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Home My WebLink AboutN-430 - Fixed Asset PolicyCITY OF PASCO ADMINISTRATIVE ORDERS Administrative Order No. 430 Finance Subject: Fixed Asset Policy and Procedures Initial Effective Date: February 17, 2016 Revised Approved I. PURPOSE: This Administrative Order is intended to foster a common understanding and consistent use of internal procedures with respect to fixed assets. II. DEPARTMENTS AFFECTED: All III. ATTACHMENTS: Fixed Asset Transaction Form IV. DEFINITIONS: Cost: "original" or "historical" cost is the amount paid to acquire an asset. This cost is based on the actual price paid, including related taxes, commissions, installation costs and other costs related to acquiring the asset or preparing the asset for use. In the case of donated assets the value assigned should approximate the fair market value. This cost principal applies to both general and proprietary fixed asset acquisitions. Depreciation: the portion of the cost of a fixed asset which is charged as an expense during a particular period. hi accounting for depreciation, the cost of a fixed asset is pro- rated over the estimated service life and each period is charged with a portion of such cost. Through this process, the entire cost of the asset is ultimately charged off as an expense. Fixed Assets: real and personal property with a cost in excess of $5,000 and which the City intends to use or keep for more than two (2) years. Categories of fixed assets are: • Land: Real property. • Buildings: Structure(s), which may or may not have full enclosure. • Improvements other than Buildings: haprovements that are not attached to or mounted on a building (i.e. fences, docks, irrigation systems, etc.). • Machinery and E ui ent: This includes office furniture, office equipment, vehicles, and other machinery and equipment. • Infrastructure: roads, bridges, sidewalks, water lines, sewers, drainage systems, etc. as identified in the Capital Improvement Plan (CIP). Items excluded from the definition of fixed assets, regardless of the cost, include: • Spare parts, supplies, and expendables • Training • Maps, plans, records, reports • Studies (unless they are included in the approved CIP Budget) Fixed Assets System: the set of policies, procedures and computer programs used to control the City's fixed assets. V. POLICIES AND PROCEDURES: CAPITALIZATION LIMIT All assets acquired or constructed with a cost of $5,000 or more and having a useful life greater than two (2) years per individual item will be entered into the Fixed Asset System. Costs for self -constructed assets will be based on all costs associated with construction accumulated through work orders and other available records. Assets acquired through capital lease financing, which will become the property of the City at the end of the lease, will be included as a fixed asset in accordance with this policy. Donated fixed assets will be recorded at estimated fair market value at the time received. Small and attractive assets are those assets with a cost under $5,000 but which are considered attractive, thus requiring property control (i.e. cameras, cell phones, radios, microphones, specialty tools/equipment, computers, etc.). These items with a cost of over $500 are to be inventoried, but not included in the fixed asset system. An attractive inventory list, separate from the fixed asset listing, will be maintained by the respective departments. Items may be tagged (provided by the department) including other items as deemed appropriate. Information Systems (IS) maintains an attractive listing of technology items that are purchased thru IS that may be located in the various departments of the City. Those items may consist of servers, desktop computers, tablet computers, laptop computers, workstation computers, Wads, Whones, printers, copiers, cameras, network switches/devices, projectors and LCD displays. Infrastructure will be capitalized in proprietary funds, including the general governmental funds. ADDITIONS A Fixed Asset Transaction Form will be completed by the department making the purchase and forwarded to Finance, upon completion of a CIP project or purchase of an item. This form will include the category of the asset, acquisition information, source of payment, and a description of the asset. Finance will input all information into the Fixed Asset System. General governmental assets will be recorded as capital expenditures in the fund that finances the asset at the time of acquisition. Such assets will be recorded annually in the General Fixed Assets Account Group (GFAAG). Fixed assets purchased in proprietary Administrative Order No. 430 — "Fixed Asset" Page 2 funds will be recorded as capital expenditures for budget purposes in those funds at the time of purchase. The capital expenditures will be closed to the appropriate asset account in the balance sheet monthly. TRANSFERS AND DISPOSALS For all assets transferred to another department, transferred to surplus pending sale, or set for disposal, a Fixed Asset Transaction Form explaining the circumstance must be completed and sent to Finance. The department FROM which the asset is moving will be responsible for completing the form. All changes in custody or use are recorded in the Fixed Asset System. Annually, entries will be made in the GFAAG for general governmental assets which have been sold or disposed of. Adjustments will be made monthly in proprietary funds for assets which have been sold or disposed of. The process for surplusing of an asset can be found in the Pasco Municipal Code, Section 2.46.080 Authority to Sell Personal Property. DEPRECIATION All fixed assets of proprietary funds, except land, are depreciated. Depreciation of fixed assets in proprietary funds will be calculated annually. Depreciation will be based on a reasonable estimate of expected useful life and the entire cost of the asset. The straight- line method will be used in which the depreciation charged is constant for each time period. Depreciation of assets for proprietary funds acquired from contributions will be calculated in the same manner as for other assets and will be reported in the same way on the income statement. PHYSICAL INVENTORY A physical inventory is a means to demonstrate that the City is exercising its custodial responsibility for assets. A physical inventory of the City's fixed assets will be taken every other year starting in 2016. Finance will distribute current listings of fixed assets by no later than April 1. Departments will be responsible for verifying the existence of the assets and the accuracy of the listing and submitting changes to Finance by December 15 of the current year (thus allowing flexibility within the departments to schedule time for the inventory). The departmental inventory listing of all attractive items (maintained by the department and not considered as part of the fixed asset inventory) will also be reviewed and updated by the respective departments annually. Approved: _ ✓r/ �(i�Illo 6bave Zabell?Ch5L"ager Date Administrative Order No. 430 — "Fixed Asset" Page 2 Attachment No.1 FIXED ASSET TRANSACTION FORM CITY OF PASCO FUND Fund purchase from: System # Acquisition Date Barcode Number: Disposal Date: Department Responsible for Asset: Transfer Date: Person Submitting This Form: Life of Item- Years Department Signature: Asset Description: Vendor: Manufacturer: Model: Serial Number: Purchase Price Repl Veh # w/taxes included) Employee assigned to: _ Project # Life of Item- Years From Department: (transfers Only) To Department: (transfer Only) Method of Disposal: please circle ONE Wrecked I Destroyed Sold ` Surplused Strapped Donated (from City to Org) Lost "' Stolen ' (If Sold), Sale Price: " Donated to: (organization) *** LOST ASSETS: The individual deemed to have the primary responsibility for the asset, as well as the employee's department head, shall complete and sign a statement to include a description of events surrounding the disappearance of the asset, who was notified of the loss, and steps taken to locate the asset. All known or suspected losses of assets shall be reported to the State Auditor's Office in accordance with RCW 43.09.185. comments: Vendor Amount Date Description 0.00 Finance Department Only. ITEM CODE FA:LOCATION GAAFR CATEGORY ACO TYPE LIFE IN MONTHS Administrative Uroer No. 43u - Fixed Asset Policy and Procedures Attachment No. 1