(A) Capital asset policy.
(1) General information.
(a) The county adopts a fixed asset policy that is effective January 1, 2004, and will be known as the capital asset policy. This policy is to include fixed assets as well as infrastructure assets. The policy is being put in effect to comply with the provisions of Government Accounting Standards Board Statement Number 34 and the requirements of the State Board of Accounts. All provisions of Government Accounting Standards Board Statement Number 34, except retroactive reporting, will be implemented for fiscal years beginning January 1, 2004. Retroactive reporting of general infrastructure assets will be implemented for fiscal years beginning January 1, 2006, and all infrastructure acquired after Government Accounting Standards Board Statement Number 34 implementation will be reported on a prospective basis. Assets that do not meet the specified threshold will be expensed in the year of purchase. An inventory of fixed assets, excluding land, buildings and infrastructure will be housed within the county’s financial reporting system.
(b) The county is adopting this policy to enhance financial and operational accountability to the citizens of the county and to all other concerned constituents.
(c) The purpose of establishing a capital asset policy is to:
1. Comply with the standards of Government Accounting Standards Board Statement Number 34;
2. Maintain accurate records of all fixed assets that are capitalized, including infrastructure;
3. Increase accuracy and clarity of financial reporting; and
4. To better serve the citizens of the county and the county’s constituents.
(d) This policy will only serve to classify assets, including fixed and infrastructure, for accuracy in financial reporting to the State Board of Accounts.
(2) Definition of capital assets.
(a) CAPITAL ASSETS are to include: land, land improvements, buildings, building improvements, machinery and equipment, vehicles, construction work in progress, easements, works of art, historical treasures and infrastructure. These assets are to have a cost of greater than $5,000. The cost of the asset will include all expenses necessary to make the asset fully operational. Assets acquired through lease purchase agreements that meet these specifications are to be capitalized. This cost will be determined as the present value or discounted value of the future stream of lease payments, and not the total lease. Items that do not meet this determination of capital assets are to be expensed in the year the asset is acquired.
(b) Exceptions:
1. Office equipment, which is custom fit to the needs of a particular office, will be capitalized as a portion of the cost of the building or area in which they are located. All other office supplies and equipment will be capitalized if it meets the specified requirements for capitalization; and
2. Inexhaustible assets such as land, improvements, artwork, statues and the like will be reported at cost.
(3) Classification of capital assets.
(a) Capital assets are to include any item that falls into one of the following categories: land, land improvements, buildings, building improvements, machinery and equipment, construction work in progress, vehicles, easements, works of art and historical treasures.
(b) These categories of capital assets are to be defined as follows:
1. Land. Consists of all lots, parcels, rights-of-way, easements, parks, police and fire stations and acreage owned by the county. This is to include all bodies of water and natural vegetation, which is growing on these properties.
2. Land improvements. Includes such items as retaining walls, driveways, landscaping, parking areas, sprinkler systems, fencing and other items that add value to or may be considered an improvement in making the land ready for its intended use.
3. Buildings. Includes all structures erected by the county for the purpose of conducting business, providing service, or facilitating work to the citizens of the county. This includes all fixtures and systems within the building, as well as specifically designed equipment. This may also include all porches, balconies, canopies, flagpoles, stairwells, fire escapes, patios, decks and any other attachments that add to the value of the building.
4. Building improvements. Items which extend the useful life of the building are to be capitalized, including remodeling, roofing projects, energy conservation projects and the like. These items are to be inventoried including: project description, year completed, funding source and dollar amount.
5. Machinery and equipment. Includes furniture and machinery and equipment. This may include items such as office equipment, furnishings, appliances, earth moving equipment, construction equipment, communication equipment, maintenance equipment, supplies and the like. Items that do not individually meet the established threshold of $5,000 may be aggregated for capitalization purposes. This may include computers, library books and the like.
6. Vehicles. Vehicles will be inventoried.
7. Easements. An easement is a specific land interest held by the county that entitles it to a specific use or right to the land. Since an easement is a right to use, they will not be reported in the financial statements unless they are owned by the county.
8. Works of art and historical treasures. These items are to be recorded at historical cost.
(4) Valuation of capital assets.
(a) All fixed assets will be valued at the unit or system level. If these costs exceed $5,000, they will be capitalized.
1. Any expense pertaining to the cost of making the asset operational may be included in this cost.
2. This may 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; and
g. Transportation charges.
(b) Capital assets are to be recorded at actual cost, which includes all expenses to make the asset fully operational. If no cost is available, replacement cost or a historic cost index may be used.
(c) Fixed assets will be capitalized when they exceed the sum of $5,000.
(5) Physical inventory and reconciliation policy. All capital assets will be inventoried every year. A physical inventory will be the responsibility of each department head to account for all capital assets at year-end, as well as inventory items that are simply tracked and inventoried. The physical inventory will include the following items: asset description, year of acquisition, method of acquisition, funding source, cost or estimate cost and salvage value. This information will be housed and updated in the county’s financial reporting system.
(6) Capital asset acquisition and obsolescence. Any newly acquired assets with a value of $5,000 or more are to be reported on the asset form prescribed by the County Auditor’s office. Any assets with a value of less than $5,000 which is no longer in use will be stricken from the printouts provided to each office. Both reports adding assets and removing assets are due in the Auditor’s office by the first Friday in January of each year.
(7) Capital assets disposition and transfer.
(a) A distinction will be made by the Commissioners as to whether the action is a betterment or a replacement. A betterment adds to or extends the useful life of the asset. These costs are to be added to the current carrying cost of the asset. A replacement requires that the asset be removed from the books and a new asset be recorded at cost.
(b) Some situations may be considered to be part betterment and part replacement. This requires determining the distribution of betterment and replacement. Once the distribution is determined, the respective portions should be handled in the usual manner for a replacement or betterment. In situations where assets are traded, the asset is to be removed from the books. If only one part of the asset is being disposed of, that asset must be removed from the books using a pro-rata share of the cost.
(B) Infrastructure assets.
(1) Method of obtaining cost. All infrastructure assets are to be reported at cost. Cost may include all costs necessary to make the asset fully operational.
(a) These costs may include:
1. Legal and title fees, closing costs;
2. Appraisal and negotiation fees, surveying fees;
3. Damage payments;
4. Land preparation costs, demolition cost;
5. Architect, engineering and accounting fees;
6. Insurance premiums during construction; and
7. Transportation charges.
(b) All infrastructure exceeding $5,000 will be inventoried.
(2) Implementation date and plan for retroactive reporting.
(a) All provisions of Government Accounting Standards Board Statement Number 34, except retroactive reporting is to occur for the fiscal year January 1, 2004. Retroactive reporting is not required until fiscal years beginning January 1, 2006.
(b) Retroactive reporting will require obtaining historic cost of all major infrastructure assets that were acquired before Government Accounting Standards Board Statement Number 34 implementation and after January 1, 1981. These costs may include all cost necessary to make the asset fully operational.
(c) For infrastructure assets where no historic cost is available, a cost index or replacement cost may be used. It is not sufficient to use assessment cost for the purpose of retroactive reporting.
(3) Infrastructure record keeping requirements.
(a) The County Highway Department will be responsible for recording values of all infrastructure assets in excess of $5,000.
(b) These new reporting requirements are mandated by the Government Accounting Standards Board and are intended to enhance financial and operational accountability to the citizens of the county and all concerned constituents.
(C) Reporting of capital assets.
(1) Definitions. For the purpose of this section, the following definitions shall apply unless the context clearly indicates or requires a different meaning.
BUILDINGS. Buildings are structures designed to house personnel or equipment. A department will capitalize buildings at full cost with no subcategories for tracking attachments such as roofs, heating, cooling, plumbing, lighting, sprinkling systems, or any part of the basic building. Each department will include the cost of items designed or purchased exclusively for the building.
(a) A department's new building will be capitalized only if it meets both of the following conditions:
1. The total cost exceeds $5,000; and
2. The useful life is greater than two years.
(b) A department improving or renovating an existing building will capitalize the cost only if the results meet the following conditions:
1. The total cost meets or exceeds $5,000; and
2. The useful life is extended two or more years.
(c) A department will record donated buildings at fair market value on the known or estimated date of transfer with any associated costs. Building purchases made using federal or state funding will follow the source funding policies and above procedures.
CAPITAL OUTLAYS. Expenditures which benefit both the current and future fiscal periods. This includes costs of acquiring land or structures; construction or improvements of buildings, structures or other fixed assets; infrastructure, machinery and equipment having an appreciable and calculable period of usefulness. These are expenditures resulting in the acquisition of or addition to the government's general fixed assets.
CONSTRUCTION IN PROGRESS. Assets included under this item type are those buildings or improvements other than buildings that are not completed at the end of a fiscal year. These assets will be included with noted payments and dates, including change orders for all services and materials necessary for the preparation of the building or improvement other than building for its intended purpose.
(a) The county will capitalize construction m progress if the results meet the following conditions:
1. The total cost exceeds $5,000; and
2. The asset's useful life is extended two or more years.
FIXED ASSET. Tangible assets of a durable nature employed in the operating activities of the unit and that are relatively permanent and are needed for the production and sale of goods or services are termed property, plant and equipment or fixed assets. These assets are not held for sale in the ordinary course of business. This broad group is usually separated into classes according to the physical characteristics of the items ( e.g. land, buildings, improvements other than buildings, machinery and equipment, furniture and fixtures).
HISTORICAL COST. The cash equivalent price exchanged for goods or services at the date of acquisition. Land, buildings, equipment, improvements other than buildings and construction in progress are common examples of assets recognized under the historical cost attribute.
IMPROVEMENTS OTHER THAN BUILDINGS. Improvements to land for better enjoyment. Assets that are attached or not easily removed, and with a life expectancy of more than two years. Examples are walks, fencing, retaining walls, pools, outside fountains, planters, underground sprinkling systems and other related items. The county will capitalize new improvements other than buildings or renovations to existing improvements other than buildings if the results meet the following
conditions:
(a) The total cost exceeds $5,000; and
(b) The asset's useful life is extended two or more years.
INFRASTRUCTURE. Roads, bridges and culverts. The county is not required to capitalize roads, bridges and culverts retroactively prior to fiscal year 2009 but will capitalize roads, bridges and culverts acquired during and following fiscal year 2009. The known or estimated historical costs of infrastructures will be included infrastructures that are accepted from subdivision developers or acquired
from other donations shall be included at the known or estimated cost at the time of receipt of the infrastructure.
LAND. The county will capitalize all land purchases, regardless of cost. Original cost of land will include the full value given to the seller, relocations, legal services incidental to the purchase (including title work and opinion) appraisal and negotiation fees, surveying and costs for preparing the land for its intended purpose (including contractors and or county workers [ salary and benefits]), such as demolishing buildings, excavating, clean up and inspections. A department will record donated land at fair market value on the date of transfer plus associated costs. Purchases made using federal or state funding will follow the source funding policies and above procedures.
MACHINERY AND EQUIPMENT. An apparatus, tool, or conglomerate of components to form a tool. The tool will stand alone and not become a part of a basic structure or building. The county will capitalize items with an individual value equal to or greater than $5,000. Machinery combined with other machinery to form one unit with a total value equal to or greater than the above-mentioned limit will be included as one unit. Shipping charges, consultant fees, and any other costs directly associated with the purchase, delivery, or set up, (including contractors and/or county workers [salary and benefits], which make such equipment operable for its intended purpose will be capitalized. Improvements or renovations to existing machinery and equipment will be capitalized only if the result of the change meets all the following conditions:
(a) Total cost is $5,000 or more; and
(b) The useful life is extended by two or more years.
A department will record donated machinery and equipment at fair market value on the known or estimated date of transfer with any associated costs. Purchases made using federal or state funding will follow the source funding policies and above procedures.
TANGIBLE ASSETS. Assets that can be observed by one or more of the physical senses. They may be seen and touched and, in some environments, heard and smelled.
(2) Recording and accounting. The county and its various departments shall classify capital expenditures as capital outlays within the fund from which the expenditure was made in accordance with the Chart of Accounts of the county's Accounting Manual. The cost of property, plant and equipment includes all expenditures necessary to put the asset into position and ready for use. For purposes of recording fixed assets of the county and its departments, the valuation of assets shall be based on historical cost or by estimation of such costs if historical cost is unknown.
(3) Safeguarding assets. Accounting controls shall be designed and implemented to provide reasonable assurance that:
(a) Capital expenditures made by the county and its various departments shall be in accordance with the Board of Commissioners' authorization as documented in the minutes.
(b) Transactions of the utilities shall be recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles.
(c) Adequate detailed records shall be maintained to assure accountability for county owned assets.
(d) Access to assets shall be permitted in accordance with Board of Commissioners' authorization.
(e) That recorded accountability for assets shall be compared with existing assets as least annually and appropriate action be taken regarding any differences.
(Ord. 04-13, passed 11-22-2004; Ord. 2019-10, passed 11-14-2019)