A capital project is a long-term, capital-intensive investment project in which the cost is capitalized or depreciated. The purpose is to build upon, add to or improve facilities within the university. Capital projects are defined by their large scale and large cost relative to other investments that involve less planning and resources. Capital projects include new construction, renovations, landscape projects and infrastructure projects, and typically utilize a blend of funding sources.
Capital Projects Defined
Buildings, facilities and infrastructure construction projects on the Stanford University campus are under the purview of the Land, Buildings and Real Estate Department. For the purposes of managing these projects, they are divided into two categories:
- Those that require a jurisdictional permit and plan check.
- Those that are routine, general maintenance projects and non-capital projects.
Regardless of size, cost or funding source, projects that require a jurisdictional permit and plan check, must follow the Form 1 request process. Examples of these projects include new construction, building demolitions and building renovations. For a detailed list of project types requiring a Form I and an explanation of the process, refer to Form 1 Project Initiation.
While construction is in process, these projects are accounted for as capital projects in the university's financial system to capture related expenditures. This treatment allows the university to categorize expenditures as capital assets or expenses and to collect expenditures in a way that supports indirect cost recovery, service center rate development and financial reporting. Administrative Guide Policy 3.1.2: University Funds provides further guidance.
Routine general maintenance projects, such as interior painting and replacement of carpet, may not require the Form 1 process and are managed either by a department or Facilities Operation. Non-capital projects are generally defined as projects under $50,000 and/or with less than one year of life. These projects are not considered capital projects, and thus do not require special accounting treatment. Refer to Capital/Non-Capital Project Decision Tree to understand the criteria for capitalization.
Key Roles and Responsibilities
The Land, Buildings and Real Estate Department is responsible for the development, design and construction of major capital projects. Each project has a Project Manager who is responsible for coordinating all aspects of the project. Some other areas, such as Residential and Dining Enterprises, Utilities, and Facilities Operations manage their own projects.
User Group is the faculty, staff and students or other group that has identified the need for a new facility. Typically these groups are led by school or department facilities representatives. They define the project vision, expectations and program requirements, and will provide input during the process.
Support Groups include:
- Development, if donors are involved
- Procurement, for assistance with contacts and vendor relationships
- The Controller's Office, primarily Capital Accounting, for project setup, vendor payments and financial controls
- Office of the Treasury, for debt management
Capital Projects Process
The complete process is explained in the Project Delivery Process. The information below summarizes the financial aspects of the process.
Project Planning and Approvals
Facilities Project Initiation Policy (Form 1) outlines the requirements for project initiation and approvals. In summary, the planning and approval process is as follows:
- Facilities Projects are initiated by individuals in schools or departments who submit online Form 1 to Land, Buildings and Real Estate to indicate interest.
- Planning continues, refining the scope, budget, and funding sources, and updating and completing the Form 1.
- Approvals are obtained per the Policy. Refer to Capital Project Approval Process for an outline of the approval process.
Then, if the project is approved, project setup commences.
Project Setup in Oracle Financials
- For capital projects that have an approved Form 1, Capital Accounting will review the form for compliance, set up the PTA in Oracle Financials and transfer the funds.
- For capital projects that do not require a Form 1, such as Fixed Equipment & Modular Furniture and Software purchases/costs that exceed $1 million, the initiator can request a capital project PTA by using PTA Manager Capital (PTAC). Refer to Topic Overview: Request New Account (PTA) for more information.
- Capital Planning also sets up the project in their database to allow the project manager to track actual and projected expenditures against approved budgets.
- Capital Accounting sends an Authorization memo to the appropriate individuals so they can grant signature authority.
- Refer to the Capital Project Sub-Task Configurations used when capital projects are set up.
Managing the Project during Construction (Project Controls)
- Contracts are established in accordance with Procurement guidelines.
- As work is done, vendor invoices are received and reviewed by CP&M and/or other responsible departments, and then end-routed to Capital Accounting for final review and approval. These invoices are paid and recorded through the Oracle Financials system.
- Refer to Capital Project Sub-tasks/Expenditure Type Transaction Controls for which expenditure types are eligible for capital project sub-tasks when creating iJournals and iProcurement transactions.
- Refer to cost guidelines for Resource: Capital Project vs. Non-Capitalizable Costs to determine which costs can be capitalizable or must be expensed.
- The project manager informs Capital Accounting when a project is completed. Capital Accounting reconciles outstanding commitments, closes the project and award, and returns unused funds in accordance with the Funding Guidelines.
- Administrative Guide Policy 5.2.1: Financing of Purchases explains loan terms, amortization schedules, and asset categories and lives.