The fixed asset policy of the city contained in this section is hereby adopted. The city shall implement such fixed asset policy and comply with its requirements until such time as said policy is amended, rescinded, or updated.
A. Purpose: The purpose of this section is to provide guidance for the control and accountability of fixed assets, and the collection and maintenance of the information needed in the preparation of financial statements. The city fixed asset policy is herein established to safeguard city assets and to ensure compliance with GASB34 for governmental financial reporting.
B. Overview:
1. This section is established to safeguard and address the city's investment in property, which represents a significant resource. This section is meant to ensure compliance with various accounting and financial reporting standards including generally accepted accounting principles (GAAP), and governmental accounting, auditing, and financial reporting (GAAFR).
2. Further, this section is meant to reflect the city's desire to meet the reporting requirements set forth in the governmental accounting standards board (GASB) statement no. 34 (which is effective for fiscal year ending April 30, 2005). Specifically, the GASB statement no. 34 states that governments should provide additional disclosures in their summary of significant accounting policies including the policy for capitalizing assets and for estimating the useful lives of those assets, which is used to calculate the depreciation expense. The statement also requires disclosure of major classes of assets, beginning and end of year balances, capital acquisition, sales/dispositions, and current period depreciation expense.
C. Inventory, Valuation, Capitalization And Depreciation:
1. Inventory:
a. Responsibility for control of fixed assets rests with the operating department wherein the asset is located. The city administrator shall ensure that such control is maintained by establishing an inclusive fixed asset inventory schedule. Asset acquisitions that fall below the capitalization threshold will not be included in the fixed asset inventory.
b. Each department will be responsible for control of fixed assets for its department. The department head shall ensure that such control is maintained by establishing a fixed asset inventory schedule. The inventory schedule will include the following for each asset:
(1) A description of the asset including the serial number and model number.
(2) Asset classification (land and land improvements, building and building improvements, vehicles, machinery and equipment, or infrastructure assets).
(3) Department name and physical location of asset.
(4) Date asset was purchased/acquired and/or disposed.
(5) Method of acquisition (purchased or donated).
(6) Cost of asset.
(7) Estimated useful life.
c. The inventory schedule will be maintained, updated, and reviewed by the department head and provided to the city administrator on an ongoing basis. (Ord. 2005-O-19, 4-6-2005)
2. Capitalizing:
a. When To Capitalize Assets: Assets are capitalized at the time of acquisition. To be considered a capital asset for financial reporting purposes, an item must be at or above the capitalization threshold (see the fixed asset schedule, subsection D of this section) and have a useful life of at least one year.
b. When Not To Capitalize Assets: Capital assets that are below the capitalization threshold on a unit basis but have value and warrant "control" are not capitalized. These assets shall be inventoried at the department level and an appropriate list maintained by the owning department.
c. Criteria: Capital assets should be capitalized if they meet the following criteria:
(1) The asset is tangible.
(2) The asset has a useful life of more than one year (the benefit exists for more than a single fiscal period).
(3) Cost exceeds the designated threshold.
d. Classes Of Assets: Capital assets include the following major classes of assets:
(1) Land And Land Improvements: Capitalized value is to include the purchase price, plus costs such as legal fees and filing fees. Improvements are classified as items such as parking lots, fences, pedestrian bridges, and landscaping.
(2) Building And Building Improvements: Costs include purchase price, plus costs such as legal fees and filing fees. Improvements include structures and all other property permanently attached to or are an integral part of the structure. These costs include building systems such as roofing, electrical/plumbing, carpeting, and HVAC.
(3) Vehicles: Costs include purchase price, plus costs such as title and registration or other necessary equipment installed on the vehicle.
(4) Machinery And Equipment: Assets included in this category are heavy equipment, operating or control systems, pumps, valves, and generators. Office equipment is classified as nonexpendable items such as a phone system or kitchen equipment.
(5) Infrastructure Assets: Infrastructure assets are long lived capital assets that are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Included in this category are roads/streets, curbs, sidewalks, water systems, water tanks, water towers, and sewer and drainage systems.
3. Depreciation:
a. Depreciation will be computed using a straight line method with depreciation computed on a monthly basis from the month of acquisition. Additions and improvements will only be capitalized if the cost either enhances the asset's functionality or extends the asset's useful life. As such, the following costs for improvements are expensed as opposed to being capitalized:
(1) Road resurfacing or sealing.
(2) Sidewalk or curb patching.
(3) Realignment of sewer lines.
(4) Manhole restorations.
(5) Water main repairs.
b. Projects in process will be added to the asset base as the projected expenses are incurred. However, the project first needs to meet its individual threshold ($50,000.00 for building projects, $150,000.00 for infrastructure projects).
c. Annexations (related land, rights of way, and infrastructure including roads, water system, and sanitary and storm sewers) will be added to the asset base in total on the date the annexation is accepted by the city (via council action). Upon completion, the appropriate documentation will be prepared and the component value of the annexation added to the books. In some cases, parks may be added to the asset base before the rest of the annexation. (Ord. 2005-O-19, 4-6-2005; amd. 2009 Code)
D. Schedule Of Fixed Assets:
Useful Life (Years) | Capitalization Threshold (Dollars) | Inventory Threshold (Dollars) |
Useful Life (Years) | Capitalization Threshold (Dollars) | Inventory Threshold (Dollars) | |
Land (and inexhaustible land improvements) | n/a | 1 | 1 |
Land improvements (exhaustible) | 10,000 | 1 | |
Structures | |||
Parking lots | 20 | ||
Fences | 15 | ||
Groundwork (landscaping) | 20 | ||
Buildings | 50,000 | 1 | |
Buildings | 50 | ||
Building systems | 50,000 | 1 | |
Roofing | 25 | ||
Electrical/plumbing | 50 | ||
Carpet | 10 | ||
HVAC | 20 | ||
Vehicles | 10,000 | 1 | |
Police | 5 | ||
Fire | 8 | ||
Public works | |||
Small trucks | 8 | ||
Large trucks | 10 | ||
Machinery and equipment | 10,000 | 1,000 | |
Police | |||
Communications | 5 | ||
Fire | |||
Communications | |||
Public works | |||
Heavy equipment | |||
Maintenance equipment | |||
Computers | 4 | 10,000 | 1 |
Furniture and fixtures | 10,000 | 5,000 | |
Office furniture | 20 | ||
Office equipment | 5 | ||
Phone system | 10 | ||
Kitchen equipment | 10 | ||
Infrastructure | 150,000 | 50,000 | |
Roads/streets | 20 | ||
Sidewalks | |||
Streetlights | |||
Water and sewer systems | |||
Lift station | 40 | ||
Water tower | 50 | ||
Water/sewer mains | 50 | ||
E. Removing Fixed Assets From Inventory: Fixed assets are to be removed from inventory once they are obsolete or claimed to be surplus property. The item must be removed from the department inventory listing and reported by the department head to the city administrator in order to update the inventory listing.
F. Donations Or Transfer: Each department head will add additions and deletions from donated or transferred assets to the inventory listing.
G. Surplus Property: Each department head will report all fixed assets classified as surplus to the city administrator. The city will have a negotiated sale, auction, or sealed bid as needed to sell the surplus property.
H. Lost Or Stolen Property: When suspected or known losses of inventoried assets occur, the department owning the lost asset should conduct a search for the missing property. The search should include the possibility that the property was transferred to another department, placed in storage, scrapped, and/or removed as surplus property. If the missing property is not found, the department head must notify the city administrator of the lost property. (Ord. 2005-O-19, 4-6-2005)