Agenda Item No. V. A. 1.

Washburn University Board of Regents

SUBJECT: Capitalization Policy for Equipment


Washburn's current policy is to track physical inventory by tagging and recording in the inventory ledger any durable item purchased at or above the following limits:

1. General Fund, Agency Fund, Building and Construction Fund - $250

2. Government and Research Fund - $25

3. President's Residence - $25

4. Art items purchased for The Mulvane Art Museum - cost of the item

Beginning with the fiscal year ending June 30, 2003, Washburn University must comply with the requirements of GASB 34 (Basic Financial Statements and Management's Discussion and Analysis for State and Local Governments) and GASB 35 (Basic Financial Statements and Management's Discussion and Analysis for Public Colleges and Universities). GASB 35 requires colleges and universities to depreciate infrastructure, buildings, and equipment capitalized by the institution.

Many institutions have increased the capitalization limit in order to expense a greater number of pieces of equipment. This concept has actually been the acceptable accounting treatment for many decades for colleges and universities whose budgets and expenditures have historically been maintained on a cash basis.

The capitalization rate for the Kansas Board of Regents institutions is $5,000. OMB Circular A-21 and Federal Acquisition Regulations provide for capitalization of equipment items valued at $5,000 or more. Consequently, many institutions have increased their capitalization limits to $5,000. This enables detailed depreciation schedules and inventory records to be simplified and the institution to focus greater attention on those items that are more expensive.

Department heads will continue to be responsible for all equipment and other assets assigned to their departments. All items subject to conversion to personal use or at greater risk of loss will continue to be tracked physically.


The new policy will be as follows:

Effective July 1, 2002, Washburn University will capitalize, tag for identification, and maintain detailed inventory records for all equipment items valued $5,000 or greater at a central University level. Custodial and security responsibility for all University equipment, both capitalized and non-capitalized, is vested at the departmental administrative level. All items subject to conversion to personal use or at greater risk of loss will continue to be tracked physically.

A. Ownership, Custody and Control

Ownership and Title. Ownership of all equipment acquired by the University, through acquisition or transfer, rests with the University rather than with any individual college, school or department.

Custody and Control. The accountability for the proper care, maintenance, and security to prevent misuse or loss for all University equipment is assigned to department heads and principal investigators.

B. Definition of Equipment, Capitalized Equipment, Non-Capitalized Equipment

Equipment Definition. University equipment consists of asset acquisitions with a unit value of $1,000 or greater and a useful life in excess of one year.

Capitalized Equipment. Equipment acquisitions with a unit value of $5,000 or greater and a useful life in excess of one year are capitalized as assets in the University's Plant Fund. All items meeting this criteria are tagged and inventoried annually.

Non-Capitalized Equipment. Equipment acquisitions with a unit value between $1,000 and $4,999 are not tagged centrally, and are not required to be inventoried annually. Controlled items will be tracked regardless of cost. Examples of controlled items are computer equipment, weapons/firearms, historical treasures and works of art, musical instruments, grant funded assets, and gifts to the University.

C. Use of Equipment

Use of University Equipment. University equipment should be used for University business only, and should not be removed from University premises for purposes other than University business.

Use of Personal Equipment. Personal equipment may be used at the owner's risk. Personal equipment will not be covered by University insurance, and the University will not be responsible for the loss of, damage to, or maintenance of personal equipment.


In accordance with the requirements of GASB 34 and GASB 35, all equipment valued at less than $5,000 will be expensed in the year of acquisition, and all equipment with a value of $5,000 or greater will be capitalized and depreciated over its useful life for financial reporting purposes.


President Farley recommends the Board of Regents approve the University Capitalization Policy as previously detailed.

_____________________ ________________________

Date Jerry B. Farley, President

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