Plant Fund

Plant Fund Definition

This fund group is used to account for the acquisition, construction, and maintenance of the University's physical plant and to control the resulting assets. The fund type categories of the Plant Fund include

  • Investment in Plant—All long-lived assets in the service of the University, except those of endowments and similar funds.
  • Renewal and Replacement—Funds transferred to finance maintenance and replacement of physical assets.
  • Retirement of Indebtedness—Interest and principal payments and other debt service charges relating to plant fund indebtedness.
  • Unexpended—Unexpended resources from various sources used to finance the acquisition of plant assets.

Capitalization of Plant Fund Assets Definition

Physical property acquired by the University by purchase, gift, trade, or fabrication and which take the form of land, buildings, equipment, improvements to land or buildings, and other tangible items are capitalized.

Financial Services and Operations is responsible for all accounting and budget control functions for plant fund (construction) projects, and preparation of financial reports.

Plant assets are stated at actual or estimated cost at date of acquisition. Construction is capitalized as expended and reflected in net investment in plant. Current fund expenditures of $50,000 or greater for renewals and replacements are capitalized only to the extent that such expenditures represent long-term improvements to properties or significant alterations, renovations, or structural changes that increase the usefulness of the building, enhance its efficiency, or prolong its useful life.

Equipment is capitalized when the unit acquisition cost is $5,000 or more, the estimated useful life is one year or longer, and it has the capacity to function without the assistance of another item

Straight-line depreciation is used when determining the useful life of the following:

  • Land Improvement and Infrastructure—20 years
  • Buildings—40 years
  • Computer Equipment—5 years
  • Equipment—7 years
  • Library Books—5 years

Componentization

New building construction is capitalized by building components and grouped into three general components of a building.

  • Building Shell (including construction and design costs)
  • Building Services Systems (e.g., elevators, HVAC, plumbing system, heating and air-conditioning system)
  • Fixed Equipment/Fixtures (e.g., sterilizers, casework, fume hoods)

The same depreciation methods are used at Michigan Tech for F&A purposes and financial statements. Beginning in FY01, upon occupation of new construction, component analysis is completed by the Facilities project engineer. The useful life of each component is as follows:

Banner CodeClassUseful LifeSalvage Value
BD Building Shell 40 years 10%
BC Building Service Systems 20 years 10%
BF Fixed Equipment / Fixtures 10 years 10%

During the design phase of the project, the architect must furnish the University with an estimate broken down into the major architectural, mechanical, electrical divisions, site, furnishings, equipment, and professional fees. The state-required contingencies are also included. This estimate is updated until the project is out to bid.

After bids come in, the responsible low bidder is chosen with a purchase order for the construction work. The contractor must provide a breakdown detail of all major divisions and subdivisions of the work. All of the contractor’s invoices include this breakdown. Any change order must be estimated by the contractor with details of all costs.

Throughout the construction project, the University has complete knowledge of all costs and changes, which are summarized to assure that the project remains within budget. The state’s expenditure reports are reconciled quarterly with the University financial statements.

Capitalization Guidelines

Final determination of capitalization will be made by the controller, using the following guidelines: