Section 5: Capital Project Accounting

PURPOSE/SCOPE

The purpose of this guideline is to provide guidance for capitalization, depreciation/amortization and construction in progress of capital assets purchased, constructed or developed using Unexpended Plant Fund accounts.  This guideline includes the following classes of assets:

• Land and land improvements
• Buildings and building improvements
• Facilities and other improvements
• Infrastructure
• Intangible assets
• Construction in progress

For more information on the approval, accounting, payment and closeout process for capital projects  recorded in Unexpended Plant Fund accounts, see UTSA Financial Management Operational Guidelines (FMOGs):

• Capital Projects Managed by the UT System Office of Facilities Planning and Construction
• Institutionally Managed Capital Projects

AUTHORITY

Governmental Accounting Standards Board Statements:

• No. 34, Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments
• No. 35, Basic Financial Statements — and Management’s Discussion and Analysis — for Public Colleges and Universities – an amendment of GASB Statement No. 34
• No. 51, Accounting and Financial Reporting for Intangible Assets

UT System Policies:

• UTS142.4 - Policy for Construction in Progress
• UTS168 - Capital Expenditure Policy
• UTS142.13 - Accounting and Financial Reporting for Intangible Assets

UNIVERSITY GUIDELINES

Table of Contents

A. Capital Assets

Capital assets are real or personal property or intangible assets that have an estimated useful life of greater than one year. Capital assets are capitalized for financial reporting purposes when their monetary value is equal to or greater than the established asset class threshold (see “Asset Classes and Capitalization Thresholds”). 

B. Plant Fund Accounting

The Plant Funds Group consists of two major subgroups, Unexpended Plant Fund  and Investment in Plant Fund. 
The Unexpended Plant Fund is used for the improvement or expansion of UTSA physical facilities and development of capitalizable intangible assets such as internally-generated software.  Expenditures may include but are not limited to land and building acquisition; construction of new facilities; major rehabilitation, renovation and remodeling; and internally-generated software projects. Allocations of funds for the aforementioned projects and the accounting entries related to bringing the assets to completion are recorded in the Unexpended Plant Fund.
The Investment in Plant Fund is used to record the value of capital assets and the related accumulated depreciation or amortization.
  
UTSA Accounting Services performs a quarterly capital project analysis to determine: (1) which expenditures should be capitalized and (2) the appropriate asset class for the capitalized expenditures.

• The expenditures are totaled, tied to the general ledger, and compared to the DEFINE GB9 screen for account number 36-4100.  
• The asset class is determined.

Accounting Services records any additions and deductions in asset classes at a general ledger level in the Investment in Plant Fund by asset class (Balance Sheet accounts: Land, Buildings, Improvements Other Than Buildings, Intangible Assets and Construction in Progress).
For example, total additions to Construction in Progress is recorded in DEFINE as a debit to 39-1810 and a credit to 39-7700, and total deductions from Construction in Progress is recorded in DEFINE as a credit to 39-1810 and a debit to 39-1804 for a transfer to Buildings.
Capital asset acquisitions recorded in other fund groups (Grants and Contracts, Gift Funds, etc.) are also capitalized to the Investment in Plant Fund as appropriate. Examples of such items include library books, works of art, vehicles, and equipment. For more information see FMOG - Capital Asset Property Accounting.
Accounting Services also updates the following Investment in Plant Fund schedules that are included in the Annual Financial Report (AFR): S-11A Land, S-11B Buildings, S-11C Facilities and Other Improvements, S-11D Equipment (this schedule includes equipment, non-depreciable works of art, library books, and vehicles and aircraft), S-11E Construction in Progress, S-11F Infrastructure, and S-11G Intangible Assets.

C. Asset Classes and Capitalization Thresholds

Examples of standard capitalization thresholds include:

*  The threshold for internally-developed software projects is $1,000,000; however, purchased/licensed software with a cost of $100,000 or more is capitalized regardless of whether it will be modified as part of a development project - see FMOG - Accounting Treatment of Intangible Assets.

For information on capitalization of equipment, see FMOG - Capital Asset Property Accounting.

D. Depreciation/Amortization of Capitalized Assets

Capitalized assets are depreciated (real and personal property) or amortized (intangible assets) over their estimated useful lives using the straight-line method (historical cost less residual value, if any, divided by useful life).

NOTE: Depreciation/amortization is not calculated for inexhaustible items such as works of art, historical treasures, and perpetual easements. 

UTSA adheres to the capitalization and depreciation/amortization standards for capitalized assets as required by Governmental Accounting Standards Board (GASB) Statements No. 34, 35 and 51.
Depreciation/amortization is calculated quarterly and is based on the State Property Accounting (SPA) system’s Class Codes for useful life.

Following are examples of SPA Class Codes and default useful lives (see SPA Class Codes and Annual Financial Report (AFR) Categories for the complete list).

*  UTSA has elected to assign a  useful life of 600 months for componentized buildings unless the Associate Vice President for Facilities determines that a specific building will have a useful life of 360 months in accordance with the SPA default amount.
Accumulated depreciation/amortization is summarized  and recorded at the general ledger level by Accounting Services in the Investment in Plant Fund as a total for buildings, equipment, library books, vehicles/aircraft, facilities and other improvements, infrastructure and intangible assets.
EXAMPLE: Total accumulated depreciation on buildings is recorded in DEFINE as a credit to 39-1826 and a debit to 39-4100

E. Construction in Progress

Construction in Progress is the economic construction/development status of buildings and other structures, infrastructure, intangible assets, additions, alterations, reconstruction, installation, and major repairs.
All construction costs associated with a project are accumulated and capitalized as Construction in Progress if the project meets the capitalization threshold for the applicable asset class. Construction in Progress is closed out and transferred to the appropriate asset class by Accounting Services when the project is:

• Substantially complete,
• Occupied, or
• Placed in service.

Replacements or renovations for institutionally managed capital projects are capitalized if they  increase the value of a building or other facility by $100,000 or more.  The total cost of a project includes items such as: preparation of plans, cost for permits, and professional fees such as architect and contractor fees.

1. Office of Facilities Planning and Construction (OFPC) managed capital projects

Accounting Services requests the Construction in Progress Transfer Request form quarterly from the UTSA Office of Facilities (Facilities) to determine if any OFPC managed capital projects should be transferred to the Investment in Plant Fund.  Before transferring a project to the Investment in Plant Fund, Accounting Services requests a componentization breakout for buildings (a listing of core elements by cost such as roof, exterior shell, HVAC system) from OFPC.  Accounting Services then transfers the project(s) to the Investment in Plant Fund, including componentization information by SPA Class Code if applicable to ensure that depreciation/amortization is recorded correctly.    

2. Institutionally managed capital projects

Accounting Services sends a list of current Construction in Progress projects each month to Facilities for review and updating of project status.  When a project is complete, Accounting Services requests a completed Construction in Progress Transfer Request form from Facilities. This form determines which projects should be transferred to the Investment in Plant Fund.   Accounting Services then transfers the project(s) to the Investment in Plant Fund, including componentization information by SPA Class Code if applicable to ensure that depreciation/amortization is recorded correctly.

DEFINITIONS

REFERENCES/LINKS

• Governmental Accounting Standards Board Statements:

  • No. 34,  Basic Financial Statements — and Management’s Discussion and Analysis — for State and Local Governments

         (http://www.gasb.org/st/summary/gstsm34.html)

  • No. 35, Basic Financial Statements — and Management’s Discussion and Analysis — for Public Colleges and Universities – an amendment of GASB Statement No. 34

         (http://www.gasb.org/st/summary/gstsm35.html)

  • No. 51, Accounting and Financial Reporting for Intangible Assets

         (http://www.gasb.org/st/summary/gstsm51.html)

  UT System Policies:

  • UTS142.4 - Policy for Construction in Progress (http://www.utsystem.edu/policy/policies/uts142_4.html)
  • UTS168 - Capital Expenditure Policy

  (http://www.utsystem.edu/policy/policies/uts168.html)

  • UTS142.13 - Accounting and Financial Reporting for Intangible Assets

  (http://www.utsystem.edu/bor/procedures/policy/policies/UTS142_13.html)

   

  UTSA Financial Management Operational Guidelines:

  • Capital Projects Managed by the UT System Office of Facilities Planning and Construction

  (http://www.utsa.edu/financialaffairs/opguidelines/2.5.1.1.html)

  • Institutionally Managed Capital Projects

  (http://www.utsa.edu/financialaffairs/opguidelines/2.5.1.2.html)

  • Accounting Treatment of Intangible Assets

  (http://utsa.edu/financialaffairs/opguidelines/0123.html)

  SPA Class Codes and Annual Financial Report (AFR) Categories
  (https://fmx.cpa.state.tx.us/fmx/spa/classcodes/afrcats.php)

  
  

RELATED FORMS/WORKSHEETS

1. Construction in Progress Transfer Request Form

2. Form 4/5 (sample)
3. Form 2 (sample)
4. Form 9 (sample)

REVISION HISTORY