There are three types of Reserves Funds
- Reserves for Renewal and Replacement (Depreciation Reserves) are funds generated from rate-based self-supporting activities to replace equipment used to generate the activity. These reserves are authorized based on an approve rate.
- Departments establish base budget using Object Code SB75 – DEPRECIATION based on equipment approved in rates and moved to custody code starting with the letter D. Equipment in Custody Codes that begin with the letter D are used in the depreciation expense calculation. (See the Self-Supporting pages for more information about rates and establishing a depreciation reserve fund).
- Every month General Accounting creates a KFS Journal Voucher (JV) and a KFS BA document which move funds from your operating accounts to your re serve accounts.
- Reserves for Improvement are self-supporting activity funds that are set aside for future use and approved through the self-supporting rate approval process.
- If part of a rate, department establishes a base budget using Object Code SB74 - IMPROVEMENTS RESERVE (see Self-Supporting-Reserves for Improvements).
- Every month General Accounting creates a KFS Journal Voucher (JV) and a KFS BA document which move funds from your operating accounts to your reserve accounts.
- Are net revenues for self-supporting activities like the hospital and university extension.
- There are also a few reserve accounts that have been set aside by the university for specific purposes. The following are a few examples:
- 75030 - Training & Development Assessment Reserve
- 74041 - Employee Support Program Reserve
- If you have question on the use and restrictions on these types of funds please contact your dean's office or BIA Analyst.
Reserve Funds are in funds "7XXXX". These funds are in Sub Fund Group Types 5 & 7.
Reserves for Renewals & Replacements (Depreciation Reserves)
Must ONLY be used to replace the equipment being depreciated with the same or similar equipment performing the same function.
Reserves for Improvement
- Can be used to support the self-supporting activity that generated the reserves.
- Cannot be charged to Federal Contracts and Grants.
All reserve fund expenditures must follow UC Davis and UCOP policies and procedures.
Sub Fund Group Types
- 5 - Reserves for Renewal and Replacement
RESERVES FOR RENEWAL AND REPLACEMENT
- 7 - Reserves
Reserve for Improvements are included in the Reserves Sub-Fund Group.
Frequently Asked Questions
- What happens if I have a rate that charges Reserves for Improvement (RFI) to a federal contract or grant?
- RFI is an unallowable cost for federal contracts and grants. If you have a rate that includes RFI and you charge a federal contract or grant, General Accounting will rebate that amount back to the federal contract or grant. For more information, please visit the Federal Rebate page.
- How often is depreciation charged to my self-supporting fund?
Depreciation is charged monthly. For more information on depreciation, visit the Depreciation page.
Note: Make sure you have a realistic start date for your rate because if you have included depreciation in your rate it will start on the start date indicated whether or not you have activity.
- How is depreciation calculated?
Depreciation = [(Asset Value - Salvage Value - Federal Amount) * Utilization Percentage]/Useful life
In other words, the total cost of the asset less the value of the asset at the end of its useful life less the amount that was purchased with federal funds. Then you multiple that amount by the percentage of time that the asset will be used for your self-supporting activity. You take that total and divide by the useful life of the asset (# of years X 12 months) to get your monthly depreciation.
Note: Rarely does an activity include salvage value but if it does it can be up to 10% of the asset value