Internal Labor Capitalization Policy

General Overview

Generally Accepted Accounting Principles (GAAP) requires the capitalization of costs associated with the acquisition or construction of property, plant, and equipment (PPE). The cost of a capital asset should include all charges necessary to place the asset into its intended location and condition for use, which includes internal labor. This document provides the general framework for identifying and tracking capitalizable labor costs.

Internal labor costs must be identified with a specific approved capital project and appropriately tracked and documented to be eligible for capitalization. Internal labor is used in lieu of contracted labor when it is determined through the bidding process that it is more cost effective to use available internal resources and those resources are not committed to other University activities.

Capitalizable Costs

Roger Williams University direct labor costs for employees who are working in the capacity of a project manager, plumber, electrician, and carpenter or construction worker are eligible to be capitalized to an approved capital project. The work must be directly related to the development or construction of the approved capital project and directly managed by the Facilities department.

Tracking and Documentation

Hours are tracked by person and project using Facilities Project Time Sheets submitted daily to the department. An average labor rate of $45.00 will be used. It was determined by taking the average rate of $23.00 per hour, at time and a half ($23.00* 1.5 = $35.00) with a burden rate of 30% for fringe benefits for a total of $45.00 per hour. We are using an overtime rate because typically taking on these projects causes us to have to pay overtime to get the regular work done simultaneously. Hours and dollars will be accumulated in the Schooldude Work Order System and charged to the project upon completion by the Facilities Budget Manager.