Good afternoon NCURA Members Welcome to Depreciation: Optimizing Recoveries in the Current University Environment a pres

1. Good afternoon NCURA MembersWelcome toDepreciation: Optimizing Recoveries in the Current University Environmenta presentation/discussion byMike Alessandro Greg SheahanDirector, Financial Cost Analysis Chief Operations OfficerBoston University HCA Asset Management d/b/a/Hirons & Associates

2.   DISCUSSION TOPICS Brief History on Government Cost Reimbursement-indirect cost (F&A) Building Componentization why should we do it? Reasons to record depreciation at the component level. Will management be interested in componentization - ROI? The impact of University Department Data on F&A Recoveries. Equipment accountability � reasons for an accurate inventory? Tracking equipment � why is it so difficult? Will management be interested in accurate inventory- ROI?

3. DEPRECIATING BY COMPONENT Reasons To Depreciate by Component: 1. Maintain the Current Rate -Offset losses in other areas -26 Point Cap on Administration -Increasing Base or Denominator -More accurate accounting of costs 2. Depreciation on buildings is already taking place -Treated as a prospective change -Accumulated depreciation rolls forward (per GAAP) -Depreciate construction costs using more representative lives -Development of accurate removal costs

4. THE PROCESS Depreciation/Componentization: Review financial information and develop a crosswalk between capitalizations and projects/renovations Review architectural drawings to determine actual areas of renovation � determine federal funding by plant fund account etc. Balance total capitalized value of the building by fund Select useful lives that represent component consumption Show current, accumulated, and un-depreciated balance It is important to note that current accumulated depreciation shown in the financial statement will remain consistent The depreciation differences are calculated on a prospective or go forward basis (also known as a change in estimate per GASB/FASB).

5. ACCOUNTING OF COSTS Using AIA documents to determine costs: Provides accurate costing of components-not an estimate Depending on the type of research performed in the building/occupancy - component costs can vary greatly Provides proper audit trail of costs Provides information with which to establish costs where no data is available relevant to your institution Provides analysis information for future building costs The best way to segregate component costs Provides the information needed to determine removal costs

6. REMOVAL OF COSTS �Layering effects� caused by depreciation: Numerous renovations to a building where no costs are removed Depreciation on both the original building project and subsequent renovations On occasion, the component is not fully depreciated but is being replaced - floor cover, roof cover etc. When the component is not fully depreciated the NBV should be written off in the year of disposal (per GAAP) By depreciating at the component level and reviewing areas of renovation one now has the ability to remove only component costs that are being replaced � accurate removal costs not a % of project cost