(a) Purpose.
(1) Based upon the identified purposes of the fixed asset system, management decisions on certain major issues must be documented if the fixed asset system is to be properly established and maintained. This documentation informs employees and other interested parties of management’s expectations and financial standing.
(2) The City of New Carlisle shall maintain a fixed asset accounting system which will incorporate sufficient information to enable the City to prepare financial statements in accordance with generally accepted accounting principles. This system, supplemented by other existing systems, shall allow the City to maintain adequate control, reporting and accountability over all governmental and proprietary fixed assets.
(3) The Finance Department is ultimately responsible for the maintenance and upkeep of the fixed asset accounting system. All departments will be responsible to report to and cooperate with the Finance Department Office to insure compliance with all fixed asset policies established.
(4) Fixed assets are defined as those tangible assets of the City with an estimated useful life in excess of one year and an individual initial cost of five thousand dollars ($5,000) or greater.
(5) For purposes of management control, each department head has the option to include all fixed assets. However, those assets with a value of less than five thousand dollars ($5,000) will not be included for financial reporting purposes.
(6) For purposes of financial reporting on a GAAP basis, only fixed assets valued at five thousand dollars ($5,000) or more will be reported.
(b) Fixed Asset Classifications.
(1) Land: Includes land and land improvements on a property site such as paving, fences, landscaping, etc.
(2) Buildings: Includes all buildings (or structures which serve as buildings, such as permanently established trailers).
A. Permanently attached fixtures installed during construction are considered a part of the building.
B. The subsequent addition of equipment will be recorded as machinery and equipment.
C. Major improvements, such as additions to building, are capitalized.
(3) Improvements other than buildings: Includes improvements such as park facilities, parking lots, baseball fields, tennis courts, swimming pools and infrastructure associated with City owned utilities (water and sanitary sewers).
(4) Equipment and fixtures: Includes most other items which do not qualify for classification in the other categories.
A. All stationary and movable equipment (excluding vehicles) including office machines, machine tools, desks, chairs, display counters, kitchen equipment, computer equipment, phone systems and the like, which meet the established cost criteria and have a useful life in excess of one year, fall in this group.
(5) Vehicles: Includes all licensed cars, vans, trucks, tankers, trailers and other motor vehicles owned by the City.
A. Ordinary repairs to these vehicles should not be capitalized unless the resulting carrying amount increases the recoverable value of the vehicle to a value above what is recorded in the fixed asset accounting system.
B. Non-licensed vehicles includes tractors, mowers, backhoes, graders, rollers, etc.
(6) Construction in progress: Represents the accumulation of capitalized labor, material, equipment, overhead costs and other ancillary costs (i.e., legal and title fees, surveying fees, appraisal and negotiation fees, damage payments, site preparation costs and demolition costs) relating to a fixed asset which is not completed as of a given point in time.
A. This includes all partially completed projects except general fixed asset infrastructure such as roads, bridges sidewalks, storm sewers, etc.
B. Buildings of various types will be the main component in this area.
C. Upon completion, these assets are transferred to one of the other fixed asset classifications.
(c) Gathering of Data.
(1) In order to ensure that all the reporting requirements under generally accepted accounting principles are being met, each department which has responsibility for purchasing, maintaining and/or disposing of fixed assets is required to gather the following data regarding each fixed asset acquisition, transfer or disposal:
A. Description of asset;
B. Location of asset;
C. Identification code of asset (i.e., serial number, parcel number, inventory tag number);
D. Applicable fund number used to acquire the asset;
E. Applicable department number which maintains the asset;
F. Purchase date of the asset (date placed in service if the date of purchase or receipt is not determinable);
G. Cost of the asset;
H. Useful life of the asset and its salvage value (if depreciable);
I. Depreciation records of the asset (if depreciable); and
J. Improvements performed on the asset.
(2) The information requirements for categories above are discussed in detail below.
A. Description of asset: A brief general description of the asset which distinguishes it from similar assets. If item is a land purchase, it should be the legal description of the property. This description should also include the asset's financial statement classification (land, building, improvements, etc.).
B. Location of asset: A brief general description of the asset's location. This could include the building, room number and desk for a computer, a parcel number or an address for building. The description should unmistakably distinguish the asset from similar assets.
C. Identification code of the asset: This would be the serial number for a computer or car; a parcel number for land; an address or assigned building number for a building; an inventory tag number for fixtures or any other “tagged” item.
1. It should also unmistakably distinguish the asset from other similar assets.
D. Applicable fund number: This should be the fund number for the department that acquired the applicable asset.
E. Applicable department number: This should be the department number for the department which maintains the applicable asset.
F. Purchase date of asset: This would be the actual date the asset was acquired.
1. In certain cases, an actual date is not determinable. For instance, a building may be under construction or material improvements to a sewer plant are under way; in these instances, the purchase date should be the date the asset was received or placed in service, or the completion date of the project.
G. Cost of the asset: This would be the actual purchase cost to acquire or construct the asset.
1. Proper accounting for general fixed assets requires the capitalization of appropriate costs and all related charges.
2. The Fixed Asset Manual for Ohio Local Governments provides other detailed examples and descriptions of which costs are considered capitalizable in the above circumstances.
3. There are instances where assets are acquired by gift or for a nominal closing fee.
4. In these instances, the assets should be recorded on the City’s books at their fair market value as valued by independent appraisal as of the date of gift, closing or purchase.
5. In cases where no cost information is available, it will be necessary to estimate the historical cost by using current appraised values (or insurance replacement costs) and “indexing” these values back to the date of purchase based upon U.S. Government Consumer Price Indexes.
6. Other estimating procedures can be used as long as their assumptions are reasonable.
H. Useful life of assets and salvage values:
1. Depreciation will not be taken on general fixed assets.
2. Fixed assets acquired and used by proprietary funds will be depreciated over their useful life on a straight-line basis.
3. In the year of acquisition a half year of depreciation is recorded and a half year of depreciation is recorded in the year of disposal.
4. It is the policy of the City to exhaust the usefulness of a fixed asset before its disposition, therefore, salvage value on all assets is considered to be insignificant and is generally exceeded by the cost of disposition.
5. Should the occasion arise where an asset is disposed of prior to the exhaustion of its useful life and since the book value is determined by the cost of the asset spread over its useful life less salvage value, appropriate adjustments will be made to account for the proper gain or loss on the sale of the asset at the time of disposition.
I. Improvements performed on the assets: As discussed, certain improvements made to an asset require capitalization.
1. These should be tracked along with records of the original cost of a fixed asset.
2. For example, assume a ten thousand dollar ($10,000) addition was made on a fifty thousand dollar ($50,000) building.
a. When a file is pulled on the building, both the original cost and the cost of the addition should be reflected in the same file.
3. In addition to the above, there are instances where assets which are leased can be considered a “fixed asset” for financial reporting purposes only.
a. There are four criteria used to make this determination.
b. If a given department has a lease which is for a period nearly the length of an asset’s estimated useful life or the lease has a bargain purchase option at the end of the lease.
c. Contact the Finance Office regarding whether the lease needs to be recorded as a fixed asset for reporting purposes.
(d) Establishing Asset Values.
(1) There are several methods which can be used to place a value on a City owned fixed asset. The current methods used are:
A. Actual cost;
B. Replacement cost;
C. Fair market value;
D. Historical cost;
E. Like item cost.
(2) The following is a brief description of each:
A. Actual cost: This method will be used to eventually establish most values on City assets as they are replaced.
1. The cost of the asset is obtained directly from the invoice or purchase order.
B. Replacement cost: Some assets belonging to the City are old enough that no record of value has been kept or can be found.
1. In such a case as this, the cost of what it would take to replace the old asset with a new, similar item is used.
2. This comes from a recent purchase order, a supply catalog, or an area vendor.
C. Fair market value: This method is used to an extent on vehicles.
1. Any vehicles in the City’s possession that were not newly purchased or their purchase cost had not been recorded were priced according to the used car blue book value.
D. Historical cost: Buildings, land and improvements are best valued by this process.
1. County real estate was researched; a value established and then applied to the Consumer Price Index with a 1967 being 1.
2. Costs of construction, materials and etc. are kept in the Clark County Real Estate Department records.
E. Like item cost: If a value is accurately established for an older item, then this value may be used for any other older items of a similar nature if all other methods have failed.
1. It is the least accurate of the pricing methods and is only used as a last resort.
(3) Annually the City will conduct a complete inventory of all assets to ensure that the inventory of fixed assets is both complete and accurate.
A. All departments will be given a print out from the Finance Office of the previous year’s listing.
B. Each asset will be physically checked for existence, location, and condition. Any differences will need to be properly reconciled and corrected.
(e) Tagging of Fixed Assets.
(1) No purchase, transfer or disposal of capital assets should be made without proper department authorization.
(2) Accurate records of all transactions should be maintained of the cost and accumulated depreciation of property, plant and equipment.
(3) All fixed assets will be assigned a unique fixed asset number that will not be changed during the time that the asset is the property of the City of New Carlisle.
(4) After an asset is disposed, the fixed asset number will not be reassigned to a newly acquired fixed asset.
(5) All fixed assets with the exception of the following categories should be physically tagged with a permanent tag provided by the City:
A. Land;
B. Land improvements;
C. Buildings;
D. Live animals;
E. Vegetation;
F. Equipment of a sensitive nature, in cases where the tag might impair the functional ability of the asset;
G. Works of art;
H. Any other fixed assets on which it is physically impossible to affix the tag.
(6) There may be cases in which a tag cannot be affixed to the fixed asset; however, the fixed asset number can be either marked or imprinted on the asset.
A. This should be done whenever possible.
B. The tag or marking should be in readily visible area.
C. The property number on the tag and location of the asset should be recorded in a detailed fixed asset ledger.
1. This ledger should always be kept accurately at all times.
(f) Disposal/Transfer of a Fixed Asset.
(1) Disposal/transfer of a capital asset should occur only after proper authorization has been given.
(2) Control over the disposition or transfer of property should be maintained not only to preserve the accuracy of the records but also to ensure that assets are safeguarded, improper disposal or transfer is avoided, and the best possible terms are received if disposed.
(3) The following procedure should be followed for each.
A. No item of property, plant and equipment should be removed from the premises without a properly approved form.
B. A form should be completed and reviewed by a responsible employee who is knowledgeable and not directly responsible for the asset.
C. When the disposal is via a trade-in of a similar asset, the acquired asset should be recorded at the book value of the trade-in asset plus any additional cash paid.
1. In no instance should cost exceed the fair market value for the new asset.
D. In the case of a transfer, both departments should fill out and sign the transfer form showing asset leaving or arriving in each department.
(Ord. 19-47. Passed 12-16-19; Ord. 2022-29. Passed 8-1-22.)