CAPITAL EXPENDITURE POLICIES & PROCEDURES

Transcription

1 CAPITAL EXPENDITURE POLICIES & PROCEDURES

2 TABLE OF CONTENTS I. PURPOSE... 3 II. CAPITAL EQUIPMENT... 3 III. CAPITAL ASSET CATEGORIES... 3 IV. DEPRECIATION... 5 V. CAPITAL BUDGET REQUESTS... 5 VI. PURCHASING OF CAPITAL ASSETS... 6 VII. CAPITAL EXPENDITURE REQUISITION PROCEDURE... 6 VIII. FIXED ASSET EQUIPMENT INVENTORY MANAGEMENT SYSTEM... 8 IX. TRANSFERS / DISPOSALS... 8 X. APPENDIX... 9 XI. FLOW CHART Page

3 I. Purpose It is essential that Midwestern University follow a uniform policy with respect to the acquisition, capitalization, management and disposition of equipment and other capital assets for financial statement purposes and compliance. Each fiscal year, capital funds are budgeted as part of the overall University budget process. The budgeting process breaks down the capital budgets into different types. II. Capital Equipment Capital assets are generally defined as tangible property, plant, and equipment used in operations with an estimated useful life greater that one year. Non-computer items that have a value of $1,500 or greater; or computer/information technology related capital items that are greater than $500. Items may also be aggregated to get to the $1,500 minimum, if they meet the following criteria; A component part can be defined as any item which cannot stand alone, and is considered an integral part and/or an enhancement to an existing or new piece of equipment. The cost of the component part would be included as a capital purchase even if the cost is under $1,500. For example, a keyboard or monitor as part of a computer purchase. Consumable products such as supplies or building and equipment repairs should not be treated as a capital item. Any product with less than a year of useful life is considered operational. III. Capital Asset Categories Computer and Non-Computer Capital Computer and non-computer related capital is defined as expenditures that cost over $1,500 for non-computer and over $500 for computer purchases and a useful life of more than 1 year. This capital is generally budgeted as a total amount for the specific item. Computer related capital must be approved by Information Technology Services (ITS) before submitted. Both computer and non-computer capital must be approved through the annual capital budget process and meet the capital requirements. 3 Page

4 Capital Projects (Construction in Progress) Midwestern University Purchasing Policy & Procedure Capital Projects are defined as expenditures that are greater than $10,000 with multiple vendors. These expenditures that are committed for single or multi-year projects or asset acquisition through specific request made and approved during the annual capital budget process and meet the capital requirements. Contingency Capital Contingency Capital funds are available for unanticipated needs. As unforeseen needs arise, requests are made from the various departments to use this fund. Contingency capital is budgeted in total and approved through the annual budget process and meets the capital requirements. These funds are available only after all previous departmental capital dollars have been exhausted. Restricted Capital There are cases in which capital budgets must be tracked due to fund restrictions. Restricted Capital requires a formal request for a restricted account set up by Business Services. The use of these funds will be tracked through Business Services. When all funds are depleted the assets are then placed into the accounting system. These include: Startup packages for new faculty members - These startup packages should be shown in the departments capital budget. Once faculty is hired, all startup departmental funds will be accrued against the departmental capital budget. Grant Asset Purchases - Assets purchased with federal funds are subject to certain federal controls on usage and disposition except when specifically stated to be "exempt" by the federal funding agency. o "Exempt Property" is defined in OMB Circular A-110, Subpart C, Section 33. (b) as follows: "When statutory authority exists, the Federal awarding agency has the option to vest title to property acquired with Federal funds in the [university] without further obligation to the Federal Government and under conditions the Federal awarding agency considers appropriate." Currently, statutory authority provides the Federal agencies can "exempt" equipment purchased on research grants. However, each Federal agency has the option to either exercise this authority or not. The Public Health Service and the National Science Foundation have exercised authority in this area as follows: Public Health Service grants an exemption from further use and disposition regulations in 45 CFR Part 74, Section 33 (b) for equipment purchased with research grant funds. (Note: exemption does not apply to PHS training and other non-research grants) The National Science Foundation (NSF) grants this exemption in Section 7.b. of the NSF Grant General Conditions except for usage control regulations. 4 Page

5 o For all other agencies and for all contracts, departments should refer to the specific rules and regulations of the agency awarding the grant or contract or specified in the notice of grant award. o The process and approval for this category does not differ from institutional funded capital. IV. Depreciation Depreciation is the rational and systematic allocation of the cost of a capital asset over its estimated useful life. Recording depreciation expense is a part of the budget process. The University s depreciation method is straight line. Capital assets may or may not be subject to depreciation. Asset categories and useful lives are as follows; Asset Category Depreciable Estimated Useful Life Land/Site Development No N/A Land Improvements Yes 15 years Construction in Progress No N/A Buildings Yes 30 years Lab/Furniture/Major Equipment Yes 7 years Computers & Software Yes 3 years Vehicles/Minor Equipment Yes 3 years V. Capital Budget Requests Capital items should be included in the annual budget process. This process will establish the framework and planning for the University s annual budget. An overall University contingency will be budgeted for unforeseen emergency requests. Any requests for capital equipment not budgeted must be replaced by a budgeted capital item within your department or college. Remodeling and renovations of the physical facilities will be requested and included in the Campus Facilities capital budget. Managers must submit requests to Campus Facilities department for inclusion in their budget. Individual departments should not budget for any of these items. Computer related capital will be requested and included in the ITS department budget. Managers must submit requests to ITS for inclusion in their budget. Individual departments should not budget for any of these items. The Business Office will submit these requests to ITS for inclusion in their budget. Media resource related capital will be requested and included in the university s Media Resources department budget. Managers must submit requests to Media Resources department for inclusion in their budget. Individual departments should not budget for any of these items. 5 Page

6 VI. Purchasing of Capital Assets When ordering capital assets, a Requisition (CER) is to be completed. The completed requisition must include; The department requesting the capital and department number Person to be delivered to The budget control number/grant general ledger account number Quotes from three suppliers (if applicable) Vendor Quote number Estimated cost Justification for the asset Signatures as required by our purchasing policy, including but not limited to: requestor, department manager, Business Services personnel, CAO, CFO, COO Signatures of ITS, Media Resources and Campus Facilities departments as needed Once all approvals are received, the procurement of the asset will be made by the Purchasing department. VII. Requisition Procedure A Requisition (CER) must have proper approval prior to the order being placed. Definitions Requestor End user of the capital asset being ordered Facilities When asset requires build out, power, water, etc Estimated Cost Requestors estimation of total purchase cost including shipping, installation, support, connectivity, etc Media Resources When asset requested is audio/visual in nature ITS When asset requested is computer related or needs computer support, i.e. software Accounting Business Office to complete/sign to verify funds are available Budgeted Indicate if expenditure is budgeted and include budget control number within the current year s budget Amount The amount of the requested assets General Ledger Number Supplied by the Business Office o For capital purchased from grants, provide grant general ledger account number Justification - The reason for the purchase 6 Page

7 Information Required to Complete a CER A CER must have proper approval prior to the order being placed. The following will illustrate the signature authority required associated with the amount of the CER. Information Required Requestor End user of the capital asset being ordered Facilities When asset requires build out, power, water, etc Info Systems When asset requested is computer related or needs computer support, i.e. software Department Manager Department Manager of requestor s department Estimated Cost Requestors estimation of total purchase cost including shipping, installation, support, connectivity, etc Dean or Vice President Dean or VP of Department Manager Chief Academic Officer Chief Academic Officer of Department Manager Accounting Business Office to complete/sign to verify funds are available Budgeted Indicate if expenditure is budgeted and include budget control number within the current year s budget Amount The amount of the requested assets General Ledger Number Supplied by the Business Office Funding Source Identify source of funds for purchase Balance B/4 Purchase Total amount left in budget BS Signature Accounting personnel who verified information Chief Financial Officer (CFO) Mr. Greg Gaus Chief Operations Officer (COO) Dr. Arthur Dobbelaere Quotation Record When available three bids are required with the exception of preferred or sole source vendor. Complete information including W-9, phone, fax, contact person, and mailing address is necessary for a new vendor. Quotation or proposal number is mandatory for the desired vendor. A generic description of the item being purchased is necessary along with cost provided by each of the vendors. There may be times when the lowest cost vendor is not the selected vendor. At these times, provide the reason for vendor choice. 7 Page

8 Upon Receipt Upon receiving the item and reviewing for completeness, the packing slip is approved and sent to the Accounts Payable department via scan/interoffice mail. The packing slip is matched to the invoice and payment is made. All capital assets will be assigned a fixed asset tag and logged into the accounting system on a monthly basis by Business Services personnel. A description of the asset, location, date on which the asset was purchased, and asset service life among other general information is entered also. VIII. Fixed Asset Equipment Inventory Management System The purpose of the Fixed Asset Equipment Inventory Management System or asset tagging is to: 1. Maintain MWU official capitalized equipment records to reflect departments concerning the addition of new equipment, modifications to equipment, changes in location, condition, custodianship and disposal. 2. Coordinate equipment management activities of departments including recording and reviewing for correctness the results of periodic physical inventories, modifying equipment records and deleting/retiring equipment as directed by departments. 3. Provide reports of inventoried equipment to departments and other institutional offices as requested to facilitate equipment screening or proper maintenance of equipment inventory. 4. Provide overall guidance to departments to facilitate the effective management and accounting of capitalized equipment. 5. Prepare university-wide reconciliations and schedules as required to meet financial statement reporting standards. 6. Initiate and coordinate and inventory of capital equipment as needed. 7. Conduct reviews and/or audits of the capital equipment inventory as needed. IX. Transfers / Disposals Business Services must be notified whenever an asset is transferred from location, disposed, destroyed or sold via the transfer/disposal form. Disposed, destroyed or sold assets must have their property tag number removed and returned to the Business Office with the transfer/disposal form. When an item is being discarded it should be destroyed so that no one can retrieve it out of the trash and re-use it. 8 Page

9 X. Appendix Commonly Asked Questions about Equipment under Grants The National Institutes of Health (NIH) Grants Policy Office and awarding institutes and centers frequently receive questions from research administrators and investigators regarding equipment purchased with Public Health Service (PHS) research grant funds. To assist recipients of PHS research grants, NIH staff has developed the following questions and answers regarding equipment. The information below does not represent new policy or a revision to policy. Rather, it is a summary of current regulations and policies pertaining to grant equipment. The answers provided are based on the assumption that there are no special requirements in the program legislation or regulations or special terms and conditions of award that would supersede the regulations and policies cited below. Does equipment purchased under a grant belong to the principal investigator/program director? PHS research grants are made to an organization on behalf of the Principal Investigator (PI) or Program Director. Title to equipment acquired with HHS funds vests in the organization receiving financial assistance directly from an HHS awarding agency to carry out a project or program, subject to certain restrictions described at 45 CFR Part (see next question). Whereas in the past, title to equipment, property, and supplies purchased under a research grant to a for-profit organization vested in the Federal Government, the revised HHS regulations now permit for-profit grantees to retain title. (45 CFR Part 74.34) Can HHS require the transfer of equipment from the grantee to another party? Yes, HHS has the right to require equipment (including title) purchased with grant funds to be transferred to the Federal Government or to an eligible third party named by the HHS awarding office, under the conditions specified in 45 CFR Part 74.34(h). Although it is seldom necessary to do so, this right may be invoked in cases where a grant is transferring to a new organization and the equipment purchased with grant funds is needed to continue the research at the new grantee organization. (45 CFR Part 74.34; GPS, p. 8-13) Does the grantee organization have an obligation to the government for the equipment after a grant has ended? Non-profit institutions of higher education and nonprofit organizations whose primary purpose is the conduct of scientific research (hereinafter referred to as exempt grantees) hold title and are exempted from further obligation to the Federal Government for equipment acquired under a PHS grant for support of basic or applied scientific research (except for the HHS right to require transfer as described above). Nonexempt grantees (hospitals, for-profit organizations, and non-profit organizations whose primary purpose 9 Page

10 is other than scientific research) hold title and must follow the requirements described in 45 CFR Part and the PHS Grants Policy Statement, pp through What happens to equipment when the PI moves to another organization? The grantee organization is the legal entity to which a grant is awarded. When the PI moves to another organization, the following options apply in the order listed. (45 CFR Part and GPS, p. 8-13) The grantee organization may request continuation of the project under the direction of an alternate PI. If the alternate PI is approved by PHS, the grant will continue and thus title to the equipment purchased under the grant will remain with the original grantee organization. The organization may relinquish its interests and rights in the grant to the PI's new organization. If the new organization is approved by the PHS awarding component to continue the grant activity, then the grant will be awarded and any equipment purchased with grant funds and still needed for the grant project would be expected to transfer to the new grantee organization, which would assume title. If the original grantee does not voluntarily agree to relinquish equipment with the grant, HHS may require transfer of the equipment as specified in 45 CFR Part 74.34(h). If an alternate PI is not accepted by the PHS awarding component (or no alternate is nominated), and the original grantee refuses to relinquish its rights in the grant to the new organization (or if the new organization is not accepted by the PHS awarding component to continue the research), then the grant will be terminated. Title to equipment will remain with the original grantee organization, subject to disposition or use as described below. The PI's new organization may submit a new application through the regular NIH peer review process to request support for the research. It is important to reiterate that a change of grantee may not take place where it will involve the transfer of a grant to or between foreign institutions or international organizations. (GPS, p. 8-3) How may equipment be used after the end of a grant? Exempt grantees hold title and are exempted from further obligation to the Federal Government for equipment acquired under a PHS grant for support of basic or applied scientific research, except for the HHS right to require transfer as described above. Nonexempt grantees hold title and shall use the equipment in the project or program for which it was acquired as long as needed, whether or not the project or program continues to be supported by Federal funds, and shall not encumber the property without approval of the HHS awarding agency. When no longer needed for the original project or program, 10 Page

11 the recipient shall use the equipment in connection with its other federally sponsored activities, if any, in the following order of priority: o Program, projects or activities sponsored by the HHS awarding agency; o Program projects or activities sponsored by other HHS awarding agencies; o Program, projects or activities sponsored by other Federal agencies. If the grantee no longer needs the equipment for the above purposes, the grantee may retain the equipment for other uses, provided that compensation is made to the original HHS awarding agency or its successor. If the recipient has no further need for the equipment, it shall request disposition instructions from the HHS awarding agency. See 45 CFR Part 74.34(g) for additional information. Commonly Asked Questions were excerpted from the NIH Guide, Volume 24, Number 15, April 28, Page

12 XI. Flow Chart ITS (As Applicable) Facilities Requestor Department Manager Dean / VP CAO Accounting CFO COO Purchasing 12 Page