NORTHUMBRIA UNIVERSITY CAPITAL EXPENDITURE POLICY

Document History
Revision
Number

Revision
Date

Effective Date

Description of
Changes

Prepared By

Approved By

3.4

03/07/2012

Immediate

Approved
version

Michael Rowe

David Soan

Contents
1.

Introduction

2.

Definitions

3.

Capital Budget Process

4.

Capital Approval Process

5.

Capital Approval Limits

6.

Monitoring and Reporting

7.

Capital Expenditure Workflow Diagram

Appendix 1

Capital Expenditure Request form

Appendix 2

Detailed Capital Expenditure Request form

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July 2012

1.

Introduction

1.1 This document describes the Capital Expenditure policy that a University employee must follow to
request and purchase an item of capital expenditure on behalf of the University. This document also
describes what constitutes capital expenditure and the procedures that must be followed to authorise
all capital expenditure requests.
1.2 The overall purpose of this policy is to ensure that all capital expenditure requirements across the
University and its schools and service departments are clearly identified, planned and authorised.
1.3 The capital planning process includes requests generated through the Academic and Service
Development Plans (ADP/SDP), estates capital development plans, IT investment plans and the
budget planning models. HEFCE funded teaching and research capital initiatives will also be
considered as part of this planning process. The outcomes will form the capital expenditure budget for
the next financial year.
1.4 The capital expenditure budget reflects a snapshot of the anticipated capital spend for the year. It is
NOT authorisation to initiate spend. Individual projects can only be commenced once a Capital
Expenditure Request (CER) form (see appendix 1) has been completed and approved. It is the
responsibility of the project manager to complete and seek approval of the CER.
2.

Definitions

2.1 Capital expenditure is money spent on acquiring, upgrading or building assets. Capital expenditure is
generally made to purchase property, furniture or fixtures, computer equipment, laboratory equipment
and motor vehicles.
2.2 Capital assets are physical items of University property that have a value greater than or equal to
5,000 and have a useful life of greater than one year. This policy applies to all construction, capital
improvements which increase the value and useful life of a building, major equipment purchases and
other capital projects totalling 5,000 or more.
2.3 Examples include:
New construction (new buildings or major additions)
Building renovations, demolition prior to construction or upgrades (capital improvements)
Property acquisitions and long-term leases
New or replacement equipment or furniture
Telecommunication and Information Technology Hardware
Motor vehicles
Heating, ventilation and air-conditioning (new or replacement)
2.4 The cost of a capital asset will include the equipment cost, initial installation cost, modifications,
attachments, and accessories necessary to make the asset usable. For a repair or replacement to be
capitalised, it must increase the value and useful life of the building. A replacement may also be
capitalised if the new item/part is of significantly improved quality and higher value compared to the old
item. Replacement or restoration to the original functionality would not qualify as capital expenditure.
2.5 The following maintenance examples would not be capitalised:
Repainting
Plumbing or electrical repairs (e.g. burst pipe)
General repairs and maintenance
Replacement roof tiles after wind damage
2.6 The following examples would be capitalised:
Replace a lift by enlarging the shaft and enhancing the carrying capacity from 5 to 20 people
The building of an extension to a lecture theatre
Replacement of a flat roof with a pitched roof if increases useful life of building
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July 2012

3.

Capital Budget Process

3.1 All schools and services will make requests for capital expenditure during the ADP and SDP annual
planning process and within the budget model returns. This will include all equipment purchases and
class room refurbishments or reconfigurations.
3.2 The Director of Campus Services is responsible for the costing of all building work and Campus
Services will review all refurbishment or reconfiguration requests made through the ADP and SDP
processes.
3.3 Cost estimates for equipment or furniture should be provided by the school or service area making the
request to purchase capital assets.
3.4 After the capital budget has been approved by the Board of Governors all Deans and Service Directors
are permitted to authorise all budgeted capital expenditure plans up to 25,000 per project. A CER (see
appendix 1) will need to be completed and signed by the Dean or Director and returned to Finance
prior to initiating spend. For unbudgeted capital expenditure and capital expenditure above 25,000 the
following capital approval process must be followed.
4.

Capital Approval Process

4.1 A CER must be completed for all capital expenditure. The CER is shown in appendix 1 and the Project
Manager is responsible for completing all of the requested details and seeking the appropriate
authorisations. The form will need to be completed and signed by the Dean or Director of the school or
service area making the request before seeking approval from the Finance Director. Capital approval
limits are summarised within section 5 below.
4.2 For all capital projects exceeding 200,000 a detailed CER will need to be completed in conjunction
with the Financial Accounting team within Finance and Planning. Forms CER and CER(D) are shown
within appendix 1 and 2. The CER(D) is intended to demonstrate the financial benefit of completing the
capital project with reference to the payback period and the project cash flows (discounted over the life
of the project).
4.3 All capital projects exceeding 200,000 will require additional authorisation from the Vice Chancellors
Executive Group (VCEG).
4.4 All capital projects exceeding 500,000 will require additional authorisation from the Employment and
Finance Committee.
4.5 For capital projects spanning two or more financial years, the Project Manager will be responsible for
identifying the profiling of all costs across each of the financial years in question.
5.

Capital Approval Limits

Approval Amount
Up to 25,000
25,000 to 200,000*
Above 200,000
Above 500,000

AUTHORISATIONS REQUIRED
School Dean or Service Director
Finance Director

VCEG

E&F

* This approval requirement also applies to unbudgeted capital expenditure.

6.

Monitoring and Reporting

6.1 For each capital project, regular monthly reporting will be undertaken by the Financial Accounting
team. Project spend will be reported indicating any variances to forecast and the authorised CER
value. If an adverse spend greater than 5% of the total project cost is forecast, a supplementary CER
must be prepared and authorised.

July 2012

7. Capital Expenditure Workflow

Requestor identifies need for capital
expenditure
Requestor prepares cost estimate

25,000 or under?

Yes

No

Complete CER

Above

Project in
Capital Budget?

Yes

No

Complete
CER

Yes

No

Complete
CER & CER(D)

Dean/Director
Approval

Dean/Director
Approval

Dean/Director
Approval

Dean/Director
Approval

Finance
Director
Approval

Finance
Director
Approval

Finance
Director
Approval

VCEG
Approval
Above
Yes

No

E&F Approval

Send approved CER / CER(D) to Financial

Accounts
Financial Accounts issue SIO
Seek tenders
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July 2012

Appendix 1
Capital Expenditure Request Form

Finance Completion
Checked:

SIO:

Project Name
Sponsor (Dean/Director)
Project Outline

Forecast Cost
In Current Years Budget
Background / Issues

Proposed Solution

What Corporate Goal(s) will the

Project Achieve?
Financial / Quantitative Targets

Qualitative Objectives

Risk Profile

Timescale
Alternative Strategies

Dean/Director Authorisation:

Finance Authorisation:

Date:

Date:

Form CER

July 2012

Appendix 2: Detailed Capital Expenditure Request Form

Form CER(D)

July 2012

Detailed Capital Expenditure Request Form (continued)

Dean/Director Authorisation:

Finance Authorisation:

Date:

Date:

VCEG Authorisation:

E&F Authorisation:

Date:

Date:

Form CER(D)

July 2012