OUS IMD 6.350 Building/IOTB Repair and Equipment Replacement Reserves for Auxiliary Enterprises and Other Self-Liquidating Activities

1. Auxiliary enterprises and other self-liquidating activities shall maintain building/IOTB repair and equipment replacement reserves for the purpose of funding the cost of repairs or replacement of depreciable assets. Such reserves should be sufficient to promote the efficient and effective operation of the related operating unit, avoid significant fluctuations in fees charged for services, and minimize the potential for unanticipated financial shortfalls that may impact the other funds of the institution.
2. Each auxiliary enterprise and other self-liquidating activity shall determine the appropriate level of repair reserves for buildings and improvements other than buildings (IOTBs) and equipment replacement reserves based on a capital asset management plan (Plan) that is prepared/updated at least annually and approved by the institution's vice president for finance and administration or designee. The Plan required under this provision will be based on a minimum five-year planning horizon and will assess the repair or replacement needs of each asset or asset class and include an analysis of the annual funding necessary to accumulate the funds required to execute the plan. When preparing/updating the Plan, consideration should be given to the availability of interest earnings on reserves of auxiliary enterprises in order to maximize the benefits of setting aside reserve funds. The Plan required under this section must be retained for audit purposes.
3. Each auxiliary enterprise and self-liquidating activity with capital assets of $150,000 (recorded cost) or more will prepare and retain the capital asset management plan (Plan) referred to in section (2) above. Should the Plan indicate the need for building/IOTB repair and/or equipment replacement reserves, a fund should be established for those purposes (if not already established) and funded accordingly. Institution-specific policies will determine whether activities with less than $150,000 (recorded cost) of capital assets will prepare a Plan and establish and fund any reserves.
4. Generally, building/IOTB repair and equipment replacement reserves may not be used for any other purpose than to repair or replace capital assets used in the operation of the related auxiliary enterprise or other self-liquidating activity. Consideration should be given to statutory requirements (see section (6) below), applicable federal cost requirements, and the source of funding before authorizing the use of building/IOTB repair and equipment replacement reserves for any other purpose. Authorization for such other use may only be granted by the institution's vice president for finance and administration or designee and must be documented and retained for audit purposes.
5. Pursuant to ORS 351.615, only building repair and equipment replacement reserves of auxiliary enterprises may be credited to the Higher Education Auxiliary Enterprise Building Repair and Equipment Replacement Fund (Fund). Reserves for the repair or replacement of other depreciable assets (IOTBs) of auxiliary enterprises may not be credited to the Fund. Monies deposited in the Fund may not be used for any other purpose than for the repair and alteration of auxiliary enterprise buildings and the replacement of auxiliary enterprise equipment. No repair/replacement reserves of service departments or any other self-liquidating activities may be credited to the Fund.
6. Except as otherwise provided, exceptions to the requirements of sections (1) through (5) may be granted by the Vice Chancellor for Finance and Administration or designee.

All self-sustaining proprietary funds - Service Departments (09xxxx funds) and Auxiliary Enterprises (1xxxxx funds) - are required to accumulate reserves for the purpose of funding the replacement of depreciable equipment if the capital value of assets owned by the department exceeds $150,000. Service Departments and Auxiliary Enterprises with assets valued at less than $150,000 have the option of establishing a reserve. Service Departments and Auxiliary Enterprises will determine the appropriate level of reserves based on a Capital Asset Management Plan that is prepared and updated annually. This plan will be based on a minimum five-year planning horizon and will estimate the funding needed for anticipated purchases of replacement equipment over the five years. See Internal Management Directive (IMD) 6.350, updated July 2003.

Funding Equipment Reserves

The Equipment Reserve fund must be evaluated annually and funded according to the equipment replacement needs identified in the Capital Asset Management Plan. To fund the reserves, transfer the needed amount from the Operating fund to the Equipment Reserve fund using the General Ledger account codes as follows:

Transfer from Operations to Equipment Reserve to Fund Reserve

Dr Department Operations fund F0002 $x,xxx.xx
Cr Equipment Reserve fund E0002 $x,xxx.xx

The balance in the Equipment Reserve fund at fiscal year-end should be adequate to meet the needs of replacing equipment as detailed in the department's five-year plan. Business Affairs is responsible for monitoring reserves and working with proprietary fund departments to ensure adequate reserves. The plan must be submitted to Business Affairs annually and retained for audit purposes. Call 346-3524 with questions or for help with Equipment Reserve issues.

Using Equipment Reserves

Equipment is purchased from the department's operating fund, not the reserve fund. If reserve money is to be used for a replacement purchase, it must be transferred from the Equipment Reserve fund to Operations using new General Ledger account codes as follows:

Transfer from Equipment Reserve to Operations to Purchase Replacement Equipment

Dr Equipment Reserve fund F0001 $x,xxx.xx
Cr Department Operations fund E0001 $x,xxx.xx

Self-sustaining proprietary funds - Service Departments (09xxxx funds) and Auxiliary Enterprises (1xxxxx funds) - with building ownership/repair responsibility are required to accumulate reserves for the purpose of funding the repair and alteration of buildings. Service Departments and Auxiliary Enterprises will determine the appropriate level of reserves based on a Capital Asset Management Plan that is prepared and updated annually. This plan will be based on a minimum five-year planning horizon and will estimate the funding needed for anticipated building repairs over the five years. See Internal Management Directive (IMD) 6.350, updated July 2003.

Funding Building Reserves

The Building Reserve fund must be evaluated annually and funded according to the building repair needs identified in the Capital Asset Management Plan. To fund the reserves, transfer the needed amount from the Operating fund to the Building Reserve fund using new General Ledger account codes as follows:

Transfer from Operations to Building Reserve to Fund Reserves

Dr Department Operations fund F0002 $x,xxx.xx
Cr Building Reserve fund E0002 $x,xxx.xx

The balance in the Building Reserve fund at fiscal year-end should be adequate to meet the demands of repairs and major maintenance as detailed in the department's five-year plan. Business Affairs is responsible for monitoring reserves and working with proprietary fund departments to ensure adequate reserves. The plan must be submitted to Business Affairs annually and retained for audit purposes. Call 346-3524 with questions or for help with Building Reserve issues.

Using Building Reserves

If reserve money is to be used for building repair or alteration, the department must send a request to move the amount from the department's Building Reserve fund to the related Building Repair fund to Rob Basto in Facilities Services. The request may be an email to rbasto@uoregon.edu or the department may use the Building Reserve Fund Transfer Request form. UO Facilities will make the transfer.

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