Capital Asset Procedures

Transcription

1 Capital assets include land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, works of art, historical treasures, infrastructure, software and all other tangible and intangible assets that have useful lives extending beyond a single reporting period. The County Board has approved a Capital Asset Policy which requires written procedures. The policy and theses procedures will allow the County to keep accurate records of the location and use of County owned capital equipment. Such records are necessary for: Financial statement calculation of value of equipment and depreciation Insurance requirements and claims Control of County equipment to guard against loss or misuse Definitions Capital Assets - assets that have a useful life extending beyond a single reporting period and that meet the following criteria: o Land and infrastructure having a purchase price of $1 or more; or o Buildings, improvements, vehicles, machinery, equipment, furniture, works of art, software and other assets having a purchase price of $5,000 or greater.. Departmental Inventory - all furniture and equipment in the department, regardless of purchase price. Purchase Price Amount paid including invoiced cost, shipping, taxes, and installation or setup charges. The determined value for donated or constructed assets. Land includes attorney fees, closing costs, deed and real estate taxes, and other expenses necessary to make the purchase. County Capital Asset Records the official asset records for the County maintained by the Administrative Services Office using a capital asset computer program. The County Administrator or assignee is responsible for the reviewing and updating of these procedures and the related policy. The Administrative Financial Manager in the Administrative Services Office is assigned the responsibility for the maintenance and reporting of the County Capital Asset Records. Such reporting includes: Obtaining the necessary information of purchases and disposals from departments to maintain accurate asset records. Maintaining the County Capital Asset Records program on the iseries. Preparing Capital Asset Financial Reports for Financial Statements Preparing the annual summary reports to the County Board. FINANCIAL STATEMENT VALUATION AND DEPRECIATION CALCULATION All Capital assets are reported under General, Public Works, or Family Services (CVS) Fund. Capital assets will be classified in the following categories:

2 County Capital Asset Record Threshold for Asset Capitalization on Asset Category Type Financial Statement Land Type 1 $1 Infrastructure Type 2 $1 Buildings and Improvements to Buildings Type 3 $5,000 Improvements, other than Buildings Type 4 $5,000 Machinery, Equipment, Furniture Type 5 $5,000 Software Type 8 $5,000 All items will be recorded at their purchase price as defined in the definition section. Construction projects in progress, including infrastructure projects, are not included in the County Capital Asset Records. The County may record and report items of value less than the threshold amount when the majority of similar items are greater than the threshold, and the exclusion of the few items of lesser value would distort the financial picture. (For example, if the County owns three boats; two have purchase price over the threshold and one was purchased under the threshold; the boat of lesser value may be reported along with the other two boats for consistency.) The acquisition of individual items which are valued below the threshold will not be reported. However, if the County acquires a group of items that exceed the threshold, it may be reported even though the individual items may or may not be inventoried for control purposes. (For example, an office replaced all of their furniture with matching cubicles, desks, and files. The replacement was bid and installed as a unit. The unit may be reported as a single capital asset in the year of purchase, and may be removed when fully depreciated.) The County may choose to record some items below the capitalization or inventory level if it is determined more control is advisable due to their uniqueness or vulnerability. Depreciation of Assets for Financial Statement Purposes Depreciation is the systematic and rational allocation of the purchase price of a capital asset over its useful life. Depreciation is calculated using the straight-line method; it is calculated as of the month the asset is put into service through the month it is taken out of service. Depreciation expense is reported as a direct expense of the functional levels of the County, with the exception of the County buildings, whose entire depreciation is reported as a General Government expense. Infrastructure depreciation is reported as a direct expense of the responsible function, primarily the Public Works Department.

3 Any income gain from the sale of asset over the depreciated value is recognized at the function level, whereas any loss is recognized as a general fund expense. The Public Works Department calculates depreciation for their annual report. Due to differences in systems, the Public Works Department s expense amount will differ from the County Capital Asset Records. For County financial statements, the County Capital Asset Records amount will be used. Useful Life Useful life is the estimated number of years that an asset will be able to be used for the purpose for which it was purchased. The useful life of capital assets conform to this generalized table: Land Not depreciated Infrastructure 15 to 75 years Buildings 25 to 40 years Improvements, other than Buildings 20 to 35 years Machinery, Equipment, and Furniture 3 to 15 years Art and Historical Treasures Unique Construction in Progress Not depreciated Public Works Equipment Per MN/DOT Guidelines When determining the useful life of an item, the following will be taken into account: government standard listings, quality, application or intended use, environment where located, expected technological advances, and the department heads determination of expected life usage. The County s useful life guide can be found in Appendix A. In most instances, the County intends to use an item no less than its useful life, and will not calculate a salvage amount. Any unrecognized depreciation expense or gain on an asset will be recognized at the time of disposal. The County will often use items beyond their expected useful life, and will only make adjustments to useful life if unique circumstances would deem it necessary. PROCEDURES FOR PURCHASE AND DISPOSAL OF ASSETS PURCHASES County Board approval must be obtained and a Capital Asset Form completed for all purchases of capital assets with a purchase price greater than $ Purchases are to be made according to the County s purchasing policy, obtaining bids, quotes, and approvals as required. It is suggested that if you are replacing an item, obtain Board approval to remove the old equipment at the same time you obtain approval to purchase the new item. 2. When the new equipment has been received and is ready for use: Complete a Capital Asset Form, including the description, serial number (if applicable), vendor name, County Board approval date, and cost of the item.

4 Send the Capital Asset Form to the Administrative Financial Manager at the time the claim is prepared and sent to the Auditor-Treasurer. The equipment will then be added to the County Capital Asset Records, which assigns an index number. 3. The Administrative Financial Manager will review the County Board minutes and the financial system account activity report for newly purchased items. If no Capital Asset Form has been completed, a reminder will be sent to the department head. Upon receipt of the reminder, a Capital Asset Form is to be completed and submitted to the Administrative Financial Manager. If no form is submitted, the item will be set up on the County Capital Asset Records using whatever information is available until such time as further information is provided. The department head will be responsible for any incomplete or inaccurate information. 4. The department s current inventory record is to be updated whenever asset items are purchased. Emergency Purchase: If a purchase, with a purchase price greater than $5000, is made under the Purchasing Policy Emergency Procedures, the Capital Asset Form must be completed and sent to the County Administrator for approval and forwarding to the Administrative Financial Manager for entering into the County Capital Asset Records. The County Administrator will obtain board approval when deemed necessary. Purchases of items $5000 or less do not require board approval or capital asset forms, but departmental inventory must be updated to reflect the change. Purchased assets will generally be paid from the department s equipment, furniture, and fixtures account (6603). Some other accounts that may be used at times are: forfeiture funds, grant expenses, or miscellaneous expense. DISPOSALS Capital Assets (any asset with a purchase price over $5000) 1. Prior Board approval must be obtained to sell, trade, or dispose of a capital asset. Upon approval the sale, trade, or disposal may take place. 2. After approval and disposal, the completed capital asset form, which must include the index number, description of item, details of the disposal, trade in or sale including sale price when applicable, and board approval date, shall be sent to the Administrative Financial Manager for updating of the County Capital Asset Records. 1.. Departmental Inventory (any asset with a purchase priceover $5000)

5 Disposal of items $5000 or lessdo not require County Board approval or the completion of a Capital Asset Form. However, it does require the updating of the department s inventory records. DEPARTMENTAL INVENTORY Each department head is responsible for maintaining a record of all assets in their department. The County Capital Asset Records includes capital assets over $5,000. The department head is required to keep a current listing of all assets in their department, regardless of value. The recommended method for recording this information is in spreadsheet format.. A copy of the County Capital Asset Records list for your department can be obtained from the Administrative Financial Manager upon request. The list of assets $5000 or less shall include equipment, but not supply items. This listing will serve as an aid in asset control; if needed, it would also assist in filing of an insurance claim. Technology Services is responsible for maintaining the complete inventory of all County-owned computer equipment, including purchase date, brand, serial number etc. (refer to the Computer Equipment section below for additional information). Per the schedule in Appendix B, departments shall update their physical inventory count of assets and send a copy of the departmental inventory list to the Administrative Financial Manager. COMPUTER EQUIPMENT Computer equipment is defined as servers, processors, monitors (including keyboard, mouse etc), copiers, phones, cell phones, printers, fax machines, etc. All purchases of computer equipment must be handled through the Technology Services Department following the purchasing policy. Technology Services is responsible for maintaining complete inventory records for all of the County s computer equipment. They will maintain computer inventory information as required by MCIT, and will send information to them upon request. Technology Services will assign the index numbers for the County-wide Capital Assets System. Using numbering series INSURANCE REQUIREMENTS All assets are insured through Minnesota Counties Insurance Trust (MCIT). MCIT writes blanket coverage for all of the County s electronic data processing (EDP) equipment. Therefore, they require an annual itemization of inventory that includes all EDP equipment with replacement cost values to confirm the blanket limit is accurate. (This does not include the data itself or the software to run it.) Information will be provided for the EDP listing upon request from MCIT. Reporting responsibilities are assigned as follows: Technology Services - listing of all computer equipment PSAP Manager - radio inventory and related equipment Auditor-Treasurer -election equipment. Administrative Financial Manager other items from the Capital Asset Records

6 Other items will be assigned as determined needed. Insurance is required on all County vehicles. When vehicles are purchased, sold, or destroyed the Administrative Services Office will submit changes to the insurance company. Exception: The Sheriff s Office and Public Works Department will make all insurance changes for their vehicles, boats, snowmobiles, heavy equipment, or other applicable items. VEHICLES TITLES, LICENSE TABS, AND FORFEITED Titles, licenses, and insurance cab cards for all County-owned vehicles will be maintained by the Administrative Services Office. Exception: The Sheriff s Office and Public Works Department are responsible for title transfers, license tab purchases, record keeping of titles, and insurance cab cards for their vehicles, boats, snowmobiles, heavy equipment, or other applicable items. Forfeiture Vehicles can, by state statute, be used by the Sheriff s Office. While being used they are assigned a unit number and added to insurance. Since there is no purchase price for these vehicles, and receipt of sale money is forfeiture funds, these vehicles will not be added to the capital assets program. Squad Purchase price shall include: lights and radios and other equipment mounted on/in the car decals and painting Misc items to make it a fully functioning vehicle If equipment is later moved to a different vehicle, the value of such equipment will not be deducted from the original car and will not be added to the receiving car (value would be insignificant compared to the task of tracking). MISCELLANEOUS ASSETS Donated Assets - All donated capital assets require County Board approval. Refer to donations policy for further information on board acceptance and whether such acceptance is required before or after acceptance of the donation. Donated assets will be recorded in the County Capital Asset Records at an estimated fair market value at the date of the donation, by the Administrative Financial Manager. Grant Fund Assets Assets acquired with grant funding shall be set up on the County Capital Asset Records. The disposal of assets acquired with grant funds with specific instructions for disposal will be the responsibility of the person obtaining the grant. Self-Constructed Assets - Items built by or for the County will be recorded in the County Capital Asset Records with a value determined by the person doing the construction and the department head requesting the item.

7 Capital Debt Purchase - Assets purchased with funds from debt proceeds will be recorded in the County Capital Asset Records as of the time of purchase to offset the debt expense on the financial statement. Capital Leases When the County enters into a capital lease, the asset will be recognized as a County asset as of the time the lease is signed. IMPROVEMENTS VS MAINTENANCE EXPENSE In order to be classified as improvement within the County Capital Asset Records it needs to be over the capitalization limit of $5,000 and meet one of the following requirements: Significantly extends the useful life (extend the remaining life by 25% or more) Increases the capacity (road that handles more cars, office that houses more staff) Improves efficiency by a minimum of 10% Changes the original function or use for Public Works Equipment per MnDot Standards The cost of maintenance and repairs that do not add to the value of the asset or materially extend the life of the asset are not capitalized. (e.g., plumbing, electrical, painting and etc). TRAILS The Soo Line Trail is located on County-owned property, which was the former Soo Line Railroad right-of-way. This land is included in Mille Lacs County s land inventory and is not depreciated. Improvements to the trail are depreciated in the same way as other infrastructure assets. (Listed as Type 4, Improvements other than Buildings, in the County Capital Asset Record, Department 310) The Burlington Northern Trail is partially located on various unconnected parcels of Countyowned property. The trail is permitted on these properties and is maintained by an association. The land which is owned by the County is included on the County s land inventory and is not depreciated. Improvements are not made by the County and, therefore, are not recorded as infrastructure assets. (All improvements listed under Trails on the County Capital Asset Records refer to the Soo Line Trail.) INTERNAL CONTROLS Annually a copy of the capital assets list maintained by the Administrative Financial Manager will be sent to each department for their review. Departments scheduled to take a full physical inventory for the year, per Appendix B, will receive a reminder. No department head or other employee has access to the Capital Asset System. Since the Administrative Financial Manager is responsible for the County Capital Asset Records, and that position is part of the Administrative Services Office, the Administrative Services Office s individual office inventory must be signed by the County Administrator.

8 The Administrative Services Office has no access to the check writing programs. A listing of all land on the Capital Asset System will be run annually and taken to the Auditor s office to review against the tax roll records. This will keep the County Capital Asset Records up-to-date with any purchases or sales that occur during the year that were missed or unreported.

9 Appendix A Guide for useful life of assets: Machinery, equipment and furniture Desks, Tables, Bookcases, Cubicles 3-15 years 15 years Chairs If limited usage 7 years 10 years Workstation Computers Computer Servers Copiers Fleet Cars Squad Cars 5 years 5 years 8 years 8 years 8 years Bridges 75 years Bridges shall meet Mn/DOT and AASHTO s definition of a bridge. Roads Trail Improvements Parking Lots Right-of-Way Public Works equipment/machinery Trucks Skidsteer Mowers GPS Motorgraders Pickups 50 years 25 years 20 years Not depreciated Per MnDot guidelines 8 years 10 years 4 years 10 years 12 years 8 years

10 Appendix B Individual department inventory is to be taken per the schedule below or annually, if the department prefers. Inventory can be taken anytime during the year, but a copy of the report is due to the Administrative Financial Manager by December 31. The report is to include the date the inventory was taken. Odd-Numbered Years Even-Numbered Years (Beginning with 2019) (Beginning with 2018) Administrative Services o Maintenance o Information Services o Extension Land Services Community and Veterans Services Assessor Auditor-Treasurer Sheriff Attorney Probation Auditor-Treasurer Public Works Court Administration/Law Library