Financial Services/Controller Standard Practices Manual

  •  GUIDELINES FOR USE OF CAPITAL FUNDS

7.210 INFORMATION TECHNOLOGY

(click here for Word version of this document)

Effective Date 7/1/2006 Revised Date 9/18/2006

Purpose: To provide guidance concerning the use of capital funding (i.e. Fund 7) resources for the acquisition of information technology.

Reviewed annually; updated as necessary

  Source : ARS Title 15-1465. Election; issuance and sale of bonds for capital outlay

ARS Title 15-1446. Lease-purchase agreements

2004 Capital Development Program Summary - page 11

Bond Overview Document - question 5

Policy Owner: Financial Services/Controller's Office

Applicability: For use by Councils and organizations such as ITAC, as well as faculty, staff, and college administrations.

Overview

As information technology evolves, determining appropriate uses for capital funds may become increasingly difficult. This document provides general guidelines that may be applied to most purchases of technology made from Fund 7 accounts. During the Capital Development Advisory Council (CDAC) process or during review and posting of transactions, it is possible that issues concerning the use of capital funds for technology may be raised that could delay the approval--or possibly result in the cancellation--of a contract. This is because although it may seem that uses are clear cut, there are many issues to consider. Any transactions that do not clearly fit these guidelines should be sent to Capital Asset Accounting for further review.

In addition to the restrictions placed on the use of capital funds by state statutes, ARS 15-1465 specifically prohibits the use of General Obligation Bond Funds for operational costs. General Obligation Bonds carry a heavy responsibility to the voters to use the funds provided in accordance with the intended purposes clearly outlined in the bond language and related documents. Two key concepts were conveyed to the voters during the campaign for the 2004 and the 1994 Bond:

•  Proceeds from the bond would be used to purchase technology

•  No operational costs would be funded with bond proceeds

Guidelines

HARDWARE

Appropriate Uses for Fund 7: Hardware purchases that confer ownership to the college and have a useful life of at least four years may be purchased from Fund 7. Examples include:

•  The purchase of desktop or laptop computers and/or components

•  The purchase of servers and/or components

•  Leasing of hardware where the lease contract meets the accounting criteria for a capital lease as described on the Capital Assets Web site. Note: The lease contract must be reviewed and approved by both the Legal Department and Capital Asset Accounting prior to any obligation on the part of the District or any of its campuses .

• In addition to the terms of the contract, state law limits the amount of lease purchase agreements in aggregate and in terms of annual payments. This limit applies to the entire district and compliance must be assured.

•  The purchase of hardware maintenance agreements if the agreement is purchased as part of the original equipment acquisition or in the same fiscal year as the original acquisition. Note: A maximum of 3 years of maintenance for hardware may be purchased with bond funds.

•  The purchase of training that is necessary to bring staff to an acceptable level of competency on hardware/systems purchased or developed using capital dollars..

•  Consulting contracts that lead to the development and implementation of a major, systemic information system (e.g. the development and implementation of a relational accounting, human resources, student information system with contracts for programmers, project managers, and persons directly involved with the implementation of the system.) In the deliberation about using capital funds for this purpose, the college or district office division must contact Capital Assets for review and discussion as to whether or not Fund 7 resources can be used.

Inappropriate Uses for Fund 7: Purchases of hardware and related costs that do not confer ownership of the equipment to the college are not appropriate uses of Fund 7 resources. Examples include but are not limited to:

• Operational Leases where access to equipment is provided but no ownership confers to the college.
• Maintenance agreements for existing equipment purchased in a prior fiscal year.
• Training costs that are part of on-going operations.
• Any transaction that can be that can be reasonably interpreted to represent "operational expenditures".

SOFTWARE

Appropriate Uses for Fund 7: Software purchases that confer ownership to the college and have a useful life of at least three years may be purchased from Fund 7. Examples include:

• The purchase of software as part of a computer system (i.e. desktop, server, etc).
• The purchase of software as a stand alone item--if ownership confers to MCCCD
• Leasing of software where the lease contract meets the accounting criteria for a capital lease as described on the Capital Assets Web site. Note: The lease contract must be reviewed and approved by both the Legal Department and Capital Asset Accounting prior to any obligation on the part of the District or any of its campuses .

  • In addition to the terms of the contract, state law limits the amount of lease purchase agreements in aggregate and in terms of annual payments. This limit applies to the entire district and compliance must be assured.

• The purchase of software maintenance agreements if the agreement is purchased as part of the original software acquisition or in the same fiscal year as the original acquisition.
• A maximum of 3 years of maintenance may be purchased with bond funds.
• Maintenance does not include operational services normally associated with an Application Service Provider, i.e. housing the software on an internet server.

• The purchase of training that is necessary to bring staff to an acceptable level of competency on software/systems purchased or developed using capital dollars.
• Consulting contracts that lead to the development and implementation of a major, systemic information system (e.g. the development and implementation of a relational accounting, human resources, student information system with contracts for programmers, project managers, and persons directly involved with the implementation of the system.) In the deliberation about using capital funds for this purpose, the college or district office division must contact Capital Assets for review and discussion as to whether or not Fund 7 resources can be used.

Inappropriate Uses for Fund 7: Purchases of software and related costs that do not confer ownership of the software to the college are not appropriate uses of Fund 7 resources. Examples include but are not limited to:

• Operational Leases (Application Service Provider contracts) where access to software is provided over the internet for a specific term and no ownership confers to the college
• Annual renewal licenses for existing software packages
• Maintenance agreements for existing software packages
• Training costs that are part of on-going operations.
• Any transaction that can be reasonably interpreted to represent "operational expenditures"

  ITAC Approval Process

  Updated: 18 September 2006

Prepared by: Capital Asset Accounting