Higher Education Assistance Funds (HEAF)                UPPS No. 03.02.05
Issue No. 3
Effective Date: 02/01/2013
Review: April 1 E5Y

 

 

01.       POLICY STATEMENT

 

01.01  This UPPS establishes guidelines covering the allocation, management, budgeting, expenditures, and related restrictions of Higher Education Assistance Funds (HEAF) appropriated to Texas State University-San Marcos. These guidelines apply to the use of HEAF funds by all departments and units of the university.

 

02.       DEFINITIONS

 

02.01  Higher Education Assistance Fund is a permanent capital funding provided under Article VII, Section 17 of the Texas Constitution for Texas Higher Education Institutions that are not participants in the Permanent University Fund (PUF) beginning September 1, 1985. These funds are General Revenue funds that must reside in and must be expended from the State Treasury.

 

02.02  HEAF Treasury Funds are those HEAF funds expended by the university, subject to state expenditure procedures and restrictions, and reimbursed from the State.

 

02.03  HEAF Bond Funds are those funds secured by HEAF treasury funds that are obtained through bonds issued in accordance with Article VII, Section 17 of the Texas Constitution.

 

02.04  Operating Expenses are costs incurred for services or items with a useful life of less than one year.

 

02.05  Consumable Supplies is a category of operating expenses for items that likely will be consumed within one year. These are expensed, rather than being capitalized as assets. Some items may have an expected useful life of more than one year, but are of nominal value and are expensed. This would include paper products, toner, paper clips, pens, pencils, and other similar items.

 

02.06  Capital Equipment is fixed or moveable tangible assets to be used for operations, the benefits of which extend over more than one fiscal year. Reference Section 04.04 a. for specific guidelines related to HEAF.

 

03.       PROCEDURES FOR THE USE OF HEAF FUNDS

 

03.01  In accordance with Article VII, Section 17(a) of the Texas Constitution, HEAF funds are appropriated for the following purposes:

 

a.   Acquisition of land, either with or without permanent improvements;

 

b.   Construction and equipment of buildings or other permanent improvements;

 

c.   Major repair or rehabilitation of buildings or other permanent improvements;

 

d.   Acquisition of capital equipment, library books, and library materials; and

 

e.   Payment of principal and interest on bonds issued under this authority. Reference Section 04. for additional information.

 

03.02  HEAF funds are to be used only for Educational and General (E&G) purposes. HEAF may not be used for:

 

a.   Student housing

 

b.   Intercollegiate athletics

 

c.   Auxiliary enterprises

 

However, in the case of renovation of a building used in part for auxiliary enterprises, HEAF may be used proportionally for the Education and General portion of the building.

 

03.03  Article VII also provides that governing boards may issue bonds or notes and pledge HEAF funds for up to fifty percent of money allocated to secure payment of the principal and interest on the bonds or notes.  

 

04.       ACCEPTABLE HEAF EXPENDITURES AND RESTRICTIONS

 

04.01  Acquisition of land with or without permanent improvements: For the purposes of HEAF expenditures, the following definitions and guidelines apply:

 

a.   Land: The surface or crust of the earth which can be used to support structure and which may be used to grow crops, grass, shrubs, and trees.

 

b.   Cost of land may include:

 

1)    Purchase price

2)    Commissions

3)    Fees for examining and recording titles

4)    Surveying

5)    Drainage costs

6)    Land clearing

7)    Demolition of existing improvements (less salvage)

8)    Landfilling

9)    Grading

10)  Interest on mortgages accrued at date of purchase

11)  Other costs incurred in acquiring the land

 

c.   Unless approved in advance by the legislature, an institution cannot use these funds to acquire land for a branch campus or educational center that is not a separate degree-granting institution created by general law.

 

04.02  Construction and equipment of buildings or other permanent improvements, for the purposes of these guidelines, are defined as follows:

 

a.   Constructing and equipping: The process of erecting buildings and providing equipment that will assure that the buildings can be used for the purposes intended, and the constructing and equipping of other permanent improvements. This category includes additions to and equipping of existing buildings. It does not include consumable supplies.

 

b.   Buildings: Roofed structures (conventional or underground) housing operations. This category includes storage structures and additions to buildings meeting this definition.

 

c.   Other permanent improvements: Assets that enhance the quality of land or buildings or facilitate the use of land or buildings and that have finite but extended lives. Permanency is relative and should be interpreted in terms of the periods of usefulness. Only land can be considered permanent in any absolute sense.

 

Examples of other permanent improvements: Paving; lighting; fences; sewers; electrical distribution systems; water systems; sewer systems; landscaping; air conditioning; elevators; vent hoods; energy management systems; mechanical, plumbing, and electrical systems; voice-and-data systems; computing systems; and the like.

           

Systems that in normal usage could be moved from building to building or from room to room are not included as permanent improvements.

 

d.   Cost of buildings may include:

 

1)   Original contract price or cost of construction;

2)   Expenses for remodeling, reconditioning, or altering a purchased building to make it suitable for the purpose for which it was acquired;

3)   Payment of unpaid or accrued taxes on the building to the date of purchase;

4)   Cancellation or buy-out of existing leases; or

5)   Other costs related to placing the asset into operation.

 

e.   Construction costs of buildings and other permanent improvements can include the costs of:

 

1)    The completed project;

2)    Excavation, grading, or filing of land for a specific building;

3)    Preparation of plans, specifications, blueprints, etc.;

4)    Building permits;

5)    Architects’, engineers’, or management fees for design and supervision;

6)    Legal fees;

7)    Temporary buildings used during construction;

8)    Unanticipated costs such as rock blasting, piling, or relocation of channel of underground stream;

9)    Drainage costs;

10)  Land clearing;

11)  Demolition of existing improvements; or

12)  Maintenance agreements purchased as part of the original acquisition (such as those for software application programs and operation systems or for energy management systems).

 

f.    Equipping costs can include costs of:

 

1)    Original contract or invoice of the furnishings or equipment;

2)    Freight-in, import duties, handling, and storage;

3)    Specific in-transit insurance;

4)    Sales, use, and other taxes imposed on the acquisition;

5)    Site preparation;

6)    Installation;

7)    Testing and preparation for use;

8)    Reconditioning used items when purchased;

9)    Maintenance agreements purchased as part of the original acquisition; or

10) Development of software application programs and operating systems.

 

g.   Unless approved in advance by the legislature, institutions cannot use these funds for constructing and equipping buildings and other improvements for a branch campus or educational center that is not a separate degree-granting institution created by general law.

 

04.03  Major repairs or rehabilitation of buildings or other improvements can include the following categories:

 

·         Repairs  

·         Renovations

·         Replacements

·         Improvements

 

a.   These improvements are normally expected to:

 

1)   Extend the useful life in excess of one year,

2)   Improve operating efficiency,

3)   Eliminate health and safety hazards,

4)   Correct structural or mechanical defects,

5)   Upgrade the quality of existing facilities, and

6)   Convert these assets to more useful functions.

 

b.   HEAF funds may be used to purchase hardware and building supplies for use on “major” construction or renovation projects. This does not include projects for routine maintenance, repairs, cleaning, painting, replacement of a part or component with a comparable part, or minimal increase in life expectancy of an existing building. Qualifying HEAF projects must have a total cost exceeding $100,000, the State’s established floor for capitalizing construction or renovation of assets.

 

04.04  Acquisition of capital equipment, library books, and library materials, for the purposes of HEAF expenditures, include the following definitions and guidelines:

 

a.   Capital equipment: Fixed or moveable tangible assets to be used for operations, the benefits of which extend over more than one fiscal year. These assets may be purchased from an outside vendor or constructed or developed by university employees. Computer software operating systems and application programs are considered capital equipment under this definition; routine maintenance or repair is not an allowable HEAF expenditure.

 

b.   Equipment purchased may include costs of:

 

1)    Original contract or invoice of the furnishings or equipment;

2)    Freight-in, import duties, handling, and storage;

3)    Specific in-transit insurance;

4)    Sales, use, and other taxes imposed on the acquisition;

5)    Site preparation;

6)    Installation;

7)    Testing and preparation for use;

8)    Reconditioning used items when purchased;

9)    Maintenance agreements purchased as part of the original acquisition; or

10)  Development costs of computer software.

11)  Equipment parts may be purchased with HEAF funds if the parts materially extend or increase the useful life of an existing piece of equipment. HEAF may also be used for the purchase of parts or accessories for incorporation into a newly-purchased piece of equipment. In these cases, the supporting documentation must clearly identify the purchase’s HEAF allowable purchase category, identifying the parent equipment and explaining how the parts materially extend or increase the useful life of the parent equipment.

 

c.   HEAF appropriated funds may not be used as partial payment for the acquisition of capital equipment to be used for both E&G and auxiliary purposes that are independent of constructing and equipping buildings or other permanent improvements, major repairs and rehabilitations of buildings or other improvements.

 

d.   Library: For the purposes of these guidelines, a collection of books and materials in locations approved by university administration that are accessible to the general university community.

 

e.   Library book: A literary composition bound into a separate volume, generally identifiable as a separately copyrighted unit. Books should be distinguished from periodicals and journals.

 

f.    Library materials: Information sources other than books (either owned or accessed), that provide information essential to the learning process, or that enhance the quality of university library programs, including:

 

1)   Journals

2)   Periodicals

3)   Microforms

4)   Audiovisual media

5)   Computer-based information

6)   Manuscripts

7)   Maps

8)   Documents

 

g.   Cost of library books and library materials can include the costs of:

 

1)   Invoice price of books or library materials

2)   Freight-in, handling, and insurance

3)   Binding

4)   Electronic access

5)   Reproduction and like costs

6)   Similar costs required to put these assets in place, excluding library salaries

 

04.05  Refunding bonds or notes: The governing board of each institution covered by Article VII, Section 17 is authorized to issue bonds to refund outstanding bond or notes. Only bond proceeds issued under this section can be used to refund bonds issued under prior law.

 

04.06  Texas State service departments (such as Facilities, Telecommunication Services and Technology Resources) will be paid from HEAF accounts via interdepartmental charges (IDT’s).

 

04.07  Advance payments are not allowed from HEAF funds.

 

04.08  HEAF funds may not be utilized for operating expenses or to purchase consumable supplies.

 

04.09  HEAF funds cannot be used for moves or relocations. The associate vice president for Finance and Support Services Planning maintains a designated funds moves account.

 

04.10  HEAF funds are on deposit in the State Treasury and must be expended there from. Consequently procurement cards cannot be issued on HEAF accounts.

 

04.11  Either the director of Purchasing or the director of Accounting is authorized to determine whether an expenditure is in accordance with HEAF restrictions and guidelines. Purchases that do not conform will require another source of funding.

 

05.       ALLOCATION PROCEDURES

 

05.01  Under the Texas Constitution, an annual appropriation of funds to eligible institutions of higher education is determined for each 10-year period beginning with 1985 and subject to review and revision at the end of each five years.

 

05.02  Annual Texas State HEAF allotments from this appropriation are then determined through a state allocation formula that is based upon the institutional space deficit, the condition of facilities, institutional complexity, and specified set-asides. The amount of the annual allotment is determined for the 10-year period, subject to a review at the end of five years.

 

05.03  On an annual basis, several months prior to the beginning of the fiscal year, the associate vice president for Finance and Support Services Planning will recommend a cash flow statement for specific allocations for construction of new buildings, demolition, and land acquisition; major repairs and renovations; for research and teaching equipment; for library books and eligible materials; and for information technology equipment to the President’s Cabinet. These internal allocations will be determined in conjunction with discussions with key academic and administrative officials and groups as well as the incorporation of the approved construction schedule in the most current Campus Master Plan. All new requests for HEAF money, not included in the cash flow statement, must go before the Cabinet for approval.

 

05.04  When construction projects exceed available funds, consideration by the Cabinet may be given to the issuance of HEAF bonds.

 

05.05  Upon the Cabinet’s approval, the associate vice president for Finance and Support Services Planning will prepare the HEAF table for submittal to the Board of Regents at the August meeting. This table will show HEAF expenditures for the current fiscal year, HEAF expenditures for the coming fiscal year and the percent difference.

 

05.06  After September 1 of each year, the associate vice president for Finance and Support Services Planning will initiate the creation and funding of HEAF accounts based upon the purposes for which the funds were allocated and notify the authorized signatories.

 

05.07  In December of each year, the cash flow statement will be reconciled to the Annual Financial Report by the associate vice president for Finance and Support Services Planning and shared with the Cabinet for review and possible reallocation.

 

05.08  HEAF allocations are provided and budgeted for a specified fiscal year and are generally encumbered or expended within that fiscal year. Unless approval is granted to allow for expenditure over a longer finite period of time, the allotment is subject to reallocation by the Cabinet to other university projects.

 

05.09  HEAF funds must be maintained in segregated HEAF accounts and may not be transferred to non-HEAF accounts. Non-HEAF funds may not be transferred into or intermixed with HEAF funds.

 

06.       REVIEWERS OF THIS UPPS

 

06.01Reviewers of this UPPS include:

 

Position                                                         Date

 

Associate Vice President for Finance      April 1 E5Y

and Support Services Planning

 

Associate Vice President for                      April 1 E5Y

Financial Services

 

07.       CERTIFICATION STATEMENT

 

This UPPS has been approved by the following individuals in their official capacities and represents Texas State policy and procedure from the date of this document until superseded.

 

Associate Vice President for Finance and Support Services Planning; senior reviewer of this UPPS

 

Vice President for Finance and Support Services

 

President