Capital Expenses Policies. Policies should include how funds are allocated, when and how purchases are made, how bids are handled, how depreciation is handled. Depreciation is a non-cash expense that reduces the value of an asset/capital purchase as a result of wear and tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached. Many nonprofits don’t “fund” depreciation or save funds to pay for future replacement or repair costs, which results in lack of funds to cover those expenses when needed. There are standardized tables that list the depreciation period for many common capital items available through GAAP guides, an accounting text, and the Internal Revenue Service Publication 946 (How to Depreciate Property).