(A) Classification of assets. The capital assets are personal property and real property and other assets used it the operations of the government that have an expected estimated useful life beyond a single reporting period. Capital assets are to include any item that falls into one of the following categories:
(1) Land.
(2) Improvements to land.
(3) Buildings.
(4) Furnishings and equipment.
(5) Vehicles.
(6) Computer software.
(7) General infrastructure.
(8) Construction in progress.
(B) Capitalization thresholds.
(1) To be considered a capital asset for financial reporting purposes, an item must at the item of acquisition, be valued for accounting and financial reporting purposes at a unit value greater than or equal to $5,000 (also $5,000 if funded through a federal grant).
(2) Assets shall remain as part of the property record until they are retired, sold, traded, or otherwise disposed of regardless of their net book value amount.
(3) The capitalization threshold for the following classes of assets shall be:
(a) Land: N/A.
(b) Improvements to land: $10,000.
(c) Buildings: $25,000.
(d) Furnishings and equipment and vehicles: $5,000.
(e) Federal grant furnishings and equipment: $5,000.
(f) Computer software: $10,000.
(g) General infrastructure: $25,000.
(h) Construction in progress: N/A.
(4) With regard to improvements to buildings and general infrastructure, a capital outlay must be significant and increase capacity, increase efficiency, or extend the asset's estimated useful life beyond what was originally estimated.
(5) A change in capacity increases the level of service provided by the asset. A change in efficiency either increases the level or service asset or other change maintains the same level of service at a lower cost. For example, an addition to a building provides increased square footage; hence, the capacity is increased, and the capital outlay is capitalized. Widening a road with additional lanes increase capacity; hence, the capital outlay is capitalized. An extended estimated useful life will result from a significant alternation, structural change, or improvement.
(6) While substantial repairs and renovations shall be reviewed for potential capitalization, it is anticipated that most will be expensed in the current year. These expenses often merely restore the asset to its original service potential but do not necessarily improve the asset.
(7) All land, including rights-of-way, shall be capitalized at the time of acquisition. If donated, it shall be recorded at its estimated acquisition value.
(C) Annual updating and reporting. Capital assets shall be recorded at historical cost which includes any ancillary charges necessary to place the asset into its intended location and condition for use. Ancillary charges include: freight and transportation charges, site preparation cost, and professional fees. Engineering costs (internal and external) include: related preliminary project and environmental studies, project estimating, design, and planning (drawings and specifications), construction engineering, construction management, construction inspection and project payment. However, no such costs shall be capitalized unless they can be directly identified to a specific capital asset and have been incurred subsequent to the determination that the capital asset will, in fact, be acquired (the costs of a feasibility study are not capitalized, nor are other costs related to the project occurring prior to its completion). Donated capital assets are recorded at the value that would be necessary to acquire them.
(D) Estimated useful lives of depreciable assets. The capital assets have estimated useful live extending beyond a single reporting period (one year) and are depreciated using the straight-line method with no allowance for salvage value. The estimated useful lives currently used were developed with the input of knowledgeable staff and reflect our government's experience with these assets:
(1) Land: non-depreciable.
(2) Improvements to land: 20 years.
(3) Buildings: 50 years.
(4) Furnishings and equipment: five years.
(5) Vehicles:
(a) Autos: five years.
(b) Light trucks: ten years.
(c) Heavy trucks: 15 years.
(d) Fire trucks: 30 years.
(6) General infrastructure: 50 years.
(7) Computer software: five years.
(E) Depreciation method/convention. Depreciation will be calculated using the straight-line method and full-year convention. No salvage value or residual value will be recognized.
(F) Retirements.
(1) Retirements apply to all capital assets including land, improvements to land, buildings, furnishings and equipment, vehicles, and general infrastructure.
(2) When an asset is disposed of, scrapped, sold, subject to demotion, etc., it is to be removed from the property record and the appropriate reduction shall be made to the asset value, accumulated depreciation, and net book value amount.
(3) Retirements shall reflect the originally recorded value of the capital asset when the amount is ascertainable. When the originally recorded value of the capital asset is not ascertainable, an estimate of that amount (typically historical cost) shall be made.
(G) Responsibility for property record maintenance.
(1) The Clerk-Treasurer shall ensure that appropriate accounting capital assets is being exercised by establishing a capital asset inventory and updating it each year. Each annual update shall reflect all improvements, additions, retirements, and transfers hat occurred during the year.
(2) Day-to-day stewardship of personal property above the capitalization threshold of $5,000 is the responsibility of the department utilizing the property.
(3) To allow for the annual updating of the capital asset records, the departments are responsible to report information on improvements, additions, retirements, and transfers in detail to the Clerk-Treasurer. It is expected that this reporting will be made in a timely manner, as the capital asset record must be updated annually. These departments include but are not limited to Public Works, Police and Fire, Parks, Engineering, Planning, and Administration (in essence, the Clerk-Treasurer will record all additions and the departments will determine all retirements and transfers and submit the information to the Clerk-Treasurer).
(4) In summary, additions of assets at or above the unity capitalization threshold of $5,000 are to be reported to the Clerk-Treasurer by the departments upon purchase or receipt of the asset. These will be verified per the purchasing process by the Clerk-Treasurer. Transfers and retirements of assets at or above the $5,000 unit threshold are to be reported as such by the departments to the Clerk-Treasurer at the time of the transaction.
(H) Assets purchased with federal grant funds. Assets at or above a threshold of $5,00 on a unit basis funded with a federal grant are to be reported for federal compliance purposes. To achieve this end a subsidiary list or other indicator is to be established and maintained annually and includes all such assets currently in use.
(I) Property control.
(1) Capital assets below the capitalization threshold of $5,000 on a unit basis but warranting "control" shall be inventoried at the department level and an appropriate list will be maintained. Data elements are to include asset description, location, make, model, serial number, and other information that assists control deemed relevant.
(2) Assets below the capitalization threshold but considered sensitive may include, for example, weapons, radios, personal computers, laptop computers, printers, fax machines, and small power tools. These minor but sensitive items shall be inventoried and controlled at the department level. Stewardship of these minor but sensitive items is the responsibility of the departments utilizing these properties.
(3) The Clerk-Treasurer shall determine appropriate means, level of detail elements, and the system to be utilized. Finally, the Clerk-Treasurer shall request copies of the inventory and/or updated inventory of controllable items to periodically review the information, adherence to policy, and check the integrity of the data.
(Ord. 19 of 2021, passed 11-8-2021)