/policies/,/policies/administrative/,/policies/administrative/uw-health-administrative/,/policies/administrative/uw-health-administrative/fiscal-affairs/,

/policies/administrative/uw-health-administrative/fiscal-affairs/230.policy

201609245

page

100

UWHC,UWMF,

Policies,Administrative,UW Health Administrative,Fiscal Affairs

Capital Asset Policy (2.30)

Capital Asset Policy (2.30) - Policies, Administrative, UW Health Administrative, Fiscal Affairs

2.30

Page 1 of 5


Administrative (Non-Clinical) Policy
This administrative policy applies to the operations and staff of the University of Wisconsin Hospitals and
Clinics Authority (UWHCA) as integrated effective July 1, 2015, including the legacy operations and
staff of University of Wisconsin Hospital and Clinics (UWHC) and University of Wisconsin Medical
Foundation (UWMF).
Policy Title: Capital Asset Policy
Policy Number: 2.30
Effective Date: 8/1/2016
Chapter: Fiscal
Version: Revision
I. PURPOSE

To establish guidelines for a uniform and systematic method to determine proper treatment of equipment,
furniture & fixtures, software and building/leasehold improvement expenditures.

II. DEFINITION

Cost Basis
The capital asset costs include all expenses incurred which “ready the asset for use.” (e.g., purchase price,
shipping, installation, and labor). Internal Labor may also be capitalized when automated processes are in
place for tracking and reporting, based on fiscal review. See “Internal Labor Capital Allocation” section.

III. POLICY ELEMENTS

A. Capital Asset Definitions
B. Contingent and Substitution Requests
C. Operating Expenses
D. Process Differences

IV. PROCEDURE

A. Capital Asset Criteria
Apply criteria below in order to define capital asset or determine if operating expense.
1. Equipment/Furniture Purchase
New Asset Purchase
New capital equipment, with a cost greater than $500K, may require a ROI calculation. The
budget team will provide guidance if one is required.
a. The purchase price of the individual piece of equipment plus installation is $5,000 or
more.
b. A group purchase of same items with a total cost of at least $100,000. (Example:
Purchase 100 computers at $1,000 each, total $100,000)
i. For shared group purchases between UWHC and UWMF, the purchase will
be evaluated prior to the split. Include the UWMF CADAF number within
the additional information field within StrataJazz project request page.
(Example: 100 computers at $1,000 each, total $100,000 with a split 70%

Page 2 of 5

UWHC and 30% UWMF. UWHC will record an asset of $70,000 and
UWMF will record an asset of $30,000.
c. The estimated useful life is 2 or more years.
i. If criteria a and c are met the equipment purchase qualifies as capital.
ii. If criteria b and c are met the equipment may be considered capital and
must be reviewed by Fiscal or Financial Reporting for further
determination.
iii. If the criteria do not apply the purchase is considered operational.
2. Multi-component System Purchase
An integrated system with a total cost of $5,000 or more comprised of components that are not
independently functional. (Example: Security access system comprised of multiple individual
components that must be installed and used in conjunction with one another in order for the
system to function as needed).
a. The total cost of the system is at least $5,000.
b. The system has a useful life of 2 or more years.
i. If criteria a and b apply this is a capital purchase.
ii. If the criteria do not apply the purchase is considered operational.
3. Asset Replacement
a. Replacement of the entire asset at a cost of at least $5,000 per unit.
b. Replacement of a part of an asset, which increases the future service/capability of the
original asset, at a cost of at least $5,000 per unit.
c. The estimated useful life is 2 or more years.
i. If criteria a and c apply this is a capital purchase.
ii. If criteria b and c apply this is a capital purchase.
iii. If the criteria do not apply the purchase is considered operational.
4. Software
Software Purchase
a. The initial purchase of software or an upgrade.
b. UWHC/UWMF obtains ownership of the software upon purchase.
c. The estimated useful life is 2 or more years.
i. If all criteria apply the purchase qualifies as capital.
ii. If the criteria do not apply the purchase is considered operational.
Multiple Software License Purchase
a. The purchase price of each individual license plus installation is $5,000 or more.
b. The total cost of a multi-license purchase is at least $100,000.
c. The estimated useful life is 2 or more years.
i. If criteria a and c apply the purchase qualifies as capital.
ii. If criteria b and c apply the purchase may be considered capital and must be
reviewed by Fiscal or Financial Reporting for further determination.
iii. If the criteria do not apply the purchase is considered operational.
5. Building and Leasehold Improvement Construction Projects
Purchases must be made under the entity which owns or leases the building.
Major Construction Projects
a. UWHC Major Construction Project:
i. Project budget total exceeds $3 million.
ii. Project budget spans multiple years.
b. UWMF Major Construction Project:
i. Project budget total exceeds $200,000.
Major Construction Projects: Equipment purchases
UWHC Major Construction Projects: Equipment purchases


Page 3 of 5

The equipment must meet the requirements established in above sections to be considered capital.
See Equipment/Furniture, Multi-component System, Asset Replacement and Software sections.

In addition, equipment that generally would not meet capital requirements may be capitalized if
purchased under a major project. All non-disposable equipment with a useful life of 2 or more
years is considered a capital start-up asset if the total cost of such items is $5,000 or more.
(Example: trash/biomedical waste containers, instrument trays, furniture, cpu accessories).

UWMF Major Construction Projects: Equipment purchases
The equipment must meet the requirements established in above sections to be considered capital.
See Equipment/Furniture, Multi-component System, Asset Replacement and Software sections.
6. Remodel/Renovation/Addition
a. The work involves multiple components such as flooring, wall coverings, drywall,
electrical, HVAC and painting, within a defined space. (Example: Changing a
clinical space to an office or vice versa).
b. The cost of the multi-component work not including equipment costs is at or above
$5,000 in total.
c. The estimated useful life is 2 or more years.
i. If all criteria apply this is a capital purchase.
ii. If the criteria do not apply the purchase is considered operational.
7. Parking Structures/Lots
a. The pavement is being replaced for the entire lot and the total cost is at or above
$5,000.
b. The size of the lot is being expanded and the total cost is at or above $5,000.
c. The estimated useful life is 2 or more years.
i. If criteria a and c are met the costs qualify as capital.
ii. If criteria b and c are met the costs qualify as capital.
iii. If the criteria do not apply the purchase is considered operational.
8. Internal Labor Capital Allocation
Facilities & Engineering Services internal labor costs for general staff and management
incurred prior to substantial completion of an approved capital project can be capitalized. Non-
facilities internal labor costs require prior fiscal review and approval for capitalization.
a. The tracked labor costs are associated with a Fiscal or Financial Reporting approved
capital project.
b. The tracked labor costs are recorded in half-hour increments on timesheets and are
submitted to Fiscal or Financial Reporting by the second business day of the month.
c. The capital project has been determined to be substantially complete and ready for
staff to complete their regular operations.
i. If criteria a and b apply the labor costs may be considered capital and must
be reviewed by Fiscal or Financial Reporting for further determination.
ii. If criteria c applies the labor is considered operational.

B. CONTINGENCY AND SUBSTITUTION REQUESTS

Capital Project Substitution will be allowed for departments that have an approved capital project, that
they determine after approval is not required or that a departmental priority has changed, the budget team
will review the request for a substitution on any project that has not been started or requisitioned against.
Only approved, non-requisitioned capital projects will be allowed to be substituted, unless prior approval
is received from the budget team.



Page 4 of 5

C. OPERATING EXPENSES

The expenses listed below do not generally meet the above definition(s) of capital assets and thus should
be treated as operating expense.
1. Minor Alterations
a. Updating or changing a single component of an area (Example: Painting the walls in
one room or replacing the carpet in one room, floor, or clinic).
b. The total cost for the multi-component work in a specific area is less than $5,000.
(Example: Replacement of carpet and wall coverings with a total cost of less than
$5,000 in room remodel).
2. Repairs
a. Repairing equipment, building, leasehold to keep the asset in an ordinary and
efficient operating condition but does not add value or increase the useful life of the
asset.
b. Examples:
i. Replacing a piece of worn or torn flooring, repainting a patch of wall or
filing in cracks in the concrete.
ii. Replacing a broken or worn part of the asset and does not increase the future
service/capability of the original asset.
iii. Resealing an entire parking lot or patching a portion of a parking lot.
iv. Spare parts or accessories purchased subsequent to the original asset
purchase date.
3. Training costs
a. Training costs associated with a capital project are considered operating expenses.
4. Office supplies or disposable medical supplies
a. Purchasing office supplies or disposable medical supplies to stock a new space or
replacing supplies for an existing department or office.
i. UWHC- Capitalizes non-disposable supplies (i.e. the stapler, not the staples)
if purchased under a major capital construction project.
ii. UWMF- All supplies are treated as operating expenses.
5. Moving expenses
a. Expenses incurred to move from one site to another for existing assets will be
considered an operating expense unless value is added to the current asset. (Example:
Moving or switching phone lines or moving existing equipment to new clinic or
department).
6. Software expenses
a. Annual renewals, subsequent yearly licensing fees, maintenance, support, and
internet-based software usage fees.
7. Warranties and maintenance contracts (includes expenses invoiced with original purchase of
asset).












Page 5 of 5


PROCESS DIFFERENCES

UWHC
ξ All capital requests are made through Strata
system
ξ Capital Contingency Funds or Substitution of
Capital Funds are approved and routed in
accordance with Hospital Administrative Policy
11.12
ξ Capital equipment requisitions are completed
through Strata. Strata requisitions with
appropriate approval are forwarded to the
Procurement Department via PeopleSoft
requisition in accordance with Hospital Admin
Policy 11.12
ξ Decals are issued to Depts. for all capital
equipment
ξ Delivery & Installation
1) Departments should contact Plant
Engineering if installation assistance is
required. Plant will require the Capital
Equipment ID number from Strata.
2) See Hospital Administrative Policies 11.12
and 2.29 for additional delivery, installation
and disposal information.



UWMF
ξ All capital requests are made through CADAF
submission
ξ Unbudgeted projects are approved and routed
in accordance with CADAF instructions

ξ Capital equipment requisitions are completed
through PeopleSoft following Finance CADAF
approval. Requisitions are forwarded to the
Purchasing Department in accordance with
Capital Asset Purchase and Authorization
Policy

ξ Decals are not used for capital equipment












V. COORDINATION

Sr. Management Sponsor: Chief Administrative Officer & Chief Financial Officer (UWMF);
SVP, Chief Financial Officer (UWHC)
Author: UWHC Senior Accountant & UWMF Accountant
Reviewers: UWHC Fiscal & UWMF Financial Reporting

Approval committee: UW Health Administrative Policy and Procedure Committee

SIGNED BY

Elizabeth Bolt
UW Health Chief Administrative Officer

Revision Detail:

Previous revision: 012015
Next revision: 082019