Capital Asset Spending Process – FY2010

Capital Assets are tangible and intangible assets acquired for use in operationsthat will benefit more than a single fiscal period. Typical examplesare land, improvements to land, easements, water rights, buildings, buildingimprovements, vehicles, machinery, equipment, infrastructure, etc.

A capitalize-able assetis a capital asset that has a value equal to or greater than the capitalization threshold established for that asset type. Capitalized assets are reported for financial reporting purposes on our Balance Sheet and are depreciated (expensed) over their approved useful life.

Here at CRJ, we have established $1,500 as the threshold below which all purchases will be expensed in their entirety at the time of purchase even if they meet the other aspects of a capitalize –able asset.

As we move forward through annual budgeting exercises over the next couple of years, look to see this threshold continue to rise. Most organizations of our size have a threshold of $3,000 or more and we will carefully move in that direction.

A commonly heard phrase during the budget process is “let’s capitalize this purchase since we cannot afford it in our budgeted operating expenses.”

Clearly this is a faulty logic and in fact over time works toward reducing available funds each year due to increasing fixed assets and higher depreciation expenses being allocated to every department budget. Additionally the more fixed assets on our balance sheet the higher our financing costs, which are also allocated to all departments.

The Board of Directors recently approved CRJ’s Capital Asset Spending plan for FY2010. This plan was approved as part of carefully coordinated financial plan that determined a spending level consistent with our overall financial resources and expectations of our banking partners. Accordingly, it is very important that we live within that limit.

This plan has been distributed to all Department Directors. Please consult with your director to determine which items/projects are on this list

Unanticipated requirements of an emergency or strategic nature do come up as the year progresses. In most cases this will not change the total amount approved for FY2010.

Therefore substitutions will need to be made. We have established a very modest contingency budget for the organization as a whole, but we will only access it as a last resort.

I have attached the new Capital Appropriation Request (CAR) form, which needs to be filled out and approved prior to any spending, budgeted or not. I have also assigned CA #’s to all approved FY2010 line items. This list will be provided to all Department Directors and Executive Staff and will be available shortly on the Staff only portion of the CRJ website under Fiscal.

Major expenditures associated with opening new programs will be approved separately as part of the program approval process. A CAR will be required for these as well.

If there are any questions please feel free to contact me, Rick McCrossan; John Rogers, our Director of Facilities or Stephen Burke, our Controller.

Thank you,

RJM