Requests for capital funds are submitted during budget development and are reviewed at the Cabinet's annual budget retreat.  The current guidelines for capital (see “Capital Asset Policy”) are:  equipment, furniture or fixtures costing $10,000 or more and having a useful life of more than one year or capital projects costing more than $25,000.  Capital Projects extend the useful life of a physical facility and/or materially increase the market value of an existing facility.  Purchases, replacements, renovations or enhancements costing less than $10,000 are considered operating expenses.

Each capital project must have a project manager who is responsible for its total completion.  This includes attaining appropriate authorization, purchasing of materials, approval of invoices and general project oversight.  Only the project manager(s) is to sign invoices for payment, as he/she is also responsible for reconciling expenses and monitoring all activity in the assigned account.

Approval of the capital budget is an acknowledgement that funds exist should the decision be made to complete the project or purchase.  It is NOT an authorization to spend funds.  Actual spending is authorized via a Project Authorization Form (PAF), which must be filled out by the project manager, have the appropriate signatures (see “Operating and Capital Policies”), and then be submitted to the Manager of Budgeting and Financial Analysis.  PAF’s without appropriate approval will be returned to the project manager.  Each request should be accompanied by a detailed explanation or narrative that outlines the scope of the project and provides a breakdown of the project components and cost estimates.  The request is then verified against the budget and an account/project number assigned.  (If the item is not budgeted, additional signatures and a substitution are required.)  A Purchase Requisition must then be completed and signed by the Project Manager, with the new account number noted, and forwarded to the Purchasing Department for creation of a Purchase Order (P.O.).

P.O.'s are required for all purchases of $5,000 or greater, both capital and operating.  When a P.O. is created, an encumbrance against the budget in that amount is also created.  Encumbrances are a mechanism for planning and control of expenditures.  The amount of the P.O. is added to year-to-date expenditures and the total is compared to the annual budget.  On the capital side, if this amount exceeds the budget, the Banner system generates a “flag” signifying need for additional authorization.  A new PAF must be completed, with appropriate signatures for the adjusted total.

As invoices for items purchased with a P.O. are paid and charged to the appropriate account, the encumbrance is decreased by these amounts.  At year-end, the P.O. number is deactivated.

As with the operating budget, unspent capital funds are NOT “rolled forward” into the next fiscal year.  Any anticipated needs for the following year, whether for new projects or for existing  projects, must be re-submitted for approval as part of the next year’s budget process.  Thus managers should carefully review the status of their current projects during the budget process and estimate as best they can whether it is realistic that they will be completed in the current year (i.e., that all materials will be purchased and received by June 30).  If that is unlikely, they should submit for approval with the new budget whatever amount needs to be carried forward.  If this is not done, they will need to substitute funds approved for the next year’s capital projects to cover expenses from the current year.