You Mean I’ve Gotta’ Pay it Back?
Debt Servicing Team Seeks to Document and Streamline

by Chris Malins

Every year, the UW pays over $50 million on $600 million worth of bond debt for campus buildings. This debt has helped to pay for buildings such as the Gates Law School, the IMA, and the newly renovated Husky Den. It is expected that with the growth in research and the corresponding need for space, outstanding debt will only increase.

In some ways, borrowing the money is the easy part; it’s paying it back that is a challenge. Information must be gathered regarding the department responsible for paying the debt and the source of their funding. It is also vital to determine whether the bonds have premiums or discounts that need to be amortized, and to set up accounts to track the outstanding principal amount and correctly report it on the financial statements. Finally, we must be ABSOLUTELY SURE that the payments are made on time. Even one late payment can have serious long term repercussions for the UW’s ability to issue additional debt.

The work of setting up accounts, servicing debt, and creating reports for a variety of campus users has long been the responsibility of the Financial Accounting Office. Nancy Treibel and Greg Henderson manage the process for the repayment of bonds and capital leases. They rely on information provided by the State Treasurer, the UW Treasury Office and the borrowing department. This process has worked very smoothly for years.

This is where the newly-formed Debt Servicing Team comes in. The permanent members are Nancy Treibel, Sarah Moore, and Chris Malins. Occasional drop-in members are Bill Christensen andGreg Henderson. The team is sponsored by Jeff Follman and Frank Montgomery. This team is tasked with documenting the debt servicing and reporting process for all types of debt that UW has and identifying ways to simplify and streamline the process.

Someone may ask: “You have a process that isn’t broken. Why try to fix it?” The reality is –to use a sports analogy- while we have great starters on the team, our bench is very shallow. For example, with respect to the process for paying debt service on State bonds, there is only oneperson at UW that completely understands this process. If this situation exists on a sports team, you’ll surely lose a lot of games. At the UW, there is much more at stake.

So far, the team has documented the process for setting up the accounting for revenue bonds, with a flow chart to document the process and a list of inputs and outputs for each step. There is even a detailed list of what the debits and credits should be for each entry. When this is complete, the team will move on to the State bond process, refunding bonds, and finally, to accounting for capital leases. When all of the processes are documented, the team will critically review the flow charts with the intent of identifying ways to make the job simpler.

On a parallel track, the team is also looking at the reporting side of the process. Data on outstanding debt and debt service payments are used for the annual report, rating agency presentations when issuing new debt, and as a decision-making tool for the capital budget office. Another goal of the team is to create an electronic file that will provide data on the bond liabilities and payments and serve the needs of all users.

While the final product is months away from being complete, the work that this team is doing is vital to continuing the UW tradition of accurate and timely recording and payment of debt service.