This week’s Financial FAQ:
Q: What is the difference between operating and capital funds? What are their sources and are these funds interchangeable?
A: The College prepares an annual operating budget to fund its day-to-day operations. The primary operating expense items are personal services (think salaries), fringe benefits, equipment, and various contractual expenses (think products and services that your department contracts for in its normal operations). State aid, student tuition, support from Monroe County and, if necessary, the fund balance provide the revenue to fund the operating budget.
Capital funds are quite different from operating funds in that they are typically used for long-term infrastructure purposes, such as buildings, roads and significant technology initiatives. You may hear these referred to as capital projects. A capital budget is typically prepared every five years as part of the College’s master facilities plan. The Wolk Center for Excellence in Nursing, PAC Center and Banner software implementation are three recent examples of capital projects. The cost of building these structures are paid with capital funds. The future day-to-day cost to operate them will come from operating funds. Capital projects are typically funded by a state/local sponsor partnership: 50 percent of the cost comes from the state and 50 percent comes from Monroe County. Both the county and the state fund capital projects through the issuance of long-term bonds.
(Occasionally at MCC, private philanthropy has contributed to or supplanted the local share of a capital project. Because of Monroe County’s financial challenges, private philanthropy made possible the PAC and Wolk centers and the Banner project. All three were funded in part by contributions received from individuals, organizations and private foundations secured by the MCC Foundation. More on the differences between MCC Foundation, MCC Association, and MCC funds in our next Financial FAQ. )
As you can see, operating and capital funds are not derived from the same source nor are they used for the same purpose. As such, they are not interchangeable. That is, operating funds cannot be used for capital projects and capital funds cannot be used for day-to-day operations.
If you have a financial question that you would like answered, send it to <
mailto:marcom@monroecc.edu>. Administrative Services and College and Community Relations will work together to answer your questions in upcoming issues of the MCC Daily Tribune.