The cost to replace an aging chiller should be part of an organization's

Replacement of major building systems (e.g., chillers, boilers, roofs) falls under capital expenditures because these items are large, non-recurring, and add to or extend the life of facility assets. The capital budget accounts for these costs, which are not part of the day-to-day operations budget.

Correct: Capital budget (A) – Covers replacement of major equipment and infrastructure.

Incorrect:

B. Project fund – May finance special projects but not part of standard budgeting categories.

C. Depreciation fund – An accounting mechanism, not typically a direct budget line for replacement.

D. Operating budget – Covers recurring expenses like utilities, maintenance, and repairs, not full replacements.