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HomeMy WebLinkAboutResolution 2007-009 N.C.S. 01/22/2007 Resolution No. 2007-009 N.C.S. of the City of Petaluma, California RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA APPROVING THE CITY OF PETALUMA CAPITAL ASSET POLICY WHEREAS, the City Administrative Services Department has deterll~ined the need for an amendment to the capitalization limits included in the City Capital Asset Policy, and; WHEREAS, the City Administrative Services Department has the responsibility for, and has established, systems and procedures through which the objectives of accurate accounting and financial reporting of assets, and safeguarding of assets can be enhanced, and; WHEREAS, the City Administrative Services Department has determine it would be more efficient to recognize different categories of City assets with different capitalization limits, while still continuing to ensure that~the City's accounting and financial reporting objectives are met and strengthens internal controls over the safeguarding of City NOW, THEREFORE, BE IT RESOLVED that the City Council approves the amendment to the City of Petaluma Capital Asset Policy as shown in Exhibit A attached. Under the power and authority conferred upon this Council by the Charter of said City. REI+ ERENCE: I hereby certify the foregoing Resolution was introduced and adopted by the A~ppr v as t Cotmcil of the City of Petalwna at a Regular meeting on the 22°~ day of January, f r 2007, by the following vote: City Attorne AYES: Barrett, Harris, Vice Mayor Nau, O'Brien, Rabbitt, Mayor Torliatt NOES: None ABSENT: None ~ ~ ABSTAIN: None ~ ' _ rf r' ATTEST: ~ /'r City Clerk Ma~ Resolution No. 2007-009 N.C.S. _ _ Page 1 City of Petaluma, California FIXED ASSET CAPITALIZATION AND INVENTORY CONTROL POLICY January 1, 2007 Objectives The objectives of the City of Petaluma's fixed asset policy are as follows: Accounting and Financial Reporting Objective-To accurately account for, and report, fixed assets in financial reports issued to external reporting agencies, granting agencies and the public. Safeguarding of Assets Objective-To establish systems and procedures to protect assets from loss or theft. The Fixed Asset Capitalization and Inventory Control Policy provides specific guidance in determining which fixed assets are subject to capitalization (separate accounting and reporting), and which are subject to the inventory control (safeguarding) policies. The Administrative Services Department is responsible for, and has established, systems and procedures through which both objectives are met. These systems and procedures are used to identify, process, control, track, and report the City's fixed assets. Capitalization Policy Fixed assets will be divided into two categories. The first will include items such as equipment, vehicles, office furniture, items with an inherently lower value than the items in category two. The items in category one will have a capitalization limit of $5,000. The items in category two, which includes items such. as land/easements, land improvements, buildings, building improvements, and infrastructure will have a capitalization limit of $50,000. This capitalization limit refers to the original cost of the asset. Infrastructure and improvement capitalized costs must substantially increase the life of the asset or significantly increase the value (thus repairs and maintenance costs are not excluded). All costs associated with the purchase or construction are considered, including ancillary costs, such as freight, site preparation, professional fees, installation, and legal claims directly attributable to asset acquisition. The capitalization threshold is applied to individual units of fixed assets. The threshold will generally not be applied to components of an asset, unless large equipment is installed as part of a larger capital project.. Repairs to existing fixed assets will generally not be subject to capitalization, unless they extend the useful life of the asset, and exceed the threshold amount. Generally, improvements to existing fixed assets will be subject to capitalization if they exceed the threshold amount. Capital projects will be capitalized as "construction in progress" until completed. Costs are reclassified from construction in progress to infrastructure, or another relevant description, the date the completion of the project is accepted by the City Council. Direct costs, ancillary costs, and construction period interest are included in the capitalized amount. Resolution No. 2007-009 N.C.S. Page 2 Inventory Control Policy Department heads are responsible for safeguarding fixed assets under their control. However, the Administrative Services Department is responsible for establishing and maintaining systems and procedures that enable the Department Heads to properly safeguard assets.. In general, inventory control is applied only to movable fixed assets. The City has implemented a policy to maintain inventory records of computer equipment with a cost between $1,000 and $5,000, and other movable assets with a cost between $2,500 and $5,000. This is in addition to movable assets with a cost greater than $5,000, which are discussed under the Capitalization Policy section of this document. Disposal of Fixed Assets The City Municipal Code, chapter 3.12, outlines the City's policy on asset disposals. The Code states that any City asset, which is no longer required for use by the City, and thus surplus, with a residual value over $500, shall be sold or disposed of as directed, by resolution, by the City Council. Any surplus asset with a residual value under $500 shall be sold or disposed of by the City Manager. Depreciation/Amortization of Fixed Assets Depreciation is the systematic and rational allocation of the estimated or actual historical cost, or fair value at date of donation (of donated assets) over the asset's estimated useful service life. Amortization is the allocation of the cost of intangible assets over their estimated useful life. Estimated useful lives are based upon GASB recommendations Asset Class Years Land/Easement NA CIP in progress NA Site Improvements, Fencing, Landscaping, Paving, Sidewalks 20 Outdoor Equipment, Playground Equipment, Fuel Tanks 20 Buildings 50 Electric, Plumbing 30 Interior Construction, Sprinkler Systems 25 HVAC Systems, Roofing 20 Furniture 20 Carpet 7 Pipelines, Treatment Plants 50 Machinery, Mowers 15 Radios, Fax 10 Licensed Vehicles 8 Computers, Copiers 3 Infrastructure Assets The purchase or construction of infrastructure assets is approved by the City Council. In addition, the donation of infrastructure assets is approved by Council. It is the responsibility of the City departments involved in the purchase, construction or acceptance of donated infrastructure assets to identify and inventory them on a regular basis. It is the responsibility of the Resolution No. 2007-009 N.C.S. Page 3 Administrative Services Department to account for the infrastructure assets by class and fund. It is the responsibility of the Department Heads to ensure that proper budgeting and purchasing guidelines are followed, and that infrastructure assets are adequately controlled and used for appropriate City purposes. All costs associated with the purchase or construction of an infrastructure asset will be included in the capitalized cost, including: design, permits, management, overhead, engineers' salary, capitalize interest. Fair value at the date of donation will be capitalized for donated infrastructure assets. The value of infrastructure assets, which are no longer in existence or service, will be estimated annually by the project engineers, and treated as infrastructure disposals. Intangible Assets Land easements will be recorded with land and not depreciated. Right of ways will be recorded separately and depreciated over useful life. Only easements and right of ways with a cost greater than $5,000 will be capitalized. Transfer of Assets Between Funds Assets will be recorded in the fund which currently controls or maintains the assets Transfers of assets between proprietary funds will be recorded as a loss on disposal, in the amount of the net book value, in the transferring fund, and other revenue, in the amount of the net book value, in the .recipient fund. Transfers of assets between governmental funds or departments will done on the fixed assets schedule only. No entry will be made to the general ledger. Transfers of assets between proprietary funds and governmental funds will be recorded as contributions to/from City/proprietary funds. Transfers of assets purchased with grant funds will be recorded as a sale between funds, including a transfer of cash. Leased Assets The City ,policy will be to enter into only operating leases on leased equipment. Resolution No. 2007-009 N.C.S. Page 4