Capital expenditures secure tangible property having a value of $5,000 or more and a useful life of two years or more or any expenditure of $50,000 or more for the renovation or remodeling of an existing facility. A request should be made to the capital budget as opposed to the operating budget if there are any doubts concerning the actual value of an item with the useful life of two years or more.
The purposes of the capital budgeting process are as follows:
- To identify, assess, and plan for the capital needs of the institution for a five-year period.
- To provide a basis for determining alternative sources of funding for capital needs including choices for donors.
- To provide a basis for assessing the new capital expenditures’ impact on the operating budget
- To provide a system for accounting for the capital resources of the institution.
The annual capital budget is prepared for a fiscal year, but it is presented within a context of a five-year capital plan. Once specific capital expenditures are approved in the annual budget, the project or equipments’ budgets will be available until they are expended. The timeframe for expenditures can vary from months to years. The budget is available only for approved capital items and cannot be expended on operational or other capital needs.