Revenue Bonds Legal Basis Accounting Welcome, my name is Sherry Pickering, from the Chancellor’s Office. This presentation, part one of a two part series, will review enterprise fund operations within the State Controller’s funds, explain how Revenue Bond legal basis accounting activity differs from the enterprise fund model and using a campus example, walk through a common set of transactions that could occur in the year that a new project is funded. Revenue Bonds Legal Basis Accounting

Enterprise Fund Operations in State Pre-Revenue Management Program. Except for Dorm Construction Fund balance, now only spend-down. Campus collects fees for service provided, deposits them to State Treasury bank account and remits to the State Controller’s Office (SCO). To pay vendors, the campus cuts a check that are initially backed by revolving fund resources. A claim schedule must be issued and submitted to the SCO to draw funds from remitted resources to replenish the revolving fund. First review enterprise fund operations pre-RMP.

Enterprise Fund Operations in State The SCO maintains transactional detail by campus agency, but centralizes the trial balance. The Chancellor’s Office picks up the net activity by campus and any other central transactions to mimic the SCO structure. To eliminate doubling up the reporting of investment balances, the campuses reflect their balance in the state using fund balance clearing. When the Chancellor’s Office picks up the net activity, they mirror or show the opposite balance in the fund balance clearing account for each campus.

What is Fund Balance Clearing? Fund balance clearing is used to reflect the receipts and disbursements that flow through the State Controller’s Office. In governmental or appropriated funds, the change in equity or revenues/expenses for the year also close to fund balance clearing. However, in enterprise funds, it is only used to record receipts/disbursements. For all funds, period 1-12 activity in fund balance clearing must match the State’s postings to stay in synch with State’s ledgers. Timing differences are okay until June 30.

Sample Enterprise Fund Activity Chancellor’s Office Campus

Sample Enterprise Fund Trial Balance Chancellor’s Office Campus

What is SRB? SRB – Systemwide Revenue Bond Program It is a systemwide program that issues bonds to provide funding for board approved construction projects. Depending on timing, it uses temporary financing, via Bond Anticipation Notes (BANs) or commercial paper. If used, the temporary financing is gathered into a Bond issuance that pays off the temporary funding and can include additional funds for the project. Revenue is pledged to pay the bond, so program is restricted to specific programs. Housing, Parking, CERF, Health Facility and Auxiliary

What makes SRB accounting activity unique? Pre-RMP: Nothing unique about Program Operations Funds Housing, Parking, CERF and Health Facility Only Chancellor’s Office records the debt on Legal basis records. Only Chancellor’s Office records activity in 0578 - Interest & Redemption Fund The State Treasurer is the trustee of the SRB proceeds. 0576 – Dorm Construction Fund holds proceeds The Chancellor’s Office records the activity in cash & investments Campuses given an allocation or a budget to spend against

How does the process start? - Summarized A project is identified by the campus. The campus works with Finance & Treasury (F&T) to develop a Financial Plan. The plan will identify funding sources for the project. The non-financial paperwork is submitted to CPDC. There are approvals that must be gained from F&T and CPDC for the project to move forward. Once the project is initially approved by CPDC, they request a project number. Project is placed on the Board of Trustee’s agenda for approval.

Two Separate BOT Approvals It is important to understand that there are two separate approvals that must be gained from the Board of Trustee’s. Until the second approval has been granted all the costs of the project to that point are funded by the campus. The F&T non-state bond funded flowchart shows all of the steps.

Once the project is a go… The Chancellor’s Office will open accounts at the SCO for BAN or bond proceeds, revenue and transfer accounts, and project expense accounts Once State accounts are established, FNAT keys are created, project expense accounts will include project number. F&T will execute the CP or bond sale. Chancellor’s Office will remit and transfer funds.

BAN Sale- Remit Proceeds & Transfer Chancellor’s Office Campus

Issue Allocation Order Chancellor’s Office will issue an Allocation Order to establish Budget or spending authority in campus project expense account.

Pay Vendors and Cash Transfer Letters Chancellor’s Office Campus

Bond Sale A sources and uses schedule is prepared by bond counsel. This nails down all of the details of the transaction. The total deposits/transfers (CSU) is the amount that is initially deposited. The Project Costs (New Money), CP Redemption and Costs of Issuance are transferred to the project account. The Capitalized Interest is transferred to the Dorm Interest and Redemption fund.

Bond Sale- Remit Proceeds & Transfer Chancellor’s Office Campus

Bond Sale- Remit Proceeds & Transfer Chancellor’s Office Campus

Issue Allocation Order for the Bond Chancellor’s Office will issue an Allocation Order to establish Budget or spending authority in campus project expense account.

Move Project Expenses from BAN to Bond Chancellor’s Office Campus

Issue De-Allocation Order for the BAN Chancellor’s Office will issue an De-Allocation Order to removing the Budget or spending authority in campus project expense account.

Pay Off BAN Chancellor’s Office Campus

Pay Vendors and Cash Transfer Letters Chancellor’s Office Campus

Transfer Debt Service Chancellor’s Office Campus

Debt Service Payment Chancellor’s Office Campus

This concludes the Revenue Bond Legal Basis Accounting Session This concludes the Revenue Bond Legal Basis Accounting Session. In the next section, I hope you will join us for Lily Wang’s presentation that takes a step by step look at the Revenue Bond Passdown entries. The California State University www.calstate.edu www.calstate.edu