CAPITAL ASSET POLICIES AND PROCEDURES HANDBOOK

CAPITAL ASSET POLICIES AND PROCEDURES HANDBOOK

Session Objectives • Understand What Data Might Be Included in A Detailed Capital Asset Policies & Procedures Handbook • Discuss in Detail Each of the Topics Included in the Above Document

A Capital Asset Record System • Is It Integrated With The General Ledger System? • Can It Calculate Depreciation Expense By Function? • Can It Provide A Report Of Disposed Assets? • Can It Provide A Report Of Data By Function?

A Capital Asset Record System • What It Is • How it Works • Who Does What • How Much Detail

The Property Record • Property Identification Number • Fund and Account • Major Asset Class • Function and Activity • Acquisition Document Number • Acquisition Date

The Property Record • Method of Acquisition • Name and Address of Vendor • Description of Asset • Organization Unit • Location • Estimated Useful Life

The Property Record • Estimated Salvage Value • Date, Method, and Authorization of Disposition

Identify Reporting Requirements • Inventory Report by Location • Inventory Report by Stewardship • Inventory Report by Class • Depreciation Expense Report • Schedule of Capital Assets by Class • Schedule of changes in Capital Assets by Class

Identify Reporting Requirements • Schedule of Capital Assets by Function and Activity • Schedule of Changes in Capital Assets by Function and Activity • Asset Replacement Report • Online Access to Data • Inquiry by Property Identification Number • Inquiry by Location • Inquiry by Asset Class

Capital Asset Classifications • Specific Classifications • Thresholds

Capital Asset Classification Capital Assets Includes: -Land -Land Improvements -Buildings -Building Improvements -Vehicles -Machinery & Equipment -Works of Art & Historical Treasures -Infrastructure -In-tangible Assets

Capital Asset Thresholds • Two Primary Criteria • - Cost of the Asset • - Useful Life • National GFOA Recommends a $5,000 Threshold Per Unit • Threshold Needs To Cover 75% - 80% of The Costs

Capital Asset Thresholds • Spend Your Time Controlling Large Items • Land • Buildings • Vehicles

Capital Asset Thresholds • Capitalized Items Versus Controllable Items • Group Method Versus Individual Asset • A Class of Assets (Furniture and Fixtures) • An Individual Asset (A School Bus)

Capital Asset Classification • Divide Between Major Class and Subclass • Major Class Usually equates to General Ledger Asset Accounts For Ease in Financial Reporting

Land • Potential Subclasses • - Vacant Parcel (Deed) • - Land Under a Building (Deed) • - Land Under the Roads

Land • Includes the Cost of Preparing Land for Use • Separate Land Cost from Cost of Buildings or Improvements if all Three are Purchased Together • Park Lands

Land Improvements • Fencing • Paving (i.e., Parking Lots) • Lighting • Plumbing (e.g., water facets) • Landscaping??

Buildings • Components: • Building Shell • Roof • Elevator • Electrical System • Plumbing System • Heating/Air Conditioning System

Buildings Improvements • Sometimes These Costs are Just Capitalized as Buildings • Alarm Systems • Carpeting • Shelving and Cabinets • Clock Systems

Buildings Improvements • Public Address & Speaker Systems Where Wiring Is "Built-in". • Curtains

Vehicles • Vehicle Tags • All Rolling Stock • Trucks • Automobiles • Buses

Machinery and Equipment • Computer Equipment • Furniture and Fixtures • Weapons • Heavy Equipment • Radios and Cell Phones

Historical Treasures and Works of Art • Paintings • Statutes • Totem Poles

GASBS 34 Requirements • Governments Should Capitalize Works Of Art, Historical Treasures, And Similar Assets At Their Historical Cost Or Fair Value At Date Of Donation (Estimated If Necessary) Whether They Are Held As Individual Items Or In A Collection.

GASBS 34 Requirements • Governments Are Encouraged, But Not Required, To Capitalize A Collection (And All Additions To That Collection) Whether Donated Or Purchased That Meets All Of The Following Conditions. The Collection Is: • Held For Public Exhibition, Education, Or Research In Furtherance Of Public Service, Rather Than Financial Gain • Protected, Kept Unencumbered, Cared For, And Preserved • Subject To An Organizational Policy That Requires The Proceeds From Sales Of Collection Items To Be Used To Acquire Other Items For Collections.

Intangibles • Software – Mainframe, Site Licenses, Upgrades, Maintenance • Radio Station License

Infrastructure

Betterments • What Are Betterments? • Extends The Estimated Life • Exceeds A Certain Cost • A Big Issue • It Depends Upon The Property Record

GAAP Values • Historical Cost • Cost Of Capital Assets In Accordance With Costs • Prevailing At Date Of Construction • Installation • Fair Market Value • Estimated Amount At Which The Capital Asset Might Exchange Between Buyer And Seller Neither Under Compulsion, Having Reasonable Knowledge Of All Relevant Facts – With Equity To Both

Inventorying Capital Asset • Frequency • Process • Discrepancies

Frequency Original Inventory Re-Inventory – At Least Annually Responsibility

The Inventory Process Project Planning Meeting Inclusions Exclusions Tagging @ the Same Time? Utilizing Existing Inventories

When To Inventory • There Is No Correct Time • During The Normal Workday • Nights Or Weekends

Inventory - Land • Listed By Parcel • Assessor's Parcel Number • Lot, Block, Track • Use • Location

Inventory - Buildings • Building Type • Use • Location

Inventory – Machinery and Equipment • Quantity • Description • Manufacturer • Serial Number • Year Acquired

Inventory – Do’s and Don’ts • Don't Start Inventories with Existing Inventory Lists • Inventory by Location • Provide Advance Notice • Avoid Abbreviations • Generic Name • Write Legibly

Inventory – Do’s and Don’ts • Organize Thoughts Before Making Notations • Review Field Notes • Use Available Resources ---- Ask Questions • Maintain Contact with Those Responsible for the Project • If You're Behind/Ahead of Schedule---Keep People Advised

Changes in Capital Assets • Additions • Disposals • Transfers • Surplus

Additions • Purchased or Constructed • Leased • Contributed • Acquired Via Trades

Disposals • Trade-ins • Sales – Sealed Bids - Auction • Cannibalization - Buses • Contributed to Other Governments

Transfers • Between Departments • Between Buildings • Any Budget Impact?

Surplus • Adding to Surplus • Taking from Surplus

The Eight “W’s” to Tagging • Why Tag? • Which Assets to Tag? • What Types of Tags to Use? • Where to Purchase the Tags? • What Should Appear on the Tag? • When to Tag? • Who Tags? • Where is the Tag Placed?

Tagging Purpose • Primary Purpose of a Tagging is to Maintain a Positive Identification of Assets Owned by the Government

Why Tag? • Quick and Accurate Method of Identifying • Facilitate Re-inventory • Controls the Location of Assets • Assists in Maintaining Assets • Provides Common Ground for Communication

Which Assets Should Be Tagged? • Influenced by Purpose of Tagging • Accounting Issues • Property Accountability • Types of Activities • Cost of Tagging

What Type of Tags Should We Use? • Metal • Decal Type • Bar Coded • Stencil/Painted

CAPITAL ASSET POLICIES AND PROCEDURES HANDBOOK