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
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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
