Faculty Release Time and Energy Rebates Presented by Sherry Pickering AUDIT

Faculty Release Time and Energy Rebates Presented by Sherry PickeringAUDIT

Agenda Faculty Release Time What is it? Legal Basis Treatment Past Instructions Current Year Instruction Impacts Energy Rebates Past Instructions Current Year Instruction Possible impacts Year-End GAAP Training Year-End GAAP Training 2

Faculty Release Time – What is it? • A 3rd party and the campus enter into a contract or grant where a campus employee will perform certain tasks. • Typically, the campus must hire a replacement worker to carry out the tasks the employee would normally perform during the contract or grant period. Year-End GAAP Training

Faculty Release Time – What is it? • The campus may contract directly for these contracts or grants, commonly referred to as State side, or • An Auxiliary Organization may enter into the agreements with the 3rd party and issue a separate contract with the campus to provide the necessary employees Year-End GAAP Training

Faculty Release Time – What is it? • The contract or grant may include: • A cost matching requirement, or • May not fully release the employee, • Or…. • Terms are specified in the agreement and they vary Year-End GAAP Training

Faculty Release Time Treatment • 3rd Party • Campus • Service • Exchange Transaction Year-End GAAP Training

Faculty Release Time and Legal Basis • The majority of the employees involved in these transactions are funded from the Operating Fund (General Fund). • For Legal Basis Reporting, Operating Fund equals: • Source of funds are Appropriations plus Student Fees • Expenditures supported by the source of funds • Faculty Release Time transactions are eliminated from Operating Fund Legal Basis Reporting Year-End GAAP Training

Faculty Release Time and Legal Basis • To facilitate the elimination of the Faculty Release Time expenditures for Legal Basis reporting, campuses: • Reimbursed Activities • Abatements • Moved out of Operating Fund Year-End GAAP Training

Faculty Release Time and Legal Basis Year-End GAAP Training

Faculty Release Time – Last Year • The 2009 GAAP manual clarified that Faculty Release Time transactions between the campus and a discretely presented Auxiliary Organization are exchange transactions. (GASB 34 Paragraph 61) • Expense of the released Faculty is not eliminated • Functional program code could be reported • As coded in legal ledgers, or • To match Auxiliary Organization functional program Year-End GAAP Training

Faculty Release Time – Last Year • Campuses with qualifying transactions: • Submission of Prior Year Reclassification PBC • ‘A’ campuses required to ‘gross up’ prior year expense comparative display for MD&A Year-End GAAP Training

Management Discussion & Analysis Year-End GAAP Training

Question #1 • All campuses with qualifying transactions eliminated in the prior year were required to submit the amounts on the schedule of Prior Year Reclassifications. • True • False Year-End GAAP Training

Question #1 Answer • All campuses with qualifying transactions eliminated in the prior were required to submit the amounts on the schedule of Prior Year Reclassifications. • True • False Year-End GAAP Training

Faculty Release Time – This Year • Systemwide policy adopted during 2009-10 • Released faculty expense must not be eliminated • Campus functional expense reported the same as Auxiliary Organization • When a campus contracts with 3rd parties directly: • Released faculty expense must not be eliminated • Campus functional expense reported in a category that most closely resembles the activity of the grant or contract New New Year-End GAAP Training

Faculty Release Time Year-End GAAP Training

Faculty Release Time – This Year • The functional expense of any required cost matching must also: • Be reported the same as the Auxiliary Organization, or • Be reported the same as the contract/grants reported on the State side Year-End GAAP Training

Faculty Release Time – This Year • Cost match should be reported as restricted based on the definition of externally imposed restriction. [GASB 34 ¶ 34 as Amended by Statement 46] • Externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments • Imposed by law through constitutional provisions or enabling legislation. Year-End GAAP Training

Faculty Release Time – This Year • Campuses with qualifying transactions must: • Submit Prior Year Reclassification PBC if: • Released faculty expense was eliminated, or • Functional expense reported did not match the Auxiliary Organization, or • Sponsored Programs is run by the campus, the functional expenses reported did not reflect the activity of the grant or contract • If an ‘A’ campus must submit the Prior Year Reclassification PBC, they must also adjust the prior year expense comparative display for MD&A accordingly • Book a GAAP adjustment for reclassifications of Net Asset Category related to Cost Matching Year-End GAAP Training

Question #2 • If the campus had qualifying transactions in 2009-10 but their treatment in 2008-09 met the new standard, they have to fill out the Prior Year Reclassification PBC. • True • False Year-End GAAP Training

Question #2 Answer • If the campus had qualifying transactions in 2009-10 but their treatment in 2008-09 met the new standard, they have to fill out the Prior Year Reclassification PBC. • True • False Year-End GAAP Training

Agenda Faculty Release Time What is it? Legal Basis Treatment Past Instructions Current Year Instruction Impacts Energy Incentives & Rebates Past Instructions Current Year Instruction Possible impacts Year-End GAAP Training Year-End GAAP Training 24

Energy Incentives & Rebates – CSU Policy • Executive Order 987 • Most recent in a series of Executive Orders • Sets goals & policies for the CSU related to Energy Conservation, Sustainable Building Practices, and Physical Plant Management for the California State University Year-End GAAP Training

Energy Incentives & Rebates – What are they? • One general category of this type of transaction involves the campus constructing or installing equipment that meets the program requirements • Savings by Design • UC/CSU/IOU Partnership • California Solar Initiative • Payments may be made in a lump sum based on expected performance or over a specified period of time. Year-End GAAP Training

Energy Incentives & Rebates – What are they? • Common requirements of these programs include: • Time • Type of equipment or expected performance • Reimbursement • Inspection Year-End GAAP Training

Savings By Design Example • Eligibility Terms: • Project must be nonresidential new or remodel within service area • Must install equipment or system specified in application which at minimum exceeds Title 24 standards • Contract Conditions: • Provide documentation required for verification • Allow site inspections and participate in studies, if requested • Benefits for not less than 5 years or rated life of equipment if it is less Year-End GAAP Training

Energy Incentives & Rebates – What are they? • Another general category of this type of activity involves the receipt of an incentive payment directly from a utility vendor for • Completion of a cumulative level of purchases • Customer retention • Settlements Year-End GAAP Training

Past Guidance on Recording Transactions • In June 2007, guidance published by the CO with KPMG concurrence. • Treatment varied for capitalized vs. non-capital expenses Year-End GAAP Training

Past Guidance on Recording Transactions • Energy incentives and rebates represent a reduction of the capitalized amount. • The incentive or rebate would be booked as a reduction of the related expense incurred. Year-End GAAP Training

Current Treatment – Type One • Rebates offered by 3rd party are considered as “reimbursement-type” or “expenditure-driven” nonexchange transactions according to GASB statement 33 • Voluntary Nonexchange • Not imposed on the provider or recipient • Fulfillment of eligibility requirements is essential for a transaction to occur Year-End GAAP Training

Current Treatment – Type One Year-End GAAP Training

Current Treatment – Type 2 • Incentive payments for: • Cumulative purchases • Retention • Settlements • Exchange transactions • Reduction of the related operating expenses. Year-End GAAP Training

Question #3 • Which of the following are typical requirements of 3rd party rebate programs for the installation of specified energy efficiency equipment or systems • Time • Inspection • Reimbursement • All of the Above • None of the Above Year-End GAAP Training

Question #3 Answer • Which of the following are typical requirements of 3rd party rebate programs for the installation of specified energy efficiency equipment or systems. • Time • Inspection • Reimbursement • All of the Above • None of the Above Year-End GAAP Training

3rd Party Rebates & Recognition • 3rd party may require repayment if terms are not fulfilled • Time requirements frequently require equipment to be in service for a specified period of time such as the term of the useful life. • Fulfillment of this requirement occurs over time • Defer recognition of revenue until the specified terms are met. Year-End GAAP Training

Savings by Design Example • Campus receives a lump sum payment based on expected performance of the installed equipment or system. • Benefits for not less than 5 years or rated life of equipment if it is less Year-End GAAP Training

Other Common Programs • California Solar Initiative: Program for permanently installed solar panels. • Two types of incentives: Lump sum or payments over time • UC/CSU/IOU: Development and installation of efficiency projects • Incremental payments during phases as billed by the campus per program terms • Self Generation Incentive Program • Various incentives based on type of self-generation technology • Use of fossil fuel for more than 25% Year-End GAAP Training

3rd Party Rebates & FASB Auxiliaries • Transactions are not limited to the campuses some auxiliary organizations are participating. • Capital Asset - Full Historical Cost • Rebate – Contributions [FASB ASC 958-605] • Fair Value • Contract Terms = Imposed Restrictions • Contingency Year-End GAAP Training

Conclusion GAAP Manual Year-End Reporting Workshop | Systemwide Financial Reporting | CSU Year-End GAAP Training

Faculty Release Time and Energy Rebates Presented by Sherry Pickering AUDIT