Treasurer's Office

POOL Loan Guidelines

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University of Massachusetts
Office of the Treasurer
POOL Guidelines -- Updated 5/1/2013

The University of Massachusetts Treasurer's Office has created a revolving loan program (the Pool) in order to provide a low cost financing mechanism for certain University purchases. The Pool allows the Treasurer's Office to loan and reloan Pool funds to the campuses and the University President's Office over the next thirty years.

Structure of the University Financing

The University originally financed the Pool on March 29, 2000 through the issuance of $40,000,000 seven-day variable rate bonds maturing November 1, 2030, through the Massachusetts Health and Educational Facilities Authority (MHEFA - now MassDevelopment). On March 27, 2009, the bonds were subject to mandatory tender for purchase due to the expiration of the liquidity facility supporting the bonds and the conversion of the bonds from a weekly rate period to a long-term rate period. Only $20,000,000 of the bonds was remarketed on the Mandatory Purchase Date and an initial long term rate period of one year was established. The remarketed bonds were remarketed again on April 1, 2010 in a long term rate period that expired on March 31, 2013. The remarketed bonds were subject to mandatory tender for purchase on April 1, 2013 and were remarketed a third time in a long term rate period that expires on April 1, 2016. Interest on the remarketed bonds in the new long-term rate period is payable on October 1 and April 1. Based upon current market conditions, the annual interest rate on loans from the Pool is 2.0% (anticipated rate to cover actual interest to bondholders plus certain administrative costs).

The University is also obligated for certain administrative expenses including trustee fees, arbitrage calculations and remarketing fees throughout the life of the bonds. Per federal tax guidelines, the University can use up to two percent of the bond proceeds for the payment of issuance costs. The net proceeds of the financing were deposited with MHEFA, who acted as the escrow agent until the proceeds were depleted. The University Treasurer's Office disburses the funds through a formal requisition process. Initially, campus loans were made from the proceeds of the bonds. The last campus loan made from the proceeds was on February 20, 2002, depleting the proceeds. Now that the proceeds have been depleted, the University finances the campus loans from "Repaid Principal". Campuses repay the loans with interest over the expected useful life of the asset being financed. The principal portion of the repayments ("Repaid Principal") is deposited with the University and invested in a Short Term Asset Reserve Fund (STAR Fund), to provide funds for future program costs. The funds will continue to recycle in this manner over the life of the bonds.

Campus Requisitions

The process of requisitioning funds from the Pool is an important part of ensuring its success. Each disbursement from the Pool will require approval through a formal requisition process similar to the process used in the University Master Lease arrangements. The requisition process will require a project or purchase description, a completed pool loan requisition and questionnaire, proof of purchase, supporting documentation and appropriate campus and Treasurer's Office approval prior to disbursing funds from the Pool.

Loans are Structured as Reimbursements

The campus should use local operating funds for payment to the vendor. The campus will remit the requisition and supporting documentation to the Treasurer's Office to initiate reimbursement from the Pool. At the time of disbursement, the campus will receive from the Treasurer's Office a repayment schedule requiring monthly interest payments and quarterly principal payments. The campuses will also be required to provide when needed, the detail of the original accounting for any reimbursement in order to assist the University Controller's Office in the preparation of the year-end financial statements.

Campus Repayments

Each individual borrowing will result in a schedule of repayments to the Pool, including principal and interest amortized at 2.0%.* This rate is anticipated to be higher than the rate of the University's obligation to bondholders to cover administrative costs. Therefore, the positive difference between the monthly campus interest payments and the University interest payments to bondholders and to vendors for administrative costs will be used to establish and maintain the administration fund. The administration fund will be used to cover the ongoing administrative costs of the Pool. The PeopleSoft chartfield strings identified by the campuses will be used to transfer funds from the Pool to each campus for loans and from the campuses to the Treasurer's Office for their monthly repayments. The campus repayments will be amortized based upon the type of project or purchase, typically ranging from one to ten years. The amortization periods will depend upon the campus's desired terms and the useful life of the financed item. At no time can a loan be amortized beyond the financed item's useful life and the Treasurer's Office must concur with the requested amortization period. University Trustee approval, state legislation and federal tax principles limit the University to only the above categories for purchases from the Pool. Please note that you may be reimbursed for allowable expenditures paid subsequent to February 3, 1999 as permitted by University Board of Trustee approval. If you have questions regarding your individual projects or purchases please provide us with documentation so that we can discuss the appropriateness of such items. The University Treasurer's Office retains the right to disallow any item for inclusion in the Pool. Therefore, if a purchase is contingent upon receiving a loan from the Pool, please verify with us that a loan is allowable prior to your initial outlay.  Each campus has an individual who will be the campus contact to the Treasurer's Office relative to the pool. Also, in order to ensure efficiency where possible, campus requirements from the pool should be combined into a single requisition.

*Subject to change.

Pool Accounting

The accounting for the Pool transactions is similar to that of the University Master Leases. The University Treasurer's Office will maintain records and supporting documentation for the Pool activity and the University Controller's Office will generally make on-top entries to campus financial statements at each fiscal year end. However, the campuses may need to book Pool transactions locally for certain Pool loans. Furthermore, the pool and its activity will be audited centrally during the year end audit.

 


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