(a) Statement of Purpose.
(1) This policy is established to conform to the GASB 34 accounting requirements to establish management and control procedures for the acquisition, disposition and the safeguards of capital assets or tangible property, whether at the individual asset level or as a network, belonging to or in the care of the Borough of White Oak.
(2) The primary responsibility to coordinate the compilation and preparation of all information necessary to implement this policy is delegated to the Treasurer or authorized agent, under the supervision of the Borough Manager. The Treasurer or authorized agent shall coordinate efforts among the Public Works, Police, Recreation, Administrative Department heads and any other staff necessary to acquire the information.
(3) The Treasurer or authorized agent shall be responsible for implementation of the necessary procedures to establish and maintain a fixed asset inventory, including depreciation schedules. Depreciation shall be computed on a straight-line basis over the useful lives of the assets using an averaging convention. Normal maintenance and repairs shall be charged as an expense as incurred; major renewals and betterments that materially extend the life or increase the value of the asset shall be capitalized. The basis for depreciation, including groups of assets and useful lives shall be done in writing and submitted for review to the Council, Borough Manager and the Independent Auditor.
(4) The required Management’s Discussion and Analysis (MD&A) [letter] shall be prepared by the Borough Manager. The MD&A shall be in the form required by GASB Statement Number 34 and shall be submitted to the Council for approval prior to publication. The auditor(s) shall review the MD&A in accordance with SAS No. 52, “Required Supplementary Information”.
(b) Capital Assets.
(1) A capital asset is real or personal property that has a cost equal to or greater than an established capitalization threshold and has an estimated useful life extending beyond one (1) year. Effective January 1, 2004, the Borough of White Oak reports capital assets with an estimated useful life of more than one (1) year and a total cost as listed on the appropriate “Capitalization Threshold Schedule”. Individual assets that cost less than the value set in “Capitalization Threshold Schedule”, but operate as part of a Network System will be capitalized in the aggregate. The Borough will continue to track and inventory all capital purchases for insurance purposes in accordance with the “Capitalization Threshold Schedule”.
(2) The following categories of capital assets shall apply: Infrastructure; Land; Building and Building Improvements; Improvements Other Than Building; Machinery, Equipment and Vehicles; Construction Work in Progress. The capitalization threshold for each category is as follows:
Capitalization Threshold | |
Capital Asset Category | Capitalization Threshold |
Infrastructure | $2,500 |
Land | Capitalize All |
Building and Building Improvements | $2,500 |
Improvements Other Than Building | $2,500 |
Machinery, Equipment and Vehicles | $1,500 |
Construction Work in Progress | Accumulate all costs and capitalize if over $2,500 when completed. |
(c) Reporting Capital Assets.
(1) Capital assets shall be recorded at historical cost and include ancillary charges necessary to place the asset into its intended location and condition for use. Donated capital assets should be reported at their estimated fair value at the time of acquisition plus ancillary charges, if any.
(2) Any improvements made to a capital asset that extends the useful life of the asset beyond one (1) year should be capitalized.
(d) Depreciating Capital Assets. Capital assets shall be depreciated over their estimated useful lives unless they are: inexhaustible (land improvements, certain works of art and historical treasures) or construction in progress. Straight-line depreciation shall be used for calculating deprecation.
Suggested useful lives (developed from Governmental Accounting Focus article by Paul E. Gruenwald, American Appraisal Associates).
INFRASTRUCTURE: | |||
ROADWAYS: | PARKING LOTS: | ||
Subject to weather conditions: | Concrete | 35 yrs | |
Dirt | 10 yrs | Asphalt | 15 yrs |
Gravel | 15 yrs | Gravel | 10 yrs |
Soil Cement | 20 yrs | Brick or Stone | 45 yrs |
Asphaltic Concrete | 20 yrs | ||
Concrete | 30 yrs | TRAFFIC/PEDESTRIAN SIGNALS: | |
Brick or Stone | 50 yrs | Mast Arms | 20 yrs |
Hung Wire | 15 yrs | ||
SIDEWALKS: | Stop Lights | 10 yrs | |
Concrete | 35 yrs | ||
Asphalt | 25 yrs | BIKE/JOGGING/WALKING PATHS: | |
Brick or Stone | 50 yrs | Dirt | 10 yrs |
Gravel | 15 yrs | ||
STORM/SANITARY DRAINS: | Concrete | 30 yrs | |
Plastic | 50 yrs | Asphalt | 20 yrs |
Cast Iron | 30 yrs | Composite Rubber | 7 yrs |
Metal Corrugated | 30 yrs | Brick or Stone | 50 yrs |
Concrete | 40 yrs | ||
Ditch/Trench | 100 yrs | ||
NON-INFRASTRUCTURE: | |||
Athletic Equipment | 10 yrs | Small and Large Dump Truck, Bobcat | 8 yrs |
Appliances/Food Service Equipment | 10 yrs | Heavy Construction Equipment | 10 yrs |
Business Machines | 7 yrs | Chipper and Leaf Equipment | 8 yrs |
Communication Equipment | 10 yrs | Grounds Equipment | 10 yrs |
Computer Software | 5 yrs | Machinery and Tools | 15 yrs |
Contractors/Construction Equipment | 12 yrs | Outdoor Recreation Equipment | 15 yrs |
Computer Equipment | 5 yrs | Stage and Auditorium Equipment | 20 yrs |
Furniture | 20 yrs | Custodial Equipment | 15 yrs |
Grounds, Agricultural Equipment | 15 yrs | Photocopiers | 5 yrs |
Licensed Vehicles | 6 yrs | Radio/Communication Equipment | 7 yrs |
Light Trucks | 7 yrs | Building (pavilions) | 40 yrs |
Berms | 5 yrs | Building, Building Components and Services | |
Permanent Structures | 50 yrs | ||
Carpeting | 7 yrs | ||
Plumbing | 25 yrs | ||
Road Signage | 10 yrs | HVAC | 20 yrs |
Roofing Flat | 10 yrs | ||
Steel Peaked | 30 yrs | ||
LAND IMPROVEMENTS: | |||
Fencing, gates, flag pole | 20 yrs | Ball Field Infield | 10 yrs |
Landscaping | 10 yrs | Building and Park Landscaping | 30 yrs |
Outside Sprinkler System | 25 yrs | Playground Equipment | 20 yrs |
Athletic Fields | 25 yrs | Soccer Fields | 15 yrs |
Septic System | 30 yrs | Running Track | 15 yrs |
Tennis Court | 20 yrs | Outdoor Lighting | 20 yrs |
Fountains | 20 yrs | Retaining Walls | 20 yrs |
Bleachers | 20 yrs | ||
INVENTORIED ITEMS: |
Items not covered through above tables shall be inventoried for internal control and insurance coverage purposes. |
(e) Definitions.
(1) “Ancillary charges” includes costs that are directly attributed to assets acquisitions, such as freight and transportation, site preparation charges and professional fees.
(2) “Building” means a structure that is permanently attached to the land, has a roof, is partially or completely enclosed by walls and is not intended to be transportable or moveable. It is generally used to house persons, property and fixtures attached to and forming a permanent part of such a structure.
(3) “Building improvements” means capital events that materially extend the useful life of a building or increase the value of a building, or both, beyond one year. Examples: roofing projects, major energy conservation projects, remodeling and replacing major building components. Building improvements should not include maintenance and repairs done in the normal course of business.
The following expenses associated with the purchase or improvement of a building should be included in the capitalization amount; original purchase price, remodeling or reconditioning, expenses, environmental compliance (i.e., asbestos abatement), professional fees (i.e., legal, architect, inspections, title searches, etc.), payment of unpaid accrued taxes on the building to the date of purchase; cancellation or buyout of existing leases; cost of building permits; permanently attached fixtures or machinery that cannot be removed without impairing the use of the building; additions to building (i.e., expansions, extensions of enlargements); conversion of attics, basement, etc., to usable office or storage space; structures attached to the building such as covered patios, garages and enclosed stairwells; installation or upgrade of heating and cooling systems, including ceiling fans, and attic vents; original installation or upgrade of wall or ceiling covering such as carpeting, tiles, paneling or parquet; structural changes such as reinforcement of floors or walls, installation or replacement of beams, rafters, joists, steel grids or other interior or other interior framing; installation or upgrade of window or doorframe, upgrading of windows or doors, building closet and cabinets; interior renovation associated with casings, baseboards, light fixtures, ceiling trims, etc.; exterior renovation such as installation or replacement of siding, roofing or masonry; installation or upgrade of plumbing and electrical wiring; installation or upgrade of phone or closed circuit television systems, networks, fiber optic cable or wiring required in the installation of equipment that will remain in the building.
The following examples should be considered maintenance and repairs and not capitalized including but are not limited to the following: Adding, removing and/or moving of walls relating to renovation projects that are not considered major rehabilitation projects and do not increase the value of the building; plumbing or electrical repairs; cleaning, pest extermination or other periodic maintenance; interior decoration such as draperies, blinds, curtain rods, wallpaper, etc.; exterior decorations such as detachable awnings, uncovered porches, decorative fences; maintenance- type interior renovation such as repainting, touch-up plastering, replacement of carpet, tiles or panel sections, sink and fixture refinishing; maintenance-type exterior renovation such as repainting, replacement of sections of siding, roof or masonry.
(4) “Capital asset” means land, land improvements, easements, building, building improvements, construction in progress, vehicles, machinery, equipment, infrastructure and all other tangible or intangible assets that are used in operations and that have initial useful lives extending beyond a single reporting period.
(5) “Construction in progress” reflects the economic construction activity status of building and other structures, infrastructure, additions, alterations, reconstruction and installation, which are substantially incomplete. These assets should be capitalized to their appropriate capital assets categories upon the earlier occurrence of execution of substantial completion contract documents, occupancy or when the assets are placed into service. It is the department’s responsibility to track, all costs related to construction work in progress so that the final value of the constructed assets is correctly captured.
(6) “Depreciation” means the process of allocating the cost of tangible property over a period of time, rather than deducting the cost as an expense in the year of acquisition. Generally, at the end of an asset’s life, the sum of the amounts charged for depreciation in each accounting period (accumulated depreciation) would equal original cost less salvage value.
(7) “Easements” means an interest in land owned by another that entitles its holder to a specific, limited right to use the land. Therefore, easements are not required to be reported in the financial statement unless the entity paid for the easement.
(8) “Infrastructure assets” means long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. Examples are roads, bridges, tunnels, drainage systems, water and sewer systems, dams and lighting systems. Building, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets for purposes of GASB 34. Improvements made to this type of asset that increase the useful life or value of the asset beyond one (1) year should also be capitalized. Infrastructure assets do not include building, drives, parking lots or any other asset that is incidental to property or access to property.
(9) “Improvements other than building” means land improvements which include items such as driveways, sidewalks, parking lots, flagpoles, retaining walls, fencing, outdoor lighting and other non-building improvements intended to make the land ready for its intended purpose. Site improvements are exhaustible and are therefore depreciable.
(10) “Inventory items” means equipment, machinery, tools (hand/powered) that need to be kept track of for the sole purpose of insurance coverage and/or internal control. Any item with a value over one hundred dollars ($100.00).
(11) “Land” means an area of ground in terms of its ownership or use. Land is to be capitalized but not depreciated. It is recorded at historical cost and remains at that cost until disposal. There is a special item in the statement of activities for reporting gain or loss on the sale of land. All commissions, professional fees (title searches, architect, legal, engineering, appraisal, surveying and environmental assessments, etc.); land excavation, fill, grading and drainage; demolition of existing building and improvements; and removal, relocation or reconstruction of the property of others (i.e., telephone and power lines, etc.) shall be included in the amount capitalized as land.
(12) “Land improvements” means betterments, other than building, that ready land for its intended use such as site improvements including excavation, fill, grading and utility installation. Removal, relocation or reconstruction of property of others, such as railroads and phone and power lines, retaining walls, parking lots, fencing and landscaping.
(13) “Exhaustible land improvements” means those that are considered part of a structure or that deteriorate with use or the passage of time. Land improvements include driveways, sidewalks, parking lots, flagpoles, retaining walls, fencing, outdoor lighting and other non-building improvements intended to make the land ready for its intended purpose. Site improvements are exhaustible and are therefore depreciable.
(14) “Nonexhaustible land improvements” means expenditures for improvements that do not require maintenance or replacement, expenditures to bring land into condition to erect structures, expenditures for improvements not identified with structures and expenditures for land improvements that do not deteriorate with use or passage of time. They are additions to the cost of land and are generally not exhaustible and therefore, not depreciable. Some examples are fill, grading costs and landscaping.
(15) “Machinery, equipment and vehicles” includes tangible property of a permanent nature, other than land and building and building improvements. These tangible assets are to be used for operations, the benefits of which extend beyond one (1) year from date of purchase and rendered into service. Examples of machinery, furniture and equipment are tools, trucks, office furniture, cars and computer/computer equipment.
(16) “Network system” means a group of related or similar assets which are interdependent and where the principal portion of the network relies on the entire network and not the individual assets such as storm water drainage systems and roads.
(17) “Salvage value” means the value an asset is expected to have when it is no longer useful for its intended purpose. (The amount for which the asset could be sold at the end of its useful life.)
(18) “Straight-line depreciation” means the historic cost of the asset written off evenly over the useful life of the asset. The total amount depreciated can never exceed the asset’s historic costs less salvage value. At the end of the asset’s estimated life, the salvage value will remain.
(19) “Useful life” means the estimated number of months or years that an asset will be able to be used for the purpose for which it was purchased.
(Res. 3409. Passed 7-18-05.)