratio, which is the base rent (principal and interest portion of the annual rental costs). As stated above, on those projects in which base rent has been adjusted to allow the projects to cash flow properly, the additional base rent also will need to be included. The renewals and replacements portion of the rental payments are not included in this calculation.

25.3 Capital Liability Structure

Last modified: May 14, 2015

When utilizing the PPV program, USG institutions should ensure that all of the following parameters are agreed to by the cooperative organizations before entering into any rental agreements:

  1. Bonds issued by the cooperative organization should be at fixed rates with level debt service. Level debt service refers to a debt service schedule where the combined annual principal and interest amounts remain relatively constant over the life of the debt. Variable rate debt should be limited to situations where it can be demonstrated that risk is mitigated adequately to offset the potential volatility of market fluctuations. Any use of variable rate debt must be approved by the Vice Chancellor of Fiscal Affairs.

  2. Since revenue bonds are the underlying funding source for construction and acquisition of all PPV projects, specific income-producing revenue streams must be available to repay capital liabilities and related project costs. Therefore, effective upon issuance of this BPM section:

    • All projects must be self-liquidating, with dedicated revenue streams (including non-mandatory transfers if identified in the pro-forma as a portion of project funding) sufficient to cover annual lease payments, including amounts necessary to fund a repair and replacement reserve and operating expenses.
    • Pledges cannot be considered a revenue stream and institutions shall not enter into agreements with pledges as the revenue source.
    • Effective with adoption of 正版bbin平台下载 Policy 9.8.3 on Capital Liability Capacity and Affordability, state appropriations and tuition funds shall not be used as revenue sources to make rental payments for any new PPV projects without the express written consent of the Chancellor and Vice Chancellor of Fiscal Affairs. Indirect cost recoveries and other revenue sources may be considered if the fund source supports the project’s use. For example, indirect cost recoveries may be used as a revenue stream to pay for an academic research building, but not as a source of funds for a student center.
    • If any funds remain in the CO’s project construction fund at completion of the project, they must be used directly to enhance the project or be applied to retire existing debt. Funds cannot be used to acquire additional assets that were not in the scope of the original project. If additional assets are deemed to be in scope and acquired as part of the project, they assets must be reported on the financial records of the institution, not on the financial records of the CO or its affiliate.

COs should monitor markets continuously for opportunities to refinance existing debt for savings. Four percent (4%) present value savings should be considered the floor for refinancing outstanding fixed rate debt. COs with synthetically fixed interest rates should monitor swap termination costs and interest rates for opportunities continuously to convert variable rate borrowings to long-term, fixed rate debt.

In accordance with Section 9.8.5 of the BOR Policy Manual, if a CO refinances or otherwise alters the terms of the underlying bond debt that reduces principal and interest payments on the debt, “USG institutions shall ensure that they achieve a corresponding reduction in the associated capital lease payments equal to at least fifty (50) percent of the cooperative organization’s savings.” The minimum of 50% will be calculated on the gross cash flow savings at closing, net of issuance costs. The rental agreement must be renegotiated to reflect this savings and USG institutions may not renew any rental agreements that have not been renegotiated to reflect the savings. While refinancing will change lease payments, the term length of the original lease should not be extended. Generally, the length of the lease term should correspond to the life of the asset.

BOR policy states that “an institution may benefit students through reducing the current mandatory and/or special fees used to support the particular PPV facility, through eliminating a planned future fee increase, through improving services offered associated with the PPV facility, or through fully funding institutional PPV reserves.” The Vice Chancellor of Fiscal Affairs must be notified in writing of any planned refinancing. Further, savings accruing to institutions must be documented and uses for those savings identified.

All rating agency reviews, including refinancings and annual reviews, must be coordinated with the Office of Fiscal Affairs.

COs may receive annual fees incorporated into the rental payment structure to cover expenses; however, those annual fees must be limited. Fees must be reasonable and only for services provided. Fees only may be charged based on amounts included in proforma financial statements as approved by the Vice Chancellor of Fiscal Affairs.

Projects should be developed so that net income from operations is sufficient to cover lease payments as well as generate sufficient project reserves. Project revenues, as reflected in the approved proforma, which may include income generated outside of the project, should support a minimum 1.05 project coverage ratio averaged over the life of the project. Exceptions may apply to State and Federal funded projects, as well as refinancing transactions. An adequate coverage margin is essential to fund the required project reserves outlined below.

Considerations for project proforma financial statements include:

  • Proformas must be developed based on achievable projections. For fee-based projects, revenues should be based on the Carl Vinson Institute of Government enrollment projections or other source approved by the Vice Chancellor for Fiscal Affairs. For other projects, such as housing, paid occupancy projections should not exceed 90%, unless accompanied by information that fully supports a higher paid occupancy rate projection.
  • Projects should be managed pursuant to project proformas. Expenditures must be managed actively to ensure that costs of operations do not exceed actual revenue growth.
  • Project proformas should include an overall project proforma, an institution proforma, and a CO proforma.
  • Proformas for all PPV projects must include revenue and expense projections, along with fund source detail. Proformas must be approved by the Vice Chancellor of Fiscal Affairs and submitted to the Integrated Review Team for approval (as outlined in Section 25.4) prior to proceeding to financing.
  • The final proformas associated with the financing, which should be consistent with proforma(s) submitted to the Integrated Review Team, shall require signatures of the institution’s chief business officer and chief financial officer of the cooperative organization.
  • In cooperation with USG system office, original financing proformas should be amended when refinancing occurs or when it is determined, based on project cash flow reports, that the original financing proforma no longer reflects current financial trends.
  • The lease term should never be greater than expected useful life of asset being financed.
  • Leases should be structured as direct financing leases, not sales type leases.
  • The BOR anticipates that any funds remaining in reserve accounts with the bond trustee will be gifted to the institution at bond maturity or the end of the lease term, whichever is less.

25.4 Project Approval Process

Last modified: December 11, 2018

An Integrated Review (IR) Team has been established with representatives from the University System Office (USO) Office of Fiscal Affairs, the Office of Real Estate and Facilities, the Office of Academic Affairs and the Office of Internal Audit and Compliance. IR will evaluate PPV project requests and make recommendations to the Capital Review Committee (CRC), which consists of senior management members, concerning the viability of potential projects.

The capital liability burden ratio (Section 25.2) will be the predominant ratio used in evaluating an institution’s capacity for potential projects. However, IR will examine many other factors as well, such as enrollment trends, system needs, the institution’s financial position and strategic mission requirements, in evaluating proposed projects.
IR will evaluate proposed PPV projects based on following criteria:

  1. Institutions may submit projects for review if all ratios are within acceptable ranges and (1) project reserves for existing projects (as discussed in Section 25.5) are fully funded; and (2) the proposed PPV project has been structured in accordance with requirements outlined in the Section 25.3 above.
  2. Approval of new PPV projects is based on many factors and should not be considered guaranteed if the capital liability burden ratio remains at or below 5% and all other ratios are within tolerable ranges. IR will review those requests and make recommendations based on system and institutional needs. For any proposed project(s), if project reserves are not properly funded or if the project has not been developed properly based on requirements in the previous section, the project proposal will be returned to the institution with comments noting the deficiencies. The institution will need to correct any noted deficiencies and resubmit the Project Concept Proposal.
  3. Potential projects that result in an institution’s capital liability burden ratio projecting above 5% will be considered to have a higher risk profile and additional due diligence will be required to justify those projects. However, in certain situations, projects may be considered. In those instances, the following parameters will apply:
    • If the projected capital liability burden ratio is between 5% and 7%, and the liquidity ratio and capital liability service coverage ratio meet the minimum acceptable levels, the project may be submitted for review. However, if the institution’s current ratio is < 1.5 and the capital liability service coverage ratio is < 2:1, the project will not be recommended for approval.
    • If the projected capital liability burden ratio is > 7% but < 10%, and if the current ratio and the capital liability debt service coverage ratio meet the minimum acceptable levels, the project may be submitted to IR for consideration; however, with liability capacity approaching maximum levels, the institution will be required to provide compelling evidence that the proposed project should move forward. Enrollment trends will be paramount and the project will have to address a strategic need, not only for the institution but for the USG.
    • An institution may not submit a project that causes the capital liability burden ratio to project greater than 10%.

25.5 Capital Liability Reserve Funding Requirements and Accounting

Last modified: May 14, 2015

A Capital Liability Reserve Fund (Fund) was established and is maintained by the BOR Office of Fiscal Affairs (System Office) in accordance with BOR Policy Manual Section 9.8.4, which states:

“It is the policy of the 正版bbin平台下载 of Regents of the University System of Georgia to protect the fiscal integrity of the University System of Georgia (USG), to maintain the strongest possible credit ratings associated with Public Private Venture (PPV) projects, and to ensure that the 正版bbin平台下载 of Regents can effectively support its long-term capital lease obligations.” To this end, the 正版bbin平台下载 of Regents shall establish a Capital Liability Reserve Fund (hereafter “Fund”).

The Fund shall serve as a pooled reserve fund. Establishment of this Fund does not relieve institutions of the responsibility for prudent management of institutional funds and the maintenance of adequate reserves at the institutional level. This Fund is only intended to be used on an emergency basis. The Fund will remain in effect until all USG lease obligations associated with the PPV program have terminated or matured. The Vice Chancellor for Fiscal Affairs reserves the right to adjust the level of contributions to the Fund according to the USG’s strategic and system needs.

The following procedures have been established for management of the Fund:

25.5.1 Payment of Funds

Last modified: May 14, 2015

25.5.1.1 Qualifying PPV Transactions

All USG institutions making rental payments for facilities constructed or acquired through the PPV program will be required to contribute to the Fund. An exception will be made for existing projects to the extent that State Educational & General (E&G) funds are used as a funding source for lease payments, as lapsable or potentially lapsable funds may not be reserved for this purpose.

25.5.1.2 Calculation of Contribution

The initial participant contribution to the Fund was based on the highest annual rental payment by project. Beginning July 2013, each institution with PPV projects were invoiced eight percent (8%) of the highest annual rental payment for each existing project, as well for any additional project(s) recorded in the institution’s financial statements for the fiscal year ending June 30, 2014.

Additional payments to the Fund will be required when an institution adds new PPV projects, or due to refinancing if the highest annual payment increases due to swap termination costs. Payment for new PPV’s also will be 8% of the highest annual rental payment. Payment into the Fund will be supported by an invoice from the 正版bbin平台下载 of Regents, Office of Fiscal Affairs. All payments into the Fund shall be due in full within 30 days of invoice receipt. No exceptions will be made for institutions that have sufficient funds available. Institutions that do not have sufficient funds available must contact the Office of Fiscal Affairs immediately upon invoice receipt. Those institutions will be required to make a partial payment from current financial resources available and will be given 12 to 36 months to pay the remaining balance, based on a payment plan approved by the Chancellor and Vice Chancellor for Fiscal Affairs.

25.5.1.3 Funding Sources

Auxiliary/Student Activity Funds

Generally, payments to the Fund should be funded by auxiliary services funds (fund 12xxx) or student activity funds (fund 13000), with the latter being used only if a project is funded from the Student Activity Fund. Also, there may be instances where other institutional funds (not subject to lapse provisions), such as Indirect Cost Recovery funds, would be an appropriate source for payments into the Fund. If an institution makes an upfront lump sum payment to reduce the liability on a PPV project, the highest annual rental payment used to calculate amount due to the Fund will be based on the highest remaining annual rental payment, exclusive of the upfront payment. To the extent that an institution proposes to use a project’s cumulative cash flow (or net profit), contact the PPV Asset Manager to confirm availability of funds and discuss a plan for replenishing the project’s cumulative cash flow reserves.

State E&G Funds

Payments may not be made from State E&G Funds due to potential lapse provisions. Existing projects using State (E&G) funds as a lease payment source only will be required to contribute the portion of the rental payment that was funded from other (non-E&G) sources.

Debt Service Reserve Funds

Payments may not be funded from a project’s debt service reserve held in escrow with the trustee.

25.5.1.4 Recording Payment into the Fund

Institution Sample Entries

Due from USO - Capital Liability Reserve Fund (a/c 126960) 100,000
Cash 100,000

To record transfer of cash from contributing account to the Fund

Unrestricted Net Assets 100,000
Other Reserves (Unrestricted) - Capital Liability Reserve Fund (a/c 329600) 100,000

To reserve fund equity no longer available for expenditure

BOR System Office Sample Entry

Cash 100,000
Funds Held for Others - Capital Liability Reserve Fund (a/c 241160) 100,000

To record transfer of Cash to the Fund

25.5.1.5 Withdrawals for Lease Payments or Rebates

All written requests for withdrawals and reimbursements must include an executed copy of the Disbursement Request Form, located at the PPV website.

Withdrawals for Lease Payments

Withdrawals/disbursements from the Fund for PPV-related lease payments will be made only after an institution has exhausted its resources to fund a lease payment(s) from all allowable funding sources. To make a withdrawal from the Fund, the President and Chief Business Officer must submit a written request (at least three months prior to the required rental payment), addressed to both the Chancellor and the Chairman of the 正版bbin平台下载. The letter must:

  • Indicate the amount needed to cover the institution’s shortfall;
  • Certify that all available and allowable funds have been applied to the lease payment; and
  • Provide a plan to be approved by the BOR for repaying the Fund, along with a projected budget (proforma) to determine the strategy and timeline for making the project self-liquidating.

Withdrawals for Retired Refunded Bonds

Withdrawals from the Fund are permissible when a project’s lease obligation no longer exists or when a project’s refinancing results in lower lease payments. To request a refund, the president and chief business officer must submit a written request to the Vice Chancellor of Fiscal Affairs, requesting a reimbursement equal to the pro-rata share of the institution’s original contribution, net of any outstanding withdrawals. Or, to the extent that a withdrawal is requested due to a refinancing that resulted in lower lease payments, the withdrawal request is limited to the savings generated from the financing transaction.

Repayment of Withdrawals

If an institution has been approved for a withdrawal from the Fund, terms will be established to repay withdrawal, including interest equal to the value of lost interest earnings. Funds withdrawn will be subject to an interest rate set at the time the withdrawal is made. The interest rate will be based on the current rate of earnings that are projected to have been earned had the funds remained in the pooled reserve investment. Terms of the repayment will be detailed in a binding funding agreement drafted by the USO Legal Office and executed by the Chancellor and Vice Chancellor of Fiscal Affairs.

Recording Withdrawal Transactions

Withdrawals when Debt is Retired

Institution Sample Entry

Cash 100,000
Due from USO - Capital Liability Reserve Fund (a/c 126960) 100,000

To record repayment of cash from the USO Capital Liability Reserve Fund

Note: Institution also would also need to remove reserve restriction in account 329600 by adjusting equity back to Unrestricted.

BOR System Office Sample Entry

Funds Held for Others - Capital Liability Reserve Fund (a/c 241160) 100,000
Cash 100,000

To record return of cash to institutions when debt is retired.

Withdrawals Requiring Repayment

Institution Withdrawal Sample Entry

Cash 25,000
Due to USO-Capital Liability Reserve Fund (a/c 218100) 25,000

To record withdrawal of funds which require repayment

BOR System Office Withdrawal Sample Entry

Due from Institution – Cap Liab Res Fund (a/c 126970) 25,000
Cash 25,000

To record distribution of funds which require repayment

Institution Sample Repayment Entry

Due to USO – Capital Liab Reserve Fund (a/c 218100) 25,000
Cash 25,000

To record repayment of withdrawn funds

BOR System Office Sample Repayment Entry

Cash 25,000
Due from Institution – Cap Liab Res Fund (a/c 126970) 25,000

To record receipt of repayment for withdrawn funds

25.6 PPV Project Cash Flow Projections and Cash Flow Report from Institutions

Last modified: May 14, 2015

Each USG institution will complete a Cash Flow Projection and Cash Flow Report for each PPV project that has a rental agreement with the 正版bbin平台下载 of Regents on an annual basis.

  1. Cash Flow Projections reflect projected revenue and expenses, including the annual lease payment for the project, for the subsequent ten (10) fiscal years. The Cash Flow Projections Report should be prepared utilizing the standard format and guidelines as provided by the System Office, Office of Fiscal Affairs.

  2. Cash Flow Report is submitted to System Office, Office of Fiscal Affairs and includes the following components:

    • Actual PPV project revenue collected and/or received to support the project;
    • Actual project expenses incurred in or attributable to the operation and maintenance of the PPV facility;
    • Lease payment, including base rent and contribution to repair and replacement reserve fund, if applicable;
    • Calculation of net cash flow after lease payment;
    • Calculation of self-liquidating coverage ratio;
    • Non-mandatory transfers needed to support the project;
    • Statement of cumulative cash flow generated from the project;
    • Statement of cash reserves held with the project;
    • Statement of amount held in the repair and replacement reserve account; and
    • Statement of amount held in Capital Liability Reserve Fund

The institution’s chief business officer shall review, acknowledge and certify the report as being complete and correct.

If any PPV project cash flow projection or report indicates the project is underperforming as defined in Section 25.6.13, the chief business officer must contact the System Office, Office of Fiscal Affairs and jointly develop an action plan to remedy the shortfall. This plan is to be adopted and implemented by the institution (see Section 25.6.13).

25.6.1 PPV Project Revenue

Last modified: May 14, 2015

PPV Project Revenue consists of actual income earned by the project and/or funds generated outside of the project but allocated to support the PPV Project for the stated period, as reflected in the approved project proforma.

Within the financial system of record, each institution is required to use project identification numbers provided by the System Office, Office of Fiscal Affairs, that permit revenue tracking by source for each PPV project. All revenue submitted and recorded in the PPV Project Cash Flow submittal must be traceable to the institution’s audited financial statements and business plan, the financial system of record and the nVision report for the appropriate period.

The specific accounts for the various sources of revenue are as follows:

PROJECT REVENUE (Direct Project Income)
Account # Acct Description PPV Cash Flow Description
404xxx Student Transportation Fees Student Fee Income
406xxx Student Health Fees Student Fee Income
405xxx Parking/Vehicle Registration Fees Student Fee Income
407xxx Student Athletic Fees Student Fee Income
408xxx Student Activity Fees Student Fee Income
409xxx Other Fees Student Fee Income
451xxx Rents Rental Income
Fund 10000 (State General) Fund10000 (State General)
4xxxxx Fund 10500 (Tuition) Fund 10500 (Tuition)
(Except Fund 10600 (Other General) Fund 10600 (Other General)
as noted Fund 14000 (Dept’l Sales & Services) Fund 14000 (Dept’l Sales & Services)
above) Fund 15000 (Indirect Cost Recovery) Fund 15000 (Indirect Cost Recovery)
All Other Funds All Other Funds
499999 Transfers In Bookstore Auxiliary Income
Dining Auxiliary Income
Concession Auxiliary Income
Other Auxiliary Income

25.6.2 PPV Project Expenses

Last modified: May 14, 2015

For PPV Project Cash Flow Reporting, project expenses are defined as expenditures incurred (for receipt of goods or services) by June 30, which would include Actual ledger expenditures. The intent is to report a full 12 months of project expenses for a reporting period.

Within the financial system of record, each institution is required to utilize project identification numbers provided by the System Office, Office of Fiscal Affairs, which permit tracking of expenses associated with operating and maintaining the PPV facility.

An institution is permitted to allocate operating expenses associated with a particular project, if its accounting methodology and/or technology barriers prevent the institution from being able to track expenses directly.

When an institution employs an allocation method for determining operating expenses:

  1. The assumptions for allocation must be reasonable, and consider the type of construction, size and age of the structure, use of facility and any other variables that may contribute to deriving a reasonable calculation.
  2. The allocation method must be approved by the System Office, AVC for Fiscal Affairs/Budget Director.
  3. Once established and utilized, the allocation method cannot be changed without prior approval from the System Office, AVC for Fiscal Affairs/Budget Director.
  4. The method of allocating expenses is explained in the annual Cash Flow submittals to the System Office, Office of Fiscal Affairs.

PPV operating expenses normally include:

  1. Salaries, wages and benefits of individuals directly responsible for work associated with running and maintaining the facility;
  2. The cost of equipment, materials, supplies and services associated with completing work on the facility;
  3. The cost of audits;
  4. Expenses for accounting services, general repair and maintenance of the structure and systems in the structure;
  5. Electricity, natural and/or propane gas, water/sewer, other utility services,
  6. Insurance and bonding; and
  7. Contracts.

For PPV housing projects, expenses may include the cost of delivering support programs for resident life, as long as the total expenses are attributable to the project and appear reasonable and consistent from year to year.

For PPV student recreation and stadium facilities and similar student auxiliary facilities, expenses should not include costs associated with running specific programs or the salaries and benefits of individuals serving as teachers, coaches, program leaders or other personnel not dedicated to managing or operating the facility.

PPV project operating expenses do not include:

  1. Reserves for extraordinary repairs or any allowance for depreciation; or
  2. Costs associated with repair or improvement that would be considered capital in nature.

Repair and Replacement (R&R) payments are recorded as an operating expense. For PPV Cash Flow reporting purposes, this payment is recorded as part of the total lease payment (base rent plus R&R contribution).

The specific expense accounts are as follows:

Account # Acct Description PPV Cash Flow Description
5xxxxx Salaries and Benefits Personnel
7172xx Electricity Electricity
7174xx Natural/Propane Gas Natural/Propane Gas
7175xx Water Water/Sewer
7171xx Coal Other Utilities
7173xx Fuel Oil Other Utilities
7176xx Other Utilities Other Utilities
7151xx Repairs & Maintenance Repairs & Maintenance
7201xx Insurance & Bonding Insurance & Bonding
7531xx Contracts Contracts
6xxxxx Travel Other Operating Expense
All other Operating Supplies Other Operating Expenses
83xxxx-88xxxx Equipment Other Operating Expenses

25.6.3 Lease Payment

Last modified: May 14, 2015

The lease payment equals the amount paid for lease obligations 正版bbin平台下载 the stated period. The amounts entered include base rent payment and any supplemental rental payments, including the R&R reserve payment.

The amount entered as the lease payment should be the same as found in the:

  • Project proforma;
  • Project lease agreement; and
  • The financial system of record

Any discrepancy should be discussed and resolved with the System Office, Office of Fiscal Affairs, prior to submitting the PPV Cash Flow report.

The specific expense accounts are as follows:

Account # Acct Description PPV Cash Flow Description
8181xx Lease Purchase Principal Base Rent
8182xx Lease Purchase Interest Base Rent
715200 Repair & Replacement R&R Fund Contribution

25.6.4 Net Cash Flow After Lease Payment

Last modified: May 14, 2015

“Net Cash Flow After Lease Payment” is defined as available cash after payment of expenses and lease payment.

25.6.5 Self-Liquidating Coverage Ratio

Last modified: July 8, 2016

All PPV Projects must attain a 1.0x or greater coverage ratio in order to meet the lease payment and associated project operating expenses. A project is considered self-liquidating if the project revenues equal or exceed the project expenses, prior to the inclusion of any non-mandatory transfers.

Self-Liquidating Coverage Ratio for each project is the ratio of net operating income to lease payment. The calculation of self-liquidating coverage ratio does not include non-mandatory transfers necessary to cover any project deficit/shortfall. The specific calculation is as follows:

Revenue = $4,600,000
Expenses = $1,200,000
Lease Payment = $2,400,000
Net Operating Income (NOI)= $4,600,000 minus $1,200,000 or $3,400,000
Self-Liquidating Coverage Ratio=NOI/Lease Payment or $3,400,000/$2,400,000 or 1.42

25.6.6 Net Cash/Project Reserve Balance as of End of Fiscal Year

Last modified: May 14, 2015

This reflects the amount of net cash/project reserve that exists as of end of the fiscal year. It includes net cash generated and still available from previous periods plus amount of net cash/project reserve available as of end of fiscal year.

Net cash flow is considered a reserve primarily dedicated for use on the project. Institutions should use caution in using this reserve other than for project-specific needs. The PPV Asset Manager must approve use of reserves equal to ten percent (10%) or greater of the existing net cash/project reserve balance in any fiscal year. The goal of the System Office is to maintain sufficient project reserves to meet unexpected financial challenges with the project.

25.6.7 Non-Mandatory Transfers

Last modified: May 14, 2015

Non-mandatory transfers include the sources and amounts of non-project revenue necessary to cover any project deficit/shortfall and to attain a minimum of a 1.0x self-liquidating ratio.

Non-project revenue includes revenue that was not specifically pledged in the original project proforma, but is needed to cover project deficit/shortfall and to attain a minimum of a 1.0x self-liquidating ratio.

Any funds (whether net cash/project reserve or auxiliary funds or other funds) used to cover project deficit/shortfall must be recorded as a “transfer-in”.

To the extent any other funds (such as a gift or contribution from foundation or in the extraordinary case, a distribution from the University System Office-held Capital Liability Reserve Fund) are used to cover a project deficit/shortfall, the funds are to be recorded as “Other Revenue Source”.

Any project funds used or encumbered to support another PPV project or auxiliary are to be recorded as a “transfer-out”.

Non-Mandatory/Mandatory expense accounts are: 911xxx and 921xxx.

25.6.8 Cash/Project Reserve Fund Amounts Needed for Project Deficit/Shortfall

Last modified: May 14, 2015

This includes the amount of project cash/project reserve, if needed and necessary, to fund deficit/shortfall and to attain a minimum of 1.0x self-liquidating ratio.

25.6.9 Capital Expenditure

Last modified: May 14, 2015

This includes the amount of capital expenditure spent on major improvements to the Public Private Project by the foundation as of the end of the fiscal year.

Specify expenditure by:

  • Interiors;
  • Systems (mechanical, electrical and plumbing and structural);
  • Envelope (roof, windows and walls); and
  • Site Improvements.

Report only amounts actually spent by the foundation 正版bbin平台下载 the period and include nature of improvement and how foundation funded the improvement(s).

25.6.10 Repair and Replacement Reserve Fund

Last modified: May 14, 2015

This includes the amount of available cash designated and held with the trustee for “Repair and Replacement” for the PPV Project. The institution must explain any major repair and maintenance that occurred on the project 正版bbin平台下载 the period.

25.6.11 Capital Liability Reserve Fund

Last modified: May 14, 2015

This includes the amount of cash contributed to and held by the System Office in the Capital Liability Reserve Fund for the reported period. (Refer to Section 9.8.4 of the BOR Policy Manual creating the Capital Liability Reserve Fund.)

Each institution must explain any withdrawal from the Capital Liability Reserve Fund in the annual Cash Flow submittal, including use of funds and expected payback timeframe (see Section 25.5.1.5 above).

25.6.12 Review of PPV Project Cash Flow Data

Last modified: May 14, 2015

The System Office, Offices of Fiscal Affairs and Facilities will review the PPV Project Cash Flow Data to:

  1. Confirm that the annual cash flow numbers are consistent with the approved proforma and verify that the institution is operating the project consistent with the approved project proforma;
  2. Analyze revenue and expense to confirm whether the correct rental payment was made and determine whether the project is self-liquidating based on project self-liquidating ratio;
  3. Review operating expenses based on the PPV portfolio’s trends and industry standards;
  4. Confirm the amount of the cash/project reserve fund held for the project at the institution and the amount of R & R reserve held with foundation/trustee is consistent with proforma;
  5. Confirm any major capital expenditures; and
  6. Perform other analysis of PPV portfolio performance as requested by internal and external parties, including rating agencies.

The University System Office, Office of Fiscal Affairs will submit an annual report of performance of PPV Projects financed by the Georgia Higher Education Facilities Authority (GHEFA) to the GHEFA board.

The University System Office, Office of Fiscal Affairs will submit an annual report of PPV performance for internal review by the Chancellor, Executive Vice Chancellor for Administration, Vice Chancellor of Fiscal Affairs, Vice Chancellor of Facilities and Associate Vice Chancellor of Audit. The report includes:

  1. A list underperforming projects;
  2. Factor(s) contributing to underperformance of the project; and
  3. Institutional plans to remedy shortfall(s).

As necessary or required, the overall performance of the PPV portfolio is submitted and shared with rating agencies, financial institutions, legislators and the public.

25.6.13 Underperforming PPV Project

Last modified: May 14, 2015

An underperforming PPV project is defined as:

  1. A project with a self-liquidating ratio before non-mandatory transfers below 1.0x.
  2. Not keeping reasonable pace with the financials (lagging revenues and extraordinary expenses in particular), as shown in the approved proforma for the project.
  3. A project with a self-liquidating ratio before non-mandatory transfers projected to be below 1.0x within the next five (5) years.

For any underperforming PPV project, the chief business officer shall:

  1. Notify the PPV asset manager prior to certification and submittal of cash flow data that the project is underperforming and state factors contributing to the underperformance of the project;

  2. Adopt and implement a PPV Project Action Plan to remedy the shortfall in coordination with the PPV asset manager. The Action Plan must include a ten (10)-year projection of revenues and expenses for the project. To the extent enrollment projections are required, the Action Plan must utilize the System Office’s official, published enrollment projection numbers.

  3. Submit progress reports periodically and/or as requested by the PPV asset manager that demonstrate compliance with the PPV Project Action Plan.

25.7 PPV Project Accounting with Unique Identification

Last modified: May 14, 2015

Each PPV project for which a Cash Flow Report is submitted will be assigned a unique ID code after the following numbering protocol: PPV / Institution Business Unit / 01 / 000. For example, PPV9901000 would be the PPV Peachtree Square Project (#01) located at Peachtree State University (Business Unit #99). The last three digits (000) may be used at the university’s discretion or may be omitted altogether from coding in the institution’s financial system of record.

25.7.1 Budget by PPV Project ID

Last modified: May 14, 2015

Effective in Fiscal Year 2016, institutions should establish budgets in the APPROP (and, optionally, ORG) ledgers, and establish revenue budgets in the REVEST ledger

  • Example for PPV9901000:

    APPROP Ledger: 700000 12210 5010111 21100 42100 PPV9901000

    REVEST Ledger: 451000 12210 5010111 21100 42100 PPV9901000

Please note that budgeting for projects (with the project id) in the APPROP and ORG ledgers will be effective with the 2016 budget year. If the activity for a PPV project spans both the 2015 and 2016 budget years, users may view that activity by running the Budget Activity Report, using the department criteria or by using a query such as the BOR_GL_PROJ_TO_DATE, which shows all ACTUALS activity for a project id.

25.7.2 Guidance for Supporting Departments

Last modified: May 14, 2015

Bursar’s Office: Ensure that Banner detail codes have been updated for all projects (rent revenue, fines, miscellaneous revenue, utilities, etc.)

Accounting/Budget:

  1. Establish project ID codes;
  2. Update combo table for revenue detail codes;
  3. Update existing speed types to include the new project ID codes;
  4. Create new speed types;
  5. Establish project budgets;
  6. Reclassify all revenue and expenditures relating to the unit’s new project ID;
  7. Update payroll distribution codes to include new project ID codes

Accounts Payable/Purchasing: Ensure that new project ID codes are being used for transactions relating to PPV projects.

Payroll: Ensure that payroll account distributions reflect the new project ID codes for payroll transactions.

25.7.3 How to Access the nVision Report

Last modified: May 14, 2015

An nVision report is available in PeopleSoft that will display all project activity that has been recorded using an assigned project ID code. The report is in an Excel format and run by project ID code. The report can be printed or saved as a file. If there is no data in PeopleSoft associated with a particular project ID, a report will still generate but will display all zeros. A reference guide for the below steps is located on the PPV website.

  • Once you have signed into PeopleSoft, select Reporting Tools within the Menu display in the left margin.
  • Select the PS/nVision folder and then Define Report Request.
  • Click the Magnifying Glass symbol and select the institution’s Business Unit from the drop down selection. Click the Search button.
  • See the Report ID menu with reports listed in alpha order. Click the report entitled PPV Public Private Venture.
  • You will be directed to a page screen. Indicate the date you want to run the report. The report will compute data as of the date you indicate.
  • Select the Run Report button and then click OK.
  • See the following indicators once the process has been queued and the report is ready:
    • Run Status = Success
    • Distribution Status = Posted
  • Select Report Request and then Report Manager.
  • Click the Administration tab for access to the report(s) by PPV project for your institution.

25.7.4 Directions for Research (R1) Institutions

Last modified: May 14, 2015

Research institutions that are not on the GeorgiaFIRST PeopleSoft Financials application model are required to develop and submit to the PPV Asset Manager a report that mirrors the mapping of the PPV Report in PeopleSoft. A template of the report and required mapping is located on the PPV website.

25.7.5 正版bbin平台下载 of Regents Review of nVision Report

Last modified: May 14, 2015

While an institution may run the PPV Report at any time, the System Office PPV team will utilize the report to support and verify project cash flow throughout the fiscal year, including the annual Cash Flow Report submission.

25.7.6 Other Notes on PPV Project Revenue and Expense (nVision Report)

Last modified: May 14, 2015

  1. Revenue is classified as either project revenue or non-project revenue. Project revenue consists of actual income earned by the project. Accounting activity coded in PeopleSoft as Mandatory Transfers (account 911xxx) and Non-mandatory Transfers (account 921xxx) will map to the Non-Project Revenue line in the report. See Section 25.6.1 to determine how project revenue (actual income earned and mandatory/non-mandatory transfers) is reflected for cash flow analysis.

  2. Project expenses are defined as expenditures that have been incurred (for receipt of goods or services) by June 30, which would include Actual ledger expenditures. The intent is to report a full 12 months of project expenses for a reporting period. Project expenses should include all direct or allocated expenses of the project, even though the typical, approved proforma reflects operating expenses as a lump sum amount. Please see Sections 25.6.2 and 25.6.3 for a breakdown of reporting PPV expenses, including PPV lease payment and deposit to R & R reserve fund.

25.8 PPV Housing Residency Requirements

Last modified: May 14, 2015

Residency Requirement

Section 9.8.2 of the 正版bbin平台下载 of Regents Policy Manual states that “for sound educational reasons, a president may require students to live on campus with prior notification to the Chancellor and subject to the Chancellor’s review.”

An institution desiring to implement a new or change an existing on-campus residency requirement must provide written documentation as to the “sound educational reasons” supporting this change.

At a minimum, the written documentation must address:

  1. Statement of educational objectives that are to be addressed with residency requirement;
  2. The method for measuring the sufficiency of the residency requirement;
  3. An estimate of increased “educational” costs the affected students will bear and a calculation of the total cost of attendance, including housing and related expenses;
  4. An estimate of the number of students anticipated to be affected by change in residency requirements;
  5. An estimate of number of students that will be exempted from the requirement;
  6. For institutions with existing housing, include the past five years housing occupancy rate by semester and location;
  7. The implementation plan and funding source for any services that must be provided or expanded to accommodate the residency requirement;
  8. A statement affirming that no new facilities and/or housing will need to be rehabilitated or constructed on the campus to support the residency requirement; and
  9. Any other facts, analysis or information that will help in determining the viability of the residency program or changes to the existing requirement.

The residency documentation shall be submitted to the Chancellor, with a copy to the EVC for Administration, as well as the Vice Chancellors of Academic Affairs, Fiscal Affairs and Facilities. No residency requirement shall be instituted until the proposal has been reviewed by the Integrated Review and Capital Review teams, approved by the Chancellor and a letter received from the Chancellor that proposed residency requirements or changes are approved or conditionally approved.

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