Capital Planning and Evaluations Policy
| Category | Finance |
|---|---|
| Type | Policy |
| Approved by | |
| Date Policy Took Effect | |
| Last Approved Revision | |
| Sponsor | Director, Financial Services |
| Responsible Officer | Senior Financial Accountant |
| Review Date |
Purpose
To ensure that capital expenditure is:
- consistent with the strategic directions of the University
- planned and evaluated in accordance with approved procedures
- committed within funding and budgetary constraints
Definitions
Capital Expenditure Project - any project which requires the investment of University resources in the creation of future service potential. (NB. this definition is wide enough to capture not only buildings, plant and equipment, but also new technological investments, new courses, investment in research and development etc.)
Capital Expenditure Plan (CEP) - A plan incorporating capital expenditure projects that have been evaluated and satisfy the criteria encompassed by the capital evaluation guidelines. Divisional and Campus Development CEPs are consolidated into a University CEP.
Capital Expenditure Budget - Annual budget derived from the Capital Expenditure Plan including all capital expenditure projects that are to be undertaken during the financial year to which the budget relates.
Policy Content
Linkages
All capital expenditure projects must be clearly linked to the strategic objectives of the University as stated in University strategic planning documents.
Planning
Capital expenditure projects are to be planned over a five-year horizon accounting for the renewal of current assets and the investment of resources into new services and markets. The Campus Development CEP and Divisional CEPs will be collated into a University CEP. The University CEP will be used as a guide for long term financial planning and scheduling of capital expenditures.
Plan Approval
The University CEP will be presented to Council annually for approval as part of the annual budgeting process. Approval of the CEP does not indicate approval of the individual projects that comprise the CEP but reflects agreement with the broad direction of the plan.
Plan Contents
The CEP will include only those projects that have been evaluated, documented and approved at the Divisional level using the Capital Evaluation Guidelines.
Capital Expenditure Budget
The annual capital expenditure budget is derived from the University CEP within budgetary and funding constraints determined by the strategic and financial planning processes. The University CEP is intended to contain all projects worthy of development. Projects will be selected from that plan for inclusion in the annual capital budget. In selecting projects for incorporation in the annual budget due regard will be given to following criteria:
- Commercially justifiable projects meeting required rates of return will be funded subject to financing arrangements being satisfactory.
- Strategically justifiable projects will be ranked and approved subject to the agreed annual capital budget for strategic projects.
- Projects meeting the Ongoing Justification criteria will be funded through the depreciation based capital replacement budget.
- A separate budget for Legal/environmental projects will be allocated annually
Implications of the Capital Expenditure Policy for Other Policies
The following university policies require modification:
Resource Allocation Policy
The cost of capital expenditure is reflected in operating budgets of sponsoring divisions through changes in operating costs and depreciation. Capital expenditure sponsored by Service Divisions will result in increased costs to Academic Divisions as it is the Academic Divisions which pay for Service Divisions. Therefore new proposals in Service Divisions will be subject to consultative processes with Academic Divisions.
Delegations Policy
No capital budget allocated to Divisional level may be converted to Operating budget.
Financial Accountability and Control
Significant capital projects prepared in accordance with the Capital Evaluation Guidelines will include an implementation and post-audit plan. Divisional sponsors of approved projects are responsible for ensuring that adequate reporting on plans takes place. Such reporting is required to be integrated into the monthly reporting cycle of the University.
Carry Forward Policy
Capital Expenditure Budgets are approved per project. Variances from budget created by timing differences will automatically carry forward to future periods. Project overruns compared to budget are to be reported in terms of the Financial Accountability and Control Policy and may necessitate project evaluations to be reconsidered. Projects completed under budget will not carry forward in the Sponsoring Division but will be made available for redistribution in accordance with the priorities of the University CEP. Divisional incentives to come under budget result from possibility of lower future depreciation and operating cost charges.
Related Policies, Procedures and Forms
- Capital Funding and Evaluations Procedures and Information
- CAWSEP Forms
