CAPITAL ASSET POLICIES

1

• CAPITAL ASSET POLICIES
• AND PROCEDURES HANDBOOK

2
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

3
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?

4
A Capital Asset Record System

• What It Is
• How it Works
• Who Does What
• How Much Detail

5
The Property Record

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

6
The Property Record

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

7
The Property Record

• Estimated Salvage Value
• Date, Method, and Authorization of Disposition

8
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

9
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

10
Capital Asset Classifications

• Specific Classifications
• Thresholds

11
Capital Asset Classification
Capital Assets Includes -Land -Land
Improvements -Buildings -Building
Improvements -Vehicles -Machinery
Equipment -Works of Art Historical
Treasures -Infrastructure -In-tangible Assets
12
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

13
Capital Asset Thresholds

• Spend Your Time Controlling Large Items
• Land
• Buildings
• Vehicles

14
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)

15
Capital Asset Classification

• ?Divide Between Major Class and Subclass
• ?Major Class Usually equates to General Ledger
  Asset Accounts For Ease in Financial Reporting

16
Land
?Potential Subclasses - Vacant Parcel
(Deed) - Land Under a Building (Deed) - Land
Under the Roads
17
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

18
Land Improvements

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

19
Buildings

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

20
Buildings Improvements

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

21
Buildings Improvements

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

22
Vehicles

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

23
Machinery and Equipment

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

24
Historical Treasures and Works of Art

• Paintings
• Statutes
• Totem Poles

25
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.
  

26
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.

27
Intangibles

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

28
Infrastructure

Storm sewers
Bridges
Parks (excluding land)
Roads
Trails
Islands
Street lights
Traffic signals
Signage
29
Betterments

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

30
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

31
Inventorying Capital Asset

• Frequency
• Process
• Discrepancies

32
Frequency

• Original Inventory
• Re-Inventory At Least Annually
• Responsibility

33
The Inventory Process

• Project Planning Meeting
• Inclusions
• Exclusions
• Tagging _at_ the Same Time?
• Utilizing Existing Inventories

34
When To Inventory

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

35
Inventory - Land

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

36
Inventory - Buildings

• Building Type
• Use
• Location

37
Inventory - Buildings

• Building Type
• Use
• Location

38
Inventory Machinery and Equipment

• Quantity
• Description
• Manufacturer
• Serial Number
• Year Acquired

39
Inventory Dos and Donts

• Don't Start Inventories with Existing Inventory
  Lists
• Inventory by Location
• Provide Advance Notice
• Avoid Abbreviations
• Generic Name
• Write Legibly

40
Inventory Dos and Donts

• 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

41
Changes in Capital Assets

• Additions
• Disposals
• Transfers
• Surplus

42
Additions

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

43
Disposals

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

44
Transfers

• Between Departments
• Between Buildings
• Any Budget Impact?

45
Surplus

• Adding to Surplus
• Taking from Surplus

46
The Eight Ws 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?

47
Tagging Purpose

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

48
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

49
Which Assets Should Be Tagged?

• Influenced by Purpose of Tagging
• Accounting Issues
• Property Accountability
• Types of Activities
• Cost of Tagging

50
What Type of Tags Should We Use?

• Metal
• Decal Type
• Bar Coded
• Stencil/Painted

51
What Do We Purchase Tags?

• Office Equipment Dealer
• Yellow Pages of Telephone Book
• The Type of Adhesive Must Be Considered
• Prices Vary

52
What Should Be Imprinted on the Tag?

• Identifying Mark
• Numbering System
• Sequential
• Chronological

53
When To Tag?

• Tag With Initial Inventory
• Normal Working Periods vs Nights and Weekends

54
Who Should Tag?

• Accounting Department
• Purchasing Department
• Receiving Department
• Asset User (Police Department)

55
Where Should The Tag Be Placed?

• Placement Where Number Can Be Identified Without
  Disturbing The Operation
• Placement Allows For Easy Periodic Inventory
  Taking
• Placement Should Be Consistent

56
Session 8

• Depreciating Capital Assets

57
Depreciating Capital Assets

• The Method
• The Estimated Useful Lives
• Residual Values
• Fully Depreciated Capital Assets

58
Depreciating Capital Assets

• When to Start Calculation Depreciation
• Charging to Applicable Functions

59
Capital Assets For Resale Governmental Funds

• Acquired Via Foreclosure and Donations
• Fund Balance Should Be Reserved

60
Capital Assets Purchased Via Capital Lease
Governmental Funds

• Debit - Expenditures
• Credit Other Financing Sources Inception of
  Capital Lease

61
Capital Assets Purchased By Federal Government

• Reversionary Interest
• Normally Reported As Governmental Asset

62
Capital Asset Note
63
Reporting Prior YearCapital Assets
64
Reporting Prior YearCapital Assets
65
Reporting Capital Asset Additions
66
Reporting Capital Asset Deletions
67
WE ARE FINISHED!

• ANY QUESTIONS, FEEL FREE TO EMAIL ME
• pglick_at_mindspring.com
• OR CALL ME _at_ 352/875-7449