(a) Introduction.
(1) This document sets forth the capital asset accounting policies and procedures manual for the City of Garfield Heights, Ohio. This manual defines "capital assets", present accounting principles, and describes the system and maintenance thereof.
(2) Inadequate capital asset records continue to be one of the major causes of deficiencies in state and local governments' financial statements. Most governments are now subject to annual independent audits as a result of state and local law. The Governmental Accounting Standards Board (GASB) has released Statement No. 34 (GASB 34), which sets forth the guidelines required for reporting capital assets on the City's financial statements. Failure to install and maintain a capital asset management system in accordance with GASB 34 will result in qualifications in the independent auditor's report on the government. A system's inadequacy and resulting auditor's qualification can result in unnecessary confusion by users of the government's financial statements.
(b) Objective.
(1) The objective of the capital asset accounting policies and procedures manual is to facilitate the safeguarding and reporting of the City's capital assets, for the betterment of the City's beneficiaries, the citizens.
(c) Responsibilities.
(1) The Finance Department, in order to comply with the GASB 34 mandated financial reporting requirements (which incorporate capital asset valuation and safeguarding), is responsible for coordinating the property management reporting function of the City.
(2) The Finance Department must work closely with, and have the cooperation of all the departmental administrators in order to accomplish this task.
(3) The Finance Department is responsible for:
- | The implementation, conversation, and maintenance of the City's capital asset policy utilizing the criteria described within this policy and procedures manual. Establishing a beginning capital asset balance, which should be broken down to the function level? Establishing a beginning balance of accumulated depreciation, which should also be broken down to the function level. |
- | A summary of the changes in General capital assets and the Fund capital assets (see "Classification of Capital Assets") during the year by asset type and function. |
- | The design, implementation and perpetuation of an asset management system to effectively utilize and report the City's capital assets, including but not limited to the establishing of edit/input procedures, maintenance of data records, maintenance of appropriate documentation, and ensuring that police reports are on file for all property thefts. |
- | The design, implementation and perpetuation (including alterations thereto) of any and all forms required to ensure the proper registration, classification, and tracking of all City wide capital assets to provide the basis for input into the City's asset management system. |
- | The specific identification of all of the City's capital assets. |
- | The assignment of capital assets to department administrators who then become ultimately responsible for the assigned property. |
- | The directing and monitoring of an annual physical inventory at each location. |
- | Ensuring that an authorized transfer request form is on file for the physical transfer of capital assets. |
- | Ensure that the City has the proper level of asset types and keep excess levels to a minimum. |
- | Coordinate the periodic sale of surplus property and account for the sale according to city, state, and GASB regulations and procedures. |
(4) Department Administrator is responsible for:
A. The department director or administrator shall be responsible for all of the property within their jurisdiction. They may assign the daily maintenance of the departmental fixed assets to a departmental employee but ultimate responsibility for all assets remains under their control, including but not limited to verifying and signing all fixed asset documents that reflect the addition, deletion, or transfer of an asset.
B. The department director, administrator, or departmental designee shall insure all of the following:
- | That all transfer/disposal request forms are processed as required on a timely basis. |
- | That proper reporting of stolen or damaged items is communicated to the property management function of the Police and Finance Department as may be required. |
- | That donated property is properly reported to the property management function of the Finance Department. |
- | That an accurate annual inventory be conducted and reported per the instructions of the property management function of the Finance Department. |
- | They shall maintain the following records for at least 2 years: |
- | Copies of all transfer/disposal request forms. |
- | Copies of annual printouts used in the inventory process. |
C. Whenever a department director, administrator, or fixed asset designee resigns, retires, or otherwise leaves the City, they may be subject to an exit audit of capital assets under their control.
(d) Capital Asset Accounting Procedures Manual.
(1) This procedures manual is designed to implement an asset management system to facilitate:
A. Management control of all fixed and movable property for more effective property accountability and interdepartmental utilization.
B. Reflection of dollar value assets for insurance coverage, proof of loss and replacement of assets.
C. Financial projections of depreciated assets for use in future capital expenditures and to determine the actual cost of a function to the City.
D. Depreciation accounting for certain assets.
E. Asset accountability for increased security of vulnerable equipment.
F. Better space utilization through more efficient relocation and or disposal of surplus equipment.
G. Provide information useful to the City in the following areas:
- | New reporting requirements in state law |
- | Audit compliance |
- | Internal reporting |
- | Asset accounting |
- | Proof of loss/property insurance |
- | Cost recovery for services |
- | Cost control and comparison |
- | Replacement cost accounting |
- | Replacement year estimates |
- | Asset utilization |
- | Maintenance scheduling |
- | Facilities planning |
- | Replacement budgeting |
- | Current value |
- | Reserves |
- | Surplus availability |
- | Purchase analysis |
(e) Definition of Capital Asset.
(1) The City defines a capital asset as tangible property, owned by the City, used in a productive capacity by the City and will benefit the City for a period greater than one year. All capital assets identified by the criteria herein shall be considered capitalized assets in the City's capital asset system and thus reportable for GAAP purposes.
(2) To qualify for inclusion as a capitalized asset in the City's capital asset system, the following five (5) criteria must be observed:
A. The asset must have a cost dollar value over $1,000
B. The asset must have a useful life exceeding one year or more (based on reasonable estimates)
C. The asset must be, but not limited to, land; buildings; improvements other than buildings; vehicles; machinery & equipment; furniture& fixtures; and infrastructure such as roads, sanitary sewer systems, and storm sewer systems.
D. The asset doesn't lose its identity as a part of a larger unit.
E. The asset is not a repair part or supply item.
(3) Purchase made for a group of assets (i.e. computers, chairs, tables, etc…), where the total cost is over the amount needed for capitalization, but the unit cost is less than that needed for capitalization, will be classified as a capital asset in a summary format.
(4) The City has determined that assets having a value under $1,000, regardless of their useful life, will not be capitalized. Assets for which accountability is desired (i.e. audio-visual, computer equipment, etc…), that have a value of less than $1,000 may, at the City's discretion, be entered in the capital asset system for control purposes only for insurance valuation. Assets recorded for control purposes and supportive purposes may or may not be reported on the City's GAAP Financial Statements, however once reported in the City's GAAP Financial Statements an asset should continue to be reported until it is disposed of or retired from the City's capital asset system.
(f) Identification and Tracking.
(1) The City in conforming to GASB standards, defines the required data elements to identify and track capital assets. The City understands that during the conversion process all elements may not be available on assets previously recorded on the capital asset system. All items mentioned below are required for new purchases/transfers/disposals made after the implementation of this Policy:
A. City's Asset Number (assigned through Finance Department)
B. Location of asset (including building, department, floor, room)
C. Acquisition Date (estimated year if unknown)
D. Acquisition Method (purchase, donation, etc.)
E. Actual Cost (estimated if unknown)
F. Source of Funding
G. Description of Asset
H. Asset Model and Serial Number
I. Purchase Order Number (if purchased)
J. Warrant or Check Number (if purchased)
K. Functional Classification of Asset
- | General Government |
- | Security of Persons & Property |
- | Public Health Service |
- | Transportation |
- | Community environment/Development |
- | Basic Utility Services |
- | Leisure Time Activities |
L. Property Type Classification of Asset
- | Land |
- | Buildings |
- | Improvement Other than Buildings |
- | Vehicles |
- | Machinery & Equipment |
- | Furniture & Fixtures |
- | Infrastructure |
- | Roads |
- | Sanitary Sewer Systems |
- | Storm Sewer Systems |
M. Estimated Useful Life
N. Estimated Salvage Value of Asset
O. Accumulated Depreciation (if a transferred asset)
P. Maintenance Agreement Vendor Name and Number (if it exists)
Q. Asset Disposal Date - if applicable
R. Manner of Disposal (auction/sale, trade-in, etc)
S. Gain or loss on Disposal of Asset (calculated by Finance Department)
(g) Acquisition/Valuation.
(1) New assets acquired by the City must be reported immediately to the Finance Department using the prescribed capital asset form. This information should be provided to the Finance Department at the time the asset is received. The Finance Department should review purchase orders to ensure that all capital assets are being reported by the various departments.
(2) All new assets should be recorded at the gross purchase cost of the asset to be put into service by a City department. This may include such items as delivery and installation charges. The City shall use the straight line method of depreciation. The Finance Department along with the purchasing department should together determine the estimated life and salvage value of all capital assets at the time of purchase, based on historical and industrial information, for inclusion in the capital asset system. A full year of annual depreciation will be recorded in the year of acquisition and no depreciation will be recorded in the year of disposal.
(3) If a newly acquired asset involves an exchange or trade-in of another capital asset, the Finance Department must perform a valuation of the old capital asset. Any trade-in or exchange amounts should be clearly identified on the invoice of the newly acquired asset. The new asset should be valued at the purchase price plus any trade-in or exchange amounts identified on the invoice.
(4) Under GASB 34 criteria, gains and losses are recognized on the sale, exchange or trade-in of capital assets. The gain or loss to be identified for an old asset traded or exchanged is the difference between the book value (cost minus depreciation) of the asset and the amount identified on the new asset invoice as the trade-in or exchange amount. In the case of a direct sale of an asset, the gain or loss shall be computed as the difference between the book value (cost minus depreciation) of the asset sold and the actual cash received for the asset.
(h) City Asset Number.
(1) The primary purpose of the City asset number is to maintain a positive identification of assets owned by the City. The City asset number should be affixed to the asset by means of a label. Effective labeling of an asset provides for:
- | An accurate method of identifying individual assets as property of the City |
- | Facilitates the inventory process on a periodic basis |
- | Controlling the location of all physical assets |
- | Assists in maintaining capital assets |
- | A common ground of communication for the asset |
(2) Some Federal Programs (e.g. Title I) may require a separate label; any separate label will be in addition to the City asset label.
(i) Classifying Capital Assets.
(1) The City conforms to GASB guidelines in classifying capital assets. The distinctive nature of governmental financial operations requires capital assets to be accounted for either within the proprietary funds or within the governmental activities. Judiciary funds (i.e. trust funds) rarely maintain capital assets; however, assets must be reported within these funds is applicable.
(2) Under GASB Statement 34 there are three classes of capital assets:
A. General Capital Assets - are those within the governmental activities. There are two classifications of General Capital Assets:
- | Depreciating Capital Assets, Net (capital assets minus depreciation) |
- | Non-Depreciating Capital Assets (Land & Construction in Progress) |
B. Fund Capital Assets - these capital assets are accounted for within the proprietary funds.
C. Infrastructure - are long-lived capital assets that are normally stationary and that can be preserved for a significantly greater number of years than most capital assets. General infrastructure assets are associated with and generally arise from governmental activities and are considered only to have value to the City.
(j) Special Cost Considerations.
(1) Donations. The valuation of these assets should be established based on their fair market value on the date of the gift. If possible a verifiable invoice copy to substantiate value should accompany all donations from related groups. All donations must be submitted to the City for acceptance.
(Ord. 35-2013. Passed 6-10-13.)