Codes

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    Madison Advisory Council and Financial Managers: This communication is intended to outline how UW-Madison is tracking both expenses and refunds related to COVID-19 activities in SFS (Shared Financial System). COVID Account Codes UW-Madison has been …

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Exhibits

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Exhibit A - Guidelines for Coding, Remodeling and Maintenance Projects

The Building Inventory was established to provide a complete overview of all state-owned buildings. Part of this overview is the remodeling which occurs to each building, the type of work performed, its cost and the value to be added to the building due to the betterment effect of the remodeling. In addition to the cost aspect, the list of the remodeling highlight any particular problem areas that may have occurred in a given building. For example, persistent major roof repairs might indicate poor initial design or improper construction. In either case, a problem that might be overlooked becomes highlighted. The building can then be examined, the problem determined and appropriate remedial action taken. More important, the identification of factors producing the situation reduces the possibility it will be repeated on future buildings.

In order to categorize the degrees of remodeling and the effect they have on the longevity or functional aspects of a building, they have been divided between two categories according to whether or not they result in a betterment to the building. A betterment is defined as a contribution to the building resulting in either an extension of its remaining physical life, an increase in the functional ability of the building to perform or the addition of a new building service such as an elevator or air conditioning. The two categories of betterment resulting from remodeling are as follows:

Category #1

Account Code 4520 or Account Code 4525

Those that are a full betterment to the building and, as such, 100% of the cost of the remodeling is added to the value of the building. These include the following items and services which did not exist in the building prior to the remodeling:

  1. An elevator or dumbwaiter
  2. Air conditioning
  3. Fire alarm system
  4. Television cameras & monitors
  5. Security windows
  6. Storm windows
  7. Survellance equipment
  8. Sprinkler system
  9. Accoustical equipment
  10. Replacement of one of the major building systems or the major portion of its components.

Category #2

Account Code 2420

The second type of remodeling consists of major repair and maintenance items. These improvements are required to maintain the building in an operating condition but add little or nothing to its value. These include:

  1. Roof and/or flashing repairs
  2. Window repairs and glass replacement
  3. Tuckpointing
  4. Masonry repairs
  5. Floor repairs
  6. Replacement carpeting
  7. Remodeling to bring building up to DILHR code
  8. General interior remodeling, which may include removal, relocation or upgrading of walls, doors or lighting.

Exhibit B - Guidelines for Rental vs. Lease Expenses

The requirements to conform with Generally Accepted Accounting Principles (GAAP) make it necessary to separately identify rent, capital lease and non-capital lease expenses. A lease is defined as an agreement conveying the right to use property or equipment for a specified period of time. Actual title to the property is not initially transferred to the lessee. A rental/lease agreement must be evaluated to determine whether the transaction should be treated as a rental expense, capital lease or a non-capital lease.

RENTAL CRITERIA

Rental expenditure codes should be used when the total payments over the term of the agreement are $5,000 or less or when the term of the agreement is one year or less. The term specified on the underlying agreement is to be used when making this determination, not the term specified on a purchase order. All payments to agencies within state government are considered rentals.

CAPITAL LEASE CRITERIA

If at its inception a lease meets one or more of the following four criteria, the lease must be classified and accounted for as a capital lease:

  1. The lease transfers ownership to the lessee by the end of the lease term.
  2. The lease contains a bargain purchase option (a provision allowing the University, at its option, to purchase the leased property for a price which is sufficiently lower than the expected fair value of the property at the date the option becomes exercisable).
  3. The lease term is equal to 75% or more of the estimated economic life of the leased property. However, if the beginning of the lease term falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.
  4. At the inception of the lease, the present value of the minimum lease payments, excluding executory costs, to be paid by the lessor, including any profit, equals or exceeds 90% of the excess of the fair value of the leased property to the lessor at the inception of the lease over any related investment tax credit retained by the lessor and expected to be realized by him. However, if the beginning of the lease falls within the last 25% of the total estimated economic life of the leased property, including earlier years of use, this criterion shall not be used for purposes of classifying the lease.

All leases entered into with the University as the lessee which meet any one of the four criteria for classifying leases should be coded as a Capital Lease. Leases which do not meet any of the four capital lease criteria should be coded as a Non-Capital Lease.

Exhibit C - Comparison Table of Rentals vs Leases

Is vendor/lessor a UW Department?

YES: Use the following SFS Codes:
  • 2300; Rental of Land
  • 2330; Rental of DP Equip
  • 2360; Rental of Other Equip
NO: Is the term one year or less OR total payments related to agreement $5,000 or less?
  • If Yes: Use Exhibit C1 – Rentals vs Leases
  • If No: Use Exhibit C2 – Rentals vs Leases

Exhibit C1 – Rentals vs Leases

Is the rental of Space?

YES: Is payment being made to Individual, Sole Proprietor, or Partnership?
  • If yes: Use SFS Code 2320; Rental of Space (Include SS#/EIN)
  • If no: Use SFS Code 2320; Rental of Space
NO: Use the following SFS Codes:
  • 2300; Rental of Land
  • 2340; Rental of Vehicles-Dealership
  • 2350; Rental of Aircraft
  • 2360; Rental of Other Equip from Individuals, Sole Prop, Partners (Include SS#/EIN)

Exhibit C2 – Rentals vs Leases

Is one or more of the following criteria met?

  • Lease transfers ownership to UW
  • Lease contains bargain purchase option
  • Lease term > or = 90% of the value of the asset
YES: Use the following SFS Codes:
  • 4625; Computer Equip-Cap Lease
  • 4635; Software-Capital Lease
  • 4655; Automobiles-Capital Lease
  • 4665; Trucks & Other-Capital Lease
  • 4605; Equipment-Capital Lease
  • 4485; Land-Capital Lease
  • 4525; Bldg & Fixtures-Cap Lease
NO: Is there a lease of space?
  • If yes: Use SFS Code: 2325; Lease of Space (include SS#/FEIN); Individuals, Sole Proprietors, Partners
  • If no: Use the following SFS Codes:
    • 2305; Lease of Land
    • 2335; Lease of DP Equip
    • 2345; Lease of Vehicle-Dealership
    • 2355; Lease of Aircraft
    • 2370; Lease of Equipment from Sole Propietors, Partners, Individuals

Exhibit D- Guidelines for determining Capital Equipment

An acquisition qualifies as capital equipment if it meets three criteria:

  1. Item has a per-unit acquisition cost of $5,000.00 or more, before any trade-in allowance if applicable.
  2. The acquired item has a useful life expectancy of one year or more.
  3. The item purchased is moveable; that is, it is not permanently affixed to a building or another object in such a way as to lose its unique identity.

If the three criteria above are met, then the following can be capitalized in addition to the cost:

  • Freight
  • In-transit insurance
  • Preparing the site or asset for intended use
  • Training
  • Installation
  • Value received from trade-in of an existing asset

Costs that cannot be capitalized:

  • Repair or replacement costs, spare parts (e.g. parts, labor)
  • Maintenance and warranty agreements
  • Consumables/disposable items used with capital equipment (e.g. pipets, slides, chemicals, liquids, gases, or similar supporting supplies)
  • Items considered as part of a building or permanently installed or affixed to a building (e.g. sinks, window air conditioners, fume hoods, buried fuel tanks)M