4.15 Capital Budgeting Policy

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This online version is for convenience; the official version of this policy is housed in the University Secretariat. In case of discrepancy between the online version and the official version held by the Secretariat, the official version shall prevail.

Approving Authority: Board of Governors

Original Approval Date: June 1, 2023

Date of Most Recent Review/Revision: N/A

Office of Accountability: Vice-President: Finance and Administration

Administrative Responsibility: Financial Resources

1.00 Purpose

1.01 The objective of this policy is to ensure appropriate oversight of capital expenditures with consideration of the value and risk associated with investment in Capital Projects and the impact to the University’s Financial Sustainability.

1.02 This policy defines the terms for Capital Budgeting, to support the responsible allocation of financial resources required to deliver on the University’s strategic plans while achieving the objectives set out in policies 4.14 Capital Planning and 9.5 External Information Technology and Cloud Services, and the IT Project and Prioritization Procedure.

1.03 To support the University’s Capital Planning processes, Capital Budgeting will identify and assess sources of funding for all Capital Projects, including consideration for internal and external debt requirements, impact on operating and ancillary fund budgets, and the overall impact on the fiscal health of the University.

2.00 Definitions

2.01 Capital Asset: A capital asset is any asset which has been acquired, constructed or developed with the intention of being used on a continuous basis, with a useful life longer than a year, and is not intended for sale in the ordinary course of business. Capital assets include Capital Projects. They also include other types of assets which are not covered in this policy including but not limited to: movable assets, research equipment, library books, land, etc.

2.02 Capital Project: A long-term, capital-intensive investment that is built or that builds upon, adds to, or improves an existing Capital Asset. Capital Projects include:

2.02.01 Facilities Capital Projects include an expansion or renovation of an existing facility, space realignment that involves more than equipment or finishes renewal, leasehold improvements, the construction of a new facility, or the acquisition of land or other real property. Significant open space projects are also Facilities Capital Projects.

2.02.02 Information Technology (IT) Capital Projects include projects that involve the acquisition or development of either services, products, software or hardware, including upgrades from one major version to another, and a range of associated activities and services (including planning, scoping, requirements elicitation, installation, development, integration, configuration, implementation and personnel).

2.03 Capital Project Budget: Is inclusive of:

a) the capital project cost, as defined in policy 4.14, for Facilities Capital Projects and as defined by Total Cost of Ownership (TCO) for IT Capital Projects; and

b) planned Funding Source(s).

2.04 Annual Capital Budget: Planned expenditures to support Facilities and IT Capital projects prioritized through Policy 4.14 Capital Planning and IT capital planning process in a particular fiscal year.

2.05 Total Cost of Ownership (TCO): Is an assessment that is completed for viable product (services, software, or hardware) contenders to determine the budget that will need to be allocated to adopt the solution. The TCO includes vendor/product costs including one-time costs of implementation support or training, recurring costs such as licensing and ongoing support, as well as the Laurier human capital estimates (labour) that need to be allocated to implement and operationalize support for the solution.

2.06 Funding Sources: Actual or committed (including, but not limited to, fundraising pledges or targets, contributions from future years’ budgets) sources of funding to support a Capital Project. Funding Sources may include, but are not limited to:

internal loans
external debt
fundraising contributions
operating fund contributions (including department-specific contributions)
ancillary fund contributions
contributions from internally restricted net assets (reserves)
external party/partner contributions

2.07 Financial Sustainability: The ability of an organization to sustain itself over the long term so that it is able to continue to support its mission; the balance between the revenues available to institutions to support their academic activities and the expenses they incur in delivering their mission.

2.08 Operating Fund: The operating fund includes tuition, grant and other typically unrestricted revenue, covers the core academic and administrative operations of the university, investments in new programs and services, and resources required to maintain current operations.

2.09 Ancillary Fund: The ancillary fund includes the revenues and expenses associated with services, materials and activities that distinct from academic programming and are not support by operating grants or tuition fees.

3.00 Jurisdiction/Scope

3.01 This policy applies to all aspects of capital budgeting processes for all of the University’s Capital Projects.

3.02 All budget aspects of capital project planning, whether facilities or technology projects, must be in accordance with this policy.

4.00 Policy

4.01 The approach to Capital Budgeting is to determine the value and risk associated with planned investments in Capital Projects.

4.02 Capital Projects are prioritized through procedures established by the Facilities and Asset Management Department (for Facilities Capital Projects) or the Information Communication and Technologies Department (for IT Capital Projects) based on principles and criteria established through committees led by the respective departments.

4.03 A review of a proposed Capital Project Budget requires consideration of the Project Cost, planned Funding Sources (whether actual or committed, including the risk associated with each funding source), impact on future operating budget requirements, and potential revenue or savings generation.

4.04 In addition to 4.02, and to support the related policies including 4.16 Capital Debt Policy, and 5.2 Budget Planning Policy, Capital Project Budget requests require the completion of a business case analysis, which may include but is not limited to a net-present-value analysis, payback period analysis, prioritization principles considered as per 4.02, as well as other relevant quantitative or qualitative considerations.

4.05 Capital Project Budget Approval:

4.05.01 Annual Capital Budget; As a component of the annual budget process, the Board of Governors shall approve a Capital Budget for the fiscal year with Capital Projects and funding sources identified.

4.05.02 An annual Capital Budget will include elements of the Capital Plan and Capital Projects Prioritized for the specific budget year with planned Funding Sources, a risk articulation for each Funding Source, and a completed business case analysis.

4.05.03 Any Capital Budget that identifies internal loans or external debt must include debt servicing capacity and the ratios and thresholds outlined in the 4.16 Capital Debt Policy. Funding Sources listed are to include a risk assessment, which considers the certainty and timeliness of funding, and mitigation required.

4.05.04 In cases where a Capital Project Budget is considered outside the timeline of the annual budget development process, the Capital Project Budget Request including components identified in 4.05.02 and 4.05.03 will be reviewed and may be approved in accordance with this policy and signing authority requirements as per policy 5.7 Signing Authority Policy.

4.05.05 To support related policies including 4.16 Capital Debt Policy and 5.2 Budget Planning Policy, and the objective of achieving and maintaining financial sustainability, additional reviews of planned capital project expenditures may be implemented by the Office of the Vice President, Finance and Administration, and exercised by Financial Resources. This may include projects that exceed certain dollar or period thresholds. These reviews will not replace the obligations or responsibilities of individuals with signing authority as set out in policy 5.7 Signing Authority Policy.