(A) General information.
(1) The Capital Asset Policy became effective January 1, 2008 and shall be referred to as the “Capital Assets Policy”. This Policy is instituted to set the minimum dollar value of capital assets as reported on the city’s financial statements at $5,000. The Policy is related to Government Standards Accounting Board Statement 34. This reporting model also requires all units to depreciate certain assets.
(2) This Policy will provide a higher degree of control over the city’s considerable investment in capital assets, and allows the city to demonstrate accountability to its various constituencies: citizens, taxpayers, oversight bodies and regulators.
(3) The purpose of this Capital Assets Policy is:
(a) To safeguard the investments of the people of Butler;
(b) To fix responsibility for the custody of equipment;
(c) To provide a basis for formulating capital asset acquisition, maintenance and retirement dispositions;
(d) To provide data for financial reporting;
(e) To demonstrate appropriate stewardship responsibility for public assets.
(B) Definitions of capital assets.
(1) “CAPITAL ASSETS” include: land, land improvements, easements, rights-of-way, buildings, building improvements, construction in progress, machinery, equipment, vehicles and infrastructure. All land will be capitalized but not depreciated. All items with a useful life of more than one year and having a unit cost of at least $5,000, or more, will be capitalized. A capital asset meeting the criteria will be reported and depreciated on the annual financial statements.
(2) Assets that are not capitalized are expensed in the year of acquisition. For accountability and safeguarding of assets, an inventory list will be kept and maintained on all of those items that have a value between $100 and $5,000, and classified as non-capitalized assets.
Class of Asset | Minimum Threshold | Depreciation Method |
Class of Asset | Minimum Threshold | Depreciation Method |
Land | $1.00 | Straightline |
Land Improvements | $2,500.00 | Straightline |
Building | $2,500.00 | Straightline |
Building Improvements | $2,500.00 | Straightline |
Construction in Progress | $2,500.00 | Straightline |
Machinery & Equipment | $2,500.00 | Straightline |
Vehicles | $2,500.00 | Straightline |
Utility Assets | $2,500.00 | Straightline |
(C) Valuation of capital assets.
(1) Capital assets should be recorded at actual cost. Normally the cost recorded is the purchase price or construction costs of the asset, but any other reasonable and necessary costs incurred to place the asset in its intended location and its intended use should also be included. Such costs could include the following:
(a) Legal and title fees, closing costs;
(b) Appraisal and negotiation fees, surveying fees;
(c) Damage payments;
(d) Land preparation costs, demolition costs;
(e) Architect, engineering and accounting fees;
(f) Insurance premiums during construction;
(g) Transportation charges;
(h) Interest costs during construction - on utility funds only.
(2) Donated or contributed assets should be recorded at their fair market value on the date donated or acquired.
(D) Asset definitions by major category.
(1) It is important to the maintenance of accurate records that each asset category be precisely defined and that all persons responsible for records maintenance are fully aware of the categorization system. This division (D) further clarifies the asset definitions by major category.
“BUILDINGS.”
1. All structures designed and erected to house equipment, services, or functions are included. This includes systems, services and fixtures within the buildings, and attachments such as porches, stairs, fire escapes, canopies, areaways, lighting fixtures, flagpoles and all other such units that serve the building.
2. Plumbing systems, lighting systems, heating, cooling, ventilating and air handling systems, sprinkler systems, alarm systems, sound systems and surveillance systems, passenger and freight elevators, escalators, built-in casework, walk-in coolers and freezers, fixed shelving, and other fixed equipment are included with the building, if owned. Communications antennas and/or towers are not included as buildings. These are parts of the equipment units that they serve.
“EQUIPMENT.”
1. The definition of “MACHINERY” and “EQUIPMENT” is as follows: an apparatus, tool, or conglomeration of pieces to form a tool. The tool will stand alone and not become part of a basic structure or building. Included within this category are office equipment and furniture, appliances, furnishings, machinery items, maintenance equipment, communication equipment, police and fire equipment, sanitation and water equipment, vehicles and emergency equipment. This list is not inclusive. All supplies are excluded.
2. Improvements or renovations to existing machinery and equipment will be capitalized only if the result of the change meets all of the following conditions:
A. Total cost exceeds $500;
B. The useful life is extended two or more years; and
C. The total costs will be greater than the current book value and less than the fair market value.
“IMPROVEMENTS OTHER THAN BUILDINGS.”
1. Improvements to land for better enjoyment, attached or not easily removed, and will have a life expectancy of greater than two years.
2. Examples of unit assets in this category are walks, parking areas and drives, fencing, retaining walls, pools, fountains, planters, underground sprinkler systems, and other similar items. Examples of utility assets in this category are water supply mains, collection sewers, wells, fences, intake pipes, manholes and fire hydrants.
“INFRASTRUCTURE.”
1. Long-lived capital assets that normally can be preserved for a significantly greater number of years than most capital assets and are normally stationary in nature. Examples include roads, bridges, sidewalks, street lights, traffic signals, street signs, waste water systems, and water systems. “INFRASTRUCTURE ASSETS” can include structures directly related to the infrastructure. An example would be water pumping buildings associated with water systems.
2. The historical reporting requirement of GSABS 34 allows the unit to only include items put into use from 1980 forward.
“LAND, EASEMENTS AND RIGHTS-OF-WAY.” Specified land, easements, rights-of-way, lots, parcels or acreage owned by the unit or its various departments, boards or authorities, regardless of the method or date of acquisition.
(E) Asset transfers and dispositions.
(1) Property should not be transferred, turned in for auction, or disposed of without prior approval of the appropriate department head. A capital asset notification form should be sent to the Clerk-Treasurer in all cases. Invoices for new purchases will not be paid unless this form is attached. Deletions for any reason must be reported to the Clerk-Treasurer.
(2) "TRANSFERS” are defined as any movement of an asset by virtue of change in location, either by account, department or building. If an asset is stolen, the department head should ensure that a police report is promptly filed and that the police report be forwarded to the Clerk-Treasurer along with the capital asset notification form.
(F) Periodic inventories.
(1) A physical inventory of all capital assets will be conducted every two years, as close to year-end as possible. This will begin in 2021 and continue for every odd year. The Clerk-Treasurer’s office will provide a list of the current capital assets to each department head during the month of November. The department heads will then compare physical observations of each asset to what is listed. The department heads will note any differences and then return the list to the Clerk-Treasurer’s office by the end of December.
(2) The department head will also make note of any items that are physically present but not on the capital assets list. The Clerk-Treasurer will ensure that those items are correctly added to the list.
(3) A physical inventory of all other non-capitalized items will be conducted annually in the same manner as described above.
(G) Safeguarding of assets. Accounting controls shall be designed and implemented to provide reasonable assurances that:
(1) Capital expenditures made by the city, its various departments and utilities are in accordance with management’s authorization as documented in the minutes.
(2) Transactions of the utilities are recorded as necessary to permit preparation of financial statements in conformity with generally accepted principles.
(3) Adequate records are maintained to assure accountability for city and utility owned assets.
(4) Access to assets is permitted in accordance with management’s authorization.
(5) The recorded accountability for assets is compared with the existing assets at least every year and appropriate action be taken with respect to any differences.
(H) Depreciation methods. The city will depreciate capital assets using the straight-line method. Salvage value will be determined on an asset-by-asset basis. Depreciation will be calculated at year-end. Land is not depreciated according to generally accepted accounting principles.
(1) The most common useful lives are:
(a) Vehicles: 5 years;
(b) Office equipment: 5 years;
(c) Office furniture: 20 years;
(d) Heavy equipment: 10 years;
(e) Fire trucks: 15 years;
(f) Buildings: 50 years;
(g) Building components (HVAC, roofing): 20 years;
(h) Lease improvements: useful life of asset or lease term, whichever is shorter;
(i) Land improvements (parking lots, athletic fields, landscaping): 20 years;
(j) Playground equipment: 15 years;
(k) Radio towers: 15 years;
(l) Grounds equipment (mowers, tractors, attachments): 15 years;
(m) Computer hardware: 5 years;
(n) Computer software: 5 years;
(o) Communication equipment (handheld radios): 10 years;
(p) Street lights: 35 years;
(q) Wastewater infrastructure:
1. Sewers: 100 years;
2. Lift stations: 50 years;
3. Treatment plants: 50 years;
4. Pumps: 20 years;
5. Storm drains: 50 years;
6. Storm infrastructure: 50 years;
7. Lab equipment;
(r) Water infrastructure:
1. Water mains: 50 years;
2. Hydrants: 50 years;
3. Meters: 10 years;
4. Pumping equipment: 50 years;
5. Water treatment equipment: 50 years;
6. Reservoirs and tanks: 50 years; and
7. Lab equipment: 10 years.
(I) Responsibilities of the Clerk-Treasurer’s office. The Fiscal Officer will ensure that accounting for capital assets is being exercised by establishing and maintaining a capital asset inventory. The Fiscal Officer will further ensure that the Capital Assets Report is updated annually to reflect additions, dispositions, depreciation and transfers.
(J) Responsibilities of department heads.
(1) It is the responsibility of the department heads to act as a steward for each piece of property. The department head will be the focal point for questions regarding the availability, conditions and usage of an asset, as well as the contact during the physical inventory process.
(2) The department head will record the receipt of the asset, examine it to make sure that no damage was incurred during shipment and make sure it is in good working order.
(3) The department head is also responsible for performing preventative maintenance and any needed repairs to keep an asset in good working condition. The department head will also ensure that the asset is used for the purpose for which it was acquired and that there is no unauthorized use.
(Ord. 1484, passed 12-17-07; Am. Ord. 1746, passed 12-20-21)