| Approved by: | President |
| History: | Issued -- October 31, 2014 |
| Revised -- | |
| Last Reviewed -- | |
| Related Policies: | Capitalization & Depreciation Policy; University Budget Policy |
| Additional References: | |
| Responsible Official: | Associate Vice President, Financial Planning, Institutional Research and Assessment tel. (202) 319-5012 |
I. Introduction
While the operating budget focus is the twelve months of the fiscal year, the focus of capital budgeting is the planning process used to determine an organization's long term investment in assets that have a useful life of greater than one year. The capital budget comprises part of the operating budget process, because it impacts operating expenses through depreciation expense, affects cash flow projections and requires funding decisions.
II. Definitions
A. Budget Committee - The Committee comprises: the Provost; the University Vice Presidents; and an Academic Senate representative.
B. Capital Investment - Includes physical assets or technology over $5,000 that has a useful life of greater than one year, including: new buildings; building improvements; system infrastructures (such as security, fire prevention, utilities); new and replacement machinery and equipment; major upgrades or repairs; technology; and vehicles.
C. Depreciation - The allocation of the cost of an asset over a defined useful life for that type of asset.
III. Prior to Budget Committee Submission
Only projects with available funding should be submitted through the capital budget process. Capital budget requests differ from operating budget requests in that respect. While the operating budget process requests actual funding for necessary expenses, the capital budget approval process assumes funding is already available and reviews the spending of those funds on projects in the scope of overall University expense and cash flow constraints and against the priorities of the Master and Strategic Plans. Each department should ensure a specific funding source is available before a project is considered for Budget Committee approval. Projects such as building repairs or routine maintenance are evaluated campus-wide and are submitted in Facilities' and Technology Services' own capital budget requests. Therefore, before it is submitted to the Budget Committee, each Vice President's/Provost area must review their capital requests with Facilities (for building-related projects) and/or Technology Services (for technology projects or systems). Equipment purchases should also be vetted through Facilities or Technology Services, if there is any level of assistance required from those areas in terms of installation, on-going support, or other help. Purchases which use or rely on any shared resources (e.g. anything that will connect to the University's wired or wireless networks) or which will collect or aggregate any confidential information (e.g. student data, financial information, etc.) should also be vetted by Technology Services. Facilities and Technology Services will consider the requests in terms of their own internal resource planning, since internal coordination is always involved, even if an external service provider is used. In addition to providing expertise on cost, timing and integration into the overall Master and Strategic Plans, the vetting process will help ensure that items are not submitted twice to the Committee by both the department and Facilities/Technology Services' own deferred maintenance budget requests.
IV. Capital Budget Requests
To accumulate the comprehensive list of capital spending requests, each Vice President and the Provost is asked to complete a capital request form covering the next three budget years and submit the request to the Budget Committee. The three-year project plan helps the department or division look further ahead at its needs in congruence with the University's move towards a longer-term approach in budget and planning. While the three-year request will still be updated annually, planning for the next three years will assist areas in thinking about future needs, such as upcoming accreditation reviews, while allowing Budget and Planning to better project future depreciation expense. Capital budget requests should prioritize the approved projects identified in the Campus Master Plan ("Master Plan") and the Strategic Plan. Master Plan requests must be approved by Facilities and will usually be submitted on Facilities' own capital request list. Strategic Plan requests must reference the specific action item in the Strategic Plan that the request supports. Any requests not included in the Strategic Plan or Master Plan must be categorized as one of the following: deferred maintenance (requires specific Facilities approval), accreditation, or safety. The requestor should include a description of the project/equipment along with a priority ranking of 1 to 5, with 1 being a top priority and 5 being the lowest priority. In addition, the requestor should provide a brief narrative that addresses the objective/purpose of the project and/or impact on the University and its mission. As noted previously, any submitted requests must have funding in terms of a specific fund and org and must have been discussed with Facilities or Technology Services and signed off on Request Form before presentation to the Budget Committee. Each capital budget request should include the anticipated expenditure for the next three years for each project. Formal cost estimates will not be performed until a specific project is approved; however, when vetting the request, the area should work with Facilities or Technology Services to determine an approximate amount and project time period. Additionally, any capital request that requires an accompanying increment (positive or negative) to operational requirements must also include that amount in the notes on the capital request as well as in the operating budget submission. Any machinery or equipment with a purchase price greater than or equal to $5,000 should be included on the capital request form. (Accumulated items of smaller dollar value that are part of a larger piece of equipment that exceeds $5,000 in total are also considered capital.) As noted previously, this amount needs to include any support (infrastructure, etc.) required for installation and operation.
V. Project Approval
The Budget Committee identifies a listing of capital projects/equipment that will be recommended to the Board of Trustees for approval for spending in the upcoming fiscal year. Once a capital request is approved for spending, the relevant Vice President or Provost will be notified that the project can proceed and the approved budget amount is communicated. If a Vice President decides to substitute one project for another project during the year, a switch can be done only if the funding is not greater than the approved budget and with approval from either Technology Services or Facilities. A technology project cannot necessarily be substituted with a facilities project or vice versa due to the resource planning in those areas. If the approved spending is for a facilities or technology project, the initiating department must contact Facilities or Technology Services so that the project can be started through those areas' specific processes. If the approved spending is for equipment, the University's purchasing policies and procedures should be followed. Projects and departments will be charged at the time of payment or when a transfer occurs. Depreciation expense is tracked and recorded centrally.