PCS 215: Land/Building Purchase and New Building Construction

To outline requirements for purchasing land or buildings and for constructing new buildings

United States. Office of Management and Budget. OMB circulars A-21 and A-110

Arizona Board of Regents Policy Manual - 7-303

Property Control

Financial Services

Department of Facilities Management

Purchasing and Business Services

Land and Building Purchases

Land and building purchases must have prior approval from the Board of Regents. All construction, repair, and maintenance projects expected to cost more than $105,000, regardless of the funding source, must have prior approval. If the original estimate was expected to be less than $105,000 and the final estimate exceeds this amount, the Board of Regents must approve the project before construction.

Capital Improvement Projects

Capital improvement projects must have prior approval from the Board of Regents regardless of cost.

Real property purchased by ASU is legally owned by the Board of Regents. This property must be appraised before purchase. Emergency purchases may be made without prior Board of Regents’ approval provided certain conditions are met. Board action following purchase may be required.

Real property may consist of the following:

Land (Object Code 7890 01)

1. Acquisition by Purchase (7890 01) - Land purchased by the university is recorded at cost. The cost includes legal, title, and broker’s fees, landfill, clearing, grading, and other costs necessary to prepare the land for its intended use.
2. Acquisition by Gift or Bequest (7890 01) - Recorded at the fair market value at the date of the gift (appraisal will usually have been completed).
3. Acquisition through Eminent Domain (7890 01) - Recorded at the amount of the court award made to the landholder(s).

Improvements to Land Other than Buildings (Object Code 7890 06)

This category consists of land improvements outside the periphery of the building. Improvements to land, other than buildings, which are required to make land ready for its intended use, are capitalized if the aggregate expenditure is $100,000 or more per project.

This category includes: roads, walkways, tunnels, utilities, drainage systems, landscaping, parking lots, tennis courts, athletic fields, fences, curbs, streetlights, and other similar items. The capitalization criteria are the same as those used for building capitalization.

Buildings/Building Components (Object Codes 7890 11– 99)

1. Buildings (7890 16) - The cost of buildings (permanent structures housing persons and personal property) is the construction cost of the building shell and its components. Examples of construction costs include, but are not limited to, building materials, architects’ fees, building permit fees, subcontract fees, rent for property to complete construction, operating and maintenance costs for property used in the construction, site preparation, compensation for work performed, and the cost of supplies consumed in the construction. Capitalization takes place as construction costs are incurred.
2. Building Components (7890 11) - Building components are items permanently attached to the building shell necessary for the building to be used as intended. Building components are items that cannot be removed from the building without damaging the building or component. Examples of building components are plumbing systems, electrical wiring, air-conditioning duct work, and windows.
3. Building Additions (7890 11) - New additions to buildings resulting in additional square footage are capitalized regardless of the dollar threshold.
4. Renovations (7890 11) - Major building component replacements or renovations of a building that extend the original life of the building and/or increase its value to the university are capitalized as a part of the building with the exception of projects involving expenditures of $100,000 or less (considered expense) or any moveable equipment worth more than $5,000 (capitalized as equipment).
5. Demolition Costs (7890 16) - The cost of building demolition in preparation of new construction is added to the cost of the new building as “site preparation costs” (7890 16). If new construction is not planned, the demolition costs are not capitalized.
6. Planning (7890 21) - Planning includes professional services and fees incurred with construction and remodelings (e.g., architects’ fees, construction and management fees, and engineering studies).

Property Control establishes a separate and complete inventory record for each distinct unit of real property. Immediately after title is acquired for a new tract of land or building, or construction of a new building is completed, a separate building record is established. D