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Funding Sources: Managing Multiple Funding Sources on Public Projects

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e-Builder.net 800.580.9322 info@e-builder.net | support@e-builder.net FUNDING SOURCES Managing Multiple Funding Sources on Public Projects EXECUTIVE SUMMARY The funding for public construction projects often comes from a variety of sources (federal, state, local, private sector, etc.) and in many forms. The type and number of funding sources for a project depends on a variety of factors. If it is a public project, common funding sources include general obligation bonds, oil and gas tax revenues, grants, and sometimes government funding in the form of stimulus programs. Private institutions fund their building projects through donations, grants, and educational endowments, among other sources. Each source has its own usage and distribution rules for handling those funds. Managing finances can be an extremely complicated endeavor when multiple sources are used to fund one project. Owners must stay organized and remain in compliance with funding requirements or risk difficult audits, penalties, or, worse, loss of funding. The ability to calculate complex funding distribution ratios and plan/assign funding according to budget and commitment levels, while retaining the flexibility to add new and different funding sources at any time, is vital to owners who strive to achieve maximum visibility over and control of funding. The use advanced, integrated tools to quickly and accurately set up, use, track, and report funding sources is imperative MONITORING AND REPORTING REQUIREMENTS For each different type of funding, there are unique rules and requirements. Funding sources may have complicated reporting requirements or spending restrictions that place limitations on what is done with all or just a portion of the funds. "Some sources have much more strenuous reporting requirements, and also spending restrictions, and other funding sources allow you to spend on certain things, so sometimes you need to set up multiple funding sources for different portions of work on projects," says David Mispagel, Project Manager for Design and Construction at the California Institute of Technology in Pasadena, CA. He notes that some funds, even if they technically come from the same place, need to be split into separate accounts for proper tracking. "Typically speaking, we track a minimum of two funding sources on each project, usually a capital funding source and a noncapital funding source. We separate funds into two accounts so that we can track what's spent on different things," says Mispagel. Other types of funding require reporting in accordance with a spending timeline. Gifton Passley, Assistant Director of Construction Services at the Georgia State Financing and Investment Commission (GSFIC) in Atlanta, Ga., says that 6-month, 3-year, and 5-year reporting is required on general obligation bond funding. "We have three milestones for the general obligation bond funding. At six months, you must commit 5% of the fund. At three years, you should spend 85% of the fund, and at year five, all the funds should be spent, or it will be used to retire debt," he says. Passley also notes that certain types of funds have built- in restrictions. "Sometimes you can't use the funds to build revenue-bearing entities. So, let's say you're building a science center with an amphitheater, or any section that will generate revenue. You would not be able to use the general obligation bond fund to construct that portion of the building." According to Anja Mathews, Senior Project Manager at GSFIC, certain types of moving costs, equipment purchases, or IT support costs cannot be funded out of certain sources.

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