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Home My WebLink AboutD-1546-01 Fixed Asset PolicySponsor: Councilor Snyder ORDINANCE NO. D-1546-01 (Formerly Ordinance No. D-1492-00) AN ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF CARMEL, INDIANA, ESTABLISHING A FIXED ASSET CAPITALIZATION POLICY WHEREAS, the Common Council (the "Council") of the City of Carmel, Indiana (the "City") has determined that a need exists to establish a capitalization policy for the City and its various Departments, and: NOW THEREFORE, BE IT ORDA1NED by the goveming body of the City of Carmel, in Hamilton County, in the State of Indiana: Sec.2-132 The Fixed Asset Capitalization Policy (a) DEFINITIONS AND PROVISIONS: For purposes of this ordinance, the following definitions shall apply unless the context clearly indicates or requires a different meaning. "Tanl~ibleAssets". An asset that can be observed by one or more ofthe physical senses is referred to as a tangible asset. "Fixed Assets". Tangible assets of a durable nature employed in the operating activities of the unit and that are relatively permanent are fixed assets. These assets are not held for sale in the ordinary course of business. This broad group is usually separated into classes according to the physical characteristics of the items (e.g. land, buildings, improvements other than buildings, machinery and equipment, fumiture and fixtures). "Canital Outlays". Expenditures which benefit both the current and future fiscal periods are considered capital outlays. This includes costs of acquiring land or structures, construction or improvement of buildings, structures or other fixed assets, and equipment purchases having an appreciable and calculable period of usefulness. These are expenditures resulting in the acquisition of or addition to the governrnent's general fixed assets. LAND The City will capitalize all land purchases, regardless of cost. Exceptions to land capitalization are land purchased outright as easements or rights-of-way for infrastructure. Examples of infrastructures are roads and D:\Files\Ordinances\D-1546-01 .doc streets, street lighting systems, overpasses, sidewalks, curbs, parking meters, street signs and storm water collection. The original cost of land shall include the full value given to the seller including relocation costs, legal services incidental to the purchase (including title work), appraisals and negotiation fees, surveying and any other costs for preparing the land for its intended purpose. Also included are contractors and/or city personnel (salary and benefits) used to demolish buildings, excavation, clean up, and/or inspection. The City shall record donated land at fair market value plus all associated costs on the date of the land transfer. Purchases made using Federal or State funding will adhere to the source funding policies and procedures. MACHINERY AND EQUIPMENT: The definition of machinery and equipment is an apparatus, tool, or conglomeration of pieces to form a tool. The tool will stand-alone and not be a pan of the basic structure or building. The City shall capitalize and tag items with an individual value equal to or greater than $2,000. Machinery combined with other machinery to form one unit with a total value greater than $2,000 will be one unit. Shipping charges, consultant fees, and any other cost directly associated with the pumhase, delivery, or set up that makes such equipment operable for its intended purpose shall be capitalized. Improvements or renovations to existing machinery and equipment shall be capitalized only if the result of the change meets all of the following conditions: 1) Costs for improvements and renovations exceed $2,000; 2) The useful life is extended two or more years; 3) The total costs wilt be greater than the current book value and less than the fair market value. Purchases made using Federal or State funding will follow the source funding policies and procedures. D:\Files\Ordinances\D-1546-01 ,doc BUILDINGS: A department will capitalize buildings at full cost with no subcategories including the cost of attachments. Examples of attachments are heating, cooling, plumbing, lighting, or sprinkler systems, or any part of the basic building. The City will include the cost of items designed or purchased exclusively for the building. A new building will be capitalized only if it meets the following conditions: 1) The total cost exceeds $100,000; 2) The useful life is greater than two years. Any department, board or commission improving or renovating an existing building will capitalize the cost only if the result meets all of the following conditions: 1) The total cost exceeds $100,000; 2) The useful life is extended two or more years; 3) The total cost will be greater than the current book value and less than the fair market value; 4) Repairs and rehabilitation of less than $100,000 shall be expensed. Capital building costs will include land preparation, architectural and engineering fees, bond issuance fees, attorney and financing costs (during eonstmction), accounting costs, and any costs directly attributable to the construction of a building. A department shall record donated buildings at fair market value including associated costs on the date of transfer. Purchases made using Federal or State funding will adhere to the source funding policies and procedures. IMPROVEMENTS OTHER THAN BUILDINGS: The definition of this group includes improvements to land which are attached or not easily removed and which have a life expectancy of greater than two years. Examples are walks, parking areas and drives, golf can paths, fencing, retaining walls, pools, outside fountains, planters underground sprinkler systems, and other similar items. Roads or drives on City-owned land that provide support to City facilities are assets. Sidewalks installed on City-owned land for use by the public and for the support of the City facility are capital assets. D:\Files\Ordinances\D-1546-01 .doc The City shall capitalize repairs or renovations to improvements only if it meets the following conditions: 1) The total cost exceeds $35,000; 2) The useful life is greater than two years. A department shall capitalize improvements or renovations to existing improvements other than buildings only if the result meets the following conditions: 1) The total cost exceeds $35,000; 2) The asset's useful life is extended two or more years, and 3) The total cost will be greater than the current book value and less than the fair market value. A department's donated improvements other than buildings will be recorded at fair market value plus all associated costs on the date of transfer. Purchases made using Federal or State funding will follow the source funding policies and the aforementioned procedures. "Historical Cost". The cash equivalent price exchanged for goods or services at the date of acquisition is the historical cost. Land, buildings, equipment, and most inventories are common examples of items recognized under the historical cost attribute. (b) RECORDING AND ACCOUNTING: All City departments excluding the Utility Department shall classify capital expenditures as capital outlays within the fund from which the expenditure was made in accordance with the Chart of Accounts of the City of Carmel. The cost of capital expenditures includes all expenditures necessary to place the asset into position and available for use. For purposes of recording fixed assets of the City and its departments, the valuation of assets shall be based on historical cost or, where the historical cost is indeterminable, by estimation for those assets in existence. In addition, a Fixed Asset Register shall be maintained in the office of the Clerk Treasurer that will provide a detailed record of the capital assets and fixed assets of the governmental unit, The Clerk Treasurer or her designee shall serve as the Fixed Asset Coordinator for the City. All departments of the City except the Utility Department shall designate at least one employee to monitor and manage the fixed assets of each department. This designee shall ensure D:\Files\Occlinances\D-1546-01 .doc that policies and procedures exist within each department for the safeguarding and accotmting of assets. These responsibilities shall include: 1 ) Proper identification of all assets. 2) Proper reporting of assets on the approved asset inventory report. 3) Utilization of City approved asset tags on all equipment and machinery. 4) A minimum of semi-annual reconciliation of assets. (c) SAFEGUARDING OF ASSETS: Be it ordained that accounting controls be designed and implemented to provide reasonable assurances that: 1. Capital expenditures made by the City shall be in accordance with the Common Council's authorization as documented by this Ordinance. 2. AssettransactionsoftheCityshallberecordedtopermittheproperpreparationof financial statements to comply with the generally accepted accounting principles. ~'t~ASSED by the Common Council of the City of Carmel, Indiana, this/~r//7'/~ day of ,L~_I~(~g.~L~)F3, , 2001, by a vote of t ayes and 19 nayT.~iisordinance will become effective on April 1, 2002. ~ ATTEST: · rdr , IAM , C1 reas re D:\Files\Ordinances\D4546-01.doe Diana L. CordTy, IAM~ ' teasurer ~s Brain(rd, May~r ATTEST: Diana L. Cordray, IAMC, Clerk-T~urer Prepared By: Diana L. Cordray, Clerk-Treasurer City of Carmel D:\Files\Ordinances~D-1546-01 .doc