Category: Administrative
Approval: Vice-Principals' Operational Committee
Responsibility: Associate Vice-Principal (Finance)
Date Initially Approved: April 28, 2014
Date of Last Revision:
Related Policies, Procedures and Guidelines: Debt Management Policy, Procedure for Internal Loans, Capital Projects Approval Policy
Definitions:
Capital Projects: A Capital Project provides for the construction, purchase, or improvement of buildings or grounds, or the installation of new Information Technology systems or campus infrastructure. The Capital Projects Approval Policy outlines requirements for Board of Trustee approval for capital projects.
Internal Loan: Internal Loans are the avenue through which the university provides financing to business units for Capital Projects. An Internal Loan includes both a signed loan agreement and a structured repayment plan.
Purpose/Reason for Policy:
Maintaining and increasing capital assets are fundamental to achieving the University's mission. In cases where capital projects will be funded with future revenue streams or operating budget allocations, Internal Loans may provide full or partial funding to complete the project.
Internal Loans may be financed through the use of cash reserves that would otherwise be invested in the Pooled Investment Fund ("PIF"), or with external debt. Decisions on the source of financing for Internal Loans are made by the Capital Assets and Finance Committee based on recommendations from the Vice-Principal's Operation Committee.
Scope of this Policy:
This policy applies to organizational units within ³ÉÈË´óƬ undertaking Capital Projects in excess of $1 million dollars that require financing.
Policy Statement:
The capacity of the University to issue Internal Loans at any point in time will be strategically managed as part of the University's debt strategy. As Internal Loans represent an opportunity cost to the University, they will be limited to strategic priorities.
Justification for the request of an Internal Loan shall be through a business case that describes the Capital Project and its alignment to the strategic priorities of the university, and outlines how loan payments will be funded.
Internal Loan terms will be for a minimum of five years and a maximum of 40 years. They may not exceed the useful life of the asset.
Interest rates on Internal Loans are based on the University's indicative cost of financing. Interest rate quotes will be valid for 60 days. If the Internal Loan is financed with external debt, the rate applicable to the related external debt shall apply.
Responsibilities:
Business Units are responsible to identify the need and prepare and justify the request for the Internal Loan.
The Vice-Principals' Operations Committee is responsible to review and provide management approval of the Internal Loan.
As per the Debt Management Policy, the Capital Assets and Finance Committee must approve all new Internal Loans.
The Office of the Controller is responsible to administer this policy and associated procedures.
Contact Officer:
Date for Next Review: September 2014
Policies Superseded by this Policy: N/A