CORPORATION OF THE TOWNSHIP OF LEEDS AND THE THOUSAND ISLANDS BY-LAW 16-025 BEING A BY-LAW TO ADOPT A TANGILBLE CAPITAL ASSET POLICY FOR THE TOWNSHIP OF LEEDS AND THE THOUSAND ISLANDS. WHEREAS Section 8 of the Municipal Act, S.O. 2001, c. M. 25, as amended, a municipality has the capacity, rights, powers and privileges of a natural person for the purpose of exercising its authority under this or any other act; AND WHEREAS Section 9 of the Municipal Act S.O., 2001, c. M. 25, as amended, provides that Sections 8 and 11 shall be interpreted broadly so as to confer broad authority on municipalities to a) enable municipalities to govern their affairs as they consider appropriate and, b) enhance their ability to respond to municipal issues; AND WHEREAS Section 11 of the Municipal Act S.O., 2001, c. M. 25, as amended, provides that a lower-tier municipality may pass by-laws respecting matters within the spheres of jurisdiction set out therein; AND WHEREAS the Council of The Corporation of the Township of deems it advisable to adopt a policy with regard to a ; NOW THEREFORE the Township of Thousand Islands enacts as follows: 1. That Schedule 'A' attached hereto forms part of this by-law. 2. That this By-law shall come into force and take effect on the day of passing. 3. This By-law shall be known and may be cited as the "Tangible Capital Asset Policy". READ A FIRST AND SECOND TIME THIS 11th DAY OF APRIL, 2016. READ A THIRD TIME AND FINALLY PASSED THIS 11th DAY OF APRIL, 2016. Joseph Baptista, Mayor Vaness timer, Clerk
Township of Page 2 of 10 Policy: SCHEDULE 'A' to By-law #16-025 The Tangible Capital Assets Policy supports organizational decision making, provides enhanced reporting and increased transparency to the organization, the public, and other stakeholders. The recognition, recording, and reporting of Tangible Capital Assets are necessary financial processes to support the goal of strategically managing, investing, and planning for sustainable municipal assets. Objective: The purpose of the is to provide direction for the recognizing and recording of Tangible Capital Assets (TCA) on a consistent basis in compliance with Public Sector Accounting Board (PSAB) Handbook Section 3150. Definitions: "Amortization" means an accounting concept in which the recorded cost of an asset is distributed in a systematic and rational manner over its estimated useful life and matches the cost of that asset to the periods in which service is derived from the asset. "Betterment" means the subsequent expenditure on a tangible capital asset, in excess of the relevant threshold, that will do one or more of the following: o Sustainably increase the previously assessed physical output or service capacity; o Significantly lower associated operating costs; or o Substantially extend the useful life of the asset. "Cost" is the gross amount of consideration given up to acquire, construct, develop or better a tangible capital asset, and includes all costs directly attributable to acquisition, construction, development, or betterment of the tangible capital asset, including installing the asset at the location and in the condition necessary for its intended use. "Fair value" is the amount of the consideration that would be agreed upon in an arm's length transaction between knowledgeable and willing parties who are under no compulsion to act. Fair value would be used to assign an amount to a donated asset received by the Township.
lbwnship of Page 3 of 10 "Historical cost" of an asset is the amount of consideration given up to acquire, construct, develop or better an asset and includes all costs directly attributable to acquisition, construction, development or betterment of the asset including installing the asset at the location and in the condition necessary for its intended use. Historical cost is generally determined using the actual original cost. Where actual original cost information is not available, an estimated original cost may be used. "Infrastructure" is composed of linear assets and their associated specific components generally constructed or arranged in a continuous or connected network. Linear assets may include transportation components like roads, bridges, and storm sewers or environmental asset components such as water distribution systems and waste water treatment systems. "Maintenance" is a recurrent expenditure, whether it be periodically or regularly required to keep an asset in a condition that helps maintain or ensure realization of the future economic benefits that are expected from the asset over the initially assessed useful life. "Pooled Assets" are assets that have a value below the capitalization threshold when considered on an individual basis but that collectively make up for a significant group of assets which exceeds the relevant threshold level. Pooled assets are recorded as a single asset with one combined value, although each unit may be recorded in the asset subledger for monitoring and control of its use and maintenance. "Residual Value" is the estimated net realizable value of a tangible capital asset at the end of it useful life. "Straight Line Method" is the preferred method of amortization in which the periodic charge is computed by dividing the cost base of the asset by its estimated useful life. "Threshold" is generally a minimum cost that an individual asset must have before it is to be treated as a tangible capital asset. The threshold amount is to be used as a guide in addition to professional judgement. "Township" means the Corporation of the Township of Leeds and the. "Useful Life" is the estimate of either the period over which a tangible capital asset is expected to be used by the Municipality.
Thwnship of Page 4 of 10 Procedure: General Tangible Capital Assets are non-financial assets having physical substance that: a) Are held for use in the production or supply of goods and services, for rental to others, for administrative purposes or for the development, construction, maintenance or repair of other tangible capital assets; b) Ownership and control clearly rests with the municipality; c) Are used to achieve municipal objectives; d) Having useful lives extending beyond one year; e) Are used on a continuing basis; and f) Are not for resale in the ordinary course of operations. The principal issues in accounting for Tangible Capital Assets are the recognition of the assets, the determination of their carrying amounts, the amortization charges, and the recognition of any related impairment or disposal losses. Capitalization Thresholds Only tangible capital assets that exceed the asset class threshold will be capitalized. The following are the thresholds that are being used to develop the initial capital assets listings: a) Any individual item that meets the definition of a tangible capital asset with a cost of $5,000 or greater; b) The pool of assets that meets the definition of a tangible capital asset, which was purchased in bulk and has a replacement cost of $25,000 or greater in any given year. Once the initial tangible capital asset listing has been prepared, in subsequent years, it will be reviewed to determine whether or not the threshold should be raised. Primary Categories of Tangible Capital Assets The following provides definitions for the primary classes of capital assets that will be used by the municipality, as well as examples of how specific assets will be classified:
lbwnship of Page 5 of 10 Construction in progress - The cost of tangible capital assets under construction, constructed or in a uncompleted process of acquisition by the municipality, and that are not yet in service. Land - Real property in the form of a plot, lot or area. Land improvements - Consists of betterments, site preparation and site improvements that ready land for its intended use, which generally decay or break down over time. Examples include but are not limited to parking lots, retaining walls, fencing, ball diamonds, tennis courts, and soccer fields. Buildings - All structures that provide shelter from elements which function independent of an asset network. Examples include but are not limited to office buildings, fire stations, garages, pavilions, change rooms, park washrooms, and water supply buildings. Furniture and equipment - An apparatus, tool, device, implement or instrument that likely uses energy to facilitate a process, function or completion of a task, as well as furniture and fixtures. Computer systems - All computer related hardware and software, including printers. Vehicles - A means of transportation for transporting persons or things or designed to be towed behind such apparatus. Includes automobiles, trucks, trailers, boats, etc. Roads - This category includes roads as well as related things such as storm drainage collection systems and street lights. Bridges - This category could include bridges and large culverts at the discretion of the Treasurer. Valuation of Tangible Capital Assets Existing tangible capital assets shall be valued in the following manner: a) Historical cost, if known; b) If historical cost is not known, then by appraised value; or c) If historical cost is not known, or the asset has not been appraised, then by insured value. Contents, being the equipment, furniture and fixture forming a part of, or contained within the buildings and facilities shall be recorded at the lump sum insured value. Contents will not be individually listed due to the labour intensity, time constraints and costs incurred to create and maintain such lists. Content values shall be adjusted on an annual basis and due to the short life and on-going disposal and replacement of such assets, will not be subject to amortization charges. Additions of all tangible capital assets for subsequent fiscal years shall be added to the appropriate asset category at cost.
lbwnship of Leeds ma the Page 6 of 10 The costs of betterments may be added to the historical cost of the specific tangible capital asset (TCA) and amortized accordingly. Where required, the useful life of the asset may be changed to reflect the betterment. To be recorded as betterment, the value of the expenditure must meet the threshold for the asset category to which the tangible capital asset subject to the betterment belongs. Repairs and maintenance on tangible capital assets shall not be capitalized unless deemed to be a betterment and/or are above the threshold amount. Expected useful life is normally the shortest of the asset's physical, technological, commercial, and legal life and is based on its use by the Municipality. In determining an asset's useful life the present condition, intended use, construction type and maintenance policy will be considered, including how long the asset is expected to meet service demands and the Municipality's experience with similar assets. Acquired, Constructed or Developed Assets Tangible Capital Assets are recorded at cost plus any ancillary charges necessary to place, prepare, and install the Asset in its intended location and condition necessary for its intended use. Cost includes all non-refundable taxes and is net of any trade discounts or rebates. Funding sources such as grant and donations are not netted against the cost of the related Tangible Capital Asset. The cost of purchased assets includes the purchase price and other acquisition costs to install the Asset at the location and in the condition necessary for its intended use, such as installation costs, design and engineering fees, legal fees, survey costs, site preparation costs, freight charges, transportation insurance costs, and duties. Costs includes all costs directly attributable to the acquisition, construction or development of the asset. Carrying costs such as internal design, inspection, administrative, and other similar costs may be capitalized. Donated or Contributed Assets The cost of donated or contributed assets that meet the criteria for recognition is equal to the fair value at the date of construction or contribution. Fair value may be determined using market or appraisal values. If it is not possible or practical to determine the fair market or appraised value, other reasonable methods of
lbtroshlp of Leeds 'tad the Thousand islands Page 7 of 10 valuation may be applied to determine an estimated cost, such as discounted cash flows or replacement cost. Group or Pooled Assets Similar assets that have unit value below capitalization threshold on their own but have a material value as a group are considered group or pooled assets. Such assets shall be pooled as a single asset with one combined value. Although recorded in the asset module as a single asset, each unit of the pool may be recorded in an asset sub-ledger for monitoring and control of their use and maintenance. Examples would include the following: Computer hardware & software Streetlights Furniture and fixtures Small Machinery Signage As similar items are purchased, they will be added to the pool. An inventory will be taken on a periodic basis. Amortization The cost of the tangible capital asset with a limited life will be amortized over its useful life using the straight line method. The amortization method and estimate of useful life of the remaining unamortized portion may be reviewed on an annual basis and revised when the appropriateness of a change can be clearly demonstrated. Amortization shall commence in the year of acquisition or "in service" and shall be charged at one half the regular rates during year of asset acquisition. Disposal of Assets When tangible capital assets are taken out of service, destroyed or replaced due to obsolescence, scrapping or dismantling, the Operating Department must notify the Treasury Department of the asset disposition and effective date of the disposal, and subject to the terms and conditions of the Procurement By-Law. Assets will be retired from the accounts of the Municipality when the asset is disposed of. A gain or loss on disposal will be calculated as the difference between the proceeds received and the net book value of the tangible capital asset. The gain or loss on disposal will be recorded in the accounts of the Operating Department.
limishlp of Leeds mui the Page 8 of 10 Write Downs A write down is used to reflect a permanent partial impairment in the value of an asset. This impairment may be a result of: a) Removal of the asset from service: b) Physical damage; c) Significant technological developments; d) A decline in or cessation of the need for the service provided by the asset; and e) A change in the law or environment affecting the asset usage. If the value of the asset is impaired, the cost of the asset will be written down to reflect the decline in the asset's value and its shorter useful life. This write down is considered a loss (expense) in the accounts of the Operating Department. Records The Treasury Department will maintain records of the complete inventory of the Township's Tangible Capital Assets and the related Amortization based on historical Tangible Capital Assets acquisitions and disposals. Financial Reporting In total and for each major category for Tangible Capital Assets, the Township will disclose the following in the annual financial statements: Cost at the beginning and end of the period; Additions in the period; Disposals in the period; The amount of any write-downs in the period; The amount of amortization expense for the period; Accumulated amortization at the beginning and end of the period; and, Net book value at the beginning and end of the period. Administration All expenditures and funding sources for Tangible Capital Assets will be approved by Council through the annual budget process. When projects are completed and all expenses have been processed, the Treasury Department will close the project and release any unused funding back to its original source.
lbwnship of Page 9 of 10 Responsibilities All employees are responsible for: Keeping accurate records when purchasing, acquiring, selling and maintaining capital assets owned by the Township Providing valuation details such as purchase price, fair market value, replacement value, useful life and scheduled maintenance of existing and future TCA s s for which they are responsible. The Treasurer is responsible for the development and maintenance of an asset registry to track all tangible capital assets and the overall enforcement of the policy. Maximum Useful Life Useful Life Classification Details (years) Buildings Fire Halls 50 Garages 40 Main Buildings 50 Other Buildings 30 Storage Sheds 20 Contents General 8 Library Books 7 Docks 15 Land Improvements Fences 20 Parking Lots 20 Playground Structures 15 Playing Fields and Courts 20 Roads Bridges 50 Culverts 15 Fire Hydrants 30 Road - Gravel 30 Road - Hard Topped 20 Road - Paved 30 Road Signs 5 Sidewalks 30 Storm Sewer 40 Street Lights 10
'Amish1p of Page 10 of 10 Maximum Useful Life Classification Vehicles and Equipment Water and Wastewater Details Computer Systems Construction Equipment Fire Trucks Marine Vessels Office Furniture and Equipment Connections, Mains and Lines Pumping stations. Sewage Lagoon Treatment Equipment Useful Life (years) 5 8-15 20 25 10 50 40 50 40