NDSU must properly account for capital improvement projects: (1) to maintain accurate reporting for the State Board of Higher Education, (2) meet audit requirements for financial reporting purposes, and (3) for NDSU management information purposes. This document is intended to provide guidance to NDSU for achieving a proper accounting of repair and capital improvement projects.
This document includes a description of the general process; definitions and guidance to help assign costs to funds, project numbers, programs, and account numbers; and identification of specific department responsibilities. At the end of the document are the North Dakota State Board of Higher Education Policies and Procedures related to capital improvements.
When the term “project” or “projects” is used in this document, we are referring to the job or work performed. The term “project number” will be used when referring to the Oracle/PeopleSoft project number.
In order to have proper accounting of repair and capital improvement projects, the projects need to be analyzed and correctly classified from the beginning. This analysis will determine whether the project is an ordinary repair or an improvement to be capitalized. If the project is considered a capital improvement, the asset category (i.e., equipment, buildings, infrastructure, land improvements) must be determined.
After the appropriate classification has been determined, budgets are then reviewed or established in Oracle/PeopleSoft Financial System and the correct accounting codes are assigned. The accounting codes are used as costs are incurred throughout the life of the project.
The NDSU department creating a project for Facilities Management to complete will first have to fill out a service request form. The Facilities Management staff will then review the service request to determine whether the project is a repair or a capital improvement; this determination will be the basis of the accounting codes assigned to the project. The request is then entered into the Facilities Management 'FAMIS' software syste
Agricultural Experiment Station
For Agricultural Experiment Station projects to be completed by NDSU Facilities Management, the request or work order should be submitted to NDSU Facilities Management for cost estimate.
If the project estimate is $50,000 or greater, it will be returned to the Agriculture Budget Office for:
- Repair or capital improvement classification
- Fund, project, and account code assignment
- Ongoing tracking
If the estimate is less than $50,000, NDSU Facilities Management will make these determinations and perform these functions.
After a repair or a capital improvement designation is made, the fund, project, and account codes will be assigned. This repair/capital improvement designation has an effect on what funding source and what specific fund, project and account codes are used to account for the project.
Repairs vs Capital Improvements
Guidance for determining whether a project is a repair or a capital improvement is as follows:
- Costs to maintain an asset in its normal state of repair are considered ordinary repairs and replacements. Such items are reported as operating expenses and are not capitalized. Examples are: replacement or repair of floor covering or roofs, reconditioning by replacing small parts, painting, or regular maintenance costs.
- Costs to replace an existing asset, or asset portion, with an improved or superior asset, usually at a cost materially in excess of the replaced item are considered improvements. Usually an improvement results in a better, more efficient or more productive asset.
- Improvements may also include extraordinary repairs and replacements, which are major repairs and replacements made, not to keep an asset in its normal state of repair, but to extend its useful life beyond that originally estimated.
Improvement projects to buildings, infrastructure, or land improvements, which are greater than $10,000, are capitalized. For financial reporting purposes, when costs are capitalized they are not all immediately recognized as operating expenses. Capitalized costs are added to the value of the capital asset and spread out over the life of the improvement through the calculation and recording of depreciation expense. Depreciation expense is calculated and recorded by the NDSU Accounting Office.
Projects under $10,000 will be considered repairs and will not be capitalized. Since these projects are considered repairs they are ineligible for charging to the capital improvement appropriations line, unless combined into a larger extraordinary repair budget for miscellaneous projects under $XXXX.
Fund and Project Accounting
Part of the designation of the funding source is to determine what kind of fund number will be needed in order to track the costs appropriately; in addition, more than one fund may be utilized to properly account for the project.
Capital improvement funds are designated funds used to track the revenues and costs of new buildings, building improvements, land purchases, land improvements, infrastructure or infrastructure improvements.
Any project designed as an improvement of $100,000 and greater, must be accounted for under a capital improvement fund. All related project costs must be considered when applying this rule. It is not allowable to split the project up and charge a project to an operating fund because of where the planned budget resides.
Minor Remodeling Projects
Capital improvement projects between $10,000 and $100,000, may be charged to an operating fund; however, if this is done, it is necessary to charge the cost to a capitalizable type of account code (account # range 682000 - 682100). If the cost is paid from an operating fund and is charged to an operating expense type of account code, it will look like any other normal operating expense and will not get capitalized. Capital improvement funds may be used for projects less than $100,000, but it is not required. All related project costs must be considered in determining whether the threshold is met.
Effective 10/21/2014: PeopleSoft project numbers will be setup for all construction projects that are funded by NDSU Development Foundation monies, regardless of dollar amount.
Construction Project Numbers and Funds
In cases where a capital improvement fund is used, a construction project number, as well as a budget, is established by the Facilities Management department. Facilities Management is then responsible for the management of the project budget.
Construction project numbers all begin with “FARC” followed by a six digit number. If a combination of state appropriations and local funds are used to fund a project, it is acceptable to use one project number, because the separate fund numbers will show the breakout of costs by funding source. University (non-agriculture) project numbers are assigned by the NDSU Budget Office and Agriculture project numbers are assigned by the NDSU Ag Budget Office. If grant funds are involved, NDSU Sponsored Program Administration will setup the project number. The capital improvement fund number to be used depends on the whether the project is funded from state appropriations, local funds or grant funds.
Fund 38100 University Capital Improvements – This fund is for appropriated capital improvement projects, including extraordinary repairs, funded from State General Fund dollars. Costs charged to this fund will be assigned to the Capital Improvement appropriations line on the OMB Appropriation Status reports.
There are other capital improvement funds for other agencies, such as the ND Forest Service, Ag Experiment Station, and the Research Centers.
Fund 28100 University Capital Improvements – This fund is for non-appropriated, non-grant funded projects for all departments except those in the Agriculture division. Projects funded from gifts, bond sales, local fund sales and service revenue, fall into this category.
Fund 28500 Agriculture Capital Improvements – This fund is for the same funding sources as fund 28100, but for projects managed by the Ag Budget Office.
Effective 7/1/2011, all capital asset acquisitions and improvements to capital assets must be charged to the account code groups as follows:
Codes for Capitalized Costs:
682005 – 682115 Capital Assets - Land, Land improvements, infrastructure & improvements, buildings & building improvements
691005 – 691080 Capital Equipment & Capitalized Intangible Assets (non- information technology)
693005 - 693035 Capital Information Technology Equipment & Capital IT Intangible Assets
Repairs or other non-capitalized costs should not be charged to the above account code groups. The non-capitalized account codes in the 682005 – 682115 account code range will be inactivated in fiscal year 2011.
Repairs and similar costs should be charged to the repairs account code group. Codes currently indicated as “Repair Services Capitalized” and “Repair Supplies Capitalized” will be inactivated in the new fiscal year. If the costs are truly capitalizable improvements, they should be charged to one of the above codes for capitalized costs. If the costs are truly repairs, they should be charged to one of the codes in the repair account code group (591025 – 591105), as shown below:
Codes for Repair Costs:
|591000||Repairs||For budget use only|
|591025||Maintenance Agreements||OK to use|
|591070||Repairs IT||OK to use|
|591095||Repair Services Noncapitalized||OK to use|
|591105||Repair Supplies Noncapitalized||OK to use|
|591090||Repair Services Capitalized||Inactive effective 7/1/2011|
|591100||Repair Supplies Capitalized||Inactive effective 7/1/2011|
Judgment is required to determine whether a cost is a repair or a capital improvement. Maintenance and other costs to maintain an asset in its normal state are considered repairs. Costs to replace an existing asset or asset portion with an improved or superior asset, usually at a cost materially in excess of the replace item, are considered capitalizable improvements.
Materiality thresholds also apply. Improvements of less than $5,000 to equipment items should be considered repairs. Improvements of less than $10,000 to buildings, land, or infrastructure items should be considered repairs.
There is one other code in the 682XXX account group, 682110 (Special Assessments), which will not be used by NDSU. NDSU will use account codes 683055 & 683060 (Special Assessment Principal & Interest) when paying for special assessments.
When paying for capital equipment (i.e., equipment items individually $5,000 and greater) account codes are available for use as follows:
|691005||Office Equipment Over $5000|
|691010||Athletic Equipment Over $5000|
|691015||Audio Visual Equip Over $5000|
|691025||Maintenance/Constr Equip > $5000|
|691030||Musical Equipment Over $5000|
|691035||Other Equipment Over $5000|
|691040||Vending/Food Equip > $5000|
|693005||Computer Equipment Over $5000|
|693015||IT Printers Over $5000|
|693020||Other IT Equipment Over $5000|
|693025||Telecommunications Over $5000|
These account codes may be used in either operating or capital improvement funds.
There are no individual definitions for each code above. Coders should just use their best judgment in selecting from the above codes.
There are three other codes in the 691XXX & 693XXX group, but they are not used on actual transactions. Account code 691000 (Equipment Over $5,000) & 693000 (IT Equipment over $5000) are used for budget purposes only. Account code 691824 (Other Equipmt > $1000 FASB) is not applicable to NDSU.
Equipment vs Building Improvements
All permanently attached fixtures, machinery, and other apparatus that cannot be removed without cutting into walls, ceilings, floors and/or otherwise damaging the building will be considered a part of the building. Fixtures or machinery not permanently attached and greater than $5,000 are to be classified as equipment.
Items classified as equipment are then given an NDSU inventory id tag, and capitalized in the Oracle/PeopleSoft Asset Management System.
Department Accounting Responsibilities
For projects to be performed by NDSU Facilities Management, NDSU departments initiate the process by completing a service request and sending it to NDSU Facilities Management. A service request can be completed either through the on-line FAMIS Discoverer Reporting module or on a paper form.
Based on the service request, NDSU Facilities Management will determine whether it is necessary to establish a capital improvement project number. If a project number is needed, Facilities Management is responsible for establishing the budget and monitoring the costs.
If the project is considered a minor remodeling project to be paid from the requesting department’s operating expense budget, NDSU departments are responsible for monitoring all expenses charged to its funds and/or projects.
On minor remodeling projects where the department is using their operating expense budget to pay for the work, the budget stays in the department. Facilities Management uses its ‘FAMIS’ software system to track the project’s cost and to bill the department. The ‘FAMIS’ software generates a monthly bill to departments which is posted by the NDSU Accounting Office. (In Oracle/PeopleSoft the general ledger Journal ID is named ‘FAMIS’.) After each monthly FAMIS journal is posted, Facilities Management staff sends out a campus email noting the posted journal. Departments can then login to the FAMIS Discoverer Reports module and obtain more detailed cost information/support for the charges. Departments are responsible for monitoring expenses charged to all of their funds, including FAMIS charges. For additional information or training on the FAMIS Discoverer Reports module visit the Facilities Management website or contact the Facilities Management department.
To track expenses in the new categories, noted above, program codes will be used as follows:
|08854||Paving & Area Lighting|
|08856||Misc Small Projects < $50K|