Reserve for Depreciation Policy
Policy Number: 600.004.01
Effective Date: December 2010
The Reserve for Depreciation has been established to provide the necessary funds to address the existing deferred maintenance on the campus and to build up a cash reserve which can be used for major renovation projects in the future not otherwise covered by gifts and debt.
The Reserve is a long term asset of the College which is displayed as a line item on the Statement of Financial Position. It may be regarded as a disaggregation of the cash and other investments of the College which are designated for the purpose described above.
Additions to the Reserve
Each year during the closing of the books of account, an amount will be added to the Reserve. The amount available for transfer will be calculated as follows; (depreciation expense plus or minus the operating surplus/deficit minus principal payments on debt minus approved capital expenditures that satisfy the thresholds to be capitalized as assets) times 50%.
Deductions from the Reserve
The Executive Committee shall approve deductions for specific projects recommended by the Finance Committee and the Buildings and Grounds Committee.
Investment of the Reserve
The short term portion of the Fund will be held in a separate money market account so that it is segregated from the operating cash of the College. Interest accruing on this account will be credited to the general operations of the College. In order to protect this portion of the Reserve and the operating cash of the College, transfers to quasi endowment due to the receipt of unrestricted bequests will not be made unless they are $500,000 or more in accordance with the Gift Accounting and Procedures Policy of the College for non-operating unrestricted gifts.
The portion of the Reserve deemed to be long term will be invested in the College’s Investment Pool and accrue income based upon the then current spending policy. This income will be added to the Reserve. Each year the Renewal and Replacement Program monitored by the Buildings and Grounds Committee will be reviewed to determine short and long term cash needs. Funds in excess of the succeeding three years of projects will be determined to be available for long term investment in the Investment Pool. A minimum of $100,000 will be transferred each year from the short term account to the Investment Pool Fund account irrespective of the calculation from above.
The Board of Trustees or the Finance Committee will review the Reserve for Depreciation periodically to determine its appropriateness and effectiveness in funding major renovation projects.
Approved by the Board of Trustees on December 11, 2010.