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HomeMy WebLinkAbout210-02 POLICY & PROCEDURE Subject: CAPITAL & ATTRACTIVE ASSETS Index: FINANCE Number: 210-02 Effective Date: March 25, 2021 Supersedes: N/A Page: 1 of 10 Staff Contact: Kari Roller & Kristin Trevelas Approved By: 1.0 PURPOSE: To establish uniform guidelines and criteria to account for assets owned by the City. To ensure that methods and controls for the acquisition, depreciation, tracking, and disposal of all asset categories comply with appropriate generally accepted accounting principles and statutory requirements. 2.0 ORGANIZATIONS AFFECTED: All departments/divisions. 3.0 REFERENCES 3.1 City Policy 100-11, Procedure for Acquisition of Real Property 3.2 City Policy 100-12, Surplus Real Property 3.3 City Policy 250-10, Surplus & Disposal of Surplus Personal Property 3.4 City Policy 300-51, Reporting Improper Governmental Action (Whistleblower) 3.5 RCW 43.09.185, Loss of Public Funds – Illegal Activity – Report to SAO 3.6 Code of Federal Regulations 2 CFR §200.313-.316 (Property Standards) 3.7 GASB Statement No. 89 – Accounting for Interest Cost Incurred before the End of a Construction Period 4.0 POLICY: 4.1 It is the policy of the City that assets shall be properly accounted for and used for appropriate City purposes. 4.1.1 Departments are responsible for establishing controls that follow the guidelines presented in this policy, maintaining asset records, and following other City policies that establish guidelines for budgeting and purchasing. 4.1.2 Finance is responsible for ensuring that the accounting treatment of all assets comply with applicable and appropriate generally accepted accounting principles and applicable statutory requirements. 4.1.3 Finance and departments are mutually responsible for communication necessary to carry out their respective responsibilities under this policy. 4.2 A delegate in each department will be responsible for ensuring adherence to this policy, with guidance from the Finance Division. An assessment shall be performed periodically by the Finance Division, in cooperation with other departments, to assess procedures and compliance with existing guidance. 5.0 DEFINITIONS: 5.1 Accounting System: The City’s financial and accounting software package used for entering, receiving, and monitoring accounts; procurement of goods, services, and assets; and recording the acquisition, depreciation, and disposal of capital assets. 5.2 Artwork: A non-depreciable asset determined to be aesthetically valuable to the City. Consists of art collections or significant works of art owned by the city. 5.3 Asset Number: A number uniquely assigned to each asset. Used for identification in the accounting system, or department level inventory system or worksheet. 5.4 Assets: Resources expected to add value to the organization. Assets may be real, tangible, or intangible property acquired through purchase, donation, or construction. 5.5 Capital Asset Cost Threshold: The minimum cost per unit at which an asset must be valued to be considered a capital asset. The various capital asset categories have different cost thresholds as set out in this policy. Assets purchased with grant funds may have a different threshold amount as stipulated by the grant. Usage and disposal of assets acquired by a grant are subject to the grant agreement and, when applicable to a federal grant, 2 CFR §200.313-.316 (Property Standards), which supersedes this policy. Also referred to as “Capitalization Threshold”. 5.6 Capital Assets: Are tangible and intangible assets that are intended to be held or used for the long-term (more than one year). Typically, these can include land, artwork, buildings, improvements, infrastructure, construction-in-progress, leases, software, machinery, and equipment. Also referred to as “Fixed Assets”. 5.7 Capital Lease: Any agreement entered into by the City involving the lease of property and granting the lessee rights to the property. A contract that conveys the right to use an asset for a period-of-time in exchange for value. Also referred to as “Lease”. 5.8 Construction in Progress (CIP): A category of capital assets, which reflects the cost and status of buildings, improvements other than buildings, infrastructure, equipment, or other capital assets under construction. This asset category is non- depreciable. When completed, the total cost is reported under the appropriate capital asset category and removed from CIP/WIP. Also referred to as “Work-in- Progress” (WIP). 5.9 Depreciation: The systematic allocation of expending the exhaustible cost of capital assets according to their estimated useful lives. Also referred to as “Amortization” or “Depletion” for certain intangible assets. 5.10 Donations: An asset that the City received as part of a non-exchange transaction. This occurs when the City is gifted an asset or does not provide equivalent value for the asset acquired. These assets can come from a governmental entity, a non- governmental entity, or an individual. 5.11 Infrastructure: Refers to public property or public domain capital assets. Defined as long-lived capital assets that normally are stationary in nature and can be preserved for a significantly greater number of years than most capital assets. Examples of infrastructure are roads, bridges, sidewalks, water lines, sewer lines, and drainage systems. 5.12 Intangible Asset: A capital asset which has no physical substance but whose value comes from the long-term rights or advantages it offers to the owner. Examples include water rights, timber rights, and computer software. 5.13 Land: A category of capital assets that includes all land and land rights acquired by the City for its own use. Acquisition could be by purchase, donation, trade and/or condemnation. Land acquired and converted to parks or open space use and land to be converted to public roads, street, or highways are included. Also included are right of ways (ROW) and easements that provide access to city owned land. 5.14 Leasehold Improvements: A capital asset related to any changes made to a rental property to customize it for the particular needs of a tenant. These can include alterations such as painting, installing partitions, changing the flooring, or putting in customized light fixtures. 5.15 Original Cost: The amount spent to acquire an asset and place into service. Generally based on actual price paid, including related taxes, commissions, installation costs, and any other costs related to acquiring the asset or preparing the asset for use. Also referred to as “Historical Cost”. 5.16 Physical Inventory: A systematic and periodic physical verification of the existence and location of capital assets and attractive assets assigned to a department. Also referred to as “Inventory”. 5.17 Right of Way (ROW): The area of land needed to provide the right of passage, generally for the purposes of public travel. Imposed by law or convention to create an easement granting the privilege or right, distinct from ownership, to use in some way the land of another. 5.18 Small and Attractive Assets: Assets that are below the City's established capitalization thresholds, and might be susceptible to loss, theft, or misuse. These assets last longer than a year, are mobile, are unlikely to be immediately missed upon their disappearance, and might be easily replaced through existing purchasing procedures without raising suspicion. Also referred to as “Attractive Assets”. 5.19 Surplus: Any asset that is no longer needed, or useful in performing the responsibilities of a department. 5.20 Useful Life: A reasonable estimate, in years, for which the department expects to use a depreciable capital asset in their operations. 6.0 PROCEDURES: 6.1 General: 6.1.1 Capitalization Thresholds: Asset Category Examples Dollar Threshold Land Property parcels, right of way, easements $ 5,000 Artwork Works of art and historical treasures $ 5,000 Buildings Structure, remodels that increase service capacity or useful life $ 25,000 Leasehold Improvements Land/building improvements made to leased property $ 25,000 6.2 Asset Identification: 6.2.1 All asset listings will contain sufficient information to allow for easy identification of assets. Some examples of asset identification include: Asset Type, Asset Description, Model Name/Number, VIN number and Serial Number. Capital asset listings are maintained and recorded in the accounting system by Finance; the department is responsible for maintaining attractive asset listings (see 6.9.1.2). 6.3 Additions: 6.3.1 It is the responsibility of each department to ensure that all capital assets acquired by purchase, construction, donation, or leases are recorded to the appropriate capital outlay account in the accounting system. The Finance Division is responsible for the maintenance of an accurate accounting system based on the correctness of the information provided. Annually, Finance will generate a list of all entries made to object codes in which capital assets may have been recorded and evaluate for accuracy, classification, and completeness. 6.3.2 Valuation: 6.3.2.1 Generally, the value of capital assets shall be determined by original cost. The original cost shall include all ancillary charges necessary to place the asset in its intended location and condition for use. Improvements Other Than Buildings & Infrastructure Park developments, parking lots, splash pools, roads, bridges, sidewalks, water lines, sewers, drainage systems $ 50,000 Machinery & Equipment General tools, printers, office equipment, copiers, office furniture, IT equipment, audio/visual equipment, playgrounds $ 5,000 Vehicles $ 5,000 Intangible Assets Computer software, water rights, timber rights $ 5,000 Other (Not identified in table) Anything not identifiable by a category listed on this table. $ 5,000 6.3.2.2 Purchased Assets: The value shall be determined by original cost, historical cost, or estimated historical cost if actual historical cost is not available. The original cost shall include the cost, sales tax, transportation expenses, extended maintenance or warranty contracts, and the cost of installation. 6.3.2.3 Land: The value shall be determined by the purchase price plus all appropriate ancillary costs such as legal fees, fill, and excavation costs incurred to put the land in condition for its intended use. Any proceeds obtained in the process of preparing the land for its intended use, such as salvage receipts, shall be treated as a reduction in the price of the land. 6.3.2.4 Intangible Assets: The Finance Division will perform an analysis to determine appropriate valuation method, which may include market, income, or cost approach. 6.3.2.5 Artwork: The value shall be determined by the purchase price, estimated fair market value, or appraisal at the date of acquisition. 6.3.2.6 Donated & Contributed Assets: The value shall be determined by the acquisition value. Acquisition value is the price that would be paid to acquire an asset with equivalent service potential in an orderly market transaction at the acquisition date, or the amount at which a liability could be liquidated with the counterparty at the acquisition date. 6.3.2.7 Grant-Funded Assets: The value shall be determined in accordance with this policy, except where the requirement of a particular grant may supersede the criteria contained in this policy. These assets must also be able to demonstrate compliance with property management requirements. 2 CFR §200.310-316 (when applicable) and grant agreements will give specific requirements related to real property, equipment, supplies, and intangible property purchased with grant funds. 6.3.2.8 Exclusions from Valuation: 6.3.2.7.1 Repair and/or maintenance expenditures such as routine repair and maintenance costs. These costs shall be expensed as they are incurred. 6.3.2.7.2 Costs that do not represent betterments shall not be capitalized. Betterments are those that increase service capacity or efficiency. 6.3.2.7.3 Costs that do not extend the original useful life shall not be capitalized. 6.3.2.6.4 Excess costs that do not add to the utility of an asset shall not be capitalized. 6.3.2.7.5 Capitalization of interest may not be capitalized as part of the historical cost of a capital asset. 6.4 Depreciation/Depletion/Amortization: 6.4.1 The straight-line method will be used. In straight-line the cost of the asset is pro-rated over the estimated useful life of the asset. The City has decided not to use or estimate salvage value for depreciable assets. The value of any asset shall not be reduced by the salvage value for the purpose of any straight-line calculations. 6.4.2 For financial statement preparation, annual depreciation is recorded as an expense of the fund in which the asset is used. 6.4.3 Depreciation expense shall be calculated for all new assets utilizing the full month convention (no matter when the asset was purchased within the month it shall be assumed that the asset was purchased on the 1st of that month). 6.4.4 Non-depreciable assets include inexhaustible assets, such as land. 6.5 Useful Life: 6.5.1 Departments will make a reasonable estimate, in years, for which the department expects to use a depreciable capital asset in their operations. 6.5.2 The Office of Financial Management (OFM) maintains a comprehensive Useful Life Schedule in the State Administrative & Accounting Manual (SAAM), which may be referred to as guidance in determining a reasonable estimate. Refer to 30.50.10, Capital asset class codes and useful life schedule, of the SAAM. Please note that this manual is only authoritative for agencies of the state of Washington, not local governments. 6.6 Deletions: 6.6.1 Assets previously acquired will eventually be disposed of and need to be deleted from the accounting system. Deletions may be required due to the sale, scrapping, mysterious disappearance (lost or stolen), or involuntary conversion (fire, flood, etc.) of an asset. It is the responsibility of each department to report all fixed asset dispositions and transfers to the Finance Division to ensure that proper record keeping is maintained. 6.7 Transfers: 6.7.1 Capital assets transferred between funds or between financial reporting entity components shall be transferred at their current carrying value, both the original cost and accumulated depreciation amounts will transfer. It is the responsibility of each department to report all fixed asset dispositions and transfers to the Finance Division to ensure that proper record keeping is maintained. 6.8 Modifications: 6.8.1 Only extraordinary modifications or repairs to capital assets that extend the useful life beyond the original estimate or increase the capability or efficiency of an existing capital asset are capitalized. It is the responsibility of each department to report all fixed asset dispositions and transfers to the Finance Division to ensure that proper record keeping is maintained. 6.9 Small and Attractive Assets: 6.9.1 Additions: 6.9.1.1 Additions subject to 6.9.1, Additions, are assets that are below the City's established capitalization thresholds identified in 6.1, Capitalization Thresholds, of this policy and have an original cost between $300.00 to $4,999.99. These assets have a life expectancy of more than one year; are mobile; might be susceptible to loss, theft, or misuse; unlikely to be immediately missed upon their disappearance, and might be easily replaced through existing purchasing procedures without raising suspicion. 6.9.1.2 The City may acquire small and attractive assets via purchase, construction, donation, or lease. Upon acquisition of a small and attractive asset, the purchasing department will tag the asset and include on attractive asset listing worksheet (Exhibit A). The department is responsible for maintaining the attractive asset listing. 6.9.2 Deletions: 6.9.2.1 Assets previously acquired will eventually be disposed of and need to be deleted from the small and attractive asset listing. Deletions may be required due to the sale, scrapping, mysterious disappearance (lost or stolen), or involuntary conversion (fire, flood, etc.) of an asset. It is the responsibility of each department to record all asset dispositions and transfers on their individually maintained listings. 6.9.2.2 Items shall not be removed from records until after the annual physical inventory has occurred. Throughout the year items must remain on the list but may be noted as deleted with the accompanying reason, as items are disposed of. 6.10 Physical Inventory: 6.10.1 Periodically, an inventory of all City property shall be conducted by the department responsible for the assets. Finance will initiate this inventory and send a listing of the assets currently assigned to each department. The department is responsible for ensuring they have the assets and making note of any changes and returning their documentation to Finance. A member of the Department personnel having no direct responsibility for the assets subject to the inventory count will certify the following: (1) They have the listed item. (2) Missing items are properly explained and noted as “missing”, “sold”, etc. (3) Incomplete information is corrected. (4) Items not included on the inventory sheet, but physically located are added. 6.10.2 For small and attractive assets, the department is responsible for maintaining and updating their own list. These lists shall be available to Finance upon request. 6.11 Surplus: 6.11.1 In the event an asset is no longer needed, or useful in performing the responsibility of a department, that asset may be disposed of to restore resources to the fund that originally acquired the asset. The City’s administrative policies 100-12, Surplus Real Property, and 250-10, Surplus & Disposal of Surplus Personal Property, and any applicable City Council- established policies, shall be followed when this action is taken. 6.12 Lost or Stolen Assets: 6.12.1 When suspected or known losses or thefts of assets occur, the responsible department shall conduct a search for the missing property. The search should include review of transfers to other divisions or departments, storage, scrapping, conversion to another asset, etc. 6.12.2 Employees who obtain information demonstrating improper governmental action related to the loss or theft shall observe the following initial steps: (a) Raise the issue with their Department Administrator, if non- involved, in writing, stating in detail the basis for the employee’s belief that an improper action has occurred. (b) Where the employee believes improper action involves the Department Administrator, the employee may raise the issue directly with the City Attorney, Chief Administrative Officer (CAO), or the CAO’s designee. The City will follow policy 300-51, Reporting Improper Governmental Action (Whistleblower). 6.12.3 Following the City’s process, Finance will report known or suspected losses or thefts of assets to the State Auditor’s Office in accordance with RCW 43.09.185 and remove the lost or stolen property from all applicable inventory and accounting records. Dept/Division: Total Inventory Value: -$ Tag/Item Number Asset Description (Make/Model) Capacity/Load (if applicable) Serial No. (if applicable)Location Original Cost (including sales tax)Purchase Date Qty Modification (if applicable)Date Modified Notes [Audit Date] Sighted (S) or Unsighted (U) Certification Statement: I hereby certify that the attractive assets in the attached listing have been inventoried and are in working condition, and that any exceptions for items missing, disposed or transferred to another City department have been listed below. I also certify that all assets that were inventoried have been physically verified and are in the custody of the department referenced on this form. Finally, I hereby certify that the information contained in the attached Attractive Asset Inventory List is, to the best of my knowledge, complete and accurate: ATTRACTIVE ASSET INVENTORY LIST , DepartmentDesignee Date