Capital Expenditure (CapEx) Approval Checklist

Project sponsor drafts the one-page business case: problem statement, proposed asset, expected useful life, alternatives considered (including lease vs. buy under ASC 842), and the strategic objective served. Tie the request to a numbered line in the approved annual CapEx plan if one exists.

Operations lead validates technical feasibility, site requirements, downtime impact, and integration risk. Document show-stoppers (utility capacity, permitting, code compliance) before financial modeling — these often kill projects that look fine on paper.

Proposal includes milestones, project sponsor, accountable executive, target in-service date (drives capitalization start under ASC 360), and a RACI for procurement, finance, and operations.

Build the TCO: purchase price, freight, install, testing, training, plus 5-year operating costs (utilities, maintenance, consumables, software). Separately call out which costs are capitalizable per ASC 360 and which expense as incurred — getting this wrong understates depreciation and overstates Year 1 net income.

Use the company's published WACC as the discount rate; do not invent a hurdle rate. Show NPV, IRR, payback, and discounted payback. Flag any project where IRR is below hurdle rate but the sponsor still wants approval — those need an explicit strategic-rationale memo.

Stress key drivers: revenue uplift -20%, cost overrun +15%, in-service date delayed 6 months. Document where the project breaks even on NPV. Approval committees consistently ask for this; have it ready before the meeting.

Pull the CapEx tracker (NetSuite, Sage Intacct, or the FP&A workbook). Confirm remaining budget at the cost-center and project-category level. If unbudgeted, flag now — reforecast cycles take 2-3 weeks and will delay approval.

Update the rolling forecast: PP&E addition, depreciation expense impact, cash outflow timing, and effect on debt covenants (fixed-charge coverage, leverage ratio, minimum liquidity). Large CapEx within 60 days of a covenant test date is a controller's red flag.

Apply the delegation-of-authority matrix. Typical tiers: under $25K (department head), $25K–$100K (VP), $100K–$500K (CFO), over $500K (CEO + board). Tier drives downstream routing — getting it wrong means the request comes back for re-routing and a missed cycle.

Package includes business case, TCO model, NPV/IRR/payback summary, sensitivity, budget confirmation, and vendor short-list. Route through the standard CapEx form (AFE — authorization for expenditure) with a unique project number assigned.

Track every committee question and the revised model version that answers it. Keep a Q&A log appended to the AFE — auditors regularly pull this during ICFR walkthroughs of the CapEx control.

Required for projects above the board-approval threshold. Coordinate with the corporate secretary to slot the AFE on the next quarterly board agenda; budget for a 2-4 week wait. Capture board minutes referencing the approved amount — these are the audit evidence.

Collect signatures on the executed AFE (DocuSign or wet-ink). File in the CapEx project folder; link the document ID to the project number in the GL system so subsequent invoices reference the approved authority.

Procurement issues to a minimum of three pre-qualified vendors (sole-source justification required if fewer). RFQ includes scope, delivery date, payment terms, warranty, and required insurance certificates.

Weighted scoring on price, lead time, technical fit, vendor financial stability, and references. Document the scoring sheet in the project folder; if the lowest bid is not selected, the rationale memo is required for SOX evidence.

Confirm W-9 on file, COI listing the company as additional insured, and ACH banking details verified by callback to a known number (wire-fraud control). PO references the AFE number and project code.

Project manager builds the Gantt with milestones, owner per milestone, and the cost-tracking baseline. Set up the project in the ERP with a CIP (construction-in-progress) account so invoiced costs accumulate to PP&E rather than expense.

Weekly variance report: committed (POs issued), incurred (invoices received), and paid. Compare to AFE budget by category. Three-way match (PO + receiving + invoice) before any vendor invoice posts to CIP.

At each milestone, controller reviews cumulative variance vs. AFE. Most delegation matrices require a supplemental AFE if variance exceeds 10% of approved amount — do not let invoices accumulate past that threshold without re-approval.

Prepare a supplemental AFE memo: cause of overrun, revised total, revised NPV/IRR, and recommendation (continue, descope, cancel). Route through the same approval tier as the original AFE — board projects need board re-approval.

Compare actuals (cost, schedule, realized benefits) to the original AFE 6-12 months after in-service. Internal audit typically owns this; results feed the next year's CapEx-planning calibration.

Capture what the original model got wrong (revenue ramp, install duration, ongoing maintenance) and update the standard CapEx-template assumptions. Store in the FP&A knowledge base.

Reclass CIP balance to the appropriate PP&E sub-account, assign asset class and useful life per the company's capitalization policy, and start depreciation on the in-service date. Confirm tax book (MACRS) is set up alongside GAAP book — divergence is the #1 source of deferred-tax true-up errors at year-end.