Plant Accounting: Certificates of Participation
UC Accounting Manual
XII. Plant Funds Accounting
P-415-16 (TL 54, 8/15/89)
*****************************************************************
PLANT ACCOUNTING:
CERTIFICATES OF PARTICIPATION
Contents
Page
I. Introduction 2
II. Background 2
III. Trust Accounts 3
1V. Accounting Procedures 4
A. General Ledger Accounts 4
B. Single Campus 5
C. Multicampus 12
D. Refinancing 18
V. Responsibilities 18
A. Trustee 18
B. Campus 18
C. Office of the President 19
VI. References 19
Exhibits: A, Request for Payment to be Made
by the Trustee 20
B, Request for Reimbursement 21
PLANT ACCOUNTING:
CERTIFICATES OF PARTICIPATION
"Someone invented the telephone, And
interrupted a nation's slumbers, Ringing
wrong but similar numbers."
--Ogden Nash
I. INTRODUCTION
One of the financing methods used by the University to fund
the acquisition of capital assets involves the issuance of
Certificates of Participation (CP), simply referred to below
as certificates. When two or more campuses use this
financing method jointly, the plant accountant at the
Corporate Accounting Office coordinates the reporting
requirements. This chapter presents the related accounting
procedures.
II. BACKGROUND
Certificates are similar to bonds; each has a face value, a
maturity date, and a fixed interest rate. However, unlike
bonds, they are secured only by ownership of the asset and
the right of the lessor to receive rental payments under a
lease/purchase agreement.
Certificates are issued to investors by the University,
through underwriters. The proceeds, deposited with a
trustee, are used to fund the purchase or construction of
the capital asset and to pay the issuance cost and any
interest expense during the construction phase. Surplus
funds may be used for the retirement of debt or for any
additional interest expense. After acquisition, the asset
is leased to the University under a lease/purchase
agreement. The certificates are not a liability of the
University; however, the lease/purchase agreement entered
into by the University is considered a capital lease and, as
such, the asset and the liability are recorded in the
University General Ledger. Interest expense and principal
on the certificates are paid from recharge funds collected
from the users of the leased equipment.
This method of financing was first used by the University in
1981 for the purchase of the UCLA Telephone and
Telecommunications System. In 1984 it was used for the
purchase of similar systems at Irvine, Santa Cruz, and San
Diego.
III. TRUST ACCOUNTS
Certificates of participation financing involves an
agreement with an independent trustee, usually a bank, to
facilitate carrying out the terms of the lease/purchase
agreement.
The trustee ordinarily sets up the following trust accounts:
(1) Cost of Issuance Trust account, (2) Equipment Purchase
Trust account, (3) Reserve Trust account, (4) Rental Payment
Trust account, and (5) Redemption Trust account. The
proceeds from the issuance of the certificates are
ordinarily deposited in one of these trust accounts,
according to the trust agreement. The purpose of each trust
account is summarized as follows:
1. Cost of Issuance Trust Account
Funds in the Cost of Issuance Trust account are used to
pay the costs related to the registration and issuance
of the certificates. These costs include legal fees,
trustee fees, and accounting expenses.
2. Equipment Purchase Trust Account
Funds in the Equipment Purchase Trust account are used
primarily to pay for the acquisition of assets. Funds
from this trust account may also be used (1) to fund
interest payments during construction by means of
transferring monies to the Rental Payment Trust
account, (2) to pay the contractor directly, and (3) to
reimburse the University for construction expenditures
it may have incurred.
3. Reserve Trust Account
Funds deposited in the Reserve Trust account can be
used to meet interest and principal payments, should
the University fail to deposit sufficient funds into
the Rental Payment Trust account. In addition, the
final payment on the lease/purchase agreement can be
funded from the Reserve Trust account.
4. Rental Payment Trust Account
Funds from this trust are used to make interest and
principal payments to the certificate holders. This
trust account is funded from (1) issuance of
certificate proceeds, (2) the transfer of funds from
the other trust accounts, and (3) the transfer of funds
from the campuses.
5. Redemption Trust Account
Deposits to the Redemption Trust account are used to
fund the redemption of certificates prior to maturity.
IV. ACCOUNTING PROCEDURES
A. GENERAL LEDGER ACCOUNTS
The following is a list of general ledger accounts
needed for recording the transactions involved in this
financing method.
1. Unexpended Plant
Cash and Investment held by X-1000XX-015XX
trustee in the Equipment
Purchase Trust account and
Rental Payment Trust account
during the construction
phase (CP Equip Invest Trust)
Unexpended Plant Liability X-10019X
Plant Reserve X-1015XX-015XX
Plant Equipment Expenditures X-9XXXXX-015XX
(CP Expenditures)
2. Investment in Plant
Construction in Progress X-101899
General Improvements X-101802-01990
Investment in Plant X-1019XX
Liability (CP Invest
in Plant Liab)
Investment in Plant X-101999-01990
3. Retirement of Indebtedness
Cash and Investment held by X-1016XX-017XX
trustee in Reserve Trust
(CP Reserve Invest Trust)
Cash in Cost of Issuance X-1016XX-017XX
Trust Account (CP Issuance
Trust)
Administrative Fees, Under- X-1016XX-017XX
writing Fees, and Issuance
Cost Expended from Cost of
Issuance Trust (CP Under-
writing/Issuance Cost)
Retirement of Indebtedness X-10169X-017XX
Liability (CP Retire Indebt
Liab)
Net Revenue Fund X-1017XX-017XX
4. Current
Reserve for Renewal and X-119710-76XXX
Replacement for Principal
and Depreciation only
(Renewal and Replace)
Unexpended Balance X-119850-660XX
Interest and Depreciation X-72XXXX-660XX
Expenditures (Expenditure)
The trustee may group some of the trust accounts
together. For example, the Cost of Issuance Trust
account may be combined with the Equipment Purchase
Trust account. Also, during the construction phase,
two trust accounts--the Equipment Purchase Trust
account and the Rental Payment Trust account--are
assigned the same account number. When such groupings
are used, the plant accountant is required to maintain
a control sheet for each applicable account.
B. SINGLE CAMPUS
The following accounting procedures are used when only
one campus is involved in the lease/purchase of an
asset funded by certificates (all entries are financial
unless specifically indicated as budgetary):
1. Issuance of Certificates of Participation
The following journal entries are to be made in
the Unexpended Plant and Retirement of Indebted-
ness accounts:
a) To record in the Unexpended Plant accounts
the proceeds from the issuance of the
certificates deposited by the trustee in the
Equipment Purchase Trust account:
Dr. CP Equip Invest X-1000XX-015XX
Trust
Cr. Plant Reserve X-1015XX-0l5XX-X-1550
This entry should agree with the beginning
balance of the Equipment Purchase Trust
account held by the trustee.
b) To credit Plant Expenditures for interest
received from the issuance of the
certificates and included in entry a), above:
Dr. Plant Reserve X-1015XX-015XX-X-1550
Cr. CP Expenditures X-9XXXXX-015XX-X-XXXX
c) To record in the Retirement of Indebtedness
accounts the proceeds from the issuance of
the certificates deposited by the trustee in
the Reserve Trust account and in the Cost of
Issuance account:
Dr. CP Reserve X-1016XX-017XX
Invest Trust
Dr. CP Issuance X-1016XX-017XX
Trust
Cr. CP Retire X-10169X-017XX
Indebt Liab
d) To record the underwriting fees paid at the
time of the issuance of the certificates:
Dr. CP Underwriting X-1016XX-017XX
/Issuance Cost
Cr. CP Retire X-10169X-017XX
Indebt Liab
e) To record prepaid interest income for the
initial purchase by the trustee:
Dr. Net Revenue X-1017XX-017XX-X-1305
Fund
Cr. CP Reserve X-1016XX-017XX
Invest Trust
After the above entries have been made, the
balance in the CP Retire of Indebt Liab
account (X-10169X-017XX-X) plus the balance
in the Plant Reserve account (X-1015XX-015XX-
X) should equal the total liability incurred
from the issuance of the certificates.
2. Construction Phase
During the construction phase, the trustee pays
all expenditures out of the Equipment Purchase
Trust account. Interest expense, offset by earned
income, is charged to the construction project.
Administrative fees, underwriting fees, and other
issuance costs are paid out of the Cost of
Issuance Trust account. These costs may be either
expensed directly to the project, or classified as
a deferred charge and amortized over a period
equal to or less than the life of the certificates
using the straight-line method. The following
entries are required:
a) Budgetary Entry. To record the appropriation
of the funds in the Project Expenditure
account which are to be financed by the
certificates:
Dr. Plant Reserve X-1015XX-015XX
Cr. CP Expenditures X-9XXXXX-015XX
b) To record payments made by the trustee for
administrative fees, underwriting fees, and
issuance costs:
Dr. CP Underwriting X-1016XX-017XX
/Issuance Cost
Cr. CP Issuance X-1016XX-017XX
Trust
c) To record interest expense or progress
payments made by the trustee during
construction:
Dr. CP Expenditures X-9XXXXX-015XX-X-XXXX
Cr. CP Equip Invest X-1000XX-015XX
Trust
Requests for trustee payments to the
contractor must be approved by the campus
accounting officer and sent to the
Treasurer's Office using the form shown in
Exhibit A.
d) To record construction expenditures
reimbursed by the trustee:
Dr. OP Financial X-119500
Control
Cr. CP Equip Invest X-1000XX-015XX
Trust
The request for reimbursement must be
approved by the campus accounting officer and
sent to the Treasurer's Office using the form
shown in Exhibit B. When the trustee makes a
payment to the University from the Equipment
Purchase Trust account, the amount of the
payment is credited to the campus location J
Financial Control. The campus should make
sure that all reimbursements are received
prior to the time the trustee closes the
Equipment Purchase Trust account at the end
of the project.
e) To record interest and capital gain:
Dr. CP Equip Invest X-1000XX-015XX
Trust
Cr. CP Expenditures X-9XXXXX-015XX-X-XXXX
Interest and capital gain earned on temporary
investments in the Equipment Purchase Trust
account are to be used to offset part of the
interest charged to the construction account.
Capital loss should be reported as interest
expense in 2.c), above.
f) To transfer income earned in the Reserve
Trust account to the Net Revenue Fund:
Dr. CP Reserve X-1016XX-017XX
Invest Trust
Cr. Net Revenue X-1017XX-017XX-X-1305
Fund
g) To transfer investment income from Retirement
of Indebtedness accounts to Unexpended Plant
accounts:
Dr. Net Revenue X-1017XX-017XX-X-1305
Fund
Cr. CP Reserve X-1016XX-017XX
Invest Trust
Dr. CP Equip X-1000XX-015XX
Invest Trust
Cr. CP Expenditures X-9XXXXX-015XX-X-XXXX
The transfer of cash from Retirement of
Indebtedness and Unexpended Plant must be
clearly designated as either investment
income or certificate principal. Unless
otherwise indicated, income is disbursed
before principal.
h) To transfer certificate principal from
Retirement of Indebtedness accounts to
Unexpended Plant accounts:
Dr. CP Equip X-1000XX-015XX
Invest Trust
Cr. Plant Reserve X-1015XX-015XX-X-1550
Dr. CP Retire X-10169X-017XX
Indebt Liab
Cr. CP Reserve X-1016XX-017XX
Invest Trust
Refer to journal entry IV.B.2.m) when the
transfer of certificate principal is from
Unexpended Plant accounts to Retirement of
Indebtness accounts.
i) To record the fees and costs amortized during
the construction period to the construction
expenditure account:
Dr. CP Expenditures X-9XXXXX-015XX-X-XXXX
Cr. Plant Reserve X-1015XX-015XX-X-1550
Dr. CP Retire X-10169X-017XX-X
Indebt Liab
Cr. CP Underwriting X-1016XX-017XX-X
/Issuance Cost
j) To transfer the balance in CP Expenditures to
Construction in Progress, and to establish
the liability in Investment in Plant
Liability (for uncompleted projects, this
entry should be made at fiscal closing):
Dr. Plant Reserve X-101499-01499-0-2000
Cr. CP Expenditures X-999990-01499-X-XXXX
Dr. Construction X-101899
in Progress
Cr. CP Invest in X-1019XX
Plant Liab
k) To transfer the balance in Plant Reserve to
Unexpended Plant Liability (for uncompleted
projects, this entry should be made at fiscal
closing):
Dr. Plant Reserve X-1015XX-015XX-X-1550
Cr. Unexpended X-10019X
Plant Liab
After journal entries j) and k) have been
made, the balance in the liability accounts
X-10019X, X-1019XX and X-10169X-017XX should
equal the balance owing on the certificates.
l) To close out the CP Expenditures account
balance to General Improvement and to
establish the liability in CP Invest in Plant
Liab (for uncompleted projects, this entry
should be made at fiscal closing):
Dr. Plant Reserve X-1015XX-015XX-X-2000
Cr. CP Expenditures X-9XXXXX-015XX-X-XXXX
Dr. General X-101802-01990
Improvement
Cr. CP Invest in X-1019XX
Plant Liab
m) To transfer the Unexpended Plant account
balances to the Retirement of Indebtedness
accounts (this entry should be made when all
expenditures have been reimbursed and the
project is complete). Upon receipt of a
notice of completion from the campus and the
Treasurer's Office, the trustee will transfer
the balance remaining in the Equipment
Purchase Trust account to the Reserve Trust
account, Rental Payment Trust account, and/or
Redemption Trust account:
Dr. Plant Reserve X-1015XX-015XX-X-1550
Cr. CP Equip X-1000XX-015XX
Invest Trust
Dr. CP Reserve X-1016XX-017XX
Invest Trust
Cr. CP Retire X-10169X-017XX
Indebt Liab
The trust statement for the Reserve Trust
account, Rental Payment Trust account and
Redemption Trust account must equal the
balance in the CP Reserve Invest Trust
account, X-1016XX-017XX-X. Budgetary entries
in conjunction with the financial entries in
l) and m) must also be made.
3. Interest and Principal Payments after Acceptance
Interest and principal payments to the certificate
holders are made by the trustee with funds drawn
from the Rental Payment Trust account. The
payment schedule may be found in the trust
agreement or the official statement. (The term
"official statement," is a comprehensive statement
containing information about the security being
offered and the issuer of that security. Full
disclosure of all pertinent facts is required in
this document. The official statement is similar
to a prospectus. A preliminary official statement
is often available prior to the final official
statement, which is typically printed only when
the final pricing and terms of the security issue
have been decided.) If there are sufficient funds
in the Rental Payment Trust account to cover the
payments to the certificate holders (which could
occur with the first payment), no additional
payment to the trustee will be required of the
campus. If the funds in this account are not
sufficient, the campus will be required to send
additional funds to the trustee. Ordinarily, the
amount the campus must send will be less than the
amount of the payments the trustee must make to
the certificate holders because any funds left in
the trust from past balances and earned interest
will be applied to such payments first. The
intention is to keep the balance of the Rental
Payment Trust account as close to zero as
possible. During the final year of the lease,
rental payments are funded from the Reserve Trust
account. This occurs when the reserve starts to
exceed the remaining liability balance. Any
remaining balance in the trust account is returned
to the University.
Interest and principal payments are recorded in
Retirement of Indebtedness accounts, and any funds
generated from employment of the asset are
transferred to those accounts.
Funds for the principal payment are provided
through depreciation. Depreciation expense is
calculated using the straight-line method and
amortized over a period equal to or less than the
life of the certificates. Depreciation is
calculated based on cost capitalized in the
Investment in Plant account. The Renewal and
Replacement account accumulates the credit for the
depreciation expense and the debit for campus
payments of principal. Even though from year to
year there are differences between the
depreciation expense and principal payments, by
the time the final payment is made, the total,
debits and credits, should equal the capitalized
asset amount.
The balance in the CP Underwriting/Issuance Cost
account is amortized, using the same method used
during the construction phase.
The campus operating the asset pays interest
expense on the certificates. The operating campus
is charged the interest expense net of interest
income, even if the certificate holders are paid
from surplus proceeds. The debits in the Net
Revenue Fund represent payments made by the
trustee for interest expense and investment in
plant liability. The credits in the Net Revenue
Fund represent interest expense to be charged the
operating campus (net of interest income) and
depreciation expense.
Campus requests (Form U5s) for interest or
principal payments to the trustee must be sent to
the Corporate Accounting Office.
Corporate Accounting charges the Campus Financial
Control account, J-1195X0 for these payments.
The following financial entries are needed to
account for interest and principal payments on the
certificates after the project is accepted by the
University.
a) To record the principal or interest payment
made to the trustee:
Dr. CP Reserve X-1016XX-017XX
Invest Trust
Cr. OP Financial X-119500
Control
b) To record the interest payment made by the
trustee:
Dr. Net Revenue X-1017XX-017XX-0-2225
Fund
Cr. CP Reserve X-1016XX-017XX
Invest Trust
c) To charge the operating campus for the above
interest expense (even if the payment was
funded with surplus proceeds):
Dr. Expenditure X-72XXXX-XXXXX-X-XXXX
Cr. Net Revenue X-1017XX-017XX-0-3045
Fund
If a portion of the payment was funded with
earned income, the net amount is charged to
the operating campus and the Net Revenue
Fund.
d) To credit income earned on the trust accounts
to the Net Revenue Fund, in order to offset
the interest expense.
Dr. CP Reserve X-1016XX-017XX
Invest Trust
Cr. Net Revenue X-1017XX-017XX-X-1305
Fund
e) To record the principal payment made by the
trustee:
Dr. Net Revenue X-1017XX-017XX-0-2125
Fund
Cr. CP Reserve X-1016XX-017XX
Invest Trust
f) To record a principal payment (or portion of
a principal payment) funded with surplus
proceeds (this entry should be made after the
Investment in Plant Liability has been repaid
and only the Retirement of Indebtedness
Liability remains outstanding):
Dr. CP Retire X-10169X-017XX
Indebt Liab
Cr. CP Reserve X-1016XX-017XX
Invest Trust
g) To transfer the principal payment as recorded
in e), above, from the Net Revenue Fund to
Renewal and Replacement:
Dr. Renewal and X-119710-76XXX-0-3400
Replace
Cr. Net Revenue X-1017XX-017XX-0-3400
Fund
h) To record principal payments other than those
mentioned in f), above, require a year-end
entry to decrease the liability (this entry
is made only for the principal amount in e),
above):
Dr. CP Invest in X-1019XX
Plant Liab
Cr. Investment in X-101999-01990
Plant
i) To record depreciation:
Dr. Expenditure X-72XXXX-660XX-5-XXXX
Cr. Renewal and X-119710-76XXX-X-3050
Replace
j) To record the amortization of administrative
fees, underwriting fees, and issuance costs:
Dr. Expenditure X-72XXXX-XXXXX-X-XXXX
Cr. CP Underwriting X-1016XX-017XX
/Issuance Cost
k) To reclassify interest and depreciation
expense at fiscal closing:
Dr. Unexpended X-119850-XXXXX-0-0544
Balance--Interest
Cr. Expenditure X-72XXXX-XXXXX-X-XXXX
Dr. Unexpended X-119850-XXXXX-0-0500
Balance--
Depreciation
Cr. Expenditure X-72XXXX-XXXXX-X-XXXX
C. MULTICAMPUS
When two or more campuses are involved in one issuance
of certificates, the plant accountant at the Corporate
Accounting Office coordinates the allocating of funds
to and the reporting of the participating campuses.
Each campus sends requests for payments or
reimbursements to the plant accountant at the Corporate
Accounting Office instead of sending them to the
Treasurer Office.
The trust assets and liabilities are maintained in the
Office of the President's General Ledger. The
administrative fees, underwriting fees, and issuance
costs are maintained in the Office of the President's
General Ledger during the construction phase and are
distributed to the campuses prior to completion of the
project, based on the percentage of each campus' share
of the total issuance.
The following accounting procedures should be used when
more than one campus is involved in the lease/purchase
of an asset funded by certificates. All entries are
financial unless specifically indicated as budgetary.
1. Issuance of Certificates of Participation
CORPORATE ACCOUNTING OFFICE
a) To record the initial sale of the
certificates and the various trust assets in
the Office of the President's General Ledger:
Dr. CP Invest Trust J-1000XX-015XX-X
Cr. Plant Reserve J-1015XX-015XX-X-1550
Dr. CP Reserve J-1016XX-017XX-X
Invest Trust
Dr. CP Issuance J-1016XX-017XX-X
Trust
Cr. CP Retire J-10169X-017XX-X
Indebt Liab
b) To transfer the Plant Reserve funds to the
campuses:
Dr. Plant Reserve J-1015XX-015XX-X-5000
Cr. Campus Finan- J-1195X0
cial Control
CAMPUS ACCOUNTING OFFICE
c) To record the receipt of funds:
Dr. OP Financial X-119500
Control
Cr. Plant Reserve X-1015XX-015XX-X-5000
2. Construction Phase
CAMPUS ACCOUNTING OFFICE
a) Budgetary Entry. To record appropriation of
the funds in the Project Expenditure account
which are to be financed by the certificates:
Dr. Plant Reserve X-1015XX-015XX-X
Cr. CP Expenditures X-9XXXXX-015XX-X
During the construction phase, the unexpended
balance as shown on the campus GL090 must
reconcile to the CP Equip Invest Trust
account. The Corporate Accounting Office
will submit periodic statements on the CP
Equip Invest Trust account to the campus for
reconciliation purposes.
CORPORATE ACCOUNTING OFFICE
b) To transfer to the campus' interest expense
or progress payments made by the trustee:
Dr. Campus Finan- X-1195X0
cial Control
Cr. CP Equip J-1000XX-015XX-X
Invest Trust
CAMPUS ACCOUNTING OFFICE
c) To record interest expense or progress
payments as posted in 2.b) above:
Dr. CP Expenditures X-9XXXXX-015XX-X-XXXX
Cr. OP Financial X-119500
Control
CORPORATE ACCOUNTING OFFICE
d) To transfer to the campus' interest income
and capital gains earned by the trustee.
Dr. CP Equip J-1000XX-015XX-X
Invest Trust
Cr. Campus Finan- J-1195X0
cial Control
CAMPUS ACCOUNTING OFFICE
e) To record interest income and capital gains
as posted in 2.d) above:
Dr. OP Financial X-119500
Control
Cr. CP Expenditures X-9XXXXX-015XX-X-XXXX
CORPORATE ACCOUNTING OFFICE
f) To record the receipt of cash from monthly
requests for reimbursement from the trustee
for expenditures paid by the campus:
Dr. Cash J-110000
Cr. CP Equip J-1000XX-015XX-X
Invest Trust
CORPORATE ACCOUNTING OFFICE
g) To transfer administrative fees, underwriting
fees, and other issuance costs paid by the
Office of the President prior to
capitalization of the project:
Dr. Campus Finan- J-1195X0
cial Control
Cr. CP Underwriting J-1016XX-017XX-X
/Issuance Cost
CAMPUS ACCOUNTING OFFICE
h) To establish an asset account for
amortization of administrative fees,
underwriting fees, and other issuance costs
paid by the Office of the President as posted
in 2.g) above:
Dr. CP Underwriting X-1016XX-017XX-X
/Issuance Cost
Cr. OP Finan- X-119500
cial Control
Administrative fees, underwriting fees, and
other issuance costs may be either charged
directly to the project as an expense, or
classified as deferred charges and amortized
over a period equal to or less than the life
of the certificates using the straight-line
method. Once the administrative fees,
underwriting fees, and other issuance costs
are set up on the campus ledger, follow the
procedures outlined in Sections IV.B.2.i.)
and IV.B.3.j), above.
i) Certificate of Participation discounts or
premiums will be transferred to the campus in
the same manner as administrative fees,
underwriting fees, and issuance costs.
Usually, the amount is small and can be
charged to capitalized interest expense.
However, if the amount is material, it must
be amortized as interest expense over the
life of the certificates using the straight-
line method. Corporate Accounting, in
conjunction with the outside independent
auditors, will advise the campus if an amount
is material. To record the amortization
expense, the following entry should be made:
Dr. (or Cr.) CP X-9XXXXX-015XX-X
Expenditures
Cr. (or Dr.) CP X-1001XX-015XX
Discount (Premium)
j) Capital procedures are similar to those used
for single campus procedures except for the
liability which is recorded at the OP.
3. Interest and Principal Payments after Acceptance
CORPORATE ACCOUNTING OFFICE
a) To transfer funds to the trustee in payment
of interest and principal:
Dr. CP Reserve J-1016XX-017XX-X
Invest Trust
Cr. Cash J-110000
b) To charge the Campus Financial Control
accounts for their share of the interest and
principal payments:
Dr. Campus Finan- J-1195X0
cial Control
Cr. Net Revenue J-1017XX-017XX-0-5100
Fund--Interest
Cr. Net Revenue J-1017XX-017XX-0-5100
Fund--Principal
CAMPUS ACCOUNTING OFFICE
c) To transfer funds to the Corporate Accounting
Office for interest and principal payment
charged in journal entry 3.b), above:
Dr. Net Revenue X-1017XX-017XX-0-5100
Fund--Interest
Dr. Net Revenue X-1017XX-017XX-0-5100
Fund--Principal
Cr. OP Finan- X-119500
cial Control
d) To charge interest expense to the appropriate
operating department:
Dr. Expenditure X-72XXXX-XXXXX-X-0XXX
Cr. Net Revenue X-1017XX-017XX-0-3045
Fund--Interest
e) To record depreciation expense (depreciation
is based on the total capitalized cost):
Dr. Expenditure X-72XXXX-660XX-5-XXXX
Cr. Renewal and X-119710-76XXX-X-3050
Replacement
f) To transfer depreciation as recorded in e),
above, to the Net Revenue Fund:
Dr. Renewal and X-119710-76XXX-X-3400
Replacement
Cr. Net Revenue X-1017XX-017XX-0-3400
Fund--Depreciation
CORPORATE ACCOUNTING OFFICE
g) To record responding entry for the interest
and principal payments made in 3.b), above:
Dr. Net Revenue J-1017XX-017XX-X-2225
Fund--Depreciation
Dr. Net Revenue J-1017XX-017XX-X-2125
Fund--Principal
Cr. CP Reserve J-1016XX-017XX
Invest Trust
Since the debt is recorded at the Office of
the President, the interest and principal
payments will be reflected at location "J".
The above entry is made once the Certificate
holders receive payment from the trustee.
h) To record interest income earned on trust
balances:
Dr. CP Reserve J-1016XX-017XX
Invest Trust
Cr. Net Revenue J-1017XX-017XX-X-1305
Fund
CAMPUS ACCOUNTING OFFICE
i) To record interest income as indicated in
IV.C.2.e) as a credit to CP Expenditure or as
a credit to Plant Reserve as income from
investments (this entry should be made if the
trust assets are still in the CP Equip Invest
Trust account and the funds are temporarily
restricted for interest and principal
payments.):
Dr. OP Financial X-119500
Control
Cr. Plant Reserve X-1015Xx-015XX-X-1300
Usually, the funds in the CP Equip Invest
Trust account cannot be transferred to the
rental payment trust for interest and
principal payments until a certificate of
completion is filed with the trustee. Prior
to this filing the campus should follow the
procedures outlined.
j) To reclassify interest and depreciation
expense at fiscal closing:
Dr. Unexpended X-119850-XXXXX-0-0500
Balance--Depreciation
Cr. Expenditure X-72XXXX-660XX-5-XXXX
Dr. Unexpended X-119850-XXXXX-0-0544
Balance--Interest
Cr. Expenditure X-72XXXX-XXXXX-X-XXXX
4. Trustee and Administrative Fees
CORPORATE ACCOUNTING OFFICE
a) To record payment of trustee fees on behalf
of the campus as a percentage of outstanding
debt:
Dr. Campus Finan- J-1195X0
cial Control
Cr. Cash J-110000
CAMPUS ACCOUNTING OFFICE
b) To record trustee fees:
Dr. Expenditure X-72XXXX-XXXXX-X-XXXX
Cr. OP Finan- X-119500
cial Control
D. REFINANCING
If a decision is made by the Treasurer to refinance or
to redeem all certificates issued prior to maturity,
the necessary journal entries are prepared by the
campuses from documents provided by the Corporate
Accounting Office. All journal entries must be
approved by the Corporate Accounting Office. Any
balance left in the CP Underwriting Fees/Issuance Costs
account and any premium expenditure (prepayment
penalty) for early redemption will be written-off.
V. RESPONSIBILITIES
A. TRUSTEE
The trustee sets up and maintains the trust accounts
and facilitates compliance with the lease/purchase
agreement terms by all parties concerned.
B. CAMPUS
The campus accounting department is responsible for the
following:
l. To review and understand the official statement
and the lease/purchase agreement related to this
financing method.
2. To set up and maintain accounts on the campus
level for recording all transactions associated
with the program, such as proceeds from the
issuance of the certificates, construction costs,
payments, and depreciation.
3. To forward to the Treasurer or to the Corporate
Accounting Office requests for payment or
reimbursement.
4. To reconcile the trust statements to the cash and
investment accounts in the campus general ledger
(single campus) or to reconcile the Corporate
Accounting statement to the campus fund balance
(multicampus).
5. To reflect the liability for the lease/purchase
agreement on the campus general ledger (if not
maintained at Corporate Accounting).
C. OFFICE OF THE PRESIDENT
Corporate Accounting is responsible for the following:
l. To review preliminary official statement regarding
issuance of the certificates.
2. To monitor and coordinate accounting procedures.
3. To reconcile trust statements to the cash and
investment accounts in the general ledger
(multicampus).
4. To record trust assets, liabilities, and fees in
the Office of the President's General Ledger
(multicampus).
VI. REFERENCES
Accounting Manual chapters:
L-217-11 Accounting and Reporting For Leases and
Installment Purchase Contracts
P-415-5 Plant Accounting: Retirement of Indebtedness
P-415-8 Plant Accounting: Unexpended Plant Funds
P-415-12 Plant Accounting: Borrowed Funds--Local
P-415-14 Plant Accounting: Debt Service--Local
_______________
Historical note: The original Accounting Manual chapter was
published 7/15/86. Present revision 8/15/89; analyst--Ken
Strangfeld.
Exhibit A:
CAMPUS STATIONERY)
To: Treasurer's Office
Subject: REQUEST FOR PAYMENT TO BE MADE BY THE TRUSTEE
PROJECT___________________
Please request the trustee to pay $________________ to
( contractor ) for (describe purpose of expenditure). Such
payment is a proper charge against the "University of California
( campus ) Equipment Subaccount." Original invoices are
enclosed with this request.
(Signature)
Campus Accounting Officer
cc: Corporate Accounting
Exhibit B:
(CAMPUS STATIONERY)
To: Treasurer's Office
Subject: REQUEST FOR REIMBURSEMENT
PROJECT______________________
Please request reimbursement from the trustee to The Regents of
the University of California in the amount of $___________ for
actual project expenditures for the month of ______________.
Such payment is a proper charge against the "University of
California
(campus) Equipment Subaccount." Supporting
documentation is on file at the ___________________ campus.
(Signature)
Campus Accounting Officer
cc: Corporate Accounting
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