(A) Introduction. This manual will be used by the village to maintain the Property Record/Fixed Asset System (PRFAS). The PRFAS consists of two segments: fixed or capital assets and controllable assets. Fixed assets are further categorized as: assets acquired by an enterprise fund; or assets acquired by the governmental funds. The chapters of this manual are separated into the various transactions required to maintain the system. The Finance Director has oversight responsibility for the PRFAS, including the maintenance of reports, the calculation of depreciation and the implementation of a physical inventory. The Department heads are responsible for preparing initial documentation necessary to develop an accurate database of village assets and assisting in physical inventories.
(1) Purpose. The purpose of this manual is to provide policy guidelines and procedures for the inventory, depreciation, disposal and maintenance of all property and assets owned or leased by the village. A property record/fixed asset system is established to detail the procedures to track and account for changes in the village’s assets. An accurate asset inventory provides for: the valuation of assets for insurance and financial statements; the ability to safeguard fixed assets; assistance in budget forecasting; and the implementation of maintenance schedules.
(2) Scope. This manual provides for the inventory of all village-owned or leased assets with a value equal to or in excess of $500 and having a useful life of more than five years, and the capitalization and depreciation of all enterprise fund assets equal to or greater than $500 in value and with a useful life of more than five years, and the capitalization of governmental funds (except infrastructure assets detailed in division (B)(3) below) equal to or greater than $500 in value and with a useful life of more than five years.
(3) Procedure. When acquiring, transferring or disposing of a village-owned or leased asset, review the asset categories to determine if the asset is to be included in the system, select the category (fixed or controllable), and prepare the proper documentation. The finance staff will calculate the depreciation, if applicable, and make the appropriate adjustments to the property record manual.
(B) Asset categories.
(1) Controllable assets. Controllable assets are required to be expensed and included in the inventory of village assets. If the value of an asset or a group of assets (such as folding chairs, desks and the like) is equal to or greater than $500 and has a useful life greater than five years then Form I-Inventory Addition/Deletion/Transfer form should be completed and returned to Finance. Form I-Inventory Addition/Deletion/Transfer form should be prepared when an item is received, retired (discarded, sold, theft) or transferred to another department. Sample controllable assets are: audio/visual equipment, computer software, calculators, minor equipment, microwaves, tools, typewriters and weed trimmers.
(2) Fixed assets. Fixed assets or capital assets are tangible assets with a value equal to or greater than $500 and a useful life in excess of five years. These assets are obtained for the purpose of using for a long time or to enhance the value of a building or land and having a significant value. These assets are not intentionally acquired for resale, nor are they readily convertible to cash. Fixed assets include buildings, machinery and equipment, improvements other than buildings, and land. The capitalization of a fixed asset means that enterprise assets are recorded in the fixed asset account on the balance sheet and governmental fund assets are recorded as investments in fixed assets in the general fixed asset account group. The policy for infrastructure additions or improvements, except those acquired by an enterprise fund, is discussed in division (B)(3) below.
(a) Fixed asset categories and subcategories.
1. Land;
2. Buildings and building improvements;
3. Machinery and equipment:
a. Vehicles;
b. Off-road equipment (backhoes, chipper, front end-loader);
c. Office equipment;
d. Computer equipment all hardware, upgrades and software; and
e. Minor equipment and tools.
4. Improvements other than buildings:
a. Water main improvements; and
b. Other enterprise fund infrastructure improvements.
5. Construction work in progress.
(b) Category descriptions.
1. Land. Includes all land purchased or otherwise acquired by the village. All costs for legal services incidental to the acquisitions and other charges incurred in preparing the land for use should be included in the cost of the land. If land and a building are acquired as a single parcel, the value of the land should be determined separately from the building and only that amount carried in the Land Account.
2. Building and building improvements. The building is valued at purchase price or construction cost. The cost should include all charges applicable to the building, including broker’s or architect’s fees and interest on borrowed money during construction. Additions and improvements to buildings as well as the cost of the heating and ventilating system or other permanently attached fixtures should be added to the Building Account. Improvements enhance the value of the building and cannot be removed from the building without impact to the structure.
3. Machinery and equipment. The Machinery and Equipment Account should consist of property that does not lose its identity when removed from its location and is not changed materially or expended in use. These assets should be recorded at cost, including freight, installation and other charges incurred to place the asset in use.
4. Improvements other than buildings. Values for other improvements can be recorded on a cost-of-construction basis including engineering and other professional fees incidental to the project. Improvements do not include landscaping, grading or movable equipment.
5. Construction work in progress. This category is utilized for a building or other capital construction projects that are incomplete as of the fiscal year end. When the project is complete, the cumulative costs are transferred to another appropriate fixed asset category.
(3) Infrastructure assets. Infrastructure assets acquired will be included in the Fixed Asset Account Group, and included in the inventory of village assets. Infrastructure assets, including roads, bridges, curbs and gutters, and streets and sidewalks shall be capitalized.
(4) Leased assets. All village assets acquired by a capital lease shall be treated as a village owned asset and included in the property record report based on the criteria established in this policy. Typically assets acquired through an operating lease are returned to the lessor at the end of the lease term and are not deemed to be owned by the village.
(C) Acquiring a fixed asset. All fixed assets are acquired in accordance with the village budget and purchasing policy manual. When a fixed asset is acquired the department head shall prepare Form A, Acquisition/Fixed Asset, and remit the form to finance. All costs incurred with making the asset usable should be included as a cost of the asset.
(D) Valuation of assets.
(1) Purchased property shall be valued at cost where historical records are available and at an estimated historical value where no historical records exist.
(2) Donated fixed assets are recorded at appraised fair market value at the time of acquisition. Assets estimated to have a value in excess of $5,000 must be appraised by a person knowledgeable and qualified with respect to that type of asset.
(3) All land or building acquisitions with an estimated value in excess of $5,000 must be appraised by a licensed real estate appraiser.
(4) Assets acquired through leases meeting the capitalization requirements of the FASB’s Statement of Financial Accounting Standards (SPAS) No. 13, Accounting for Leases, should be recorded at the net present value of future minimum lease payments. Typically, these are fixed assets that transfer ownership of the property to the village by the end of the lease term.
(5) Assets acquired by the exercise of eminent domain powers shall be capitalized in the General Fixed Asset Account Group in the amount of compensation awarded the property owner plus legal service costs incidental to the acquisition.
(E) Retirements of fixed assets.
(1) Assets are typically retired for three reasons: obsolescence, sale or trade, and theft or loss. In general, the village’s practice is to exhaust the usefulness of its assets before disposition. However, assets may be sold or traded-in when it is in the best interest of the village to do so.
(2) Property may not be transferred, traded-in or disposed of without prior approval of the department head and the Village Administrator.
(a) A Form R-Retirement should be completed by the department head and a copy sent to finance for all retirements of fixed assets.
(b) Obsolescence is the decrease in the value of fixed assets, resulting from economic, social, technological or legal change.
(c) Assets that are surplus shall be discarded, used for parts, or sold at the end of its useful life but are not intended to be replaced. Form R-Retirement shall be completed when the asset is declared surplus.
(d) Property which is declared as surplus, obsolete or unserviceable should be accompanied by a statement prepared by a person knowledgeable regarding the specific equipment.
(e) Assets that are not unserviceable or obsolete must be sold by competitive sale, negotiated sale or auction. Any other method of retirement of assets with a value equal to or in excess of $500 at the time of disposal shall be approved by the Village Board and assets with a value less than $500 at the time of disposal shall be approved by the Village Administrator.
(f) Assets missing due to theft, loss or destroyed during use shall be reported on Form R-Retirement with an explanation of the circumstances for the loss.
(g) If an item is held in storage all appropriate documentation shall be remitted to Finance.
(F) Transfers and modifications to fixed assets.
(1) Transfer of a fixed asset to another village department must be approved by the Village Administrator and the receiving department head. The receiving department head should prepare Form T-Transfer.
(2) Additions and betterments to village assets should be reported on Form M-Modifications. Additions or betterments to existing fixed assets should significantly prolong a fixed asset’s economic life or expand its usefulness in order to be capitalized. Normal repairs that merely maintain the asset in its present condition should be recorded as an expenditure/expense and not capitalized.
(G) Depreciation of enterprise fund fixed assets.
(1) Depreciation is used to reflect the economic loss in the value of an asset. The method used should reflect the actual occurrence of economical loss as it takes place over the projected life of an asset. Generally Accepted Accounting Principles (GAAP) requires that the method used to allocate the cost of a capital asset over its estimated useful life be as equitable as possible to the periods during which services are obtained from the use of the asset.
(2) In most cases, the straight line method of depreciation will be used for all capitalized assets. However, this policy does not preclude the use of another method of depreciation that can be substantiated as reasonable for specific types of assets. A change in the method of calculating depreciation for assets already placed in service and partially depreciated shall be reviewed by the village audit firm.
(3) The procedure for calculating depreciation in the year of acquisition is the recording of one-half year of the first year’s depreciation. Conversely, one-half of the depreciation expense is recorded in the year of retirement.
(4) The estimated useful lives of fixed assets for the purpose of depreciation are found in schedule MU entitled Estimating Useful Life For Capital Assets.
(H) Physical inventory of controllable and fixed assets.
(1) Inventories are physical reviews and confirmations of the village’s assets. A periodic evaluation of the inventory will ensure the integrity of the amounts in the financial statements, maintain current insurance valuations and assist in loss detection.
(2) Inventories shall be conducted as follows:
(a) Land and buildings every five years;
(b) Improvements other than buildings every five years;
(c) Machinery and equipment every three years; and
(d) Controlled assets every three years.
(I) Accounting for fixed assets.
(1) Investment in general fixed assets. Fixed assets, except infrastructure assets, acquired with funds from general, special revenue or capital projects funds are accounted for in the General Fixed Asset Account Group.
(2) Enterprise fund assets. Assets purchased with funds from an Enterprise Fund (Water/Sewer, Garbage) are accounted for in the specific Enterprise Fund with the proper allocation of depreciation.
(3) Multi-funded assets. Assets purchased with money from two or more separate funds shall be shown as a percentage owned by each fund based on a reasonable method such as percentage of usage or amount of cost contributed.
(4) Source of funds:
(a) General Operating Fund;
(b) Water/Sewer Operating Fund;
(c) Water/Sewer Capital Fund;
(d) Motor Fuel Tax Fund;
(e) Parks Fund;
(f) Capital Construction Fund;
(g) Phase I Fund;
(h) Special Assessment Fund; and
(i) Village Hall Fund.
(J) Interest capitalization for constructed fixed assets. When a government chooses to construct a fixed asset for an enterprise fund, a significant accounting issue that arises is the calculation of interest to be capitalized. Guidance on the capitalization of interest is contained in two FASB pronouncements: SFAS No. 62, Capitalization of Interest Costs in Situations Involving Certain Tax-Exempt Borrowings and Certain Gifts and Grants and SFAS No. 34, Capitalization of Interest Cost.
(K) Reports. Annual reports shall be prepared by the Village Auditor at the end of each fiscal year showing the fixed assets by: class; source of funding; and function and activity. Each year, Finance will update the property record report and prepare the depreciation expense.
(L) Policy. A fixed asset inventory is herein established to ensure compliance with reporting standards and to safeguard village assets. Fixed assets shall include land, buildings, machinery, equipment, vehicles with a useful life of five years or more and having an original cost of at least $500.
(M) Estimating useful life for capital assets (years):
(1) Roadways:
(a) Dirt: 10;
(b) Gravel: 10;
(c) Concrete: 30;
(d) Asphalt: 20; and
(e) Brick/stone: 50.
(2) Sidewalks:
(a) Concrete: 30;
(b) Asphalt: 25; and
(c) Brick/stone: 50.
(3) Parking lots:
(a) Concrete: 35;
(b) Asphalt: 16;
(c) Gravel: 10; and
(d) Brick/stone: 45.
(4) Road signage: 10.
(5) Traffic lights:
(a) Mast arms 20; and
(b) Hung wire: 15.
(6) Street light:
(a) Concrete: 30;
(b) Metal: 20; and
(c) Wood: 15.
(7) Sewer lines:
(a) Concrete: 50;
(b) Brick: 90; and
(c) Metal: 40.
(8) Storm drains:
(a) Plastic: 25;
(b) Cast iron: 30;
(c) Metal corr: 30;
(d) Concrete: 40; and
(e) Ditch/trench: 100.
(9) Alleys:
(a) Concrete: 20;
(b) Asphaltic concrete: 20;
(c) Dirt: 10;
(d) Gravel: 15; and
(e) Brick/stone: 50.
(10) Movable equipment:
(a) Athletic equipment: 10;
(b) Audio visual equipment: 7;
(c) Business machines: 7;
(d) Communication equipment: 10;
(e) Computer software: 5;
(f) Contractors construction equipment: 12;
(g) Computer equipment: 5;
(h) Furniture: 20;
(i) Grounds, ag equipment: 15; and
(j) Lab equipment: 10.
(11) Land improvements:
(a) Fencing: 20;
(b) Landscaping: 10;
(c) Fountains: 20;
(d) Retaining walls: 20;
(e) Bleachers: 20;
(f) Soccer fields: 15; and
(g) Outdoor lighting: 20.
(12) Buildings, components and services:
(a) Permanent structures: 50;
(b) Portable structures: 25;
(c) Excavation: 50;
(d) Foundation: 50;
(e) Frame: 50;
(f) Floor structure: 50;
(g) Floor covering: 15;
(h) Carpeting: 5;
(i) Exterior walls: 50;
(j) Roof cover: 10;
(k) Interior construction: 15;
(l) Interior renovation: 10;
(m) Ceiling finish: 10;
(n) Plumbing: 20;
(o) HVAC: 20;
(p) Electrical: 20;
(q) Fire system: 25;
(r) Elevators: 20;
(s) Law enforce equipment: 10;
(t) Licensed vehicles: 6;
(u) Machinery and tools: 15;
(v) Outdoor recreational equipment: 15;
(w) Custodial equipment: 15; and
(x) Photocopiers: 5.
(N) Forms.
(1) Forms:
(a) Form I-Inventory Addition/Deletion;
(b) Form A-Acquisition of Fixed Assets;
(c) Form M-Modification of Fixed Assets;
(d) Form R-Retirement of Fixed Assets; and
(e) Form T-Transfer of Fixed Assets.
(2) Information required:
(a) Land: by parcel, lot/block/tract/subdivision, location, use, acquisition date and cost. Application of tax exemption received, including improvements such as sewer and water that enhance the value of the land;
(b) Building: Building location, PIN number, building description, date of construction, historical cost, useful life, depreciation method (if enterprise) and purpose of building; and
(c) Machinery and equipment: location, account, building, floor, department, quantity, description, manufacturer, serial number, date acquired, remaining life, historical cost, depreciation method (if enterprise fund).
Village of Elwood
Fixed Asset Inventory
Inventory Addition/Deletion (controllable assets)
Form I
Date: ________________________________
Department: ________________________________
Fund: ________________________________
Addition: ________________________________
Deletion: ________________________________
Land: ____________________________________________________________________
Building and Building Improvement: ___________________________________________
Machinery and Equipment: ___________________________________________
Improvements Other than Building: ___________________________________________
Construction Work in Progress: ___________________________________________
Leased Assets: _________________________________________________________
Account Number: __________________________________________
Description: __________________________________________
Quantity: __________________________________________
Manufacturer: __________________________________________
Model: __________________________________________
Serial Number: __________________________________________
Location: __________________________________________
Original Cost: $ ___________________________
Salvage Value: $ ___________________________
Useful Life: _____________________________ years
________________________________________________________________
Department Head (Print)
________________________________________________________________
Department Head Signature
Village of Elwood
Fixed Asset Inventory
Acquisition of Fixed Assets
Form A
Date: ________________________________
Department: ________________________________
Fund: ________________________________
Addition: ________________________________
Deletion: ________________________________
Land: ____________________________________________________________________
Building and Building Improvement: ___________________________________________
Machinery and Equipment: ___________________________________________
Improvements Other than Building: ___________________________________________
Construction Work in Progress: ___________________________________________
Leased Assets: _________________________________________________________
Account Number: __________________________________________
Description: __________________________________________
Quantity: __________________________________________
Manufacturer: __________________________________________
Model: __________________________________________
Serial Number: __________________________________________
Location: __________________________________________
Original Cost: $ ___________________________
Salvage Value: $ ___________________________
Useful Life: _____________________________ years
________________________________________________________________
Department Head (Print)
________________________________________________________________
Department Head Signature
Village of Elwood
Fixed Asset Inventory
Modification of Fixed Assets
Form M
Date: ________________________________
Department: ________________________________
Fund: ________________________________
Addition: ________________________________
Deletion: ________________________________
Land: ____________________________________________________________________
Building and Building Improvement: ___________________________________________
Machinery and Equipment: ___________________________________________
Improvements Other than Building: ___________________________________________
Construction Work in Progress: ___________________________________________
Leased Assets: _________________________________________________________
Account Number: __________________________________________
Description of Modification: __________________________________________
Quantity: _________________________________________________
Manufacturer: _________________________________________________
Model: _____________________________________________________
Serial Number: __________________________________________
Location: __________________________________________
Modification Cost: $ ___________________________
Salvage Value: $ ___________________________
Useful Life: _____________________________ years
________________________________________________________________
Department Head (Print)
________________________________________________________________
Department Head Signature
Village of Elwood
Fixed Asset Inventory
Retirement of Fixed Assets
Form R
Date: ________________________________
Department: ________________________________
Fund: ________________________________
Addition: ________________________________
Deletion: ________________________________
Land: ____________________________________________________________________
Building and Building Improvement: ___________________________________________
Machinery and Equipment: ___________________________________________
Improvements Other than Building: ___________________________________________
Construction Work in Progress: ___________________________________________
Leased Assets: _________________________________________________________
Account Number: __________________________________________
Description: __________________________________________
Quantity: __________________________________________
Manufacturer: _________________________________________________
Model: _____________________________________________________
Serial Number: __________________________________________
Location: __________________________________________
Original Cost: $ ___________________________
Salvage Value: $ ___________________________
Remaining Useful Life: _____________________________ years
________________________________________________________________
Department Head (Print)
________________________________________________________________
Department Head Signature
Village of Elwood
Fixed Asset Inventory
Transfer of Fixed Assets
Form T
Date: ___________________________________________
Department From: ________________________________________________
Department To: ________________________________________________
Fund: ___________________________________________
Land: ___________________________________________
Building and Building Improvement: _____________________________________________
Machinery & Equipment: _______________________________________________
Improvements Other than Building: ________________________________________
Construction Work in Progress: ____________________________________________
Leased Assets: _____________________________________________________
Account Number: ___________________________________________
Description: ___________________________________________________________
Quantity: ___________________________________________________
Manufacturer: ___________________________________________________________
Model: _______________________________________________________
Serial Number: ________________________________________________
Location From: ________________________________________________
Location To: ________________________________________________
Original Cost: $ __________________________
Salvage Value: $ __________________________
Remaining Useful Life: ____________________ years
______________________________________________________________
Department Head (Print)
______________________________________________________________
Department Head Signature
(Ord. 830, passed 9-20-2006)