CAPITAL PURCHASES & CAPITALIZATION THRESHOLD …
CAPITAL PURCHASES & CAPITALIZATION THRESHOLD POLICY
Sample for small and mid-size nonprofits –
change position titles, tasks, and policy components to suit specific organization needs.
This policy was approved by the ORG Board of Directors
on ______________________ (date).
Definition and Threshold:
Capital purchases comprise furniture, fixtures, equipment, software, leasehold improvements, etc. that meet two criteria:
1) a useful life of more than one year, and
2) cost more than a certain amount.
The ORG Board of Directors has established $ _______ as the threshold amount for capitalization.
(For small or mid-sized organizations the threshold is often set at $750 to $1,000, but the threshold should be set for each organization according to its individual circumstances and needs.)
Competitive bid:
For purchases in excess of $________, competitive bids (preferably three, minimum two) should be sought when appropriate.
Approval:
ORG’s Capital Budget is updated each year and should include proposed capital purchases that are anticipated to take place during the year. Those purchases itemized within the approved capital budget are considered approved.
ORG’s Capital Budget includes a discretionary fund of $_______ that can be accessed by the executive director without prior approval, provided resources are available, and with the stipulation that the board be informed of any use of the fund at the next regular meeting.
Capital purchases not within the approved capital budget, or beyond the scope of the discretionary fund, must be specifically approved by the finance committee [or board]. To seek such approval the executive director must provide the price and rationale for the purchase and assurance of availability of financial resources to support the purchase.
Recordkeeping:
ORG shall maintain a list of fixed assets showing the date of the acquisition, its cost, and a schedule for depreciation of the asset. ORG shall keep on file documentation for each purchase.
Annual depreciation expense will be included in ORG’s annual operating budget.
For each purchase, the position title shall evaluate whether the acquisition will have an impact on insurance coverage, determine if present coverage valuations are adequate, and obtain additional coverage if necessary.
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