25.6 PPV Project Cash Flow Projections and Cash Flow Report from Institutions
(Last Modified on 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 Board of Regents on an annual basis.
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.
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 on 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 on 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:
- 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.
- The allocation method must be approved by the System Office, AVC for Fiscal Affairs/Budget Director.
- Once established and utilized, the allocation method cannot be changed without prior approval from the System Office, AVC for Fiscal Affairs/Budget Director.
- 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:
- Salaries, wages and benefits of individuals directly responsible for work associated with running and maintaining the facility;
- The cost of equipment, materials, supplies and services associated with completing work on the facility;
- The cost of audits;
- Expenses for accounting services, general repair and maintenance of the structure and systems in the structure;
- Electricity, natural and/or propane gas, water/sewer, other utility services,
- Insurance and bonding; and
- 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:
- Reserves for extraordinary repairs or any allowance for depreciation; or
- 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 on May 14, 2015)
The lease payment equals the amount paid for lease obligations during 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 on 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 on 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 on 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 on 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 on 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 on 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 during the period and include nature of improvement and how foundation funded the improvement(s).
25.6.10 Repair and Replacement Reserve Fund
(Last Modified on 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 during the period.
25.6.11 Capital Liability Reserve Fund
(Last Modified on 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 on May 14, 2015)
The System Office, Offices of Fiscal Affairs and Facilities will review the PPV Project Cash Flow Data to:
- 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;
- 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;
- Review operating expenses based on the PPV portfolio’s trends and industry standards;
- 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;
- Confirm any major capital expenditures; and
- 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:
- A list underperforming projects;
- Factor(s) contributing to underperformance of the project; and
- 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 on May 14, 2015)
An underperforming PPV project is defined as:
- A project with a self-liquidating ratio before non-mandatory transfers below 1.0x.
- Not keeping reasonable pace with the financials (lagging revenues and extraordinary expenses in particular), as shown in the approved proforma for the project.
- 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:
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;
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.
Submit progress reports periodically and/or as requested by the PPV asset manager that demonstrate compliance with the PPV Project Action Plan.
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