25.4 Project Approval Process
(Last Modified on December 11, 2018)
An Integrated Review (IR) Team has been established with representatives from the University System Office (USO) Office of Fiscal Affairs, the Office of Real Estate and Facilities, the Office of Academic Affairs and the Office of Internal Audit and Compliance. IR will evaluate PPV project requests and make recommendations to the Capital Review Committee (CRC), which consists of senior management members, concerning the viability of potential projects.
The capital liability burden ratio (Section 25.2) will be the predominant ratio used in evaluating an institution’s capacity for potential projects. However, IR will examine many other factors as well, such as enrollment trends, system needs, the institution’s financial position and strategic mission requirements, in evaluating proposed projects.
IR will evaluate proposed PPV projects based on following criteria:
- Institutions may submit projects for review if all ratios are within acceptable ranges and (1) project reserves for existing projects (as discussed in Section 25.5) are fully funded; and (2) the proposed PPV project has been structured in accordance with requirements outlined in the Section 25.3 above.
- Approval of new PPV projects is based on many factors and should not be considered guaranteed if the capital liability burden ratio remains at or below 5% and all other ratios are within tolerable ranges. IR will review those requests and make recommendations based on system and institutional needs. For any proposed project(s), if project reserves are not properly funded or if the project has not been developed properly based on requirements in the previous section, the project proposal will be returned to the institution with comments noting the deficiencies. The institution will need to correct any noted deficiencies and resubmit the Project Concept Proposal.
- Potential projects that result in an institution’s capital liability burden ratio projecting above 5% will be considered to have a higher risk profile and additional due diligence will be required to justify those projects. However, in certain situations, projects may be considered. In those instances, the following parameters will apply:
- If the projected capital liability burden ratio is between 5% and 7%, and the liquidity ratio and capital liability service coverage ratio meet the minimum acceptable levels, the project may be submitted for review. However, if the institution’s current ratio is < 1.5 and the capital liability service coverage ratio is < 2:1, the project will not be recommended for approval.
- If the projected capital liability burden ratio is > 7% but < 10%, and if the current ratio and the capital liability debt service coverage ratio meet the minimum acceptable levels, the project may be submitted to IR for consideration; however, with liability capacity approaching maximum levels, the institution will be required to provide compelling evidence that the proposed project should move forward. Enrollment trends will be paramount and the project will have to address a strategic need, not only for the institution but for the USG.
- An institution may not submit a project that causes the capital liability burden ratio to project greater than 10%.