Skip to:

Policy Number: 
4.01.05.60
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office
Purpose: 

The Tennessee Board of Regents, on behalf of its Institutions, adopts this Identity Theft Prevention Policy and enacts this program in an effort to detect, prevent and mitigate identity theft, and to help protect the Institutions, their faculty, staff, students and other applicable constituents from damages related to the loss or misuse of identifying information due to identity theft.

Definitions: 
  • Covered account - includes:
    • Any account that involves or is designated to permit multiple payments or transactions; or
    • Any other account maintained by the Institution for which there is a reasonably foreseeable risk of identity theft to students, faculty, staff or other applicable constituents, or for which there is a reasonably foreseeable risk to the safety or soundness of the Institution from identity theft, including financial, operational, compliance, reputation or litigation risks.
  • Identifying information - is any name or number that may be used, alone or in conjunction with any other information, to identify a specific person, including but not limited to:  name, address, telephone number, social security number, date of birth, government issued driver’s license or identification number, alien registration number, government passport number, employer or taxpayer identification number, student identification number, computer Internet Protocol address or routing code, credit card number or other credit card information.
  • Identity theft - means a fraud committed or attempted using the identifying information of another person without authority.
  • Red flag - is a pattern, practice or specific activity that indicates the possible existence of identity theft.
Policy/Guideline: 
  1. Background
    1. The risk to the institutions of the Tennessee Board of Regents (hereinafter referred to as "Institutions"), its faculty, staff, students and other applicable constituents from data loss and identity theft is of significant concern to the Board and its Institutions, and the Institutions should make reasonable efforts to detect, prevent, and mitigate identity theft.
    2. Under this Policy the program will:
      1. Identify patterns, practices or specific activities (“red flags”) that could indicate the existence of identity theft with regard to new or existing covered accounts (see Definitions);
      2. Detect red flags that are incorporated in the program;
      3. Respond appropriately to any red flags that are detected under this program to prevent and mitigate identity theft;
      4. Ensure periodic updating of the program, including reviewing the accounts that are covered and the identified red flags that are part of this program; and,
      5. Promote compliance with state and federal laws and regulations regarding identity theft protection.
    3. The program shall, as appropriate, incorporate existing TBR and institutional policies and guidelines such as anti-fraud programs and information security programs that establish controls for reasonably foreseeable risks.
  2. Identification of Red Flags
    1. The following examples of red flags are potential indicators of fraud or identity theft. The risk factors for identifying relevant red flags include the types of covered accounts offered or maintained; the methods provided to open or access covered accounts; and, previous experience with identity theft. Any time a red flag or a situation closely resembling a red flag is apparent, it should be investigated for verification.
    2. Alerts, notifications or warnings from a credit or consumer reporting agency.  Examples of these red flags include the following:
      1. A report of fraud or active duty alert in a credit or consumer report;
      2. A notice of credit freeze from a credit or consumer reporting agency in response to a request for a credit or consumer report;
      3. A notice of address discrepancy in response to a credit or consumer report request; and,
      4. A credit or consumer report indicates a pattern of activity inconsistent with the history and usual pattern of activity of an applicant such as:
        1. A recent and significant increase in the volume of inquiries;
        2. An unusual number of recently established credit relationships;
        3. A material change in the use of credit, especially with respect to recently established credit relationships; or,
        4. An account that was closed for cause or identified for abuse of account privileges by a financial institution or creditor.
    3. Suspicious documents. Examples of these red flags include the following:
      1. Documents provided for identification that appears to have been altered, forged or are inauthentic.
      2. The photograph or physical description on the identification document is not consistent with the appearance of the individual presenting the identification.
      3. Other information on the identification is not consistent with information provided by the person opening a new covered account or individual presenting the identification.
      4. Other information on the identification is not consistent with readily accessible information that is on file with the Institution, such as a signature card or a recent check.
      5. An application appears to have been altered or forged, or gives the appearance of having been destroyed and reassembled.
    4. Suspicious personal identifying information. Examples of these red flags include the following:
      1. Personal identifying information provided is inconsistent when compared against other sources of information used by the Institution. For example:
        1. The address does not match any address in the consumer report; or,
        2. The Social Security number (SSN) has not been issued or is listed on the Social Security Administration's Death Master File.
      2. Personal identifying information provided by the individual is not consistent with other personal identifying information provided by that individual. For example:
        1. There is a lack of correlation between the SSN range and date of birth.
      3. Personal identifying information provided is associated with known fraudulent activity. For example:
        1. The address on an application is the same as the address provided on a fraudulent application; or,
        2. The phone number on an application is the same as the number provided on a fraudulent application.
      4. Personal identifying information provided is of a type commonly associated with fraudulent activity. For example:
        1. The address on an application is fictitious, a mail drop, or a prison; or
        2. The phone number is invalid or is associated with a pager or answering service.
      5. The social security number provided is the same as that submitted by another person opening an account.
      6. The address or telephone number provided is the same as or similar to the address or telephone number submitted by that of another person.
      7. The individual opening the covered account fails to provide all required personal identifying information on an application or in response to notification that the application is incomplete.
      8. Personal identifying information provided is not consistent with personal identifying information that is on file with the Institution.
      9. When using security questions (mother's maiden name, pet's name, etc.), the person opening that covered account cannot provide authenticating information beyond that which generally would be available from a wallet or consumer report.
    5. Unusual use of, or suspicious activity related to, the covered account. Examples of these red flags include the following:
      1. Shortly following the notice of a change of address for a covered account, the Institution receives a request for a new, additional, or replacement card, or for the addition of authorized users on the account.
      2. A covered account is used in a manner that is not consistent with established patterns of activity on the account. There is, for example:
        1. Nonpayment when there is no history of late or missed payments;
        2. A material change in purchasing or usage patterns.
      3. A covered account that has been inactive for a reasonably lengthy period of time is used (taking into consideration the type of account, the expected pattern of usage and other relevant factors).
      4. Mail sent to the individual is returned repeatedly as undeliverable although transactions continue to be conducted in connection with the individual's covered account.
      5. The Institution is notified that the individual is not receiving paper account statements.
      6. The Institution is notified of unauthorized charges or transactions in connection with an individual's covered account.
      7. The Institution receives notice from customers, victims of identity theft, law enforcement authorities, or other persons regarding possible identity theft in connection with covered accounts held by the Institution.
      8. The Institution is notified by an employee or student, a victim of identity theft, a law enforcement authority, or any other person that it has opened a fraudulent account for a person engaged in identity theft.
      9. A breach in the Institution’s computer security system.
  3. Detecting Red Flags
    1. Student enrollment. In order to detect red flags associated with the enrollment of a student, the Institution will take the following steps to obtain and verify the identity of the individual opening the account:
      1. Require certain identifying information such as name, date of birth, academic records, home address or other identification; and,
      2. Verify the student’s identity at the time of issuance of the student identification card through review of driver’s license or other government-issued photo identification.
    2. Existing accounts. In order to detect red flags associated with an existing account, the Institution will take the following steps to monitor transactions on an account:
      1. Verify the identification of students if they request Information;
      2. Verify the validity of requests to change billing addresses by mail or email, and provide the student a reasonable means of promptly reporting incorrect billing address changes; and,
      3. Verify changes in banking information given for billing and payment purposes.
    3. Consumer/Credit Report Requests. In order to detect red flags for an employment or volunteer position for which a credit or background report is sought, the Institution will take the following steps to assist in identifying address discrepancies:
      1. Require written verification from any applicant that the address provided by the applicant is accurate at the time the request for the credit report is made to the consumer reporting agency; and
      2. In the event that notice of an address discrepancy is received, verify that the credit report pertains to the applicant for whom the requested report was made and report to the consumer reporting agency an address for the applicant that the Institution has reasonably confirmed is accurate.
  4. Responding to Red Flags
    1. Once a red flag or potential red flag is detected, the Institution must act quickly with consideration of the risk posed by the red flag.
    2. The Institution should quickly gather all related documentation, write a description of the situation and present this information to the Program Administrator for determination.
    3. The Program Administrator (see Section VI) will complete additional authentication to determine whether the attempted transaction was fraudulent or authentic.
    4. The Institution may take the following steps as is deemed appropriate:
      1. Continue to monitor the covered account for evidence of identity theft;
      2. Contact the student or applicant for which a credit report was run;
      3. Change any passwords or other security devices that permit access to covered accounts;
      4. Close and reopen the account;
      5. Determine not to open a new covered account;
      6. Provide the student with a new student identification number;
      7. Notify law enforcement;
      8. Determine that no response is warranted under the particular circumstances;
      9. Cancel the transaction.
  5. Protecting Personal Information
    1. In order to prevent the likelihood of identity theft occurring with respect to covered accounts, the Institutions may take the following steps with respect to its internal operating procedures:
      1. Lock file cabinets, desk drawers, overhead cabinets, and any other storage space containing documents with covered account information when not in use.
      2. Lock storage rooms containing documents with covered account information and record retention areas at the end of each workday or when unsupervised.
      3. Clear desks, workstations, work areas, printers and fax machines, and common shared work areas of all documents containing covered account information when not in use.
      4. Documents or computer files containing covered account information will be destroyed in a secure manner. Institution records may only be destroyed in accordance with the Board's records retention and destruction policy, 1:12:01:00.
      5. Ensure that office computers with access to covered account information are password protected.
      6. Ensure that computer virus protection is up to date.
      7. Avoid the use of social security numbers.
      8. Utilize encryption devices when transmitting covered account information.
    2. Institutional personnel are encouraged to use common sense judgment in securing covered account information to the proper extent.
    3. Furthermore, this section should be read in conjunction with the Family Education Rights and Privacy Act (“FERPA”), the Tennessee Public Records Act, and other applicable laws and policies.
    4. If an employee is uncertain of the sensitivity of a particular piece of information, he/she should contact his/her supervisor. The Office of the General Counsel may be contacted for advice.
  6. Program Administration
    1. Oversight and Appointment of the Institutional Program Administrator
      1. The Identity Theft Prevention Policy is the responsibility of the governing body, the Tennessee Board of Regents. Approval of the initial plan must be appropriately documented and maintained.
      2. Each individual institution is required to tailor this program taking into consideration its size, complexity, and nature of its operation. Each institution will consider the types of accounts it offers and maintains, the methods it provides to open those accounts, the methods it provides to access its accounts and its previous experience with identity theft.
      3. Operational responsibility of the program at each individual institution is delegated to a Program Administrator appointed by the President and shall include but not be limited to;
        1. The oversight, development, implementation and administration of the program;
        2. Approval and implementation of needed changes to the program; and,
        3. Staff training.
      4. The Program Administrator is also responsible for ensuring that appropriate steps are taken for preventing and mitigating identity theft, for reviewing any staff reports regarding the detection of red flags, and for determining which steps should be taken in particular circumstances when red flags are suspected or detected.
      5. A report to the Institution’s President should be made annually concerning institutional compliance with and effectiveness of the program, and the responsibility for such report may be placed with the Program Administrators. This report should address;
        1. Service provider arrangements;
        2. The effectiveness of the program in addressing the risk of identity theft;
        3. Significant incidents of identity theft and the institution’s response; and,
        4. Any recommendations for material changes to the program.
    2. Staff training
      1. Staff training shall be conducted for all employees for whom it is reasonably foreseeable, as determined by the Program Administrator, that may come into contact with covered accounts or identifying information.
    3. Periodic Updates to the Program
      1. At periodic intervals established in the program, or as required, the program will be re-evaluated to determine whether all aspects of the program are up to date and applicable.
      2. Consideration will be given to the Institution’s;
        1. Experiences with identity theft situations;
        2. Changes in identity theft methods, detection methods or prevention methods; and,
        3. Changes in the Institution’s business arrangements with other entities. 
      3. Periodic reviews will include an assessment of which accounts are covered by the program.
        1. As part of the review, red flags may be revised, replaced or eliminated. Defining new red flags may also be appropriate.
      4. Actions to take in the event that fraudulent activity is suspected or discovered may also require revision to the program.
    4. Overview of service provider arrangements
      1. It is the responsibility of the Institution to ensure that the activities of all service providers are conducted in accordance with reasonable policies and procedures designated to detect, prevent, and mitigate the risk of identity theft.
      2. In the event the Institution engages a service provider to perform an activity in connection with one or more covered accounts, the Institution will take the following steps to ensure the service provider performs its activity in accordance with reasonable policies and procedures designed to detect, prevent and mitigate the risk of identity theft.
        1. Require, by contract, that service providers have such policies and procedures in place; or,
        2. Require, by contract, that service providers review the Institution’s program and report any red flags to the Program Administrator.
          1. Specific language for inclusion in contracts can be found in TBR Guideline G-030 Contracts and Agreements.
      3. A service provider that maintains its own identity theft prevention program, consistent with the guidance of the red flag rules and validated by appropriate due diligence, may be considered to be meeting these requirements.
Sources: 

Authority

T.C.A. § 49-8-203; All Federal and State statutes, codes, rules and regulations referenced in this policy.

History

March 26, 2009 Board meeting; June 19, 2009.

Policy Number: 
4.01.05.50
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office
Purpose: 

The Tennessee Board of Regents is committed to the responsible stewardship of its resources. Management of each TBR institution is responsible for maintaining a work environment that promotes ethical and honest behavior. Additionally, it is the responsibility of management of each TBR institution to establish and implement internal control systems and procedures to prevent and detect irregularities, including fraud, waste and abuse. Management at all levels should be aware of the risks and exposures inherent in their areas of responsibility, and should establish and maintain proper internal controls to provide for the security and accountability of all resources entrusted to them.

Definitions: 
  • Fraud - An intentional act to deceive or cheat, ordinarily for the purpose or result of causing a detriment to another and/or bringing about some benefit to oneself or others. Fraudulent activities may include, but are not limited to the following:
    • Theft, misappropriation, misapplication, destruction, removal, or concealment of any institutional assets or resources, including but not limited to funds, securities, supplies, equipment, real property, intellectual property or data.
    • Improper use or assignment of any institutional assets or resources, including but not limited to personnel, services or property.
    • Improper handling or reporting of financial transactions, including use, acquisitions and divestiture of state property, both real and personal.
    • Authorization or receipt of compensation for hours not worked.
    • Inappropriate or unauthorized use, alteration or manipulation of data, computer files, equipment, software, networks, or systems, including personal or private business use, hacking and software piracy.
    • Forgery or unauthorized alteration of documents.
    • Falsification of reports to management or external agencies.
    • Pursuit of a personal benefit or advantage in violation of the TBR Conflict of Interest Policy.
    • Concealment or misrepresentation of events or data.
    • Acceptance of bribes, kickbacks or any gift, rebate, money or anything of value whatsoever, or any promise, obligation or contract for future reward, compensation, property or item of value, including intellectual property.
  • Waste - Waste involves behavior that is deficient or improper when compared with behavior that a prudent person would consider a reasonable and necessary business practice given the facts and circumstances. Waste is a thoughtless or careless act, resulting in the expenditure, consumption, mismanagement, use, or squandering of institutional assets or resources to the detriment or potential detriment of the institution. Waste may also result from incurring unnecessary expenses due to inefficient or ineffective practices, systems, or controls. Waste does not necessarily involve fraud, violation of laws, regulations, or provisions of a contract or grant agreement.
  • Abuse - Abuse involves behavior that is deficient or improper when compared with behavior that a prudent person would consider a reasonable and necessary business practice given the facts and circumstances. Abuse also includes misuse of authority or position for personal financial interest or those of an immediate or close family member or business associate. Abuse does not necessarily involve fraud, violation of laws, regulations, or provisions of a contract or grant agreement. (U.S. Government Accountability Office, Government Auditing Standards, July 2007.)
Policy/Guideline: 
  1. Preventing Fraud, Waste or Abuse
    1. Maintaining an Ethical Work Environment
      1. Management is responsible for maintaining a work environment that promotes ethical and honest behavior on the part of all employees, students, contractors, vendors and others.
      2. To do so, management at all levels must behave ethically and communicate to employees and others that they are expected to behave ethically.
      3. Management must demonstrate through words and actions that unethical behavior will not be tolerated.
    2. Implementing Effective Internal Control Systems
      1. Management of each TBR institution has the responsibility to establish and implement internal control systems and procedures to prevent and detect irregularities, including fraud, waste and abuse.
      2. Internal controls are processes performed by management and employees to provide reasonable assurance of:
        1. Safeguards over institutional assets and resources, including but not limited to cash, securities, supplies, equipment, property, records, data or electronic systems;
        2. Effective and efficient operations;
        3. Reliable financial and other types of reports; and
        4. Compliance with laws, regulations, contracts, grants and policies.
      3. To determine whether internal controls are effective, management should perform periodic risk and control assessments, which should include the following activities:
        1. Review the operational processes of the unit under consideration.
        2. Determine the potential risk of fraud, waste, or abuse inherent in each process.
        3. Identify the controls included in the process (or controls that could be included) that result in a reduction in the inherent risk.
        4. Assess whether there are internal controls that need to be improved or added to the process under consideration.
        5. Implement controls or improve existing controls that are determined to be the most efficient and effective for decreasing the risk of fraud, waste or abuse.
      4. Most managers will find that processes already include a number of internal controls, but these controls should be monitored or reviewed for adequacy and effectiveness on a regular basis and improved as needed. Typical examples of internal controls may include, but are not limited to:
        1. Adequate separation of duties among employees.
        2. Sufficient physical safeguards over cash, supplies, equipment and other resources.
        3. Appropriate documentation of transactions.
        4. Independent validation of transactions for accuracy and completeness.
        5. Documented supervisory review and approval of transactions or other activities.
        6. Proper supervision of employees, processes, projects or other operational functions.
    3. Reviews of Internal Control Systems
      1. Audits or other independent reviews may be performed on various components of the internal control systems.
    4. Internal Audit
      1. Internal Audit is responsible for assessing the adequacy and effectiveness of internal controls that are implemented by management and will often recommend control improvements as a result of this assessment.
      2. During an audit of a department or process, Internal Audit will also perform tests designed to detect fraud, waste or abuse that may have occurred.
    5. External Audits
      1. The Tennessee Department of Audit, Division of State Audit, performs periodic financial audits of Tennessee Board of Regents institutions.
      2. One purpose of this type audit is to evaluate an institution’s internal controls, which will often result in recommendations for control improvements.
      3. State Audit will also perform tests designed to detect fraud, waste or abuse that may have occurred.
    6. Other Reviews
      1. Various programs may be subject to audits or reviews by federal, state or other outside agencies based on the type of program, function or funding.
      2. Although audits and reviews may include assessments of internal controls, the primary responsibility for prevention and detection of fraud, waste or abuse belongs to management.
      3. Therefore, management should take steps to review internal controls whether or not audits are to be performed.
  2. Reporting Fraud, Waste or Abuse
    1. Responsibility for Reporting Fraud, Waste or Abuse
      1. Any official of any agency of the state having knowledge that a theft, forgery, credit card fraud, or any other act of unlawful or unauthorized taking, or abuse of, public money, property, or services, or other shortages of public funds has occurred shall report the information immediately to the office of the Comptroller of the Treasury (T.C.A. § 8-19-501(a)), To ensure compliance with this statute, the Tennessee Board of Regents system office provides a means for institutional employees and others to report such matters, which are subsequently reported to the Comptroller's Office.
        1. Institutional administration with knowledge of fraud, waste or abuse will report such incidents immediately.
        2. Others, including institutional management, faculty and staff with a reasonable basis for believing that fraud, waste or abuse has occurred are strongly encouraged to immediately report such incidents (T.C.A. § 8-50-116).
        3. Students, citizens and others are also encouraged to report known or suspected acts of fraud, waste or abuse.
        4. Although proof of an improper activity is not required at the time the incident is reported, anyone reporting such actions must have reasonable grounds for doing so.
        5. Employees with knowledge of matters constituting fraud, waste or abuse, that fail to report it or employees who knowingly make false accusations may be subject to disciplinary action.
    2. Protection from Retaliation
      1. State law (T.C.A. § 8-50-116) prohibits discrimination or retaliation against employees for reporting allegations of dishonest acts or cooperating with auditors conducting an investigation.
      2. The Higher Education Accountability Act of 2004 directs that a person who knowingly and willingly retaliates or takes adverse action of any kind against any person for reporting alleged wrongdoing pursuant to the provisions of this part commits a Class A misdemeanor.
    3. Confidentiality of Reported Information
      1. According to T.C.A. § 49-14-103, detailed information received pursuant to a report of fraud, waste or abuse or any on-going investigation thereof shall be considered working papers of the internal auditor and shall be confidential.
      2. Although every attempt will be made to keep information confidential, circumstances such as an order of a court or subpoena may result in disclosure.
      3. Also, if TBR or one of its institutions has a separate legal obligation to investigate the complaint (e.g. complaints of illegal harassment or discrimination), TBR and its institutions cannot ensure anonymity or complete confidentiality.
    4. Methods for Reporting Fraud, Waste or Abuse
      1. Any employee who becomes aware of known or suspected fraud, waste or abuse should immediately report the incident to an appropriate departmental official. Incidents should be reported to one of the following officials or offices:
        1. A supervisor or department head;
        2. an institutional official;
        3. the institutional internal auditor;
        4. the Office of System-wide Internal Audit at 615-366-4441 or reportfraud@tbr.edu; or
        5. the Tennessee Comptroller of the Treasury’s Hotline for fraud, waste and abuse at 1-800-232-5454.
      2. If the incident involves their immediate supervisor, the employee should report the incident to the next highest-level supervisor or one of the officials or offices listed above. Employees should not confront the suspected individual or initiate an investigation on their own since such actions could compromise the investigation.
      3. A department official or other supervisor who receives notice of known or suspected fraud, waste or abuse must immediately report the incident to the following:
        1. President/Vice President for Business and Finance, or designee.
        2. Internal Audit Department
        3. Safety and Security Office/Campus Police (when appropriate)
      4. The President/Vice President or designee receiving such notice will immediately notify the TBR Vice Chancellor for Business and Finance and the System-wide Chief Audit Executive regarding the acknowledged or suspected fraud or misconduct.
      5. The System-wide Chief Audit Executive will notify the Comptroller of the Treasury of instances of fraud, waste or abuse.
      6. After initial notification, each institution should refer to TBR Guideline B-080, Reporting and Resolution of Institutional Losses, for additional reporting procedures.
  3. Investigations/Actions
    1. Cooperation of Employees
      1. Individuals involved with suspected fraud, waste or abuse should assist with and cooperate in any authorized investigation, including providing complete, factual responses to questions and either providing access to or turning over relevant documentation immediately upon request by any authorized person.
      2. The refusal by an employee to provide such assistance may result in disciplinary action.
    2. Remedies Available
      1. The Tennessee Board of Regents will evaluate the information provided and make a determination concerning external reporting obligations, if any, and the feasibility of pursuing available legal remedies against persons or entities involved in fraud, waste or abuse against the institution.
      2. Remedies include, but are not limited to;
        1. terminating employment,
        2. requiring restitution, and
        3. forwarding information regarding the suspected fraud to appropriate external authorities for criminal prosecution.
      3. In those cases where disciplinary action is warranted, the Office of Personnel/Human Resources, Office of General Counsel, and other appropriate offices shall be consulted prior to taking such action, and applicable institutional and Board policies related to imposition of employee discipline shall be observed.
    3. Resignation of Suspected Employee
      1. An employee suspected of gross misconduct may not resign as an alternative to discharge after the investigation has been completed.
      2. Exceptions to this requirement can only be made by the institution’s President, and require advance consultation with and approval by the Vice Chancellor for Business and Finance.
      3. If the employee resigns during the investigation, the employment records must reflect the situation as of the date of the resignation and the outcome of the investigation (General Personnel Policy, 5:01:00:00).
    4. Effect on Annual Leave
      1. An employee who is dismissed for gross misconduct or who resigns or retires to avoid dismissal for gross misconduct shall not be entitled to any payment for accrued but unused annual leave at the time of dismissal (Annual Leave Policy, 5:01:01:01; T.C.A. § 8-50-807).
    5. Student Involvement
      1. Students found to have participated in fraud, waste or abuse as defined by this guideline will be subject to disciplinary action pursuant to the TBR Policy 3:02:00:01, General Regulations on Student Conduct and Disciplinary Sanctions.
      2. The Dean of Students/Vice President of Student Affairs/TCAT President, or designee, will be responsible for adhering to applicable due process procedures and administering appropriate disciplinary action.
    6. Confidentiality during Investigation
      1. All investigations will be conducted in as strict confidence as possible, with information sharing limited to persons on a “need to know” basis.
      2. The identities of persons communicating information or otherwise involved in an investigation or allegation of fraud, waste or abuse will not be revealed beyond the institution and staff of the TBR Offices of General Counsel, Business and Finance and System-wide Internal Audit unless necessary to comply with federal or state law, or if legal action is taken.
    7. Management’s Follow-up Responsibility
      1. Administrators at all levels of management must implement, maintain, and evaluate an effective compliance program to prevent and detect fraud, waste and abuse.
      2. Once such activities have been identified and reported, the overall resolution should include an assessment of how it occurred, an evaluation of what could prevent recurrences of the same or similar conduct, and implementation of appropriate controls, if needed.
Sources: 

Authority

T.C.A. § 49-8-203; All Federal and State statutes, codes, acts, rules and regulations referenced in this policy.

History

TBR Board Meeting, March 28, 2008; TBR Board Meeting, December 8, 2011; TBR Board Meeting, March 27, 2015.

Policy Number: 
4.01.05.00
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office, Board Members
Purpose: 

This policy addresses staffing, responsibilities of the internal audit function, audit planning, and reporting on internal audit activities.

In addition to this policy, the Office of System-wide Internal Audit maintains an audit manual. The purpose of the audit manual is to provide for consistency, continuity, and standards of acceptable performance.

Policy/Guideline: 
  1. General Statement
    1. The internal audit function contributes to the improvement of the institution's operations by providing objective and relevant assurance regarding risk management, control, and governance processes to management and the Board.
    2. Management is responsible for evaluating the institution's risks and establishing and maintaining adequate controls and processes.
    3. To provide relevant information, the internal audit activity will consider the goals of the institution, management's risk assessments and other input from management in determining its risk-based audit activities.
  2. Internal Audit Standards
    1. Each internal audit function shall adhere to The Institute of Internal Auditors' (IIA) International Standards for the Professional Practice of Internal Auditing and Code of Ethics (T.C.A. § 4-3-304(9)). The Institute of Internal Auditors, International Professional Practices Framework (IPPF), incorporates the definition of internal auditing, the International Standards for the Professional Practice of Internal Auditing, the Code of Ethics, and the Core Principles for the Professional Practice of Internal Auditing into one document. It includes the following definition of internal auditing:
      1. Internal Auditing is an independent, objective assurance and consulting activity designed to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.
    2. Risk is the possibility of an event occurring that will have an impact on the achievement of an institution's goals and objectives.
      1. Risk is measured in terms of the impact an event may have and the likelihood that the event will occur.
      2. To optimize the achievement of the institution's goals and objectives, the Board and management act to minimize the related risks by implementing reasonable procedures to control and monitor the risks.
    3. Governance processes are the combination of processes and structures implemented by the Board to inform, direct, manage, and monitor the activities of the organization toward the achievement of its objectives.
      1. Examples of such processes include:
        1. The organizational structure within an institution or a department.
        2. Policies, guidelines, and procedures instituted by the Board or management to direct and control a particular activity such as maintenance fees or hiring practices. 
        3. Preparation and review procedures for preparing reports such as annual financial statements or federal grant or financial aid reports.
    4. The IPPF includes attribute standards, which address the expected characteristics of organizations and individuals performing internal audit activities and performance standards, which describe the nature of internal audit activities and establish criteria to evaluate the performance of internal audit activities.
    5. To assure compliance with the IIA Standards, internal audit offices must implement and maintain a quality assurance and improvement program that incorporates both internal and external review activities.
      1. Internal reviews include both ongoing and periodic review activities.
      2. External reviews must be performed at least every five years by a qualified, independent reviewer.
      3. Results of quality assurance reviews will be communicated to the Audit Committee and management.
  3. Internal Audit Personnel
    1. Community Colleges shall employ at least one full-time internal auditor.
    2. The titles of internal audit staff shall be consistent within the overall institutional structure.
    3. Internal Audit Staff
      1. Internal audit staff must possess the professional credentials, knowledge, skills, and other competencies needed to perform their individual responsibilities.
      2. The internal audit function collectively must possess or obtain the knowledge, skills, and other competencies needed to perform its responsibilities.
      3. The System-wide Chief Audit Executive must be licensed as a Certified Public Accountant or a Certified Internal Auditor, maintain an active license and annually complete sufficient, relevant continuing professional education to satisfy the requirements for the professional certification held.
      4. The campus Internal Audit Director must be licensed as a Certified Public Accountant, Certified Internal Auditor, and/or a Certified Information Systems Auditor and maintain an active license.
      5. All system auditors must annually complete sufficient, relevant continuing professional education to satisfy the requirements for the professional certification held.
      6. Internal Audit Directors should communicate concerns to management and the System-wide Chief Audit Executive regarding the lack of sufficient resources to complete the objectives of an engagement or the audit plan.
      7. Such resources may include the need for additional personnel or personnel with specialized knowledge, such as those with knowledge of fraud, information technology or other technical areas.
    4. Appointments
      1. The appointment of campus Internal Audit Directors as recommended by the President is subject to approval by the Chancellor or designee (T.C.A. §.49-14-106).
      2. The appointment of the System-wide Chief Audit Executive is subject to review and approval by the Audit Committee of the Board of Regents (T.C.A. §.49-14-102).
    5. Compensation
      1. Compensation of the campus internal auditors is subject to review by the Audit Committee of the Board of Regents.
      2. Compensation of the System-wide Chief Audit Executive and the system office internal auditors is subject to review and approval by the Audit Committee of the Board of Regents.
    6. Termination or Change of Status
      1. The termination or change of status of campus Internal Auditor Directors (T.C.A. § 49-14-106) requires the prior approval of the Chancellor and the Audit Committee of the Board of Regents.
      2. The System-wide Chief Audit Executive (T.C.A. §.49-14-102) may be removed only for cause, which requires a majority vote of the Board of Regents.
  4. Internal Audit Role and Scope
    1. Reporting Structure
      1. In accordance with T.C.A. § 49-14-102, the System-wide Chief Audit Executive reports directly to the Audit Committee and the Tennessee Board of Regents.
      2. Campus internal auditors report to the respective campus President with audit reporting responsibility to the Audit Committee and the Board through the System-wide Chief Audit Executive.
      3. This reporting structure assures the independence of the internal audit function.
    2. The TBR, Office of System-wide Internal Audit, hosts periodic meetings and communicates with the audit directors on matters of mutual interest.
    3. The Office of System-wide Internal Audit maintains an internal audit manual to guide the internal audit activity at each institution in a consistent and professional manner.
    4. The internal auditors’ responsibilities include:
      1. Working with management to assess institutional risks and developing an audit plan that considers the results of the risk assessment.
      2. Evaluating institutional controls to determine their effectiveness and efficiency.
      3. Coordinating work with external auditors, program reviewers, and consultants.
      4. Determining the level of compliance with internal policies and procedures, state and federal laws, and government regulations.
      5. Testing the timeliness, reliability, and usefulness of institutional records and reports.
      6. Recommending improvements to controls, operations, and risk mitigation resolutions.
      7. Assisting the institution with its strategic planning process to include a complete cycle of review of goals and values.
      8. Evaluating program performance.
      9. Performing consulting services and special requests as directed by the Audit Committee, the Chancellor, or the institution’s President.
    5. The scope of internal auditing extends to all aspects of institutional operations and beyond fiscal boundaries. The internal auditor shall have access to all records, personnel, and physical properties relative to the performance of duties and responsibilities.
    6. The scope of a particular internal audit activity may be as broad or as restricted as required to meet management needs.
    7. Objectivity is essential to the internal audit function. Therefore, internal audit personnel should not be involved in the development and installation of systems and procedures, preparation of records, or any other activities that the internal audit staff may review or appraise. However, internal audit personnel may be consulted on the adequacy of controls incorporated into new systems and procedures or on revisions to existing systems.
    8. Management is responsible for identifying, evaluating, and responding to potential risks that may impact the achievement of the institution’s objectives. Auditors continually evaluate the risk management, internal control, and governance processes. To facilitate these responsibilities, Internal Audit will receive notices or copies of external audit reviews, program reviews, fiscally related consulting reports, cash shortages, physical property losses, and employee misconduct.
  5. Audit Plans and Activity Reports
    1. Internal Audit shall develop an annual audit plan using an approved risk assessment methodology.
    2. At the beginning of each fiscal year, after consultation with the Chancellor or President and other institution management, Internal Audit will prepare an annual audit plan. The audit plan must be flexible to respond to immediate issues and will be revised for such changes during the year.
    3. Audit plans and revisions will be reviewed by the System-wide Chief Audit Executive and approved by the Audit Committee.
    4. At the end of each fiscal year, Internal Audit will prepare an annual activity report of all significant audit services performed.
    5. Annual activity reports and approved audit plans will be provided to the Comptroller's Office, Division of State Audit.
  6. Audit Engagements
    1. Audit engagements will be planned to provide relevant results to management and the Audit Committee regarding the effectiveness and efficiency of processes and controls over operations. To ensure management's expectations are met, auditors will communicate with management regarding the objectives and scope of the engagement.
    2. In planning and during the engagement, auditors should consider and be alert to risks that affect the institution's goals and objectives, operations, and resources. Auditors should consider risks based on the operations under review, which include but are not limited to the risk of financial misstatements, noncompliance, and fraud.
    3. An audit work program will be designed to achieve the objectives of the engagement and will include the steps necessary to identify, analyze, evaluate and document the information gathered and the conclusions reached during the engagement.
    4. Working papers that are created, obtained, or compiled by an internal audit staff are confidential and are not an open record (T.C.A. § 4-3-304(9)).
  7. Communicating Audit Results
    1. A written report that documents the objectives, scope, conclusions, and recommendations of the audit will be prepared for audit engagements providing assurance to the Board and management. Management will include corrective action for each reported finding.
    2. Internal Audit will follow-up on findings or recommendations included in internal audit reports, investigation reports, and State Audit reports. The status of Internal Audit recommendations and/or findings will be monitored through the recommendation logs. For recommendations not corrected at the time of Internal Audit follow-up or the corrective action due date, management will be asked to provide a revised corrective action implementation date. A written internal audit follow-up report is required for all State Audit reports that include findings, regardless of the current status of audit findings. The Chancellor or institution’s President, along with the Audit Committee, will be notified at the conclusion of a follow-up review if management has not corrected the reported finding or implemented the recommendation.
    3. A written report that documents the objectives, scope, conclusions, and recommendations will be prepared for investigations resulting from allegations or identification of fraud, waste, or abuse. As appropriate to the circumstances, management will include corrective action for each reported finding. In a case where allegations are not substantiated by the review and there are no other operational concerns to report to management regarding the review, the case may be closed by writing a memo to the working paper file documenting the reasons for closing the case.
    4. Reports on special studies, consulting services, and other non-routine items should be prepared as appropriate, given the nature of the assignment.
    5. All internal audit reports will be signed by the institution's Internal Audit Director and transmitted directly to the Chancellor or President, as applicable, in a timely manner.
    6. The Internal Audit Director will transmit an electronic copy of the internal audit report to the System-wide Chief Audit Executive.
    7. The System-wide Chief Audit Executive will present significant results of internal audit reports to the Audit Committee quarterly.
    8. The System-wide Chief Audit Executive will provide a copy of each report to the Comptroller's Office, Division of State Audit.
  8. Exceptions
    1. Any exceptions to the policy established herein shall be subject to the approval of the System-wide Chief Audit Executive and the Audit Committee.
Sources: 

Authority

T.C.A. § 49-8-203; All other State statutes referenced in this policy; Institute of Internal Auditors

History

June 3, 1981 TBR Presidents’ Meeting; July 1, 1984; May 20, 1986; February 14, 1989; November 14, 1989; August 13, 2002; February 10, 2004; November 18, 2004; Changed from Guideline B-050 at TBR Board Meeting, June 29, 2007; TBR Board Meeting, December 6, 2007; TBR Board Meeting, December 8, 2011; TBR Board Meeting March 27, 2015; TBR Board Meeting September 29, 2018; TBR Board Meeting December 12, 2023.

Policy Number: 
4.01.04.00
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges
Purpose: 

The purpose of this policy is to establish responsibilities and procedures regarding the solicitation and acceptance of gifts to the institutions governed by the Tennessee Board of Regents.

T.C.A. § 49-8-203 provides:

Board shall have the power to receive donations of money, securities, and property from any source on behalf of the institutions..., which gifts shall be used in accordance with the conditions set by the donor.

The Board considers the solicitation and acceptance of gifts to be appropriate administrative responsibilities of institutional presidents and delegates to the presidents the authority to solicit and accept gifts in accordance with the provisions of this policy.

Policy/Guideline: 
  1. General Statement
    1. The Board recognizes the vital importance of gifts to institutional development.
    2. Gifts of real and personal property from individuals and organizations often benefit institutions by making possible the accomplishment of objectives for which support from other sources is limited or unavailable.
    3. Gifts also often represent a means by which the donor may contribute to an aspect of postsecondary education that is of particular interest to the donor.
    4. The Board authorizes and encourages the institutions to solicit and accept gifts for purposes that are consistent with their missions.
    5. All activities related to the solicitation and acceptance of gifts shall be implemented in a manner which serves the mutual interests of the donors and institutions.
    6. To this end, each institution shall develop policies and procedures which incorporate the following provisions.
      1. Solicitation of Gifts
        1. The president shall designate the campus official(s) authorized to approve and conduct activities for the purpose of soliciting gifts to the institution.
        2. Criteria and procedures for soliciting gifts shall be established which clearly define appropriate activities and the campus approval process.
        3. Solicitation of gifts which may require a commitment of institutional resources must be approved by the president.
      2. Acceptance of Gifts
        1. The president is authorized to accept gifts on behalf of the institution, subject to the following conditions:
          1. Only the Board may accept a gift if board acceptance is a condition set by the donor;
          2. Only the Chancellor and Board may accept gifts of real property or any permanent interest in real property, and title must be conveyed to the Board on behalf of the institution; in the name of the Tennessee Board of Regents for the use and benefit of the institution.
          3. Any acquisition of real property by gift or devise which obligates the institution, Tennessee Board of Regents or State of Tennessee to expend State of Tennessee funds for capital improvements or continuing operating expenditures shall be approved by the State Building Commission in accordance with T.C.A. § 4-15-102(d)(2) prior to acceptance by the Chancellor and Board. Any such Deed transferring title to the Tennessee Board of Regents shall not be recorded until the State Building Commission has approved the acceptance of the gift property.
          4. Gifts with conditions that ultimately will require consideration by the Board or Chancellor must be approved by the Chancellor prior to acceptance (e.g., gifts to support the initiation of a new academic program or capital improvement project); and
          5. Gifts of property subject to an indebtedness must be approved by the Chancellor prior to acceptance.
          6. The cost of accepting or keeping a gift in accordance with donor restrictions should not cost more than the benefit of the gift.
        2. The president may recommend approval by the Chancellor or Board prior to acceptance of any gift.
        3. The president may delegate to a campus official or officials his/her authority to accept gifts on behalf of the institution; however, institutional policies must identify the specific types of gifts that may be accepted by the designated official(s). The acceptance of all gifts is subject to confirmation by the president.
        4. Corporate stock given to an institution may be sold by the institution through or in consultation with a registered security broker within 60 days of receipt of the stock certificate, and the sale may be executed by the president or a designated representative.
        5. Appropriate procedures must be established for acknowledging acceptance of gifts and for ensuring compliance with conditions set by the donors and in compliance with IRS regulations.
      3. Records and Reporting
        1. Adequate records of all gifts shall be maintained by the institution in accordance with accepted accounting procedures to allow a proper audit trail.
        2. A summary of all gifts to the institution during a fiscal year shall be included in the institution's annual report to the Board, as required by Board Policy (No. 1:02:10:00, Annual Reports).
      4. Foundations
        1. For purposes of distinguishing institutional gifts and related procedures from those of foundations established pursuant to Board Policy (No. 4:01:07:02, Foundations):
          1. The institution may not accept gifts specifically intended for the foundation, and only gifts specifically intended for a foundation may be accepted by a foundation.
          2. In general, institutional resources may not be used to meet conditions of gifts to a foundation; however, exceptions may be approved by the president or the Chancellor in accordance with the provisions of this policy on acceptance of gifts.
          3. The institution must maintain records of gifts to the institution separate from those of gifts to the foundation.
          4. The institution shall report gifts to foundations in the summary of gifts during a fiscal year to be included in its annual report, as provided in this policy in b. under Records and Reporting.
Sources: 

Authority

T.C.A. § 49-8-203; T.C.A. § 4-5-102

History

TBR Meeting, September 30, 1983; September 21, 1990; TBR Meeting, March 15, 1991; TBR Meeting March 20, 1992; TBR Meeting March 30, 2007; Board Meeting June 20, 2014.

Policy Number: 
4.01.03.00
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
Community Colleges
Purpose: 

The purpose of the following policy is to outline significant provisions for consistent administration of fees, charges, refunds, payment of fees and enrollment of students for the community colleges governed by the Tennessee Board of Regents. The policy largely represents a consolidation of existing statements and practices. The policy contents include general and specific provisions for: standard/in-state tuition (sometimes referred to as maintenance fees); out-of-state tuition; other fees; deposits; refunds; payment of fees and enrollment of students.

The policy supersedes all previous fee and refund policies and may be revised by action of the Tennessee Board of Regents or the Chancellor. Exceptions to the policy may be made by the Chancellor.

Policy/Guideline: 
  1. General Provisions
    1. Establishment of Tuition, Fees and Charges
      1. The Tennessee Board of Regents must establish or approve all tuition, institutional fees, and charges unless authority has been delegated to the chancellor or presidents.
      2. The institution president is responsible for the enforcement and collection of all fees and charges. Fees and charges which specifically do not require Board approval, unless otherwise noted, must receive formal approval by the chancellor or their designee or the president or their designee as applicable (see section VII for pass-through charges).
      3. Institutions should attempt to follow a general format in publishing information on fees and charges, including but not limited to the following:
        1. All statements which include the fee amount should be complete and specific enough to prevent misunderstanding by readers.
        2. When a fee is quoted, the refund procedures should be clearly stated.  If there are qualifying conditions for refunds, those conditions also should be stated. If there is no refund, it should be labeled as non-refundable.
        3. Whenever possible, specific dates related to the payment of fees and the refund procedures should be stated.
        4. It should be made clear that fees are subject to change
  2. Standard/In-State Tuition  
    1. Description
      1. Standard tuition, also referred to as in-state tuition, is a charge to all students enrolled in credit courses. It is calculated based on the number of Student Credit Hours (SCH's) for which the student enrolls.  
      2. The charge is applicable to courses for which the student is enrolled on an audit basis.
    2. Rates
      1. Rates are established by the Board and incorporated in the tuition and fee schedule. The hourly tuition and fee rate will be discounted when students enroll in more than 12 hours.
      2. For community colleges with multiple summer sessions, tuition may be assessed by using the current part-time rate with no maximum amount for total credit hours enrolled.
      3. Tuition and fees may not be waived, except as provided by exception in subsection C.
      4. See TBR Policy 2.03.01.04 Admission, Enrollment, and Readmission of Service Members for information related to charges for eligible service members after returning from periods of active service. 
    3. Accounting Treatment
      1. A revenue account for standard/in-state tuition is used to record both the revenue assessed and refunds made.
      2. As provided in GASB Statements 34 and 35, summer school revenues and expenditures must be accrued at fiscal year-end. Summer school revenue and expenditures will not be allocated to only one fiscal year.
      3. In some cases, full tuition and fees are not assessed to students who self-identify under one of the below categories. These occur when statutes establish separate rates for such groups as the disabled, elderly, and military dependents. The difference between normal fees and special fees is not assessed. Fees not assessed in these cases do not represent revenue.
        1. Pursuant to T.C.A. § 49-7-113, exceptions exist for certain disabled and elderly students, as well as state service retirees. For audit courses, no tuition or mandatory fee is required for persons with a permanent, total disability, persons 60 years of age or older and domiciled in Tennessee and persons who have retired from state service with 30 or more years of service, regardless of age. For courses taken for credit, a fee of $70 per semester may be charged to persons with a permanent, total disability, and persons who will become 65 years of age or older during the academic semester in which they begin classes and who are domiciled in Tennessee. (Note: T.C.A. provides for a waiver of mandatory tuition and fees but does not apply to non-mandatory fees). 
        2. Pursuant to T.C.A. § 49-7-102, certain statutory tuition and fee exceptions exist for dependents and spouses of military personnel killed, missing in action, or officially declared a prisoner of war while serving honorably as a member of the armed forces during a period of armed conflict. If these provisions are invoked by a student, the correct applicable law should be determined and followed. 
      4. Agreements/contracts may be executed with a third party (federal agency, corporation, institution, etc.), but not with the individual student, to deliver routine courses at a fixed rate or for the cost of delivering the course and may not charge the fixed rate fees to individual students. Individual student fees will be assessed as usual and charged to the functional category Scholarships and Fellowships. The amount charged to or paid by the third party is credited to the appropriate Grants and Contracts revenue account.
      5. In some cases, a non-credit course provides an option to grant regular credit. If a separate, additional fee is collected because of the credit, that amount is reported as tuition revenue.
      6. Full-time employees of the Tennessee Board of Regents, the Locally Governed Institutions (LGIs), and the University of Tennessee systems may enroll in one course per term at any public postsecondary institution, with tuition, student activity fees and registration fees waived for the employee. No tuition paying student shall be denied enrollment in a course because of enrollment of TBR, LGI, and UT employees.
      7. Part-time regular and part-time temporary employees, including adjuncts, of community colleges and colleges of applied technology are eligible to enroll in one credit course per term at the college where they work, with tuition charges waived for the employee.  Any fees (other than tuition/maintenance fees) associated with enrollment and attendance are not waived.
      8. Spouses and dependents of employees of the Tennessee Board of Regents system may be eligible for a tuition and mandatory fee discount for undergraduate courses at Tennessee Board of Regents institutions, the LGIs, and the University of Tennessee. Tennessee Board of Regents institutions exchange funds for tuition and mandatory fee discounts of employees’ spouses and dependents who participate in a Tennessee Board of Regents educational assistance program. This also applies to exchanging of funds for tuition discounts between Tennessee Board of Regents institutions, the LGIs, and the University of Tennessee institutions.
      9. Fee waivers for full-time State employees and fee discounts to children of certified public-school teachers shall be accounted for as a scholarship.
  3. Out-of-State Tuition 
    1. Description of Fee
      1. In addition to standard tuition, out-of-state tuition is charged to students classified as non-residents who are enrolled for credit courses, including audit courses.
      2. Out-of-state tuition fee rates are established by the Tennessee Board of Regents and are incorporated in the annual fee schedule.
      3. Applicability of out-of-state tuition is determined pursuant to Tennessee Board of Regents Policy for Classifying Students In-State and Out-of-State for Paying College Fees & Tuition & for Admission Purposes (No. 3.05.01.00). The business office will collect fees based upon student classification as determined by the appropriate authority within the institution.
    2. Accounting Treatment
      1. A revenue account for out-of-state tuition is used for recording both credits for fees and debits for refunds.
      2. Other accounting is the same for out-of-state tuition as that outlined under standard/in-state tuition except separate out-of-state accounts are used.
        1. In the case of fees not collected from students under grants and contracts, the same expense account under Scholarships and Fellowships may be used.
  4. eRate
    1. Description of Fee
      1. The eRate is available to students who enroll at TBR institutions, who are classified as non-residents of Tennessee, and who are enrolled exclusively in online or other remote delivery courses.
      2. The eRate is 150% of the institution's approved standard/in-state tuition rate.
      3. The hourly rate will not be discounted for students receiving the eRate and enrolling in more than 12 hours.
      4. To qualify for an eRate, students must:
        1. Meet all institution admission requirements and must be verified and documented by the institution as an online out-of-state student enrolled exclusively in courses delivered exclusively online or by other remote delivery methods.
        2. Out-of-state students must both be classified as an out-of-state student and be physically living outside the state of Tennessee. Undocumented students living in Tennessee do not qualify for the eRate and must pay the out-of-state rate.
      5. Students enrolled in any type courses with an on-ground, in Tennessee component will not be eligible for the eRate specified in this guideline and will instead incur traditional out-of-state tuition and fees.
        1. Students who enroll in both online or remote delivery courses and on-ground in Tennessee courses and subsequently drop the on-ground courses will not then become eligible for the eRate. 
    2. Accounting Treatment
      1. The eRate fee will be recorded as out-of-state tuition.
  5. Mandatory Fees
    Mandatory fees are generally fees to support various programs that are assessed to all enrolled students and are not course dependent.
    1. Debt Service Fees
      1. The amount of debt service fees, if any, will be approved by the Tennessee Board of Regents. Separate rates are recommended by each institution based on the requirements of the institution.
      2. Revenue from debt service fees will be recorded in the unrestricted current fund and then transferred to the retirement of indebtedness fund.
      3. At the conclusion of the debt retirement for a given project, the debt service fee attributed to the project will cease. Any new project requires the approval of a new debt service fee on its own merits without the reallocation of any existing fee. Any continuation of fees necessary for renewal and replacement of a project for which the debt is totally retired must be approved for that purpose by the Tennessee Board of Regents.
    2. Student Activity Fees
      1. Student activity fees must be approved by the Tennessee Board of Regents. Such fees may be recommended by each institution based on facilities and services to be provided which are related to the activity fee. These services include but are not limited to access to all social, athletic, and cultural functions sponsored by the school.  Per TCA §49-8-109, these services are available to any student upon the payment of the regular activity fee.  

        A portion of the student activity fee (and/or tuition) may be allocated to the student government association (SGA) and recorded in the restricted fund as an SGA fee.  A referendum providing for an increase in that portion of the student activity fee and/or tuition, received by the SGA may be held for student body approval or rejection.  Per TCA §49-8-110, the referendum shall be held at the election for SGA officers and shall be on the ballot with the candidates for the offices.  The referendum shall be held if the SGA legislative body votes to hold such a referendum and if the college administrative body designated to supervise adn advise the SGA approves the decision to hold a referendum.  In the event a majority of the students voting in the election approve the question submitted in the referendum, then that portion of the student activity fee allocated to the SGA shall be increased by the amount approved subject to the Board’s approval.  The increased portion shall be used for student projects, student activities and student scholarships.  The uses shall be approved by the administrative body of the college designated to supervise and advise the SGA.
        The student activity fee portion will be unrestricted current funds revenues. These fees are refundable on the same basis as tuition or as established by the institution.
    3. Student Government Association Fee 
      1. Student Government Association fees must be approved by the Tennessee Board of Regents. The fee is intended to fund the activities of the Student Government Association. These activities may include the operating expenses of the SGA, funding activities of student clubs and organizations, bringing speakers and/or art exhibits to campus, and other expenses as approved by the SGA.
    4. Technology Access Fees
      1. A fee may be levied by each institution, upon receiving approval by the Board of Regents, for the purpose of providing student access to computing and similar technologies. It is refundable on the same basis as tuition or as established by the institutions. Institutions shall establish expenditure accounts and designated revenue accounts for purposes of recording technology access fees and expenditures.
      2. The TAF should be used by TBR institutions for direct student benefit, for items such as new and improved high technology laboratories and classrooms, appropriate network and software, computer and other equipment, and technological improvements that enhance instruction. Use of TAF funds includes but is not limited to the following items:
        1. Computers and other technical laboratory supplies, equipment, and software maintenance.
        2. Network costs (internet service, interactive video, etc.)
        3. "Smart" or multimedia classroom equipment and classroom modifications.
        4. Lab and course staffing - student and staff assistance for lab and classroom uses; community colleges are limited to 25% maximum of current-year TAF revenues for student or staff employees.
        5. Renewal and replacement reserves as necessary.
        6. New machines for faculty use when faculty are actively engaged in developing and conducting on-line courses.
        7. Faculty and staff development directly related to the introduction or application of new technology which impacts students. These guidelines should have the flexibility to place instructional technology in a faculty lab where course materials are being prepared. For example, TAF funds can be used to create faculty labs to include the purchase of computers and to conduct faculty training and course development. (Travel costs for faculty and staff are excluded; however, consultants may be hired as needed for training.)
        8. Infrastructure (wiring, network, servers, etc.) necessary to provide maximum computing capability to students. A ceiling is established of 50% of the total project costs from which technology access fees can be used.
        9. Expand technology resources in library, i.e., video piped anywhere on campus, interactive video room for distance education, network for web video courses.
    5. Program Services Fee
      1. The amount of program service fees will be approved by the Tennessee Board of Regents. This includes support for application to the college, change of course processing, transcript processing, graduation ceremonies, parking facilities, etc.  It is refundable on the same basis as tuition or as established by the institution.
    6. International Education Fee
      1. The amount of the International Education Fee will be approved by the Tennessee Board of Regents. Separate rates are recommended by each institution based on the requirements of the institution. Generally, the fee supports cultural and international opportunities, student activities for all students, and promotion of student’s world knowledge.  This fee assists in integrating cultural and international concepts across all academic disciplines in order to increase a student’s ability to compete in the international environment.
      2. International Education Fee Usage Per TBR Policy 2.08.10.00
        1. Recognizing the need for flexibility while maintaining accountability, the TBR has established the optional assessment of an international education fee to be paid by each student enrolled in the institutions.
        2. Individual institutions have authority to allocate funds to activities in support of globalization efforts for the campus, including international professional development of the faculty.
        3. Institutions should use a portion of the revenue generated through the international education fee for study abroad scholarships.
        4. Individual institutions are responsible for establishing an infrastructure to determine the allocation of the international education fees collected from students to promote globalization at the home institution. The infrastructure should include student representation or input received from the entire study body.
        5. Employee Compensation/Benefits provided by Program Abroad
          1. A portion of the fee may be used to pay salary and benefit costs for those involved in providing direct support for international programs but should be controlled and kept to a minimum.
          2. Faculty engaged in directing or teaching study abroad courses receive remuneration from their home institutions. Direct instructional cost should be charged to the appropriate departmental budget and not to the international education fee budget.
  6. Miscellaneous Course Fees 

Certain courses require expensive maintenance/updating of equipment and/or software and the employment of highly qualified staff. The high costs of instruction for these programs can be offset by establishing miscellaneous course fees. Miscellaneous course fees may be used for a variety of purposes, as deemed necessary by the institution, for the delivery of a credit course.

Examples of these purposes include extraordinary instruction costs due to: a. individual instruction such as private music lessons, b. high cost class supplies, course-specific software, and specialized equipment such as welding equipment and materials, c. third party charges for use of a facility such as golf, d. special transportation requirements, e. extraordinary instructional costs such as intensive supervision, support or additional technical expertise required for the delivery of the course, or f. some combination of these reasons.

As part of the submittal for consideration of a miscellaneous course fee, a program will be required to identify which justification category or categories apply and submit the described data corresponding with the category.

Categories:

  1.  

    1. High Cost of Instruction. Programs qualifying for charging a miscellaneous course fee under this category should provide data demonstrating that they are more costly than other programs offered by the institution. If appropriate, the extraordinary cost of the program must be validated including benchmarking with similar programs in the region and nation

  1. High Demand. Programs qualifying under this category should provide data estimating the number of students enrolled in the program and that the student credit hours generated are sufficient to justify additional fees.
  2. High Cost of Updating/Maintaining Equipment and Software. Programs qualifying under this category should provide data demonstrating the extensive maintenance and regular updating of equipment and/or software, and estimated costs associated with this maintenance. An average hardware/software cost per student credit hour serves as the basis for determining the amount of the fee.
  3. Accreditation. Meeting standards of specific accrediting agencies may also qualify for charging a miscellaneous course fee. The accrediting standards that justify a fee are those that include specialized testing or assessment costs, specify the possession and use of certain equipment and unique software that are extraordinarily costly and/or the employment of faculty with specific credentials that demand high salaries.
  4. High Recognition and Quality. Programs qualifying under this category are expected to be distinctive and with a regional reputation. The program should demonstrate that it has achieved exceptional recognition in its particular enterprise.
  5. High Cost of Consumables. Programs qualifying under this category should document the program’s costs of consumables, as compared to expenditures necessary for other programs. Examples include; laboratory supplies, specialized tool or equipment kits for use in the program, etc. 
  6. Specialized Assessment. Programs qualifying under this category have an additional cost associated as the result of a third party determined cost or fee that is not a direct pass-through cost. Examples include specialized testing fees not associated with accreditation such as program entrance exams, standardized test fees, etc. The program should fully explain the need and include supporting third party documentation (if applicable) with the request.    
  7. Other. Programs not fitting into one of the above category types wishing to submit a fee for consideration should contact TBR’s Office of Business and Finance via the campus fiscal agent for assistance.  

Fees for courses using materials or services that are required or recommended by faculty and are a direct pass-through of the actual cost charged by a third-party provider may be approved by the chancellor. The process and timeline for submitting miscellaneous course fees that are direct pass-through fees is the same as that of non-pass-through fees.  

  1. Incidental Fees and Charges
    1. The following fees will be uniformly charged (or, if applicable, to the extent that they remain within the set range) at all institutions both as to the amount and condition of assessment. Charges are subject to approval by the Tennessee Board of Regents.
      1. Returned Check Fee: $30.00 per check - nonrefundable. This fee will apply to all returned checks received by the institution, whether from students, faculty, staff, or other parties. The Board will review state statutes each spring to determine any changes. (T.C.A. § 47-29-102)
      2. Prior Learning Assessment (PLA) fee:  $25 (non-refundable).  This fee, also known as credit by exam fee, will be assessed at the rate of $25 per exam, regardless of the number of credit hours awarded.  PLA standards were developed by the Tennessee Prior Learning Assessment Task Force and adopted by the TBR and UT Systems.
    2. Other Fees and Charges Subject to Board Approval
      1. All Institutions
        1. The following fees may be assessed by all institutions. Specific rate recommendations will be developed separately by each institution for approval by the Tennessee Board of Regents. In review of the recommendations, the Board staff will consider the consistency of fees for comparable services among institutions.
          1. Motor Vehicle Registration - nonrefundable. A fee may be levied by each institution per academic year, per fiscal year and/or per academic term for motor vehicle registration.  The fee may be assessed to faculty and staff.
          2. Traffic and Parking Fines - nonrefundable. These fines will apply to all employees and students and shall not exceed the greater of fifty dollars ($50.00) or the amount set by any state law, or any county or municipal ordinance in the institution’s jurisdiction for the same offense. Changes to traffic and parking fines require approval by the Chancellor and Board of Regents.
      2. Fees and Charges to be Established and Administered by the Institution.
        1. The following fees and charges may be established and administered by each institution. No specific approval or notification to the Tennessee Board of Regents will be required unless subject to other Board or State requirements. The institution will establish appropriate refund policies. 
          1. Sales of goods and services of a commercial nature, including bookstores (including digital textbook costs assessed on the student’s account), food services, vending, laundry, and similar activities. Fees for auxiliary services must take into consideration that Auxiliary Enterprises should be a break-even operation with rates and charges generating revenue sufficient to cover all expenses as defined in operating budget guidelines.
          2. Rental of facilities. Fees may be established to control the utilization of facilities and services or to offset the cost of extraordinary requirements as a result of specific programs or activities. [Reference Tennessee Board of Regents Policy on Access to and Use of Campus Property and Facilities (No. 1.03.02.50).]
          3. Admissions fees to athletic and other events open to the public, including special events sponsored by campus organizations and activities.
          4. Sales and services of educational activities such as clinical services, publications, etc.
          5. Registration for conferences, institutes, and non-credit activities. Fees established for non-credit courses and activities shall at a minimum be sufficient to cover the total costs incurred in providing instruction and may be influenced by current market rates for comparable courses or training.
          6. Parking permits and parking meters for use by guests and visitors.
          7. Library fines, which will apply to students, faculty, staff, and other library users.
          8. Child Care Fees - Kindergarten, Preschool, Early Childhood, Day Care, or similarly defined activities. The refund policy will be established by the institution.
          9. Special Exam Fee and Standardized Test Fees - nonrefundable. The fee will be determined based upon cost to the institution.
          10. Local Dual Credit Exam Fee: The fee will be determined by the institution, but may not exceed the PLA fee. 
          11. Identification Card Replacement - nonrefundable.  There will be no charge for the original identification card. A fee may be set by each institution to offset the cost of replacing the card. This fee applies only to student ID cards and not to faculty and staff ID's.
          12. Change of Course or Section Fee - nonrefundable. If the change is caused by the institution, there will be no charge for the change. If two or more forms are used at one time, they will be treated as one change/form. Institutions may waive the fee for schedule changes.
  2. Deposits
    1. Breakage deposits may be required by the institution for courses or items in which it can be shown that there is a reasonable chance of loss or damage to items issued to students. The amount of the deposit should be related to the materials issued and subject to a 100% refund.
    2. A deposit may be established by the institution for rent or lease of buildings and facilities or for the issuance of other institutional property or equipment. Deposits should be subject to a 100% refund if no damage or loss occurs. The amount of such deposits should be related to the value of the facilities or equipment subject to loss and the general ability of the institution to secure reimbursement should loss or damage occur.
  3. Other Fee and Charge Considerations
    1. Institutions may submit for Board of Regents approval fees and charges not specifically covered by those guidelines when the establishment of a fee or charge is justified by the institution.
    2. When fees and charges are incorporated in agreements with outside contractors and vendors, specific rates, refunds, and conditions must be clearly stated.
  4. Refunds and Fee Adjustments
    1. Adjustments to all fees and charges must be in accordance with the following provisions except as previously stated, or when required by federal law or regulation to be otherwise.
    2. Pursuant to T.C.A. §§ 49-7-2301 and 49-7-2302, students called to active military or National Guard service during the semester are entitled to a 100% adjustment or credit of mandatory fees.
    3. Tuition Refunds and Adjustments
      1. Refunds are 100% for courses canceled by the institution.
      2. Changes in courses involving the adding and dropping of equal numbers of Student Credit Hours for the same term at the same time require no refund or assessment of additional maintenance fees, unless the dropping and adding involves a TNeCampus course. A TNeCampus fee is applicable when adding or dropping a TNeCampus course.
      3. The fee adjustment for withdrawals or drops during regular terms (fall and spring) is 75% from the first day of classes through the fourteenth calendar day of classes and then reduced to 25% for a period of time which extends 25% of the length of the term. When the first day of the academic term falls on a Saturday, the 100% refund period is extended through the weekend until the following Monday morning (12:01 am). There is no fee adjustment after the 25% period ends. Dropping or withdrawing from classes during either the 75% or the 25% fee adjustment period will result in a fee adjustment of assessed tuition based on the total credit hours of the final student enrollment.
      4. For summer sessions and other short terms, the 75% fee adjustment period and the 25% fee adjustment period will extend a length of time which is the same proportion of the term as the 75% and 25% periods are of the regular terms.
      5. All fee adjustment periods will be rounded to whole days and the date on which each fee adjustment period ends will be included in publications. In calculating the 75% period for other than the fall and spring and in calculating the 25% length of term in all cases, the number of calendar days during the term will be considered. When the calculation produces a fractional day, rounding will be up or down to the nearest whole day.
      6. A full refund (100%) is provided on behalf of a student whose death occurs during the term. Any indebtedness should be offset against the refund.
      7. A 100% refund will be provided for students who drop a course or courses prior to the beginning term.
      8. A 100% refund will be provided to students who are compelled by the institution to withdraw when it is determined that through institutional error, they were academically ineligible for enrollment or were not properly admitted to enroll for the course(s) being dropped. An appropriate official must certify in writing that this provision is applicable in each case.
      9. When courses are included in a regular term's registration process for administrative convenience, but the course does not begin until later in the term, the 75%/25% fee adjustment periods will be based on the particular course's beginning and ending dates. This provision does not apply to classes during the fall or spring terms which may meet only once per week. Those courses will follow the same refund dates as other regular courses for the term.
      10. The fee adjustment is based on the per credit hour cost of the courses at final enrollment after adjustments have been applied for all courses dropped.
    4. Out-of-State Tuition Refunds and Fee Adjustments
      1. The fee adjustment provision for out-of-state tuition is the same as that for standard/in-state tuition. The 75% fee adjustment period and the 25% fee adjustment period will follow the same dates as the fee adjustment periods for standard/in-state tuition. When 100% of standard/in-state tuition (maintenance fees) are refunds, 100% of out-of-state tuition also is refunded.
    5. Debt Service Fee Refunds
      1. Debt service fees will be subject to the same refund policy as tuition.
    6. Processing of Refunds and Adjustments
      1. Refunds and adjustments, when due, shall be made without requiring a request from a student.
  5. Payment of Student Fees and Enrollment
    1. All assessed fees by an institution governed by the Tennessee Board of Regents are due and payable at the time of registration or at a time set by the institution.
      1. Community colleges may implement deferred payment plans as may be allowed under a TBR guideline and as authorized for the student.
    2. An individual will be considered enrolled and counted as a student at a TBR institution when:
      1. all assessed fees have been paid (unless otherwise noted in policy); or
      2. the initial minimum payment due under any deferred payment plans has been paid; or
      3. an acceptable commitment from an agency or organization approved by the institution has been received by the institution.
    3. An individual shall possess an acceptable commitment when an application(s) for financial aid has been timely submitted with the reasonable probability of receiving such.
      1. An acceptable commitment from an agency or organization shall be limited to a commitment which identifies the applicant and promises to pay all unpaid assessed fees for such applicant.
      2. No commitments from individuals will be accepted on behalf of applicants.
    4. Pursuant to the above condition, institutions must require payment of all applicable fees or payment of the initial minimum payment due under the deferred payment plan or have an acceptable commitment from an agency or organization.  Otherwise, institutions must purge students from the class rolls who have not satisfied the payment requirements.
      1. At a minimum, two purges for non-payment should occur. 
      2. One purge for non-payment must occur sometime prior to the beginning of classes. 
      3. A final purge must occur on or before the census date to ensure that only students that have met the payment requirements are reported in the census reports.
      4. Students will not be purged for non-payment if the debt owed, whether current debt or prior debt is less than $100.
    5. Notwithstanding sections XI.C and D., an institution may hold students, due to discrepancies between State aid deadlines and fee payment deadlines, when there is an expectation the student will receive State aid to pay or a secondary school partner will pay charges.
    6. Notwithstanding any other requirements in policy, there will be no record holds, enrollment holds, or purging of students for non-payment if the debt owed, whether current debt or prior debt, is less than $100 or, in accordance with 34 CFR § 668.14(b)(33), it resulted from an error in the institution’s administration of title IV, HEA programs, or any fraud or misconduct by the institution or its personnel.
    7. All outstanding debts and obligations of $100 or greater not evidenced by an acknowledgement of debt/promise to pay agreement (see Section XII) or a current semester deferred payment agreement must be fully satisfied by the 14th day purge of the semester.
    8. An individual will not be considered for admission/readmission as a student until all past due debts and obligations of $100 or greater incurred in prior academic terms, of whatever nature, have been paid, or the student, if allowable, has entered into an acceptable acknowledgement of debt/promise to pay agreement (see Section XIV) with the institution for the past due debts and obligations.
    9. When an individual tenders payment of fees by means of a personal check or credit card, the individual may be considered and counted as a student. If the payment is subsequently dishonored by the financial institution, and the payment is not redeemed in cash, the institution has the option to not consider that student as enrolled for the term.
      1. At the discretion of the institution, the student may be considered enrolled and will be assessed the applicable returned payment fee, the applicable late registration fee, and normal collection procedures as prescribed in TBR Guideline B-010 (Collection of Accounts Receivable) will be followed.
      2. Institutions may deny future check writing privileges to students who have paid registration fees with checks that are subsequently dishonored.
      3. While institutions have discretion in how these situations will be handled, all students must be treated the same at that institution.
      4. The institutions are authorized, subject to approval by the Board, to establish charges for late registration and/or payments which are returned dishonored, and such charges shall become assessed fees for purposes of admission.
  6. Records Holds
    1. Except as provided in sub-section XII.B. and XI.E. hereof, institutions shall not issue diplomas, transcripts, certificates of credit or grade reports until the student involved has satisfied all debts or obligations of $100 or greater or the debts or obligations are evidenced by notes or other written contracts providing for future payment, such as, but not, limited to, loans authorized under federal or state education or student assistance acts. This does not prohibit the conferring of the degree. Diplomas, transcripts, certificates of credit, and grade reports shall not be withheld for debts that are less than $100.
    2. The colleges in the college system of Tennessee shall issue a certificate of credit or official transcript for a student seeking admission to any college in the college system of Tennessee if the student has entered a written agreement (acknowledgement of debt/promise to pay) to satisfy the outstanding debt or obligation owed to the college issuing the certificate of credit or official transcript in the form of Exhibit 1 hereto.
      1. Any credit or official transcript issued under this subsection shall indicate that it is subject to an outstanding debt to the issuing college.
      2. The college receiving the certificate of credit or official transcript issued shall not subsequently issue a diploma, certificate of credit or official transcript to that student until it receives proof that the student has satisfied the outstanding debt to the college that issued the certificate of credit or official transcript. This does not prohibit the conferring of the degree.
  7. Enrollment Holds
    1. Except as provided in sub-section XI.E. a student must pay any past due debts and obligations owed to the institution incurred in prior academic terms before being permitted to register at the institution unless the debt is less than $100, or an acknowledgement of debt/promise to pay agreement (see section XII) for the prior debt or obligation has been executed.
    2. Institutions shall allow enrollment when the outstanding obligation is less than $100.
      1. Additionally, all known debts and obligations to the institution incurred during the current term of $100 or greater must be satisfied prior to a student being allowed to pre-register for any future terms.
    3. An amount owed under the institution’s deferred payment plan for enrollment fees which is not yet due shall not cause an enrollment hold to be applied.
    4. A student that is currently assigned to a collection agency will be allowed to register if the student signs an acknowledgement of debt/promise to pay agreement in the form of Exhibit 1 hereto that acknowledges they will not receive a diploma, certificate of credit or official transcript (except as provided in XIII. A and B above) until the debt is paid in full. This does not prohibit the conferring of the degree. The student account will not be recalled from the collection agency.
  8. Acknowledgement of Debt/Promise to Pay Agreement for Prior Debt and Obligations
    1. A student who has prior outstanding debt of $100 or more and was not enrolled in the preceding semester (excluding summer semester) may execute an acknowledgement of debt/promise to pay agreement with the institution.
      1. The acknowledgement of debt/promise to pay agreement will require that the debt be fully satisfied before a diploma or degree will be issued. However, this does not prohibit the conferring of the degree.
      2. The acknowledgement of debt/promise to pay agreement will require continuous enrollment.
        1. If continuous enrollment is not maintained the institution may continue with immediate collection efforts as prescribed in TBR Guideline B-010 (Collection of Accounts Receivable) or pursuant to the terms of any previously executed repayment agreement.
      3. A student may only ever execute one such agreement with the institution.
      4. "Continuous enrollment" means a student is enrolled in the fall and spring semesters of a single academic year unless granted a medical or personal leave of absence. Allowable medical or personal reasons may include illness of the student; illness or death of an immediate family member; extreme financial hardship of the student or student’s immediate family; fulfillment of a religious commitment encouraged of members of that faith; fulfillment of required initial active duty for training as a National Guard or Reserve member or for National Guard or Reserve mobilization.
  9. Applicability of Fees
    1. In accordance with this policy, the president or designee of an institution or the chancellor or designee has the authority to determine the applicability of certain fees, fines, charges, and refunds, and to approve exceptions in instances of unusual circumstances or for special groups. All such actions should be properly documented for auditing purposes.
  10. Exceptions
    1. With regard to payment of student fees and enrollment, the Chancellor or designee may approve exceptions to the requirements of this policy in appropriate circumstances.
    2. Requests for exceptions from Presidents must include sufficient justification documentation.
Sources: 

Authority: T.C.A. § 49-8-203; Public Chapter 739 of the Public Acts of the State of Tennessee, 2018

History:

TBR Meetings, June 20, 1975; September 30, 1983; June 24, 1988; June 29, 1990; June 21, 1996; December 8, 2006; December 4, 2008; June 21, 2013; March 30, 2016; June 22, 2018; June 17, 2022; January 16, 2024, Ministerial Changes; Revisions approved March 27, 2024 Board meeting.

 

Former Guideline B-060, Fees, Charges, Refunds, and Fee Adjustments

December 2, 1977 TBR meeting.  Revised March 14, 1980 TBR meeting; November 13, 1991 presidents meeting; November 8, 1982 presidents meeting; July 1, 1984; November 1, 1988; May 15, 1990 presidents meeting; August 14, 1990 presidents meeting; November 1§0, 1992 presidents meeting; August 10, 1993 presidents meeting; November 9, 1993 presidents meeting; August 9, 1994 presidents meeting; May 8, 1995 presidents meeting, August 8, 1995 presidents meeting, November 8, 1995 presidents meeting, February 6, 1996 presidents meeting, May 14, 1996 presidents meeting, November 12, 1996 presidents meeting, May 6, 1997 presidents meeting, July 16, 1997 called Board meeting, November 5, 1997 presidents meeting, February 17, 1998 presidents meeting via conference call, August 25, 1998 presidents meeting, May 9, 2000 presidents meeting, August 8, 2000 presidents meeting, November 8, 2000 presidents meeting, February 13, 2001 presidents meeting, August 21, 2001 presidents meeting, May 21, 2002 presidents meeting, February 11, 2003 presidents meeting, May 20, 2003 presidents meeting, February 10, 2004 presidents meeting, August 17, 2004 presidents meeting, February 8, 2005 presidents meeting, May 17, 2005 presidents meeting, February 8, 2006 presidents meeting, May 16, 2006 presidents meeting, August 16, 2006 presidents meeting, May 15, 2007 presidents meeting, August 21, 2007 presidents meeting, November 6, 2007 presidents meeting, February 17, 2009 presidents meeting; May 12, 2009 presidents meeting; August 11, 2009 presidents meeting; November 10, 2009 presidents meeting; February 16, 2010 presidents meeting; February 15, 2011 presidents meeting; May 17, 2011 presidents meeting; August 16, 2011 presidents meeting; May 16, 2012 presidents meeting; August 21, 2012 presidents meeting; Revised at Presidents Meeting, February 4, 2014; Revised at Presidents Meeting, August 18, 2015; Revised at Presidents Meeting, November 10, 2015; Presidents Meeting February 2, 2016; August 8, 2017; Guideline B-060 merged into Policies 4.01.03.00 and 4.01.03.10 at Board Meeting June 17, 2022.

Policy Number: 
4.01.02.30
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office
Purpose: 

The following policy is adopted by the Tennessee Board of Regents relative to the planning and design of facilities on the campuses of institutions governed by the Board.

Policy/Guideline: 
  1. Facilities Planning and Design
    1. Prior to proceeding with preplanning or design of any project for which an architect or engineer is engaged, the institution president shall, in coordination with the Tennessee Board of Regents staff, develop a comprehensive program statement for the project.
    2. This program statement shall fully set forth the scope of the proposed project and the functional requirements to be satisfied.
    3. When approved by the Board of Regents staff, the program statement shall be the basis for the preplanning and design of the project.
    4. The Chancellor shall ensure that the preplanning, design, and final plans of each project are carried out in conformance with the approved program statement.
Sources: 

Authority

T.C.A. § 49-8-203

History

TBR Meetings, October 12, 1973; September 30, 1983; December 8, 2006

Policy Number: 
4.01.01.20
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office, Board Members
Purpose: 

Debt management policies provide written guidance about the amount and type of debt issued by governments, the issuance process for such debt, and the management of the debt portfolio. A debt management policy tailored to the needs of the Board:

  • Identifies policy goals and demonstrates a commitment to long-term financial planning.
  • Improves the quality of decisions concerning debt issuance; and
  • Provides justification for the structure of debt issuance.

Adherence to its debt management policy signals to rating agencies and the capital markets that the Board is well-managed and should meet its obligations in a timely manner.

Debt levels and their related annual costs are important financial considerations that impact the use of current resources. An effective debt management policy provides guidelines for the Board to manage its debt programs in line with those resources.

Policy/Guideline: 
  1. Introduction
    1. The Board of Regents of the State University and Community College System (“Board”) adopts the following policies concerning debt management.
    2. Pursuant to T.C.A. § 49-3-1205(11), whenever the Board takes action under chapters 4, 7-9, and 12 of Title 49 to borrow money for any purpose, the Board must first seek the approval of the Tennessee State School Bond Authority (the “Authority”), created in 1965 under the Tennessee State School Bond Authority Act, T.C.A. § 49-3-1201 et seq. The Authority is a corporate governmental agency and instrumentality of the State of Tennessee whose purpose is to finance revenue generating capital projects for public institutions of higher education located in Tennessee by issuing its bonds and notes. The Board has entered into a Second Program Financing Agreement as of November 1, 1997 with the Authority for the financing of projects for institutions under the jurisdiction of the Board.
    3. At this time, the Board chooses to borrow only through the Authority; however, with the approval of the Authority, the Board reserves the right to utilize other borrowing methods should special circumstances arise.
    4. The Authority has financed for the Board a variety revenue generating of higher education projects including, but not limited to, dormitories, athletic facilities, parking facilities, student activities/recreation centers, research laboratories, and major equipment purchases. These projects stand in contrast to non-revenue generating capital projects for basic academic needs such as classrooms and libraries that are funded from the proceeds of the State’s general obligation bonds issued by the State Funding Board and for which the Board is not obligated to pay the debt service.
  2. Goals and Objectives
    1. The Board is establishing this debt policy as a tool to ensure that financial resources are adequate to meet the Board’s long-term debt program and financial planning.
    2. In addition, this Debt Management Policy (the “Policy”) helps to ensure that financing undertaken by the Board satisfy certain clear objective standards designed to protect the Board’s financial resources and to meet its long-term capital needs.
    3. This Policy coordinates with other policies and guidelines of the Board.
      1. The goals of this Policy are:
        1. To document responsibility for the oversight and management of debt related transactions;
        2. To define the criteria for the issuance of debt;
        3. To define the types of debt approved for use within the constraints established by the General Assembly;
        4. To define the appropriate uses of debt; and
        5. To minimize the cost of issuing and servicing debt.
      2. The objectives of this Policy are:
        1. To establish clear criteria and promote prudent financial management for the issuance of all debt obligations;
        2. To identify legal and administrative limitations on the issuance of debt;
        3. To ensure the legal use of the Board’s direct debt issuance authority;
        4. To maintain appropriate resources and funding capacity for present and future capital needs;
        5. To evaluate debt issuance options;
        6. To promote cooperation and coordination with other stakeholders in the financing and delivery of services;
        7. To manage interest rate exposure and other risks; and
        8. To comply with Federal Regulations and generally accepted accounting principles (“GAAP”).
  3. Debt Management
    1. Purpose and Use of Debt Issuance
      1. Debt may be used to finance projects identified by institutions comprising the State University and Community College System.  Ordinarily, projects are identified and included within the System’s approved capital plan that is submitted annually to the Tennessee Higher Education Commission.  After consideration by the Commission, these projects are incorporated into the State of Tennessee annual budget (as “disclosed projects”).  From time to time, mission critical projects not considered as part of the annual process will be brought to the Commission by the Board for intra-year financing.
      2. Debt may be used to finance project costs which include all direct capital costs and indirect capital costs of projects, including but not limited to costs of construction and acquisition, costs of issuance of debt, funded interest on debt, and amounts to fund or replenish reserves, if and to the extent approved by the Authority.  In compliance with Article II, Section 24 of the Tennessee Constitution, no budgeted operational expenditures (including internal employee labor) shall be reimbursed with debt proceeds unless such debt is retired/repaid within the fiscal year of issuance.
      3. Prior to the issuance of bonds, bond anticipation notes may be issued for the payment of costs as authorized by the Authority.
      4. Bonds may be issued to refinance outstanding debt.
    2. Debt Capacity Assessment
      1. The debt capacity of the Board is partially reliant on the debt capacity of each institution under its jurisdiction.  Due to this reliance, this Policy requires the assessment of the debt capacity on a project by project basis as each project is considered.  Debt capacity of each project is based on debt service coverage, which measures the actual margin of protection for annual debt service payments from the annual pledged revenue.  The pledged revenue plus the pledge of legislative appropriations must meet a two times coverage test for a project to be approved for debt funding.
      2. Bond anticipation notes are limited to the amount stated in the related Resolution and/or Credit Agreement.
    3. Federal Tax Status
      1. Tax-Exempt Debt
        1. The Board will use its best efforts to have projects eligible for financing with tax-exempt debt based on the assumptions that tax-exempt interest rates are lower than taxable rates and that the interest savings outweigh the administrative costs, restrictions on use of financed projects, and investment constraints.
      2. Taxable Debt
        1. The Board will agree to financing of projects with taxable debt when projects are not eligible to be financed with tax-exempt debt or when the administrative costs, restrictions on use of financed projects, and investment constraints outweigh the benefit of tax-exempt rates.
    4. Legal Limitations on the Use of Debt
      1. Pursuant to T.C.A. § 49-3-1207(d)(4), limitations on the purpose to which the proceeds of sale of bonds or notes may be applied are contained in the resolution or resolutions authorizing the bonds or notes.
      2. No debt may be issued for a period longer than the useful life of the capital project it is funding. 
  4. Types of Debt
    1. Pursuant to T.C.A. § 49-3-1207, the Authority is authorized from time to time to issue its negotiable bonds and notes. These include:
      1. Bonds
        1. The Authority may issue bonds, where repayment of the debt service obligations of the bonds will be made through revenues generated from specifically designated sources. The bonds will be special obligations of the Authority. These bonds may include, but not limited to:
          1. Fixed Interest Rate Bonds - Bonds that have an interest rate that remains constant throughout the life of the bond.
            1. Serial Bonds
            2. Term Bonds
          2. Variable Interest Rate Bonds - Bonds which bear a variable interest rate but do not include any bond which, during the remainder of the term thereof to maturity, bears interest at a fixed rate. Provision as to the calculation or change of variable interest rates shall be included in the corresponding Supplemental Resolution.
          3. Capital Appreciation Bonds - Bonds as to which interest is payable only at maturity or prior redemption of such Bonds or which bear a stated interest rate of zero. The corresponding Supplemental Resolution for the bonds will define the manner in which the period during which principal and interest shall be deemed to accrue, and the valuation dates for the bonds and the accreted value on the valuation date.
          4. Refunding Bonds - Bonds refunding the whole or a part of a Series of Bonds delivered on original issuance.
      2.  Short-term Debt
        1. The Authority may issue short-term debt, from time to time as needed to fund projects for the Higher Educational Institutions during their construction phase. Such debt shall be authorized by resolution of the Authority. Short-term debt may be used for the following reasons:
          1. To fund projects with an average useful life of ten years or less; and
          2. To fund projects during their construction phase.
        2. These notes may be structured as Bond Anticipation Notes (“BANs”) or short-term obligations that will be repaid by proceeds of a subsequent long-term bond issue or fees and charges from the borrowers. Typically these notes are issued during the construction period to take advantage of lower short-term interest rates. These notes may include:
          1. Commercial Paper (“CP”) – CP is a form of bond anticipation note that has a maturity up to 270 days, may be rolled to a subsequent maturity date and is commonly used to finance a capital project during construction. It can be issued incrementally as funds are needed.
          2. Fixed Rate Notes – Notes issued for a period of time less than three years at a fixed interest rate.
          3. Variable Rate Notes – Notes issued for a period of time less than three years which bear variable interest rates until redeemed. Provision as to the calculation or change of variable interest rates shall be included in the authorizing resolution.
          4. Revolving Credit Facility – A form of bond anticipation note involving the extension of a line of credit from a bank. The bank agrees that the revolving credit facility can be drawn upon incrementally as funds are needed. The draws upon the line of credit may bear variable interest rates until redeemed. Provision as to the calculation or change of variable interest rates shall be included in the authorizing credit agreement. 
  5. Debt Management Structure
    1. The Board, when requesting financing for a project, shall request the Authority to structure the funding:
      1. Term
        1. All capital projects financed through the issuance of debt will be financed for a period not to exceed the useful life of the projects, but in no event will the term exceed thirty (30) years.
      2. Financed (Capitalized) Interest
        1. From time to time certain projects may require the use of capitalized interest from the issuance date until the Board has beneficial use or occupancy of the financed project.
        2. Interest may be financed (capitalized) through a period permitted by federal law and the Authority’s Second Program General Bond Resolution if it is determined that doing so is beneficial.
      3. Debt Service
        1. Debt issuance shall be planned to achieve relatively net level debt service.  The Board shall not use bullet or balloon maturities, absent sinking fund requirements, except in those instances where these maturities serve to make existing overall debt service level or to match a specific income stream.
        2. No request shall be made to the Authority for debt to be structured with deferred repayment of principal unless such structure is specifically approved by affirmative vote of the members of the Board.
      4. Call Provisions
        1. In general, the Authority’s securities will include a call feature no later than ten (10) years from the date of delivery of the bonds. Call Features should be structured to provide the maximum flexibility relative to cost. The Authority will avoid the sale of long-term non-callable bonds absent careful evaluation by the Authority with respect to the value of the call option.
      5. Original Issuance Discount/Premium
        1. Bonds sold with original issuance discount/premium will be permitted with the approval of the Authority.
  6. Refunding Outstanding Debt
    1. At least semiannually, Authority staff with assistance from the Authority’s Financial Advisor analyzes outstanding bond issues for refunding opportunities, whether for economic, tax-status, or project reasons.
    2. Consideration is to be given to anticipated costs and administrative implementation and management.
    3. The Board shall report to the Authority a need for refunding when:
      1. The refunding of the debt is necessary due to a change in the use of a project that would require a change to the tax status of the debt.
      2. The project is to be sold or no longer in service while still in its amortization period.
      3. Restrictive Covenants prevent the issuance of other debt or create other restrictions on the financial management of the project and revenue producing activities.
    4. The Board will request the refunding term to be no longer than the term of the originally issued debt. 
  7. Reserve Funds
    1. Debt Service Reserve Fund
      1. The Authority’s Second Program General Bond Resolution provides that a Debt Service Reserve Fund shall be established up for each bond that is issued.
      2. If future Authority bond resolutions do not require such a reserve fund, this provision is not required.
    2. Liquidity Facility
      1. In the event the Authority shall utilize CP, the Authority may set up a liquidity facility to provide liquidity to securities that have been tendered. The liquidity facility may be in the form of a letter of credit, advance agreement or other arrangement that may provide liquidity.
    3. Interest Rate Reserve Fund
      1. The Authority establishes an interest reserve fund for the bond anticipation notes issued for each project. The interest reserve fund provides security for interest due on the bond anticipation notes as such interest matures between billings.
      2. The Board will pay on a monthly basis based on the amount borrowed.
      3. When the short-term debt for a project is either repaid or converted to bonds, the amount invested in the reserve fund will be credited back to the Board.
  8. Risk Assessment
    1. The Executive Director of Facilities Development, subject to approval of the Vice Chancellor of Business and Finance, will evaluate each transaction to assess the types and amounts of risk associated with that transaction, considering all available means to mitigate those risks.
    2. The Executive Director of Facilities Development, subject to approval of the Vice Chancellor of Business and Finance, will evaluate all proposed transactions for consistency with the objectives and constraints defined in this Policy.
    3. The following risks should be assessed before issuing debt:
      1. Change in Public/Private Use
        1. The change in the public/private use of a project that is funded by tax-exempt funds could potentially cause a bond issue to become taxable.
      2. Default Risk
        1. The risk that revenues for debt service payments are not all received by the due date.
      3. Liquidity Risk
        1. For variable rate debt, the risk of having to pay a higher rate to the Authority for the liquidity provider in the event of a failed re-marketing.
      4. Interest Rate Risk
        1. For variable rate debt, the risk that interest rates will rise, on a sustained basis, above levels that would have been set if the issue had been fixed.
      5. Rollover Risk
        1. For variable rate debt, the risk of the inability to obtain a suitable liquidity facility at an acceptable price to replace a facility upon termination or expiration of the contract period.
  9. Transparency
    1. As a public body, the Board shall comply with the Tennessee Open Meetings Act.
    2. Additionally, the Board will assist the Authority in complying with U.S. Securities and Exchange Commission Rule 15c2-12, by providing certain financial information and operating data by specified dates, and to provide notice of certain enumerated events with respect to the bonds, if material. Such material events include:
      1. Issuer’s Counsel - The Authority will enter into an engagement letter agreement with each lawyer or law firm representing the Authority in a debt transaction. No engagement letter is required for any lawyer who is an employee of the Office of Attorney General and Reporter for the State of Tennessee which serves as counsel to the Authority.
      2. Bond Counsel - Bond Counsel shall be engaged through the Office of State and Local Finance and serves and assists the Authority on all its debt issues under a written agreement.
      3. Financial Advisor - The financial advisor shall be engaged through the Office of State and Local Finance and serves and assists the Authority on financial matters under a written agreement. However, the financial advisor shall not be permitted to bid on or underwrite an issue for which it is or has been providing advisory services. 
  10. Professional Services
    1. From time to time the Board uses its General Counsel for advice on aspects of a debt transaction; no engagement letter is required since General Counsel is an employee of the Board.
    2. Additionally, the Board relies upon advice from the Office of Attorney General and Reporter, with which no engagement letter is required.
  11. Potential Conflicts of Interest
    1. If the Board were to hire professionals to assist the Board in a debt transaction, the professionals shall be required to disclose to the Board existing client and business relationships between and among the professionals to a transaction (including but not limited to financial advisor), as well as the Authority.
    2. This disclosure shall include such information that is reasonably sufficient to allow the Board to appreciate the significance of the relationships. 
  12. Debt Administration
    1. Planning for Sale
      1. The Board (through the Executive Director of Facilities Development and Vice Chancellor of Business and Finance) will provide all requisite information to the Authority to facilitate the compilation of data necessary for the Official Statement related to the bond issuance and bond underwriting.
    2. Post-Sale
      1. The Board will ascertain that fees and charges are established at levels sufficient to meet the two times debt service coverage when combined with legislative appropriations.
      2. The Board will (through the Executive Director of Facilities Development and Vice Chancellor of Business and Finance) provide for timely transmission of requisite debt service payments as billed by the Authority.
    3. Continuing Administration
      1. The Board (through institutional administration) will ascertain that facilities financed with tax exempt debt will be used in a manner such as to not jeopardize the exempt status of the issued debt.
      2. The Board (through institutional administration) will maintain the financed facilities in a prudent manner establishing maintenance reserves when necessary to preserve the viability of facilities.
  13. Federal Regulatory Compliance and Continuing Disclosure
    1. Arbitrage
      1. The Board (through the Executive Director of Facilities Development and Vice Chancellor of Business and Finance) will work with the Office of State and Local Finance to comply with arbitrage requirements on invested tax-exempt bond funds consistent with representations made in the relevant Tax Certificate.
      2. The Board will also retain all records relating to debt transactions for as long as the debt is outstanding, plus three years after the final redemption date of the transaction.
    2. Generally Accepted Accounting Principles (GAAP)
      1. The Board will comply with the standard accounting practices adopted by the Governmental Accounting Standards Board when applicable.
  14. Review of the Policy
    1. The debt policy guidelines outlined herein are intended to provide direction regarding the future use and execution of debt. The Board maintains the right to modify these guidelines in a manner similar to the original adoption of the Policy.
Sources: 

Authority

T.C.A. § 49-8-203; All Federal and State statutes, codes, rules and regulations referenced in this policy.

History

TBR Board Meeting September 21, 2012; TBR Board Meeting June 23, 2016

Policy Number: 
4.01.01.10
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
TCATs, Community Colleges, System Office
Purpose: 

The following policy on the deposit and investment of funds is adopted by the Board of Regents for the institutions under its jurisdiction, and shall apply to all funds, regardless of source, which are received by any institution.

All depositories which provide deposit or investment services shall agree to comply with the terms of this policy, and with the requirements of Chapter 4 of Title 9 of Tennessee Code Annotated as amended, and the latter provisions shall control in the event of conflict. Words and phrases used in this policy shall have the same definition and meaning as in Chapter 4 of Title 9 Tennessee Code Annotated.

Definitions: 
  • Collateral Security - means securities which may be accepted as collateral for deposits.
  • Compensating balances - means the amount of funds allowed to remain in an account.
  • Default - may include but is not limited to:
    • The failure of any qualified public depository to return any public deposit, including earned interest in accordance with the terms of the deposit contract.
    • The failure of any qualified public depository to pay any properly payable check, draft or warrant drawn by the public depositor.
    • The failure of any qualified public depository to honor any valid request for electronic transfer of funds.
    • The failure of any qualified public depository to account for any check, draft, warrant, order, deposit certificate or money entrusted to it.
    • The issuance of any order of any court or the taking of any formal action by any supervisory authority, which has the effect of restraining a qualified public depository from making payments of deposit liabilities.
    • The appointment of a conservator or receiver for a qualified public depository; or
    • Any other action which the treasurer determines to place public deposits in jeopardy.
    • Failure to provide the required collateral.
  • Deposit Insurance - means the insurance provided by the Federal Deposit Insurance Corporation.
  • Eligible Collateral - shall have the meaning set forth in T.C.A. § 9-4-103. For savings institutions securing local government deposits, eligible collateral shall also include securities described in T.C.A. § 9-1-107(a)(2) under such additional conditions as the treasurer deems appropriate.
  • Loss - includes but is not limited to:
    • The principal amount of the public deposit;
    • All accrued interest through the date of default;
    • Additional interest at the rate the public deposit was earning on the total of the principal amount of the public deposit and all accrued interest through the date of default, through the day of payment by a liquidator or other third party or through the date of sale of eligible collateral by the treasurer or his agent; and
    • Attorney's fees incurred in recovering public deposits.
  • Market Value - means current market price.
  • Depository - means any bank, savings and loan association or savings bank (collectively referred to as savings institutions) located in the state of Tennessee which is under the supervision of the Department of Financial Institutions, the United States Comptroller of the Currency, or the Office of Thrift Supervision, and which has been appropriately designated to hold public deposits by a public depositor.
  • Required Collateral - means eligible collateral, excluding accrued interest, having a market value equal to or in excess of the greater of the average daily balance or average monthly balance of public deposits multiplied by the qualified public depository's collateral-pledging level as required by the Tennessee Board of Regents. (T.C.A. § 9-4-502)
  • Trust Receipts - means a receipt issued by the trustee custodians in lieu of the actual deposit of eligible collateral, it is subject in all respects to the claims and rights of the institution to the same extent as though such collateral had been physically deposited with the institution.
  • Trustee Custodian - means a financial institution designated to hold eligible collateral on behalf of the Tennessee Board of Regents or its institutions and a qualified public depository pursuant to T.C.A. § 9-4-108.
Policy/Guideline: 
  1. Depository Accounts
    1. Each institution shall maintain one general operating account and one payroll account at an authorized depository for the regular operating and payroll functions of the institution. No additional checking accounts may be opened or maintained by any institution unless approved by the Chancellor or his or her designee.
    2. All checks, drafts, or other methods of withdrawing funds from an account must be co-signed by the president and the chief business officer of the institution; provided that facsimile signatures may be used on checks, drafts, or other methods of withdrawals; and provided that any authorization or request for withdrawal form shall bear the original or electronic signature of the president or the chief business officer or designee approved by the president in all cases where expenditures exceed one percent (1%) of the state appropriation to the institution.
    3. The President of each institution is authorized to establish one or more checking accounts for the deposit and disbursement of petty cash funds within the business office. Additional petty cash accounts may be authorized by the presidents for departments external to the business office provided that no account shall exceed one thousand dollars ($1,000.00). If the custodian of the fund has accepted responsibility for the funds in writing, and has agreed to repay any shortages or expended funds not properly accounted for from the account, then the custodian may be designated as the signatory authority for the account, and the custodian or the chief business officer of the institution shall be authorized to withdraw funds from the account.
    4. Institutions will retain written documentation of employees’ authority to perform routine activities related to the depository accounts.
    5. No accounts shall be authorized or established which are complimentary non-interest bearing accounts. When using compensatory balances, the amount of funds allowed to remain in any checking account should be reasonably related to the number of transactions to be processed through the account during any month, and other servicing costs, if any.
  2. Collateral
    1.  All depositories must provide collateral security for deposits and accrued interest in all accounts, including checking, savings, and certificates of deposit. Securities which may be accepted as collateral for deposits shall be limited to those specified in T.C.A. § 9-4-103. All items listed in Section V.J of this policy and items noted in Section V.K are eligible as collateral.
    2. The required collateral accepted as security for deposits at financial institutions that do not participate in the collateral pool shall be collateral whose market value is equal to one hundred five percent (105%) of the value of the deposit and secured thereby; less so much of such amount as is protected by the Federal Deposit Insurance Corporation or the Federal Savings and Loan Insurance Corporation. The required collateral accepted as security for deposits at financial institutions participating in the collateral pool will be set by the Department of Treasury.
    3. At the time of designation as an institution's depository or at any time thereafter, additional collateral with a market value of one hundred thousand dollars ($100,000) shall be required where the capital to asset ratio of a savings and loan association, savings bank, or bank is less than five percent (5%). This additional collateral shall be in addition to the collateral required by other provisions of this policy.
    4. The market value of required collateral shall be evaluated by the institution monthly and more frequently if required by unusual market conditions. Any depository not providing collateral with a market value as specified in II.B above must provide additional, adequate collateral within two working days of a request by the institution. Failure to provide the additional collateral may be considered an act of default.
    5. In the case of a checking account, the market value of the collateral accepted as security for deposits shall be the amount specified in Section II.B based on the highest daily depository book balance in the account for the preceding month excluding large deposits covered below. The amount of the depository balance must be determined on or before the fifth day of the month in question. Large deposits, such as registration receipts, which may result in insufficient collateral, either should be invested immediately or additional collateral should be in place. (If the investment is in a certificate of deposit, the certificate must be collateralized.) Alternatively, depositories may be allowed to post collateral daily to cover the current depository book balance.
    6. Any loss to the institution due to a depository's default shall be satisfied out of collateral pledged by the depository to whatever extent possible. The collateral security shall be liable for any loss, including and not limited to the principal amount of the deposit, for accrued interest through the date of default, for additional interest through the date of recovery on the principal and accrued interest at the rate the deposit was earning, and for attorney's fees incurred in recovering deposits and other losses.
    7. An institution must either be provided the actual securities pledged as collateral for deposits, or trust receipts from trustee custodians for the collateral in lieu of the actual delivery of the securities. A trustee custodian is one which meets the requirements of T.C.A. § 9-4-108. When any trustee custodian holds collateral for an institution's depository which is related to the custodian through shared ownership or control, such collateral shall be held in a restricted account at a Reserve Federal Bank or branch thereof or at a Federal Home Loan or branch thereof.
    8. In lieu of the actual deposit of eligible collateral, the institution is authorized at its option to accept trust receipts therefore.
      1. Trust receipts shall be issued by trustee custodians in a form acceptable to the institution following the deposit of eligible collateral with the trustee custodian by an institution's depository.
      2. Eligible collateral deposited with a trustee custodian shall be subject in all respects to the claims and rights of the institution to the same extent as though such collateral had been physically deposited with the institution.
      3. Each trust receipt shall be nonnegotiable and irrevocable and shall continue in full force and effect until surrendered by the issuing trustee custodian with the release of the institution endorsed thereon.
      4. The institution may present the trust receipt at any time to the issuing trustee custodian and upon delivery thereof shall be entitled to receive any and all collateral represented thereby from the trustee custodian, and such collateral shall thereafter be held by the institution as if deposited with the institution by the depository as collateral, without further liability on the party of the trustee custodian.
      5. Following delivery of the collateral to the institution, the institution is permitted to register such collateral in the name of the institution and to hold it on behalf of the depository.
    9. Institutions with depositories participating in the collateral pool administered by the Department of Treasury will not be responsible for monitoring the collateral securities pledged. As provided in T.C.A. § 9-4-501 through 9-4-523, the Department of Treasury will monitor the collateral securities pledged.
  3. Depository Institutions
    1. Subject to the other requirements of this policy, accounts may be authorized and established at depositories which are either under the supervision of the Department of Financial Institutions, the United States Comptroller of the Currency or the Federal Home Loan Bank Board.
    2. Before a depository may be used by an institution for the deposit of funds in a checking account, it must provide documentation verifying the following:
      1. That the depository is supervised by the Department of Financial Institutions of the State of Tennessee, the United States Comptroller of the Currency, or the Federal Home Loan Bank Board;
      2. The capital to asset ratio of the depository as of the current date and the date of the last audited financial statements of the depository;
      3. That the depository can comply with the collateral security requirements for all accounts;
      4. The names of the members of the board of directors and officers of the depository;
      5. The name of the holding company of the depository, if applicable; and
      6. The names of the owners of ten percent (10%) or more of the stock of the depository.
    3. Each institution shall identify the nature and level of services which must be provided by a depository before a checking account is established. Such services should include but are not limited to the minimum services in the standard request for proposals for depository services as set forth in guidelines established pursuant to this policy. Some or all of these services may be required without charge to the institution.
    4. Each institution shall solicit proposals from all qualified depositories with offices within a reasonable distance from the campus, and shall determine those depositories which can provide the nature and level of services for accounts as required by the institution on a competitive basis. The agreement with the depository cannot exceed 5 years.
  4. Depositing Funds
    1. Each institutional department will deposit funds each day when $500 in funds has been accumulated. All funds must be adequately secured. In all cases, a deposit must be made at least once each work week (Monday - Friday) if there are any funds to be deposited.
    2. The $500 is considered in excess of the established change fund amount.
  5. Investments
    1. All investment decisions shall be in accordance with this policy and must be approved by the chief business officer or his or her designee.
    2. All investments in which funds are deposited outside the State of Tennessee must be authorized by the president.
    3. A trustee custodian account should be used for handling and holding all investments, other than the Local Government Investment Pool and collateralized certificates of deposit.
    4. All investments must be made subject to "delivery versus payment."
    5. All funds which are received by an institution and which are available for a sufficient period of time for investment in any interest generating medium should be invested within three (3) days after receipt of such funds.
    6. At a minimum, each institution shall determine rates of return on all feasible authorized mediums of investment prior to making an investment; and funds shall be invested in those mediums expected to pay the highest rate for the period of time for which the funds are available for investment.
    7. All investments of funds in certificates of deposits where the period of investment will exceed thirty (30) days shall be determined on the basis of competitive bids, with appropriate records maintained for audit purposes, including the person obtaining the bids, the institutions which submitted the bids, the amount and rate of return of each bid, and the person who approved the investment. Where more than one bid provides the highest rate of return available, investments should be made in such a manner that no one institution making one of the high bids receives a disproportionate amount of the investments on the basis of two or more equal bids over a reasonable period of time. Records shall also be maintained on the basis for selecting LGIP and other investments as an investment medium.
    8. An investment plan should be developed that specifies liquidity requirements for providing cash needed by an institution.
    9. Investments of endowments in equity securities shall be limited to funds from private gifts or other sources external to the institution. Endowment investments shall be prudently diversified.
    10. Funds of the institution may be invested in a savings account or certificate of deposit of any depository provided the requirements of this policy including Sections III.A and III.B, and the collateral security requirements of Section II. are met. Other authorized investments, subject to the limitations of Section V.L, are set forth in T.C.A. § 9-4-602.
    11. All investments via repurchase agreements must include the following:
      1. There must be a written agreement in accordance with the standard agreement set forth in guidelines established pursuant to this policy.
      2. The agreement must state explicitly that the exchange of assets represents a simultaneous purchase and resale transaction "and is not intended to be collateralized loan."
      3. The purchased securities must be transferred to the Trustee Custodian Account.
      4. The purchased securities must, at the time of purchase, have a current market value of at least 100% of the amount of the repurchase agreement.
    12. The following terms and conditions shall apply to investments:
      1. Prime banker's acceptances must be issued by domestic banks with a minimum AA rating or foreign banks with a AAA long term debt rating by a majority of the rating services that have rated the issuer. The short term debt rating services that rate the issuer (minimum of two ratings must be available). Banker's acceptances shall not exceed five percent of total investments on the date of acquisition. The amount invested in any one bank shall not exceed five percent of total investments on the date of acquisition.
      2. Prime banker's acceptances are required to be eligible for purchase by the Federal Reserve System. To be eligible the original maturity must not be more than 270 days, and it must
        1. arise out of the current shipment of goods between countries or within the United States, or
        2. arise out of storage within the United States of goods under contract of sale or expected to move into the channel of trade within a reasonable time and that are secured throughout their life by a warehouse receipt or similar document conveying title to the underlying goods.
      3. The combined amount of banker's acceptances and commercial paper shall not exceed thirty-five percent of total investments at the date of acquisition.
      4. Prime commercial paper shall not have a maturity that exceeds 270 days. Acquisitions shall be monitored to assure that no more than five percent of total investments at the date of acquisition are invested in commercial paper of a single issuing corporation. The total holdings of an issuer's paper should not represent more than two percent of the issuing corporation's total outstanding commercial paper. Purchases of commercial paper shall not exceed thirty-five percent of total investments at the date of acquisition. Prime commercial paper shall be limited to that of corporations that meet the following criteria:
        1. Senior long term debt, if any, should have a minimum rating of A1 or equivalent, and short term debt should have a minimum rating of A1 or equivalent, as provided by a majority of the rating services that rate the issuer. If there is no long term debt rating, the short term debt rating must be A1 by all rating services (minimum of two).
        2. The rating should be based on the merits of the issuer or guarantee by a non-bank.
        3. A financial review should be made to ascertain the issuer's financial strength to cover the debt.
        4. Commercial paper of a banking institution should not be purchased.
      5. The amount invested in money market mutual funds shall not exceed ten percent of total investments on the date of investment.
  6. Lead Institutions and Colleges of Applied Technology
    1. Each college of applied technology is authorized to establish a checking account. The type of account will be based upon the needs of each college of applied technology. A request for the establishment of such an account must be submitted jointly by each college of applied technology president and lead institution president, and be approved by the Chancellor. Each account will be subject to a $5,000 maximum for any one transaction. Activity in this account shall be limited to operating transactions, and shall not include travel reimbursement. All transactions must be based on the concept of competitive bidding where possible with appropriate documentation maintained for review. All checks must be co-signed by any two of three authorized employees (president, assistant director, and a third employee) designated in the request for establishing the account. The documentation for the transactions must be reviewed at least quarterly by a person(s) designated by the president of the lead institution.
      1. The request to establish such an account should, at a minimum, include a description of the type of account, the procedures that will be followed in administering the account, those persons authorized to sign the checks, the bank where the account will be established, and the person(s) at the lead institutions who will be assigned the responsibility for the quarterly review.
    2. The president of the college of applied technology or designee is authorized to establish a depository account for the deposit of miscellaneous revenues received by the college of applied technology. These funds shall be transmitted at least monthly to the lead institution for deposit and investment on behalf of the college of applied technology.
    3. The lead institution shall maintain a separate chart of accounts on behalf of each of the colleges of applied technology under its jurisdiction pursuant to the provisions of this policy and shall ensure that all interest income generated by the colleges of applied technology is appropriately credited to the individual college of applied technology accounts.
    4. The lead institution shall maintain appropriate fiscal records to ensure the existence of an audit trail for each college of applied technology under its jurisdiction.
  7. General
    1. The Chancellor or designee may approve exceptions to the requirements of this policy in appropriate cases.
Sources: 

Authority

T.C.A. § 49-8-203; All other Federal and State statutes, codes, rules and regulations referenced in this policy.

History

TBR Meetings: September 29, 1978; September 30, 1983; December 13, 1985; September 18, 1987; September 16, 1988; June 30, 1989; September 21, 1990; June 28, 1991; September 23, 1994; June 21, 1996; October 2, 1998; June 23, 2000; September 26, 2003; December 8, 2006; March 28, 2014.

Policy Number: 
4.01.00.10
Policy/Guideline Area: 
Business and Finance Policies
Applicable Divisions: 
Community Colleges, System Office
Purpose: 

The purpose of this policy is to establish a plan for allocation of resources among community colleges as required by T.C.A. § 49-7-202 (c) (4) (D)):

For fiscal years ending on and after June 30, 2013, the commission shall have no authority for recommending individual community colleges operating budgets or in approving or disapproving the transfer of any funds between community colleges as may be determined necessary by the board of regents.

The intent of this policy is to:

Reinforce the performance incentives present in the higher education funding formula adopted by the Tennessee Higher Education Commission; and

Support development of a unified system of community colleges as dictated by the Complete College Tennessee Act of 2010, including providing financial incentives for cooperative action among institutions.

This policy provides for the pooling of community college resources to be used for system level investments, provision of funding for certain new program start-up expenses, expenses shared among all community colleges, to reward collaboration, and to allocate remaining resources among all community colleges.

Policy/Guideline: 
  1. Community College System Investment Account (“Account”)
    1. Account Established
      1. There is established at the Board Office a Community College System Investment Account for the benefit of the Tennessee Community College System.
      2. For each fiscal year, the target funding level of the Account will be an amount equal to point five percent (0.5%) of the Community College System recurring state appropriation.
      3. To achieve the target funding level, the difference between the estimated funding level at fiscal year-end and the target funding level will be calculated.  Should a deficit exist, an amount equal to 1/12th of the deficit amount will be withheld from the monthly Community College System state appropriation and deposited to the Account.
      4. The Chancellor is authorized to allocate funds within the Account among the categories of uses provided below.
    2. Uses of Account
      1. System Level Investments.  It is the Board’s intent that funds be available to initiate or maintain activities that promote the interest and wellbeing of the community college system and its students.  Examples of system level investments may include, but are not limited to, activities designed to communicate the benefit to students of considering attending community colleges, funding to support block scheduling and fast track activities.  The Vice Chancellor for Community Colleges, in consultation with the Presidents, shall recommend the allocation of funds for specific system level investments, subject to approval by the Chancellor.
      2. Program Start-Up Funding.  It is the Board’s intent that funds be available to offset the cost to an individual college of development of a new program offering that is portable to other colleges and meets the needs of students at multiple colleges or the system as a whole.  Guidelines shall be established that specify the process and criteria used in determining which program start-up proposals should be funded through this mechanism.
      3. Community College System Shared Expenses.  Eligible expenses include, but not be limited to, salaries, benefits and operational expenses that directly support the operations of the Office of Community Colleges, common licensing of software, and other expenses borne individually by colleges.  The Vice Chancellor for Community Colleges, in consultation with the Presidents, shall recommend the allocation of funds for system level shared expenses, subject to approval by the Chancellor.
      4. Reporting.  On an annual basis the Chancellor shall file a written report with the Board Committee on Academic Policies and Programs and Student Life summarizing the activities funded through the Investment Account.
    3. Allocation of Funds to Community Colleges
      1. After funding of the Account, remaining state appropriations are to be distributed to individual community colleges in the following order:
        1. Allocation of Remaining Recurring State Appropriation.
          1. Board staff, in consultation with THEC staff, shall annually determine the percentage of the total Community College System recurring state appropriation that is attributable to each individual college as calculated within the THEC higher education funding formula.
          2. The allocation of recurring state appropriation remaining after distributions to the Investment Account and for Collaboration shall be calculated by multiplying the remaining recurring state appropriation by the percentage determined for each college in I.B.1.
    4. Delegation
      1. The Board acknowledges and grants authority for the development of guidelines necessary to implement the provisions of this policy, such guidelines to be consistent with and in furtherance of the provisions of this policy.
    5. Exceptions
      1. Exceptions to this policy may be recommended by the Vice Chancellor for the Community Colleges for interim approval by the Chancellor.
Sources: 

Authority

T.C.A. § 49-8-203; 47-7-202; Complete College Tennessee Act of 2010

Hidtory

TBR Board Meeting June 28, 2012; Board Meeting March 28, 2014.

Policy Number: 
B-110
Policy/Guideline Area: 
Business and Finance Guidelines
Applicable Divisions: 
TCATs, Community Colleges
Purpose: 

The purpose of the following guideline is to outline significant provisions for consistent capitalization procedures for fixed assets at the institutions governed by the Tennessee Board of Regents.

Policy/Guideline: 
  1. Introduction
    1. These guidelines largely represent a consolidation of the existing practices and are intended to serve as a reference document for institutional staff responsible for fixed asset administration.
      1. The guideline includes provisions for capitalizing land, land improvements, leasehold improvements, buildings, additions and improvements to buildings, infrastructure, nonexpendable personal property, software, and livestock.
        1. Additionally, the guideline also includes provisions for the inventory of sensitive items.
    2. Property records should be maintained for all land and capitalized assets.
      1. Procedures should ensure the proper recordkeeping of capitalized assets, including the initial recording, movement and eventual disposal of assets and should ensure that these assets are periodically inventoried.
      2. Property records for assets acquired with federal funds should conform to OMB Circular A-110, Uniform Administrative Requirements for Grants and Other Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations.
  2. Land
    1. Land is generally considered to have an unlimited life and is therefore a non-depreciable asset. Land acquired by the institution should be recorded at its original cost which includes a variety of expenditures related to its acquisition and its preparation for use as intended by the institution.
    2. The following are examples of expenditures that should be capitalized as a part of the cost of land:
      1. The original acquisition price.
      2. Commissions related to the acquisition.
      3. Legal fees related to the acquisition.
      4. Cost of surveys.
      5. Cost of an option to buy the acquired land.
      6. Cost of removing unwanted buildings from the land, less any proceeds from salvage.
      7. Unpaid taxes (to the date of acquisition) assumed by the institution.
      8. Cost of permanent improvements (e.g. landscaping) and improvements that will later be maintained and replaced by other governments (e.g. street lights, sewers).
      9. Cost of getting the land in condition for its intended use, such as excavation, grading, filing, draining, and clearing.
    3. Land acquired through forfeiture should be capitalized at the total amount of all taxes, liens, and other claims surrendered, plus all other costs incidental to acquiring ownership and perfecting title.
      1. Assumption of liens, mortgages, or encumbrances on the property increases the purchase price and should be included in the original cost.
      2. A liability should be recognized for the amount of the lien, mortgage, or encumbrance assumed by the institution.
    4. Land acquired by donation, or the intent to donate, e.g., for one dollar, should be recorded on the basis of an appraisal of the market value at the date of acquisition.
      1. The cost of the appraisal itself, however, is expensed at the time incurred.
      2. When costs are incurred but the land is not acquired, the costs should be expensed.
    5. Land held for investment purposes should be classified as investments rather than as property.
  3. Land Improvements
    1. Expenditures for land improvements that have limited lives and exceed $50,000 should be capitalized in a separate account from the Land and depreciated over their estimated useful lives.
      1. Examples of land improvements include, but are not limited to, site improvements such as landscaping that has a limited life (e.g. shrubbery, flowers, trees); retaining walls, parking lots, fencing, sidewalks, sculptures, and art work.
      2. Land improvements are normally depreciated over a useful life of 20 years.
    2. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use.
      1. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  4. Leasehold Improvements
    1. Leasehold improvements include improvements to existing or new leased spaces. These improvements should be capitalized if the cost exceeds $50,000 and the cost is borne by the institution.
    2. Leasehold improvements are generally depreciated over the lesser of the original term of the lease or the useful life of the improvements.
    3. If the lease contains an option to renew for additional years but renewal is uncertain or the likelihood of renewal is uncertain, the improvements should be depreciated over the original term of the lease or the useful life of the improvement.
  5. Buildings
    1. The cost of a building includes all necessary expenditures to acquire or construct and prepare the building for its intended use.
      1. Buildings consist of relatively permanent structures, including all permanently attached fixtures, machinery and other appurtenance that cannot be removed without damaging the building or the item itself.
    2. Buildings are erected for the purpose of sheltering persons or property. Examples include, but are not limited to such items as academic buildings, dormitories, apartments, barns, etc.
      1. All buildings costing $100,000 and above should be capitalized.
      2. Buildings costing less than $100,000 should be expensed.
      3. Buildings are normally depreciated over a useful life of 60 years.
    3. Buildings acquired by purchase should be capitalized at their original cost. The following major expenditures are capitalized as part of the cost of buildings:
      1. The original bargained purchase price of the building.
      2. Cost of renovation necessary to prepare the building for its intended use.
      3. Cost of building permits related to renovation.
      4. Unpaid taxes (to date of acquisition) assumed by the institution.
      5. Legal and closing fees.
    4. Buildings acquired by construction should be capitalized at their original cost. The following major expenditures are capitalized as part of the cost of buildings:
      1. Cost of constructing new buildings, including material, labor, and overhead.
      2. Cost of excavating land in preparation for construction.
      3. Cost of plans, blueprints, specifications, and estimates related to construction.
      4. Cost of building permits.
      5. Architectural and engineering fees.
      6. Landscaping and other improvements related to the building construction that cannot be separately identified from the building project (e.g. wiring within the building, shrubbery and sidewalks around the building).
    5. Buildings acquired by donation, or the intent to donate, e.g. for one dollar, should be recorded on the basis of an appraisal of the market value at the date of acquisition.
      1. The cost of the appraisal itself, however, should not be capitalized.
      2. Removable fixtures, including but not limited to furnishing for the new building, should be distinguished from the cost of the building and capitalized or expensed in the appropriate accounts even if they are acquired as a part of the purchase or the construction project.
    6. The cost of a building that is acquired but immediately removed to prepare the land for construction of a new building is treated as part of the cost of the land rather than as part of the cost of the new building.
    7. The cost of removing an old building that you have occupied in the past but that is now deteriorated and must be removed prior to constructing a new building, should be capitalized as a part of the cost of the new building.
      1. The precedent supporting this treatment is the requirement to capitalize all normal costs of readying an asset for use, i.e., capitalizing demolition costs of unwanted building(s) with the purchase of land, capitalizing renovation costs when a building is purchased, capitalizing excavating costs in preparation for construction of a new building and, when a building is constructed with plans to expand later any demolition costs are capitalized with the cost of the addition.
    8. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  6. Additions and Improvements to Buildings
    1. Additions
      1. Additions represent major expenditures that are capital in nature because they increase the service potential of the related building.
      2. Additions costing $50,000 or above should be capitalized.
      3. Additions costing less than $50,000 should be treated as repairs and maintenance even though they have the characteristics of capitalized expenditures. Example:
        1. A new wing is added to an existing building at a cost of $700,000. The cost would be capitalized.
        2. A new wing is added to an existing building at a cost of $49,999. The cost would be expensed since it does not meet the dollar level established for capitalization.
      4. Two major issues are involved with accounting for additions and generally require some professional judgment:
        1. Useful life: If the estimated useful life of the addition is independent of the building to which it relates, the addition is treated as a separate asset and depreciated over its estimated useful life, regardless of the life of the original asset. If the addition is not independent of the original asset, the useful life must be determined in relation to the original building. In this case, the cost of the addition is depreciated over the shorter of the estimated life of the addition or the remaining life of the original building.
        2. Capitalized costs: If the original building was constructed with a plan to expand, cost related to the original building incurred when the addition takes places should be capitalized. However, costs that could have been avoided with appropriate planning at an earlier date should be expensed rather than capitalized.
    2. Improvements
      1. Improvements represent the substitution of a new part of an asset for an existing part.
        1. For example, the roof of a building may be replaced or a new HVAC may replace an old HVAC system.
        2. If the new part of the asset is similar in nature to the part being eliminated, the substitution is a called a replacement.
        3. If the new part represents an improvement in quality over the part being eliminated, the substitution is called betterment.
      2. Both replacements and betterments are subject to capitalization if the cost is $50,000 or more.
        1. The appropriate accounting treatment is determined by whether the original part of the existing asset is separately identifiable.
        2. If separate identification is possible, the new expenditure should be substituted for the portion of the book value being replaced or improved.
          1. Example: Roof replacement at cost of $50,000 (original cost separately identified is $30,000).
            1. Building (new roof)                            $50,000
            2. Accumulated Depreciated                   27,000
            3. Loss on replacement of roof                  3,000
            4. Building (old roof)                              $30,000
            5. Cash                                                 50,000
        3. The separately identified asset is depreciated over the shorter of the expected life of the separate asset or the remaining life of the building.
        4. If separate identification is not possible, the cost of replacements and betterments is treated as an increase in the book value of the Building, thereby increasing the basis for depreciation over the remaining life of the Building.
        5. If the replacement or betterment is designed primarily to enhance the quality of the service potential of the building, the cost is charged to the Building asset account.
        6. An appropriate increase in depreciation expense is recognized in future years but the useful life is not increased. Example:
          1. Building              $70,000
          2. Cash                  $70,000
        7. If the replacement is designed primarily to extend the length of the service life of the asset, the book value is increased by debiting Accumulated Depreciation. The revised book value is then depreciated over the revised useful life. Example:
          1. Accumulated Depreciation – Building $70,000
          2. Cash            $70,000
          3. Note:
            1. Alterations that modernize rather than improve the quality of a building should be expensed unless the alteration is so extensive as to increase the estimated life of the building.
            2. Re-roofing costs that are not replacing a separately identified asset should not be capitalized unless they are part of a major renovation of a building.
        8. Examples:
          1. An old gymnasium is converted to a block of individual rooms at a cost of $500,000. This is considered a major renovation and would be a building capitalization. This renovation enhances the service quality of the building but does not extend the life of the building.
            1. Debit: Building  $500,000
            2. Credit: Cash   $500,000                         
          2. A deteriorating roof on an existing building (the original roof costs are not separately identified) is replaced at a cost of $55,000. These costs should be expensed in the year(s) costs are incurred.
            1. Debit:  Maintenance of buildings  $55,000                         
            2. Credit: Cash  $55,000
          3. A dormitory is completely renovated at a cost of $1,000,000 including a new roof. It is estimated that the renovation will add an additional 10 years to the life of the building. The entire project costs would be capitalized under buildings.
            1. Debit:  Accumulated depreciation $1,000,000             
            2. Credit: Cash  $1,000,000 
            3. Note: The life of the building should be changed to reflect the additional 10-years of service. The debit to accumulated depreciation is the accumulated depreciation on the original building.
          4. A parking lot is repaved at a cost of $20,000 in order to restore to its original condition. This would be considered maintenance and would not be capitalized.
            1. Debit: Paving expense  $20,000
            2. Credit: Cash  $20,000
      3. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use.
        1. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  7. Infrastructure
    1. Infrastructure is defined as improvements related to the skeletal structure and function of the campus.
      1. Examples include, but are not limited to, roads, steam lines, chiller systems, storm sewers, tennis courts, sewer lines, severe weather systems, athletic scoreboards, turf, lighting, radio and television towers, water lines, signage, all-weather track, telecommunications and computing wiring, and energy management systems.
    2. Improvements valued at or above $50,000 should be capitalized.
    3. Improvements valued at less than $50,000 should be expensed.
    4. The same accounting rules that apply to improvements to buildings also apply to improvements to infrastructure. Infrastructure items are normally depreciated over a useful life of 20 years.
    5. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use.
      1. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  8. Nonexpendable Personal Property
    1. Examples of nonexpendable personal property include machinery, implements, tools, furniture, vehicles and other apparatus with a unit cost of $5,000 or more and a minimum life expectancy in excess of one year.
    2. The following list includes some of the costs that should be capitalized in the appropriate asset account:
      1. The original bargained acquisition price.
      2. Freight, insurance, handling, storage, and other costs related to acquiring the asset.
      3. Cost of installation, including site preparation, assembling, and installing.
      4. Cost of trial runs and other tests required before the asset can be put into full operation.
      5. Cost of reconditioning equipment acquired in a used state.
    3. Nonexpendable personal property acquired by donation, or the intent of donation, e.g. acquisition for one dollar, should be recorded on the basis of an appraisal of the market value at the date of acquisition.
      1. Furniture – Movable furniture that is not a structural component of a building. Examples include, but are not limited to, desk, tables, filing cabinets, and safes.  Office furniture purchased in components should be capitalized only if the individual components that cannot be separated cost at least $5,000.  Furniture is normally depreciated over a useful life of 20 years.
      2. Office and operational equipment – Office and operational equipment other than computers and peripherals. Examples include, but are not limited to, copiers, sorters, folders, filing system, printing press, shop equipment, athletic equipment, kitchen equipment, generators, and yard equipment. Office and operational equipment are normally depreciated over a useful life of 10 years.
      3. Computers and peripheral – Computers and peripheral equipment are normally depreciated over a useful life of 5 years.
      4. Educational and scientific equipment – Classroom or laboratory equipment used to conduct the normal program of education and research activity.  Examples include, but are not limited to, audiovisual equipment, classroom demonstration models, electronic instruments, lab equipment, surveying equipment, radio equipment, pianos, and other musical instruments. Educational and scientific equipment are normally depreciated over a useful life of 10 years.
      5. Motorized vehicles – Examples include, but are not limited to, cars, mini-vans, vans, boats, and light general-purpose trucks. Motorized vehicles are normally depreciated over a useful life of 5 years.
      6. Heavy equipment – Examples include, but are not limited to, buses, heavy general-purpose trucks, forklifts, snowplows, and agricultural equipment.  Heavy equipment items are normally depreciated over a useful life of 10 years.
      7. Library holdings – Library holdings include library books, music, artistic, and reference materials included in the institution’s library collection. Examples include, but are not limited to, books, microfilm, microfiche, government documents, films, videocassettes, audiocassettes, phonograph records compact disc - audio, slide set, filmstrip, transparency, maps, multimedia kit, three-dimensional models, non-catalogued pamphlets, computer software manuscripts and archives, photographs, and compact disc. Library holdings are normally depreciated over a useful life of 10 years.
    4. The same accounting rules that apply to building improvements apply to improvements to nonexpendable personal property.
    5. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use.
      1. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  9. Software
    1. Software with a cost of $100,000 or greater should be capitalized and amortized.
      1. Capitalized software costs will include external direct costs of materials and services consumed in developing or obtaining internal-use computer software.
      2. Training costs are not internal-use software development costs and should be expensed as incurred.
      3. Data conversion often occurs during the application development stage. Data conversion costs should be expensed as incurred.
      4. Internal costs incurred for maintenance should be expensed as incurred.
    2. Software costs are normally amortized over a useful life of 10 years.
    3. For each module or component of a software project, amortization should begin when the computer software is ready for its intended use, regardless of whether the software will be placed in service in planned stages that may extend beyond a reporting period.
      1. For purposes of this guideline, computer software is ready for its intended use after all substantial testing is completed.
      2. Amortization shall begin the year in which the first module is placed in service. A full year of amortization will be charged the first year regardless of the actual implementation date.
    4. Software with a cost less than $100,000 should be expensed unless the institution determines, and provides justification, for capitalizing.
      1. For example, if an institution purchases a separate software package to support the Banner system (example Luminous Premier), it may be appropriate to capitalize the cost even if less than $100,000 since it is directly related to the Banner system.
      2. It should be noted that software licensing agreements that are not perpetual in nature will be expensed, regardless of cost.
    5. As assets near the end of their estimated lives, the estimates should be reviewed for accuracy of the original estimate and adjusted to reflect the anticipated number of years of continued use.
      1. Any adjustment of estimated lives is a change in accounting estimate and should be applied to current and future depreciation calculations.
  10. Livestock
    1. Livestock should be expensed.
  11. Works of Art, Historical Treasures and Other Similar Assets
    1. Works of art, historical treasures, and other similar assets should be capitalized whether held as individual items or as a collection. These can include, but are not limited to, paintings, works of art on paper, photography, sculptures, maps, manuscripts, recordings, film, artifacts, textiles, and other memorabilia.
    2. These items with a cost (or fair value at the date of donation) in excess of $5,000 will be capitalized at their historical cost or fair value at the date of donation.
    3. Collections that meet all of the following criteria will not be capitalized:
      1. Held for public exhibition, education, or research in furtherance of public service rather than financial gain.
      2. Protected, kept unencumbered, cared for, and preserved.
      3. Proceeds from the sales of collection items must be used to acquire other items for collections.
    4. Notwithstanding paragraph Xl.C above, any collections already capitalized at June 30, 1999, will remain capitalized and any additions to such collections will be capitalized.
    5. Capitalized collections or items which are exhaustible, such as exhibits whose useful lives are diminished by display or educational or research applications, should be depreciated over their estimated useful lives. Inexhaustible collections or items are items where the economic benefit or service potential is used up so slowly that the estimated useful lives are extraordinarily long. Depreciation is not required for collections which are inexhaustible.
    6. Capitalized collections deemed exhaustible should be depreciated over a useful life of 10 years.
  12. Sensitive Minor Equipment
    1. Sensitive minor equipment items are of a movable nature which is particularly vulnerable to theft and have a cost or fair value (for donated items only) between $1,500.00 and $4,999.99, regardless of funding source.
      1. The following items are examples of items that may be viewed as sensitive minor equipment: binoculars, boat motors, boat trailers, boats, cameras, camera lenses, canoes, computers, external computer storage devices, ham radios and receivers, marine band transmitters and receivers, microscopes, musical instruments, scientific equipment, oscilloscopes, PDAs, printers, projectors, radio scanners, external computer scanners, spectrum analyzers, televisions, two-way radio transmitters and receivers, vector scopes, video cameras, video recorders and players, and waveform monitors.
      2. All weapons, regardless of cost, should be considered sensitive minor equipment.
    2. Each institution will perform a risk assessment to determine which items should be designated as sensitive minor equipment for that institution.
      1. The useful life of sensitive minor equipment is estimated at 3 years, after which the fair value will be considered to be nominal.
    3. Although sensitive minor equipment items are not capitalized, they must be identified and inventoried.
      1. Physical inventory of sensitive minor equipment should be conducted annually.
      2. Sampling is an acceptable method of conducting the physical inventory of sensitive minor equipment. 
Sources: 

Authority

T.C.A. § 49-8-203

History

New Guideline approved at Presidents Meeting, August 17, 2010. Revised at Presidents Meeting, February 4, 2014; Revised at Presidents Meeting, August 19, 2014; Revised at Presidents Meeting, May 19, 2015.

Pages

Subscribe to policies.tbr.edu RSS