Color of Money: Operating Versus Capital

1. Color of Money:Operating Versus Capital Presented by Tim Young

2. 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

3. 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

4. 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

5. Hierarchy of Accounting Rules • Contract 31 • DOE Accounting Handbook • Federal Financial Accounting Standards (FFAS) • Financial Accounting Standard Board • Generally Accepted Accounting Principles (GAAP)

6. Color of Money 1 >50k$ & Service Life >2 years 2 <50k$ & Service Life <2 years

7. 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

8. 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

9. 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)

10. Equipment/Fabrication • 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

11. 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

12. 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