CAPITAL EXPENDITURE REPORTING GUIDELINES YOU HAVE INDICATED TO THE

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CAPITAL STRATEGY SEPTEMBER 2006 CONTENTS PAGE 1 INTRODUCTION
CENTRAL AMERICAN CAPITALS MEXICO CITY IS THE

Expenditure Responsibility Grant Capital Expenditure Reporting


Capital Expenditure Reporting Guidelines



You have indicated to the foundation that your organization is not classified as a public charity (or its equivalent) under US tax law. As a result, if the foundation awards a grant to your organization, the grant will be considered an “expenditure responsibility” grant. Under the tax rules, if you use a portion of the grant funds to purchase “capital equipment”, you will be required to provide the foundation with one or more Capital Equipment Reports for the “useful life” of the equipment.


The purpose of these Guidelines is to provide you with information on how to determine whether a particular item is considered capital equipment, and to provide an overview of the related reporting requirements if a grant is awarded to you.


What is Capital Equipment?


Capital equipment includes any item with a value equal to or greater than $5,000, or that has a “useful life” (defined below) of more than one year. Common examples of capital equipment include vehicles, office equipment, computer software (in some cases), equipment used to conduct scientific research or testing, buildings and significant facilities improvements such as a new roof.


The $5,000 threshold must be applied on a per-item basis. For example, if you purchase 3 laptop computers with a price of $2,000 each, you have not purchased any capital equipment because the cost of any one computer does not exceed $5,000.


Equipment that is not “capital equipment” as defined above should be listed as a supply or other expense in your budget and proposal.


Please note that facilities or equipment with a useful life exceeding 7 years, such as a building or significant building improvements, may NOT be purchased with foundation funds. These items therefore should not be included in your budget or proposal. You may, however, lease buildings and facilities with foundation funds (during the term of the project).


If you have any questions about whether an item is capital equipment, please contact your foundation grants manager and/or program officer.


Calculation of Useful Life.


Useful life is a depreciation concept used to measure the time period in which an asset becomes obsolete The useful lives of common equipment purchased with the foundation’s funds appears in the following table:

Type of Equipment

Useful Life (reporting term)**

Computers and Peripheral Equip. (e.g., printers, scanners, etc.)

3 years

Office Furniture, Fixtures and Equip. (e.g., desks, conference tables, file cabinets, etc.)

7 years

Data Handling Equip. (e.g., copiers)


5 years

Automobiles, trucks and motorcycles

5 years

High technology or medical equip.

5 years

** If your organization is classified as a private foundation under US tax law, the useful life for all capital equipment that you purchase with the foundation’s funds is 3 years.


If you have any questions about the length of an asset’s “useful life,” please contact your foundation grants manager and/or program officer.


Capital Equipment Reporting.


As stated above, the foundation must receive reports on each item of capital equipment purchased by you with the foundation’s funds for the useful life of that equipment. This reporting period may extend beyond the term of the grant, and your grant cannot be closed until all reporting obligations are satisfied. During its useful life, capital equipment may only be used for the charitable purposes for which the grant was made.


The foundation will provide you with a template Capital Equipment Report at the appropriate time. This report will ask you to list the type of equipment purchased, provide the date of purchase and indicate the year in which the useful life of the equipment expires. The report also contains a certification that you must sign confirming that all capital equipment purchased with foundation funds has been and will continue to be used solely for the charitable purpose of the grant.


* * *


If you have questions about any information contained in these Guidelines, please contact your foundation grants manager and/or program officer.



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