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*TT. <br /> FINANCE DEPARTMENT 17 - 4 52 <br /> 41°era me .c° G 0 2 <br /> ORANGE COUNTY <br /> GORDON R. BAKER <br /> DIRECTOR <br /> MEMORANDUM <br /> To: Board Members <br /> From: Finance Director <br /> Subject: Five Year Capital Improvement Program and Capital Policies <br /> Date: September 1, 1987 <br /> Suggestions regarding County policy on capital expenditures and reserves have been <br /> solicited from the staff for your consideration for the September 8th Board meeting. <br /> I have reviewed the policies proposed by the Chair in a memorandum to the Board <br /> dated duly 20, 1987. I endorse those policies with a few suggested changes. <br /> Also, I recommend that the Board consider two additions to the proposed policies. <br /> The changes and additions are explained later in this memo. <br /> Before considering adopting policies on capital expenditures and reserves, <br /> definitions of certain terminology and some background information on the value <br /> and use of a capital improvement program may be beneficial. <br /> A capital expenditure is any expenditure to acquire or to improve a tangible <br /> asset that is of a permanent or "fixed" nature. A capital project describes a <br /> • major capital expenditure that is generally not recurring on a year in,year out <br /> basis. Whether a capital expenditure is considered major depends upon the size <br /> of the entity and its budget. A capital improvement program is a schedule of <br /> capital expenditures and projects in priority order over a given period of time <br /> with estimated costs and a&ailabl€ financing sources. A capital reserve fund is <br /> a fund to account for financial resources being accumulated for specifically <br /> identified purposes. By law, a capital reserve fund may be used for any <br /> purpose for which bondsmay be issued. The purpose for which financial resources <br /> are being accumulated in a capital reserve fund is determined by Board action <br /> either through adoption of a budget ordinance or a resolution. A capital project <br /> fund is a fund to account for financial resources being used for a major capital <br /> expenditure. <br /> While a capital improvement program is not a budget itself, it provides information <br /> that is necessary for prudent budgetary decisions. Adoption of a capital improvement <br /> program is not a binding action but is an assertion of future intent. The first <br /> year of an approved capital improvement program is normally incorporated into the <br /> next annual operating budget. <br /> 106 EAST MARGARET LANE • HILLSBOROUGH, NORTH CAROLINA 27278 • 919/732-8181 <br />