(A) Purpose. To establish policy and procedures for the implementation of management controls regarding the acquisition, inventory, transfer and disposition of assets for Dearborn County, Indiana (hereinafter referred to as "Dearborn County" or "county").
(B) Policy.
(1) Dearborn County is implementing a Capital Asset Policy effective July 2, 2004. This policy is being implemented to meet the requirements of the new accounting reporting model, Governmental Accounting Standards Board Statement (GASB) 34. The new reporting model will require the county to depreciate capital assets. The new policy will be referred to as the Dearborn County Capital Asset Policy (DCCAP). Historically, Dearborn County has accounted for expenditures utilizing the cash accounting method, where the costs of assets are recorded as expenditures the same year in which the costs are paid. This method, although simple, does not reflect the true value of the investments that are made with county dollars. Once the expenditures are made those dollars transform into real assets. Assets, particularly infrastructure assets like roads, bridges, water treatment plants, landfills, sewers, and the like, become part of the intrinsic value of Dearborn County. The county is more than the builder it is the steward of the investment. DCCAP is aimed at accounting for not only the costs incurred, but moreover the value the assets held DCCAP is an excellent tool for managers to identity and validate the work that must be done to maintain these infrastructure assets and their associated budgets as well.
(2) Dearborn County is establishing the comprehensive Capital Assets Management system in order to provide a higher degree of control over its considerable investment in, capital assets, and to able to demonstrate accountability to its various constituencies: citizens, rate-payers, oversight bodies and regulators.
(3) The purpose of establishing a formalized Assets Management System (AMS) is to:
(a) Safeguard the investments of the citizens of Dearborn County;
(b) Fix responsibility for the custody of equipment;
(c) Provide a basis for formulating capital asset acquisition, maintenance and retirement policies;
(d) Provide data for financial reporting; and
(e) Demonstrate appropriate stewardship responsibility for public assets.
(4) This Capital Assets Policy is limited to outlining the broad classifications of property, the definitions of assets, methods of creating asset data, acquisitions, transfers, and retirements of county-owned property for which the county is fiscal agent. It does not include ongoing data, processing, programming requirements, or computer operations procedures.
(5) The historical reporting requirement of GASB 34 requires the county to report items put into use from 1980 forward, and gives the county the option to report items put into use prior to 1980. The county will not report such items that were put into use prior to 1980.
(6) The Asset Manager for Dearborn County can be reached at ________ Dearborn County Administration Building.
(C) Assets defined.
(1) A fixed asset is a long-lived tangible asset obtained or controlled, as a result of past transaction, events, or circumstances. Fixed assets are broken into two categories:
(a) Capitalized Assets;
(b) Inventoried Assets.
(2) Throughout this policy, the term ASSET MANAGEMENT SYSTEM used to track our assets will be referred to as the AMS.
CAPITALIZED ASSETS. A CAPITALIZED ASSET is property, such as land, land improvements, including monuments, buildings, building improvements, construction in progress, machinery and equipment and infrastructure with an initial cost of at least $20,000, and a useful life of more than year. CAPITALIZED ASSETS are acquired for use in normal operations and are not for resale. These assets are long-term in nature and may be subject to depreciation, depending on which fund was used to record the asset. Only assets purchased for $20,000 and over are capitalized (acquisitions by lease-purchase agreements and donated items). All capital assets meeting this criterion shall be reported and depreciated in the government-wide financial statements.
INVENTORIED ASSETS. INVENTORIED ASSETS are those items valued at $500 through $19,999.99 and recorded inventory purposes only. These items are not capitalized and are not subject to depreciation. This allows management to keep items on inventory, yet have a consistent capitalization limit for the annual financial report. INVENTORIED ASSETS will be maintained on the AMS, if their initial cost is at least $500 but not more than $19,999.99 with the following exceptions:
(a) Department Heads may choose to keep inventory on items that cost under $500, however, this inventory will not be part of the AMS or part of the annual report. If for some reason the Department Head feels certain items that cost under $500 should be inventoried and included in the AMS, the Department Head must receive approval from the AMS manager.
(b) An inventory shall be kept of all computers, printers and all other computer related items regardless of cost computers, printers, and the like with a cost of $20,000 or greater will be capitalized, and those that cost less than $20,000 will be classified as non-capitalized items in the AMS.
(c) An inventory shall be kept on all weapons regardless of cost. Weapons with a cost of $20,000 or greater will be capitalized.
(d) An inventory shall be kept on all vehicles with a license plate regardless of cost. Vehicles with a cost of $20,000 or greater will be capitalized.
Note: Purchases made using grant funds must comply with grant requirements or the above procedures, whichever are the most restrictive.
(3) Level of control: The Asset Manager will maintain the AMS. Each department needs to maintain assets based on location so that accurate inventory reports can be printed.
(4) Threshold levels for capital assets: The following schedule will be followed for the different types of capital assets:
Asset | Inventory/ Tracking Threshold | Capitalize Threshold |
Asset | Inventory/ Tracking Threshold | Capitalize Threshold |
Land | equal to or greater than $1 | $20,000 |
Construction in Progress | equal to or greater than $1 | $20,000 |
Buildings | equal to or greater than $1 | $20,000 |
Vehicle | equal to or greater than $1 | $20,000 |
Computers | equal to or greater than $1 | $20,000 |
Weapons | equal to or greater than $1 | $20,000 |
Building Improvements | equal to or greater than $500 | $20,000 |
Machinery and Equipment | equal to or greater than $500 | $20,000 |
Land Improvements | equal to or greater than $500 | $20,000 |
(D) Valuation of capital assets.
(1) All assets shall be recorded at historical cost or estimated historical costs. If purchasing a new asset, the cost is the amount paid for the asset, including tax and freight. The amount recorded includes the total purchase price, less any discounts. It also includes any payment required to place the asset in its intended state of operation, such as labor to install. If it is a donated asset, cost is defined as the fair market value on the date donated. The fair market value is the estimated amount of the asset for which it would be exchanged between knowledgeable and willing buyers and sellers, when neither is forced into the exchange.
(2) Capital assets should be recorded at actual cost. Normally the cost recorded is the purchase price or construction costs of the asset, but also included is any other reasonable and necessary costs incurred to place the asset in its intended location and intended use. 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 enterprise funds only.
(E) Asset definition by major category. It is important to the maintenance of accurate records that each asset category (land, building, equipment, infrastructure, and the like) be precisely defined and that all persons responsible for records maintenance be fully aware of the categorization system. This section further clarifies the asset definitions by major category.
(1) Land.
(a) LAND is defined as specified land, lots, parcels or acreage including rights-of-way, owned by the Board of Commissioners of the County of Dearborn, its various departments, boards or authorities, regardless of the method or date of acquisition. Easements will not be include, as the county does not own or maintain them, but an interest in land owned by another (such as property owner) that entitles its holder to a specific limited use. All land is entered on the AMS, regardless of cost, however, it is not depreciated. Land is entered to the AMS, when the Board of Commissioners of Dearborn County takes ownership of the property.
(b) Purchased land should be entered at its cost. Cost includes its purchase price plus any other charges necessary to purchase the land. Other charges include costs such as site preparation, expenditures, attorney fees, deed stamps, appraisals, surveys, and legal claims attributable to the land acquisition. If land and building are acquired as a single parcel, cost should be allocated between land and building, and recorded in the appropriate accounts.
(c) Donated land should be recorded at the appraised market value at the time of donation.
(2) Land improvements. Examples of county assets in this category are walks, parking areas and drives, fencing, retaining walls, fountains, wells, storm sewers, planters, underground sprinkler, systems, and items.
(3) Buildings. 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.
(a) Guidelines.
1. Buildings valued at $20,000 or greater are capitalized. Those purchased for $500 to $19,999.99 are recorded on the AMS for inventory purposes only. They are not capitalized.
2. Buildings are recorded at the purchase price or construction cost. Cost should include all charges applicable to the building such as purchase price, contract price or job order costs and any other expenditures necessary to put a building or structure into its intended state of operation. Other expenditures may include the following: professional fees (broker's or architect's fees), damage claims, cost of fixtures, insurance premiums or interest on construction (for proprietary funds only) and related costs incurred during the period of construction, Fixtures permanently attached to the building, such as heating and ventilation systems, should be included in the cost of the building.
3. Donated buildings should be recorded at the appraised fair market value at the time the building was donated.
4. If using in-house resources such as labor, materials to construct, renovate or add on to the building, these costs are to be included in the cost of the asset. Those departments that perform in-house services, such as general building construction (electrical, plumbing, carpentry, and the like), grading/paving (chip/seal, asphalt resurfacing, and the like), or other improvements, shall keep cost records of this work. These costs will be capitalized and recorded, as if outside sources were used.
5. If an addition to a building is constructed, its cost is added to the AMS as a separate asset, when such costs meet the inventory/ capitalization threshold.
6. The addition, meeting the inventory/capitalization threshold, should receive its own asset number.
7. Cabinets, shelving, bookcases, and similar items, added subsequent to original construction, which are custom made for a specific place and not adaptable elsewhere, will be capitalized.
8. Exceptions to the minimum capitalization limit and/or minimum inventory limit will require written approval by the Asset Manager.
9. Maintenance expenses are incurred to keep assets in normal operating condition and to help maintain the original use of the building. Maintenance expenses do not extend the life of the building beyond the expected useful life at acquisition. Maintenance costs are exspensed and not capitalized.
10. Buildings need not be tagged. The asset number is still recorded in the system, but not physically attached to the asset. The legal description, including address and plat location found in the County Register of Deeds records, must be recorded in the asset record to identify it as being county property.
11. Rehabilitation costs are incurred to restore or improve buildings or other capitalized assets acquired in a run down condition. Property to be rehabilitated is usually purchased at a discounted price. The reason for the lower price is that considerable money will need to be spent to rehabilitate the asset before it can be placed into service. The rehabilitation costs incurred become part of the cost of the asset and are capitalized according to the same criteria as other capitalized assets. Normally, the costs take place over an extended period. Care must be taken to distinguish between maintenance and rehabilitation during this period.
(b) Procedures.
1. The Auditor's Office will maintain records for the buildings that have been completed and those that are still under construction. At fiscal year end, the Auditor's Office will add completed buildings to the AMS and adjust the Construction in Progress account for the cost of buildings still under construction.
2. The Auditor's Office and Purchasing Department must be notified by each county department of the purchase, transfer to or from, or disposition of any land, buildings or equipment. This process is necessary in order to maintain accurate asset information for financial statement purposes.
3. Buildings and or equipment purchased or funded through a holding corporation will be added to the AMS, after being accepted by the Board of Commissioner's of Dearborn County.
(c) Renovations/additions and improvements/betterments.
1. Renovations/additions increase the physical size or operating capabilities of an asset through expansion or extension. They do not involve replacements.
2. Improvements/betterments extend the useful life of an existing asset, increase the normal rate of output, and lower an asset's operating cost or increase efficiency.
3. Renovations/additions and improvement/betterments costs are different from maintenance. Maintenance costs are incurred to keep the asset in normal operating condition.
4. Two criteria must be met in determining whether or not a renovation or improvement costs should be capitalized:
a. The first criterion is whether the expenditure significantly extends the useful life of the original asset.
b. The second is whether the expenditure meets the $20,000 capitalization threshold established for all assets.
5. If both criteria are met, the expenditure must be capitalized. Expenditures not meeting both of these criteria should be classified as a maintenance expense. Care must be taken when distinguishing between maintenance, renovation, and improvement costs. Assets valued below $20,000 are exspensed; they are not capitalized or depreciated.
6. If part of an asset is removed during a renovation or improvement, the cost of the removed part must also be removed from the AMS.
a. Use all of the available information in determining the original cost of the part being removed.
b. The removal costs associated with the renovation should be exspensed.
(d) Maintenance.
1. Maintenance expenses:
a. Are incurred to keep assets in normal operating condition.
b. Are incurred to help maintain the original intended use of the asset.
c. Do not extend the life of the asset beyond the expected useful life at acquisition;
d. Are incurred to keep the asset operational throughout its useful life.
2. Maintenance costs are exspensed and not capitalized.
(4) Infrastructure.
(a) Infrastructure assets are long-lived capital assets that normally can be preserved for significant greater number of years than most capital assets and that are normally stationary in nature. Examples include roads, bridges, culverts, streetlights, traffic signals, drainage systems, and water systems. Infrastructure assets do not include buildings, drives, parking lots or any office examples given above that are incidental to property or access to the property above.
(b) Generally, infrastructure will not be depreciated. County elects a modified approach to track the general condition of such items of infrastructure. Maintenance/repairs will be considered as necessary to maintain the existing asset, and therefore not capitalized. For example, patching, resurfacing, snow removal, and the like, are considered maintenance activities and will be exspensed. Also, any normal department operating activities such as feasibility studies, a engineering and design, will be exspensed and not capitalized as an element of the asset.
(5) Equipment. Equipment includes all other types of physical property within the scope of the ASM not previously classified. Included within this category are office mechanical equipment, office furniture, appliances, furnishings, machinery items, maintenance equipment, communication equipment, police, fire, sanitation and park department equipment, laboratory equipment, vehicles, road equipment, aircraft, emergency equipment, earth moving equipment, text equipment, civil defense equipment, and data processing equipment. All supplies are excluded.
(F) Depreciation method.
(1) The county will be depreciating capital assets by using the straight-line method. There will be no salvage value. Depreciation will be calculated at year-end. Land is not depreciated. Infrastructure will not be depreciated but will be maintained at existing quality levels as prevail at-the time of this policy implementation, or better, at the discretion of the Board of Commissioners.
(2) Straight-line depreciation: All Assets in the AMS will be depreciated using the straight-line method of depreciation. A gain or loss on disposal will be recorded. Following is a list of the most common useful lives:
Name | Years |
Name | Years |
Vehicles | 5 years |
Office Equipment | 5 years |
Heavy Equipment | 10 years |
Buildings | 40-60 years |
Building Components (HVAC systems, roofing) | 20 years |
Leasehold Improvements | 10 years |
Land Improvements-structure (parking lots, athletic courts and the like) | 25 years |
Land Improvements-ground work (landscaping, fencing) | 25 years |
Outdoor Equipment-(playground equipment, radio towers) | 25 year |
Grounds Equipment-(mowers, tractors, attachments) | 5 years |
Mains | 65 years |
Pump Stations | 45 years |
Structure & Improvements | 45 years |
Pump Equipment | 20 years |
Treatment Equipment | 25 years |
Furniture & Equipment | 12 years |
Other Equipment | 12 years |
Transportation Equipment (total stations, levels, nuclear density, and the like) | 6 years |
Shop & Lab Equipment | 15 years |
Computer Equipment | 5 years |
Communication Equipment | 7 years |
(3) For any item not listed above, contact the Asset Manager to determine the service lift.
(G) Tagging assets.
(1) Generally all assets are tagged. All capitalized and inventoried assets are assigned a number in the AMS, but not all assets are tagged. For example, land is recorded but if not tagged items not needing a tag are:
(a) Buildings (record legal description in asset record);
(b) Land (record legal description in asset record);
(c) Firearms (record serial number in asset record);
(d) And certain other items as determined by the Purchasing Department.
(2) Equipment identification and tags: The Purchasing Department will forward the asset identification tags to the respective departments along with the pending asset form. Upon receipt of these tags, the Department Head or designee will have them attached to the identified equipment.
(3) It will be the responsibility of each department to follow up to ensure that equipment has been assigned to each asset and that it is properly tagged, if required.
(H) Physical inventory.
(1) A physical inventory of capitalized assets is taken to verify that capitalized assets physically located in the department are recorded in the asset accounts. At the same time a physical inventory of inventoried items is taken by all locations to ensure these items have been recorded properly. Inventories will be taken at the direction of the Board of Commissioner but at least once a year.
(2) The Asset Manager will furnish each department with an updated Asset Report for the taking of a physical inventory. If possible, the inventory should not be taken or checked by a person who has custodial responsibility for the assets, nor has responsibility for receiving, checking in, tagging or recording the assets.
(3) Exceptions to or changes to a physical inventory will be noted on the Asset Report and communicated to the Asset Manager by the Department Head, the Department Asset Officer in their designee. Examples would include:
(a) Assets listed on report not found at the location;
(b) Assets at the location not listed on the report;
(c) Missing or incorrect serial number(s);
(d) Missing or incorrect description(s).
(I) Responsibilities of department heads. It is the responsibility of the Department Head to act as or designate a steward for each piece of property for which he or she is responsible. The steward will become the focal point for questions regarding availability, condition, and usage of the asset, as well as the contact during the physical inventory process.
(Ord. 5-2004, passed 7-22-04)