Capital Renewal Fund Policy February 1, 1996 To request an official copy of this policy, contact: The Office of the Governing Council Phone: 416-978-6576
Table of Contents Sources of Revenue for the Capital Fund
The broad purpose of the Capital Fund is to consolidate the University's capital financing in a single, comprehensive budget. This ensures that the financial plans and their consequences for all capital projects are reviewed consistently and coherently. This also helps to ensure that plans are implemented in a timely and efficient manner, that all sources of capital funding are thoroughly exploited and that the total capital commitment can be effectively controlled and planned. In conjunction with the Capital Plan, the Capital Renewal Fund makes possible an orderly and optimal matching between available cash flows and the priorities for individual projects, and permits rational programming in spite of the irregularity of flow of funds from external sources. Used in this way, the fund allows a smoothing of construction schedules, within a tolerable level of risk, to suit the local construction market and the administrative capacity for managing multiple projects. The fund provides a consistent method of allocating interest credits and costs to project cash flow balances and shortfalls. The Capital Renewal Fund represents the net unexpended balance in the overall Capital Fund. The Capital Renewal Fund is used to account for projects in the operating fund and for some projects for ancillary operations. The Capital Renewal Fund may be used to provide bridge financing for projects in order to respond to urgent priorities or to take advantage of special opportunities either in the availability of funding or in attractive construction costs. Investment income earned when the fund is in positive balance may provide a further source of undesignated funding for the Capital Plan or for unforeseen expenses The existence of the Capital Renewal Fund in no way predetermines or over-rides the Capital Plan. In order for a project to be eligible for support from the fund it must be approved by normal procedures ("Steps in the Approval and Execution of Major Capital Projects") and duly included in the Capital Plan. 1. Funding of the capital costs of all new construction, additions, repairs. renovations, and alterations, and for a regular program of deferred maintenance will be managed through the Capital Fund. Excluded are the operating expenses for routine maintenance, and alterations costing less than $500,000. Sources of Revenue for the Capital Fund The following internal and external sources of revenue may provide support to the fund in accordance with appropriate University policies. Such support may flow to the fund either directly or indirectly through the operating budget or income from the unrestricted endowment. External sources include capital grants and facility renewal grants from the Ministry of Education and Training; other provincial capital grant programs; capital grants from agencies of federal and municipal governments, or other agencies of the provincial government; designated and undesignated gifts from foundations, corporations and individuals; and bequests. Internal sources include annual appropriations from the operating budget; trust funds in the custody of the University or various divisions which have terms compatible with the fund*; contributions from private fundraising income; contributions from funds carried forward in divisional operating budgets*; maintenance funds from the annual operating budget of Facilities and Services; a portion of overhead income on research grants and contracts*; net revenue from selected ancillary services. (e.g. parking); contributions from students, duly approved under the Policy on Ancillary Fees; and proceeds from the sale of real estate assets.
* Policies and signing authorities relevant to the use of these funds will remain in place. Any changes in policy regarding restricted funds will be addressed separately and with full consultation.
A number of factors must be taken into account in determining whether or not a capital project may receive support from the Capital Renewal Fund. The project must be in the University's Capital Plan or revised Capital Plan, in the approved facility renewal schedule and other comparable schedules, on the list of major projects approved by the Accommodation and Facilities Directorate, or, in the case of property acquisition, consistent with campus master plans and the Policy on Real Estate Strategy. Other factors which will be considered are: i. The project's priority according to the Capital Plan. Depending on the basis on which contributions are made to the fund, it may serve as a "credit union." All designated contributions on deposit in the fund will be consolidated in order to minimize the debt burden and provide optimal cash flows. Investment income may be attributed to specific projects, with a right to credit established for divisions as they contribute to the Fund. a) Investment income on moneys placed into the Capital Renewal Fund for a specific project will accrue to that project, if such interest is an explicit part of the approved project funding plan. Whenever the fund is underwritten by debt financing, indication must be given on an individual project basis of: i. the form of debt that will be assumed. The Capital Renewal Fund may be used to temporarily bridge finance capital projects when there is an acceptable plan to repay the funds, subject to the approval by the Business Board for projects with a value above $500,000 and by the Accommodation and Facilities Directorate for projects below $500,000. Investment income will be determined at interest rates established by the Chief Financial Officer based on the University's opportunity cost, normally consistent with the annual budget report. The Chief Financial Officer may approve bridge financing for approved projects up to $500,000 when a permanent funding source has been identified or there is a reasonable belief that funding will be secured. The Chief Financial Officer will ensure that the management structures and competence necessary to administer a program of debt financing are in place. |