This chapter provides an overview of operating expenses, lists prerequisites, and discusses how to:
Establish operating expenses for a lease.
Perform operating expense audits for payables leases.
Reconcile operating expenses for receivables leases.
The cost of maintaining a property or a building, commonly referred to as Common Area Maintenance (CAM) or operating expenses, is typically considered a shared expense between a landlord and a tenant. These expenses can include utilities, taxes, insurance, maintenance, cleaning, advertising, and promotions. The actual expenses are normally based on the percentage of the space that is occupied (pro rata share) and is detailed in the actual lease. The PeopleSoft Real Estate Management system enables you to set up recurring invoices or payments for estimated operating expense charges and also perform end-of-year audits and reconciliation for those shared expenses.
Typically, on an annual basis, the landlord breaks down all estimated operating expenses for the year and passes those charges through to the tenants on a monthly basis based on how much of the building that they are occupying. Since the monthly amount that is invoiced or paid is based on an estimate, the system tracks all invoices and payments that are made. At the end of the year, the landlord reconciles the estimated expenses with actual costs. A credit is issued to the tenant for overpayment or an invoice for underpayment. After the reconciliation is complete, the landlord uses that data to better estimate the upcoming year's expenses and provide a new budget and estimated bill amount. Tenants can hold CAM audits in situations where they believe that the costs are inaccurate or if they just want to verify the estimates against actuals.
Catch up payments are the adjustment payment for the first months of the new year. Catch up payments are the difference between the estimated payment amount paid to date in a new lease year (which has been paid at the prior year estimated payment amount) and the amount due per the new estimated payment amount. It may be possible for this to be a negative number, which would be treated as a credit. During the revision of the annual expenses through an amendment, the catch up amount should be recorded at the category level. This catch up payment will be added to the first transaction that will be sent to the transaction queue after the amendment is activated.
Before you can set up operating expenses, you must:
Set up the routing code.
Set up the operating expense categories.
Associate the routing code with the operating expense categories.
Add accounting rules for those operating expense categories/routing codes.
Define the Prorata Basis.
See Understanding Operating Expense Categories.
This section discusses how to:
Establish operating expense details.
Establish prorata share details.
Enter cap/minimum details.
Approve operating expenses.
Page Name |
Definition Name |
Navigation |
Usage |
RE_LS_TRM_SEC |
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Define an operating expense for the lease. When you establish your operating expense details, you can set up categories and minimum and maximum amounts for that operating expense. |
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Accounting Distributions |
RE_LS_TRM_DST_SEC |
Click the Accounting Distributions link on the Financial Terms - Operating Expenses Details page. |
Override the accounting distributions defined at the business unit level. |
Prorata Share Basis |
RE_LS_PRTA_SEC |
|
Use this page to enter prorata basis information for this operating expense. Note. This link is available only if you select Gross Leasable Area, Occupied area, or Occupied Area with Floor as the Prorata Share Basis. |
Caps/Minimum Details |
RE_LS_OPX_CAP_SEC |
|
Use this page to enter caps detail information for this operating expense. Note. This link is available only if you select Apply as the CAP/MIN. |
Operating Expense Approval |
RE_LS_OPX_APP |
Select a task item from your worklist. |
Approve operating expenses that exceed tolerances. |
Access the Financial Terms - Operating Expenses Details page (click the Add Operating Expense button on the Financial Terms page).
Start Date |
Enter the begin date for the operating expense. The start date must occur on or after the lease start date. The system uses the lease start date as the default. |
End Date |
Enter the end date for the operating expense. The end date should occur on or before the lease termination date. The system uses the lease end date as the default. |
Payee |
Enter the entity who receives the operating expense payments. The default value is the landlord from the lease. This field appears only for operating expenses that are associated with payables leases. |
Ship To |
Enter the vendor ship to location. This location will be used for VAT and SUT calculations by PeopleSoft Payables Voucher Build application. Applicable only for payables leases. This is not a required field and if this is left blank, Voucher Build will populate the default ship to location for the vendor. |
Payor |
Enter the entity who is responsible to make the operating expense payments. The default value is the tenant from the lease. This field appears only for operating expenses that are associated with receivables leases. |
Accounting Distribution |
Click this link to access the Accounting Distribution page and to override the operating expense details accounting distribution rules defined at the business unit level. |
Add Expense Line |
Click to add a new row to the Operating Expense Categories grid. |
Prorata Share Method |
This is the basis on which the tenant's share of expenses is calculated. Generally, it represents the ratio of the area of the tenant's premises to that of the building or property as a whole, or an appropriate part thereof. Select either:
|
Prorata Details |
Click this link to access the Prorate Share Details - Basis page. This link is only available if you select Gross Leasable Area, Occupied Area,or Occupied Area with Floor as the Prorata Share Method. |
Admin Fee Method (administration fee method) |
Choose either:
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Admin Fee Percentage (administration fee percentage) |
Enter the admin fee percentage |
Exclude Base Year |
Select this check box to exclude a base year. The base year fields are informational only. |
Base Year |
Enter the year to be used as the base year. If you select Exclude Base Year, then you must enter a base year. |
Base Year Amount |
Enter the amount to be used for the base year. If you select Exclude Base Year, then you must enter a base year amount. |
Base Year Gross Up Percent |
Enter the base year gross up percentage. If you select Exclude Base Year, then you must enter a base year gross up percent. |
Cap/Min |
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Caps Detail |
Click this link to access the Caps/Minimum Details page. This link appears only if Apply is selected as the Cap/Min value. |
Exp. Gross Up(expense gross up) |
Select this check box to enable expense gross up. |
Gross Up Percent |
Enter the gross up percentage to be applied to this operating expense. |
Gross Up Method |
Select either:
|
Operating Expense |
Enter or select the operating expense category for recoverable shared expenses. You can select from only active operating expense categories. |
Estimated Amount |
Enter the estimated amount for the operating expense. Use the estimated amount for monthly recurring invoices or payments. |
Min Amount (minimum amount) |
Enter the minimum amount for the operating expense. Note. This field is for information use only. |
Max Amount (maximum amount) |
Enter the maximum amount to charge for the operating expense. Use this field to calculate audit alerts during the audit and reconciliation processes. |
Administration Fee |
Enter the administration fee. The system adds this amount to the operating expense charges after final calculations of all operating expenses for the lease. |
Straightline |
Select to apply straightline calculations to the operating expense. Note. If the rent amount or recurring expense amount for the operating expense is not evenly billed across periods, then those amounts must be reported in the general ledger on a straightline basis (an even distribution). |
Calculate |
Click the button to calculate the recurring monthly operating expenses. Note. This button is only available when the lease or amendment is in pending status. |
Total Estimated Payment |
Displays the total estimated payment amount for the operating expenses. |
Schedule |
Select a value from the prompt table to specify how often to invoice or pay the operating expenses. Use this field to determine the frequency of the invoice or payment. The values from which you select come from the Schedule component. Note. If the value you need is not available, to the Schedule component to add additional values. |
Frequency |
Displays the frequency that is associated with the schedule that you selected. |
Anticipated Process Date |
Displays the current anticipated processing date or the next date on which a transaction is available to be approved and sent to PeopleSoft Payables or PeopleSoft Billing. This field appears only after lease activation. Note. You must run the Transaction Generator to get the scheduled transactions into the transaction queue. |
Terms Calendar |
Enter the terms calendar, which determines the start date and end date of billing periods for the operating expense. The calendar ID from the business unit definition appears by default. You can override this value, but the frequency of the schedule and terms calendar must be the same. This is a required field. |
Details
Caps |
Select this check box is caps apply to this expense. |
Fee |
Select this check box if fees apply to this expense. |
Gross Up |
Select this check box if grossing up applies to this expense. |
Anchor Contribution |
Enter any anchor contribution made by the tenant. |
Basis |
Select a basis for this operating expense. |
Catch Up |
Catch up payments are the adjustment payment for the first months of the new year. The difference between the estimated payment amount paid to date in a new lease year (which has been paid at the prior year estimated payment amount) and the amount due per the new estimated payment amount This catch up payment will be added to the first transaction that will be sent to the transaction queue after the amendment is activated. |
Accounting Distribution |
Click this link to access the Accounting Distribution page and override the operating expense category accounting rules defined at the business unit level. |
Access the Accounting Distributions page (click the Accounting Distributions link on the Operating Expense Details page).
The fields on this page differ depending upon the distribution selected. When you select a value other than None, the ChartField values become available for edit.
Distribute By |
Select either:
|
Add Distribution |
This button appears if you select Percentageor Area for the distribute by value. Click this button to insert a new distribution row. |
Delete Distribution |
This button appears if you select Percentage or Area for the distribute by value. Select a row and click this button to delete it from this page. |
Select |
This checkbox appears if you select Percentage or Area for the distribute by value. This checkbox is used to delete distribution rows. Select this checkbox and click the Delete Distribution button to delete the rows. |
Percentage |
This field appears if you select Percentagefor the distribute by value. Enter a percentage amount for this distribution line. Percentage amounts must equal 100% to be valid. |
Area |
This field appears if you select Areafor the distribute by value. Enter the area for this distribution line. All lines must add up to the total rentable area for the lease to be valid. |
Valid |
Used to indicate a valid combination of chartfields. When activating the lease, edit checking will be provided and the checkbox will be selected for each row representing a valid combination of chartfields. A lease cannot be activated until every accounting distribution is marked as valid. |
Access the Prorata Share Details - Basis page (click the Prorata Details link on the Operating Expense Details page)
The fields on this page vary depend on which prorata share basis is selected on the Operating Expense page.
Prorata Share Method |
Displays the prorata share method selected on the Operating Expense Details page. |
Unit of Measure |
Displays the unit of measure. |
Agreement No(agreement number) |
Displays the agreement number for the prorata share details. |
Prorata Basis |
Enter a prorata basis. |
Tenant Area |
Enter the tenant's area. |
Total Area |
Enter the total area to be considered for this prorata basis. The total area of the property selected on the lease will be defaulted here. The user can override this value here. |
Floor Percentage |
Enter the percentage of floor to be considered for this prorata basis. This field is only available if you select Occupied Area With Floor as the Prorata Basis option on the Operating Expense Details page. |
Description |
Enter a description for the prorata share details. |
Access the Cap/Minimum Details page (click the Caps Detail link on the Operating Expense Details page).
Caps Applied To |
Select whether the caps are applied to Tenant Share or Landlord Expense. |
Caps Basis |
Select either:
|
Cap Applied |
Select either:
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Subsequent Year Cap
Method |
|
Percentage |
Enter the percentage to be used in calculation. |
Compare To |
Select a comparison value:
|
Index Name |
For Indexed or Least of Percent or Index, specify the index value to be used. |
Subsequent Year Minimum
Method |
|
Percentage |
Enter the percentage to be used in calculation. |
Compare To |
Select a comparison value:
|
Index Name |
For Indexed or Least of Percent or Index, specify the index value to be used. |
Access the Operating Expense Approval page (Click a task in your worklist.)
If operating expenses are outside tolerance limit, the system will:
On Processing, set the operating expense worksheet to Pending Approval.
Create tasklist for the approver
Route the approver from the tasklist to the approval page
If the transaction is approved, send the transactions to the TQM and change the status of the Worksheet to Processed.
If the transaction is denied, change the status of the worksheet to Pending so that the worksheet can be edited and the whole process can be repeated.
The Approval map displays the path and status of approvals. Ad-Hoc approvers can be added by clicking on the Add button.
This section provides an overview of operating expense audits and discusses how to:
Perform operating expense audits.
Compare operating expenses with the previous audit.
The PeopleSoft Real Estate Management system provides you with the ability to reconcile annual operating expenses or CAM against your estimated payments. When the landlord sends the annual CAM reconciliation statement with any invoice or credit against the estimated payments that you have made, you can compare the information against your records of estimated payments, as well as the CAM charges from the previous year. If the charges significantly increase or decrease or the data that is provided by the landlord is insufficient, you can initiate a formal CAM audit.
You can use the Audit Operating Expenses - Operating Expense Audit page to enter the values from the reconciliation statement for each expense category. The system automatically calculates the amounts that you paid to the payee, which includes all of the recurring amounts and the audit adjustment amounts. To calculate the paid amount, the system uses only processed transactions from the transaction queue. You can enter manual adjustments the final total for each expense category. The system compares the data that you entered against the data that is stored in the lease and flags any value that exceeds a certain tolerance threshold.
Note. You set up the tolerance threshold at implementation in the real estate management business unit.
After you have reviewed and compared the data in the worksheet and are satisfied with the final calculated numbers, you can issue a payment for any underpayments. If an overpayment occurs, you can create a negative payables line and apply it to any future payments, or, the landlord can issue a refund check or credit.
Before you can perform an operating expense audit, the lease that you are auditing must be in active, expired, or holdover state. You must also enter operating expenses terms against the lease.
Access the Audit Operating Expenses - Operating Expense Audit page (Real Estate Management, Payables Lease, Audit Operating Expenses).
Business Unit |
Displays the lease administration business unit selected on the search page. |
Lease Number |
Displays the lease number selected on the search page. |
Currency |
Displays the currency of the lease. |
Lease Name |
Displays the lease name. |
Agreement No (agreement number) |
Displays the agreement number for the lease operating expense. |
Audit Number |
Displays the sequential number that is assigned to this audit. |
Status |
Displays the audit status. |
Landlord |
Displays the landlord for this lease. |
From Date |
Enter the date on which you want the audit period to begin. This date must occur after the lease start date and cannot be later than one day after the To Datefrom the previous audit. The system sets the From Date to one day later than the previous audit by default. For first audit period the system uses the lease commencement date by default. |
To Date |
Enter the date on which you want the audit period to end. This date must occur after the from date and cannot be later than the current date. |
UOM (unit of measure) |
Displays the unit of measure of this lease. |
Revision |
Displays the revision number for this audit. |
Accounting Distributions |
Select this link to access the Accounting Distributions page. |
Update Audit |
Click to update this audit. The system compares the actual charges in the current audit with the charges for the operating expense categories in the previous audit and creates and invoice for the balance amount. You can update an audit only after all of the audit transactions have been processed. This field appears only for processed audits. |
Prorata Basis
Prorata details group box will not be available for the user if:
Fixed percentage method is used for sharing expenses.
Prorata share is not used to calculate tenant's share.
Prorata Share Method |
Displays the prorata share method for this operating expense. |
Gross Up Percentage |
Displays the gross up percentage for this operating expense. |
Gross Up Method |
Displays the gross up percentage for this operating expense. |
Calculate Prorata Basis |
Click this button to calculate the prorata basis. |
Prorata Basis |
Displays the prorata basis selected for this operating expense. |
Tenant Area |
Enter the area this tenant occupies. |
Rentable Area |
Enter the total rental area available. |
Occupied Area |
Enter the total area occupied. |
Occupancy Percentage |
Displays the percentage of area this tenant occupies. |
Prorata Share |
Displays the percentage of the total area that you are occupying. The system displays the value from the lease. The field is informational only. The system does not use the field for any calculations. |
Expense Details
Admin Fee Percentage Administration Fee Percentage |
Displays the administration fee percentage. |
Base Year |
Displays the base year entered on the lease. |
Base Year Adjustment |
Displays the base year adjustment entered on the lease. |
Add Category |
Click this button to create a new operating expense category for the lease. This button appears only for pending audits. |
Base Year Gross Up |
Displays the base year gross up entered on the lease. |
Category |
Select the expense category. Operating expense categories that are in a processed state will be retrieved from the Transaction Queue for the given lease and payee. |
Actual Amount |
Enter the actual amount for this expense category. |
Previous Period |
Displays the amount for the previous period if available. |
Change |
Displays the change in amounts from the previous period. |
Caps |
Select this check box to indicate if caps are applied to this category. |
Fee |
Select this check box to indicate if administration fees apply to this category. |
Gross Up |
Select this check box to indicate if gross up applies to this category. |
Overall Expense
Grossed Up Expense |
Enter the grossed up expense for this expense category. |
Admin Fee (administration fee) |
Enter any administration fees applied to this category. |
Anchor Contribution |
The anchor contribution defaults from the lease, the user can override the value here. |
Adjusted Expense |
Enter the adjusted expense for this category. |
Minimum |
Enter the minimum for this category. |
Maximum |
Enter the maximum for this category. |
Sharable Expense |
The system calculates this value. This is the expense which needs to be shared based on the prorata share of the tenant. |
Tenant Share
Prorata Share |
Displays the prorata share calculated using the values entered. |
Occupancy Pct (occupancy percentage) |
Enter the occupancy percentage for this category. The default is 100 percent. |
Tenant Share |
Displays the tenant share calculated based on the sharable expense, prorata share, and the occupancy percentage entered. |
Paid Amount |
Displays the amount paid to the landlord. |
Amount Due |
Displays the amount due to the landlord. |
The system automatically populates the Operating Expense Categories grid with the operating expense categories that are associated with the lease and payee on which you are performing the audit.
Operating Expense Categories in the processed state will be retrieved from the Transaction Queue for the given Lease and Payee.
Calculate |
Click the button to calculate the total lines that were entered. When you click the button, the system calculates the difference between the paid amount and the actual amounts and displays the totals and the adjustments. |
Total Paid To Landlord |
Displays the total operating expenses that were paid to the landlord. The system adds all of the amounts in the Paid Amount column. |
Total Adjusted Actual Amount |
Displays the total amount of the operating expenses that should have been paid to the landlord or payee. The system adds all of the amounts in the Actual Amount column. |
Total Manual Adjustment |
Displays the total amount of the manual adjustments. The system adds all of the amounts in the Adjust Amount column. |
Total Administration Fee |
Displays the total administration fee. The system adds all of the amounts in the Admin Fee column. |
Total Amount Due |
Displays the amount that you owe the landlord or payee. The system uses this formula to calculate the amount: Amount Owed = Total Adjusted Actual Amount + Total Manual Adjustment + Total Administration Fee − Total Paid To Landlord. |
Create Payment |
Click to create a payment for underpayment of the operating expenses for the year. When you click this button, the system sends the transaction to the transaction queue for payment processing. |
Compare Previous Audit |
Click to select the previous audit for comparison, if it exists. The system bases the comparison on the audit end dates. The previous audit is the one with an audit end date less the current audit end dates. The system retrieves the two audits and displays them side-by-side. The system flags category differences from year-to-year and identifies massive increases or charges that are above the maximum that is allowed. If the system cannot find a category match, it separates those categories that are not available for comparison. |
Access the Audit Operating Expenses - Compare Operating Expenses with Previous Audit page (click the Compare Previous Audit link on the Audit Operating Expenses page).
This page enables to you compare and audit operating expenses against previous audit data, if it exists. The system retrieves the two audits and displays them side-by-side. The system flags category differences from year-to-year and identifies massive increases or charges that are above the maximum that is allowed. If the system cannot find a category match, it separates those categories that are not available for comparison.
Current Period |
Displays the date range for this audit period. |
Prior Period |
Displays the date range for the prior audit period that you are comparing. |
Common Operating Expense Audits for Current and Prior Audits
Current Actual |
Displays the current actual amount that you entered based on the reconciliation statement. |
Prior Actual |
Displays the previous audit actual amount. |
Difference % (difference percentage) |
Displays the percentage difference between the current actual amount and the prior actual amount. ((Current Actual - Prior Actual) ÷ Prior Actual). |
Diff Amt (difference amount) |
Displays the difference amount. (Current Actual - Prior Actual). |
Current Cost/Sq Unit (current cost per square unit) |
Displays the current cost per square unit. (Current Cost ÷ Sq Unit = Adjusted Actual Amount ÷ Total Rentable Area). |
Prior Cost/Sq Unit (prior cost per square unit) |
Displays the prior cost per square unit. (Prior Cost/Sq Unit = Prior Actual Amount ÷ Prior Total Rentable Area). |
When the system cannot match up one or more categories from a previous audit with the categories from the current audit, the system displays the discrepancies in the Unmatched Categories grid. This occurs when you create a new category or an existing category from a previous audit does not exist, or if you change the category in the middle of the year. As a result, the system is unable to provide any comparisons for these categories because there is no exact match.
Calculated Total for Current and Prior Audits
Current Actual |
Displays the total amount that you paid to the payee. This amount might differ from the reconciliation statement that is provided by the landlord. The current actual amount paid is based on an estimate that is provided to you at the beginning of the lease. |
Prior Actual |
Displays the total amount that you paid to the payee in the prior period. |
Diff Amt (difference amount) |
Displays the difference between the prior actual amount and the current actual amount. |
Current Payor Actuals |
Displays the current total amount that is paid by the payor. |
Payors Actuals Difference |
Displays the total amount that the payor paid in the prior audit. |
Current Rentable Area |
Displays the current total rentable area in the lease. |
Prior Rentable Area |
Displays the total rentable area in the prior audit. |
Rentable Area Difference |
Displays the difference between the current and prior rentable area in the lease. |
Current Cost Per Sq Unit (current cost per square unit) |
Displays the total current cost per square unit. |
Prior Cost/SQ Unit (prior cost per square unit) |
Displays the total prior cost per square unit. |
Cost/SQ Unit Difference (cost per square unit difference) |
Displays the difference of the total cost per square unit between the current period and the prior periods. |
This section provides an overview of operating expense reconciliation and discusses how to:
Reconcile operating expenses
Compare operating expense reconciliations
PeopleSoft Real Estate Management enables you to reconcile the difference in the original estimated operating expense and the actual operating expenses for each tenant or payor for a time period. The system calculates the amount of estimated operating expenses for the transactions that the system processed during a time period that you specify. You can enter the actual expenses that you incurred based on these criteria:
Operating expense category: Summarize your charges by operating expense category.
Tenant: Specify the tenant or payor.
Time period: Determine reconciliation from and to dates.
Use the Reconcile Operating Expenses - Operating Expense Statement page to enter these amounts and compare them with the amounts that the payor paid. You can manually adjust the amount for each operating expense category. Click the Create Invoice button on the Operating Expense Statement page to access the Billing Review page. In the case of an overpayment, you can issue a credit to the tenant that could be applied against future rent payments. In the case of an underpayment, you can issue an invoice for the remaining sum. Enter the billing amount as negative to generate a payment credit or positive to create an invoice.
You can compare this reconciliation with the previous reconciliation to identify any time gaps or large amount differences in the operating expenses.
Access the Reconcile Operating Expenses - Operating Expense Statement page (Real Estate Management, Lease Administration, Receivables Lease, Reconcile Operating Expenses).
Note. The fields on this page function the same as the fields on the Audit Operating Expenses - Operating Expense Audit page.
See Performing Operating Expense Audits.
Access the Reconcile Operating Expenses - Compare Operating Expenses with Prior Statement page (click the Compare Previous Audit link on the Reconcile Operating Expenses page).
The fields on this page function in the same way as the fields on the Audit Operating Expenses - Compare Operating Expense with Prior Audit page.
See Comparing Operating Expenses with the Previous Audit.