Real Property / Strategic Financial Analysis / Financial Analysis

Project and Equipment Costs for SFA

The Strategic Financial Analysis application does not assign costs directly to projects or equipment. This is because capital projects and equipment typically only generate mission value or income by being part of a larger facility. Particularly for NPV and IRR, looking at the return on the whole facility is typically the right level of granularity, so that the income for the facility can be gauged against the total expense in each timeframe over the facility lifecycle. For many metrics, the application assigns the project or equipment cost to the building or property, and sums the total project and equipment cost for that building or property. For this reason, if you are going to include capital projects or capital equipment in the analysis, you will use the Forecast Capital Costs action. When you run the Forecast Capital Costs action, the application includes costs for the asset you select and creates a finanal_params record for the project or equipment. See Forecast Capital Costs.

To include project and equipment costs in the unified cost model:

Run the Forecast Capital Costs action for each asset you want to gauge capital expenditures on.
Run the Forecast Income and Expenses action for each building or property for which you want to estimate operating costs and income

Capital Costs for Projects and Equipment are recorded as Scheduled Costs associated with the building within which the project or equipment reside. These costs are distinguished from building costs by the Cost Category. There are no scheduled costs for projects or equipment.

Metrics for Projects and equipment

The metrics that apply to projects and equipment are these:

Book Value depends on the record in the Financial Analysis Parameters table (finanal_params record ) created when you run the Forecast Capital Costs record.
FCI depends on Action Item (activity_log ) items assigned to that project or equipment item.
Schedule Variance (%) comes from the metric trend values table. (projects only)
Budget Variance (%)comes from the metric trend values table. (projects only)

Even if the analyst does not include a project or equipment item in the analysis explicitly (by creating its own finanal_params record), any historic project costs are still rolled up with the building or property.

Cost categories for projects and equipment

The Aggregate Operating Costs and the Forecast Capital Costs actions break out the capital project and capital equipment costs to separate cost categories. As such, you can opt to include the values for project and equipment costs in the following metrics for properties and buildings.

Remaining Mortgage
Remaining Lease Commitment
Interest
Principal
Cost of Capital
Depreciation
Annual Worth
NPV
IRR

The application parameters controlling the cost categories for projects and equipment are below.

To this metric	Add these cost categories
fin_anlys_RemainingMortgage_an	CostCategory_PrincipalCapProj CostCategory_PrincipalPPE CostCategory_InterestCapProj CostCategory_InterestPPE
in_anlys_Interest_an_fy	CostCategory_InterestCapProj CostCategory_InterestPPE
fin_anlys_Principal_an_fy	CostCategory_PrincipalCapProj CostCategory_PrincipalPPE
fin_anlys_CostOfCapital_an_fy	CostCategory_CapitalCapProj CostCategory_CapitalPPE
fin_anlys_Depreciation_an_fy	CostCategory_DeprCapProj CostCategory_DeprPPE
cap_AnnualWorth_an_fy	Add categories to UpdateAnnualWorth
leas_Costs-RemainingCommitment_an	Add categories to CostCategory_RentAll

Calculations for Project and Expense Costs

Some metrics sum the Scheduled Costs assigned to properties or buildings from specific cost categories (e.g. DEPRECIATION - CAPPROJ, DEPRECIATION - PPE) that record project or equipment costs. If the cost has no building, it is summed to the property; otherwise, it is summed to the building. That is, these values are totals for the project or building. (These values are 0.0 for any project or equipment record in the Financial Analysis Summary finanal_sum table.)

Depreciation - Capital Projects
Depreciation - PPE

Some project metrics are summed to buildings or properties from the costs in the projects table. These are summed to the property if the project has no building, otherwise, they are summed to the building.

Capital Projects (fy) – that is cap_CapitalProjects-Approved_an_fy
Planned Capital Projects (3 years)
Planned Capital Projects (lifetime)
Expensed Projects - Approved (fy)

Some project metrics are calculated from the metric trend values:

Schedule Variance (%)
Budget Variance (%)

Note: The application also use the Financial Analysis Parameters values for projects and equipment in calculating the Capital and Expense Matrix values, which presents other totals on these outlays.

Equipment data for SFA

You only need to develop capital equipment or equipment that you may want to depreciate.

You can alternatively define a capital project that holds a group of equipment items (for example, 300 PC's) that you have purchased as a group, and will depreciate as a group.

The Strategic Financial Analysis application does not assign costs directly to projects or equipment. For many metrics, the application assigns the project or equipment cost to the building or property, and sums the total project and equipment cost for that building or property. For this reason, if you are going to include capital projects or capital equipment in the analysis, you will use the Forecast Capital Costs action. When you run the Forecast Capital Costs action, the application includes costs for the asset you select. See Project and Equipment Costs.

If you do not have Archibus Assets:

Use the Smart Client view to enter:
- Equipment Code
- Purchase Price
- Purchase Date
- Property Type

If you have Archibus Assets:

Develop the Equipment assets as you typically do. See Adding Equipment.

For Forecasting Capital Costs for Equipment

Make sure your equipment is associated with a building (for inside building equipment) or with a property (for outside building equipment, such as a wind mill or cogeneration plant), as costs for the equipment is rolled up to the building or property.

Options for recording Equipment Asset value

Cost analysts have several options of recording equipment, depending on their judgment as to which most accurately represents the value and the practicality of creating separate cost records.

Method	Used For
Tracking Equipment Market and Book Value with each Equipment record Note: The Market Value maps to the Current Value for the equipment in the Equipment Depreciation table (eq_dep.value_current.) The Book Value is the Deprecated Value ( (eq.cost_dep_value.)	equipment above a certain cost threshold that changes custody within the organization
Tracking Equipment Market and Book Value with each Equipment record, and additionally using the "Estimate Charges for Capital Expenses" to record finance charges. This estimate is entered using the Forecast Income and Expenses action.	expensive strategic assets, such as MRI equipment or manufacturing equipment, for which the organization makes distinct financing choices
Tracking Equipment Market and Book Value as part of a Capital Project and not recording Equipment Market and Book Value with individual equipment records.	equipment, such as a bulk purchase of computers for classrooms, that is aggregated for purchase or for depreciation (i.e. to bring the bulk purchase above the lower threshold value used by the organization for equipment costs that are depreciated).

Method

Used For

Tracking Equipment Market and Book Value with each Equipment record

Note: The Market Value maps to the Current Value for the equipment in the Equipment Depreciation table (eq_dep.value_current.)
The Book Value is the Deprecated Value ( (eq.cost_dep_value.)

equipment above a certain cost threshold that changes custody within the organization

Tracking Equipment Market and Book Value with each Equipment record, and additionally using the "Estimate Charges for Capital Expenses" to record finance charges. This estimate is entered using the Forecast Income and Expenses action.

expensive strategic assets, such as MRI equipment or manufacturing equipment, for which the organization makes distinct financing choices

Tracking Equipment Market and Book Value as part of a Capital Project and

not recording Equipment Market and Book Value with individual equipment records.

equipment, such as a bulk purchase of computers for classrooms, that is aggregated for purchase or for depreciation (i.e. to bring the bulk purchase above the lower threshold value used by the organization for equipment costs that are depreciated).

If you track Equipment value as part of a Capital Project:

Do not enter the Market Value or Book Value with the equipment record
Consider breaking purchases of Equipment with different depreciation Property Types into different Capital Projects so that you can match the infrastructure calculations of finance and depreciation with the accounting calculations. Doing so often makes sharing inventory and depreciation information back and forth with the financial system easier.