Loading...
HomeMy WebLinkAboutD-1680-04 Capital Asset PolicySponsor: Councilor Kirby ORDINANCE NO. D-1680-04 AN ORDINANCE OF THE COMMON COUNCIL OF THE CITY OF CARMEL, INDIANA REPEALING ORDINANCE NO. D-1546-01 AND DELETING IN ITS ENTIRETY CHAPTER 2, ARTICLE 3, DIVISION IV OF THE CITY OF CARMEL, INDIANA CODE OF ORDINANCES WHICH ESTABLISHED A FIXED ASSET CAPITALIZATION POLICY AND ADDING A NEW CHAPTER 2, ARTICLE 1, DIVISION III, SECTION 2-13 TO THE CITY OF CARMEL, INDIANA CODE OF ORDINANCES WHICH ESTABLISHES A CAPITAL ASSET POLICY FOR THE CITY OF CARMEL, INDIANA WHEREAS, the Common Council (the "Council") of the City of Carmel, Indiana (the "City") previously adopted Ordinance No. D-1546-01 which established a Fixed Asset Capitalization Policy which was codified as Chapter 2, Article 3, Division IV of the City of Carmel, Indiana Code of Ordinances; and, WHEREAS, the Government Accounting Standards Board established a new F/xed Asset Policy effective January 1, 2002 referred to as the Capital Asset Pohcy; and, WHEREAS, the Council is desirous of replacing the .previously adopted Fixed Asset Capitalization Policy and adopting the Capital Asset Policy for the City and its various Departments; NOW, THEREFORE, BE IT ORDAINED by the Common Council of the City of Carmel, Indiana, as follows: Section 1: The above recitals are incorporated herein by reference as though fully set forth herein below. Section 2: Ordinance No. D-1546-01 is hereby repealed and Chapter 2, Article 3, Division IV is deleted in its entirety from the City of Carmel, Indiana Code of Ordinances. Section 3: A new Chapter 2, Article 1, Division III, Section 2-13 is hereby added to the City of Carmel, Indiana Code of Ordinances, as follows: Section 2-13: Capital Asset Policy (a) Definition of Capital Assets Capital assets include: land, land improvements, including monuments, buildings, building improvements, construction in progress, machinery and equipment, vehicles and infrastructure. All land will be capitalized but not depreciated. All items with a useful life of more than one year, and having a unit cost of $5,000 or more shall be capitalized ('including acquisitions by lease-purchase agreements and donated items). A capital asset meeting the criteria will be reported and depreciated in the government-wide financial statements. Assets that are not capitalized (items < $5,000) are expensed in the year of acquisition. An inventory will be kept on all computers and other equipment with a capitalized cost of<$5,000. Exceptions are: (1) items costing less than the above limits which are permanently installed as a part of the cost of original construction or installation of a larger building or equipment unit will be included in the cost of the larger tm/t; (2) modular equipment added subsequent to original equipment construction of a larger building or equipment trait which may be put together to form larger units costing more than the prescribed limits will be charged to capital assets even though the cost of individual items is less than such units; (3) cabinets, shelving, bookcases, and similar items, added subsequent to original construction, which are custom made for a specific place and adaptable elsewhere, will be capitalized; NOTE: Purchases made using grant funds must comply with grant requirements or the above procedures, whichever are the most restrictive. (b) Threshold Levels For Capital Assets The following schedule will be followed for the various types of capital assets other than infrastructure assets: Capitalize/Depreciate Land Land Improvements Buildings Building Improvements Construction in Progress Machinery and Equipment Vehicles City Utility Assets All; Capitalize only $5,000 $5,000 $5,000 All; Capitalize only $5,000 $5,000 $ 750 2 (c) Infrastructure Retroactive Reporting At the network level, the asset will be classified as major if the cost of the network item is at least 10% of the cost of all capital assets in fiscal year 1999. A network will be defined as a group of similar assets that serve a particular function or purpose for the Civil City. At the subsystem level, the asset will be classified as major if the cost of the sub- system item is at least 5% of the cost of all capital assets in fiscal year 1999. A subsystem will be defined as a segment of a network of assets that serve a similar fimction for the City of Carmel. (d) Valuation of Capital Assets Capital assets must be recorded at actual cost. Normally the cost recorded is the pumhase price or construction costs of the asset, but also included is any other reasonable and necessary costs incurred to place the asset in its intended location and intended use. Such costs could include the following: (1) Legal and title fees, closing costs; (2) Appraisal and negotiation fees, surveying fees; (3) Damage payments; (4) Land preparation costs, demohtion costs; (5) Architect, engineering and accounting fees; (6) Insurance premiums during construction; (7) Transportation charges; (8) Interest costs during construction. Donated or contributed assets should be recorded at their fair market value on the date donated. (e) Asset Definitions by Maior Category It is important to the maintenance of accurate records that each asset category is precisely defined and that all persons responsible for record maintenance are fully aware of the categorization system. This section further clarifies the asset definition by major category. (1) Land Land is defined as specified land, lots, parcels or acreage including rights of way, owned by the City of Carmel, its various departments, boards or commissions, regardless of the method or date of acquisition. Easements will not be included as the City does not own them, but as an interest in land owned by another (i.e. property owner) that entitles its holder to a specified limited use. The City Utility, however, will capitalize easements. (2) Improvements Other Than Buildings Examples of the Civil City assets in this category are parking areas and drives, fencing, pools and fountains, underground sprinkler systems, decorative street lighting and other similar items. Examples of the City Utilities assets in this category are water supply mains, collection sewers, wells, fences, intake pipes, manholes, and fire hydrants. (3) Buildings All structures designed and erected to house equipment services, or functions are included. This includes systems, services, and fixtures within the buildings, and attachments such as porches, stairs, fire escapes, canopies, areaways, lighting fixtures, flagpoles, and all other such units that serve the building. Plumbing systems, lighting systems, heating, cooling, ventilating and air handling systems, alarm systems, sound systems, surveillance systems, passenger and fxeight elevators, escalators, built-in casework, walk-in coolers and freezers, fixed shelving, and other fixed equipment are included as part of the building if it is owned. Communication antennas and/or towers are not included because they are treated as part of the equipment unit. (4) Equipment Equipment includes all other types of physical property within the scope of the Fixed Asset Management System not previously classified. Included with/n this category are office equipment, office furniture, appliances, furnishings, machinery items, maintenance equipment, commuuication equipment, police, fire, laboratory equipment, vehicles, road equipment, aimraft, emergency equipment, earth moving equipment, text equipment, 4 civil defense equipment, and data processing equipment. All supplies are excluded. (5) Infrastructure Infrastructure assets are long-lived capital assets that normally can be preserved for a significantly greater number of years than most capital assets and that are normally stationary in nature. Examples include roads, streetlights, traffic signals, drainage systcnns, and water lines. Infrastructure assets do not include buildings, drives, parking lots or any other examples given above that are incidental to property or access to the property above. Preservation costs that extend the useful life of an asset beyond its previously established life are capitalized. Maintenance/repair costs allow an asset to continue to be used during its ori~nally established useful life and are expensed in the period incurred. Examples include patching, resurfacing, snow removal, etc. Also, routine departmental operating activities such as feasibility studies and preliminary engineering/design studies will be expensed as an element of the infraslmcture asset. Alleys will not be included as part of the infrastructure, however. The retroactive reporting requirements for infrastructure of GASB 34 requires the City to report items put into service from 1980 forward, and gives the City the option to report items put into service prior to 1980. The City will report only on items put into service after 1980. Retroactive reporting is not mandated until fiscal years beginning after January 1, 2006 at which time the City will comply. (f) Depreciation Methods The City will depreciate capital assets by using the straight-line method. Salvage value will be determined on an asset-by-asset basis. Depreciation will be calculated at year-end. Land is not depreciated according to generally accepted accounting principles. A network of assets is composed of all assets that provide a particular type of service for government. A subsystem of a network of assets is composed of all assets that make a similar portion or segment of a network of assets. The following will be the breakdown of our networks and subsystems: (1) Roads/Streets Network Subsystems: Streets, Curbs, and Sidewalks 5 (2) (3) Traffic Components Network Subsystems: Traffic Signals and Street Lights Drainage Systems Network (g) Straight-line Depreciation The following assets accounted for under the Capital Asset Pohcy will be depreciated using the straight-line method of depreciation. A gain or loss on disposal will be reported. The most common useful lives for the Civil City is as follows: (1) Vehicles -- 5 years (2) Office Equipment -- 5 years (3) Office Furniture -- 20 years (4) Heavy Equipment -- 10 years (5) Fire Trucks -- 15 years (6) Buildings -- 50 years (7) Building Components (HVAC systems, roof'mg) -- 20 years (8) Leasehold Improvements -- useful hfe of asset or lease term (whichever is shorter) (9) Land Improvements -- structure (parking lots, athletic courts, swimming pools) --20 years (10) Land Improvements -- groundwork (golf course, athletic fields, landscaping, fencing) --20 years (11) Outdoor Equipment -- (playground equipment, radio towers) --15 years (12) Grounds Equipment- (mowers, tractors, attachments) -- 15 years (13) Computer Hardware --3 years (14) Computer Software --5 years The following assets are accounted for by the City Utility under the Capital Asset Policy and will be depreciated using the straight-line method of depreciation. The useful lives for the assets of the Carmel Utility are as follows: 6 (h) (i) Water (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13) (14) (15) Sewer Buildings and Improvements --50 years Transmission and Distribution Mains --50 to 75 years Meters/Meter Installation--25 to 30 years Pumping Equipment --50 years Water Treatment Equipment--50 years Elevated Storage --75 years Office Equipment-- 10 years Machinery-- 5 to 40, 67 years Hydrants -- 50 to75 years Well Equipment -- 15 to 20 years Wells -- 50 to 100 years Computer Hardware -- 3 to 5 years Communications Equipment -- 10 years GPS -- 100 years Clearwell- 100 years (1) Buildings and Improvements -- 50 years (2) Sewer Lines -- 50 years (3) Lift Station -- 50 years (4) Treatment Plant Equipment -- 10 years (5) Office Equipment --10 years (6) Machinery-- 6-20 years (7) Vehicles -- 5 years (8) HVAC Systems -- 25 years (9) GPS -- 100 years (10) Computer Hardware -- 3 to 5 years (11) Computer Software -- 5 years 7 Infrastructure The following is the list of networks and their useful lives: (1) Roads/Streets Network Subsystems: Types of Roads/Streets, Curbs, and Sidewalks-- 45 years (2) Traffic Components Network Subsystems: Traffic Signals -- 35 years Street lights -- 25 years (3) Drainage Systems Network -- 50 years (k) Capital Asset Acquisitions The method of acquisition is not a detenuining factor. Each department should report items acquired by: (1) Regular purchases (2) Lease purchase (3) Construction by city employees (4) Construction by other than city employees (5) Condemnation (6) Donation (7) Addition to an existing asset (8) Transfer from another department (9) Trade or barter (10) Annexation Leased equipment should be capitalized if the lease agreement meets any one of the following criteria: (1) The lease transfers ownership of the property to the lessee by the end of the lease term. (2) The lease contains a bargain purchase option. (3) The lease term is equal to 75 percent of the estimated economic life of the leased property. 8 (4) The present value of the minimum lease payments at the inception of the lease, excluding executory costs, equals at least 90 percent of the fair value of the leased property. Leases that do not meet any of the above criteria should be recorded as an operating lease and reported in the notes of the financial statements. (1) Asset Transfers and Dispositions Property should not be transferred, auctioned, or disposed of without prior approval of each department director. An Inventory Disposal Notification Form (Exhibit A) must be sent to the Asset Manager reflecting any of these transactions. This is a dual-purpose form for transfers (defined as any movement of an asset by virtue of change in location, either by account, department, building, floor, or room) or retirement (disposal) of property. The main points to be remembered when using the Inventory Disposal form are: (2) (3) (4) (5) (6) Always provide sufficient detail to identify each asset. Most important is the asset's identification number; Be accurate and do not overlook any of the needed entry fields; Type or print all information; Complete each column for every asset listed on the form; Directors must sign every form; Return all information to the Asset Manager in the Fiscal Office. If an asset is stolen, the department must immediately notify the Asset Manager in the office of the Fiscal Officer. (m) Periodic Inventories A physical inventory of all capital assets (any item over $5,000) will be conducted in each department at least two times per year prior to December 31. The Asset Manager will conduct spot checks on a random basis. Directors will be accountable for the capital asset inventory charged to their departments by verifying an itemization of all capital assets prior to each year-end. (n) Responsibilities of the Fiscal Officer The Fiscal Officer will ensure that accounting for capital assets is being exercised by establishing a capital asset inventory both initially and periodically in subsequent years. The Fiscal Officer will further ensure that the capital asset report will be updated annually to reflect additions, deletions, and transfers and to reflect the new annual capital asset balance for financial reporting purposes, as well as the annual and accumulated depreciation calculation. (o) Responsibilities of Department Directors It is the responsibihty of the director in each department or his/her designee to inventory each piece of property and to complete the Inventory Acquisition Form (Exhibit B). The director/designee will be the focal point for questions regarding the availability, condition, and usage of the asset, as well as the contact during the physical inventory process. All assets will be examined after shipment to ensure that assets have not been damaged. The director is also responsible for arranging the necessary preventative maintenance and any needed repairs to keep the asset in working condition. Each director shall ensure that the asset is used for the purpose for which it was intended and that there is no personal or unauthorized use. Section 4: All prior Ordinances or parts thereof which may be inconsistent with any provision of this Ordinance are hereby repealed. The paragraphs, sentences and words of this Ordinance are separable, and if any portion hereof is declared unconstitutional, invalid or unenforceable by a court of competent jurisdiction, such declaration shall not affect the remaining portions of this Ordinance. Section 5: This Ordinance shall be in full force and effect from and after the date of its passage and signing by the Mayor and such publication and recordation as is required by law. PASSED by the Common Council of the City of Carmel, Indiana, this I ~{- day of ( ~/l~'C~ ,2004, by a vote of ~ ayes and O nays. ( ~ ~/OMMON COUNCIL FOR THE CITY OF CARMEL f/oe fths // Kevin Kirby Mark Rattermann Rick Sharp ATTEST: Diana L. Cordray, IAMC~k-Treasurer . ~ j Preselated by me to the M, aTo..r ~e City of Carmel, Indiana, this ~ day of C-~'/4-~X'"'/ ., 2004, at ~ ~.M. Diana L. Cordray, IAMC, Cler~-Treh~surer ~.A~roved by me, the Mayo/r..o~f~ t]3e City of Carmel, Indiana, this /,"~xlay of "~"~' ,2004, at ATTEST: Diana L. Cordray, IAMC, Cler~surer Prepared By: 831165 Diana L. Cordray, Clerk-Treasurer CITY OF CARMEL One Civic Square Carmel, IN 46032 11 City of C el arm Invento~ Disposal Notification SECTION I Department Name: Transaction Date: [vl~t:ho;~ Of g!s~U~[:;1) Worthless Property 2) Auction: $ 3) Sale: $ Destruction: (,c 5-22-22-8 4) Trade Value: $ 5) Transfer: 6) Donated, to whom: Other: SECTION II Des~'~'~h ~f ~et Asset Number: Serial #: Model #: VlN #: SECTION III Remarks, if any: Approved by the Inventory Disposition Review Committee: Dave Brandt, Facilities Manager, City of Carmel: Date: __/ / Fred Glaser, Carmel Fire Department: Date: / / Sandy Johnson, Asset Manager: Date __/ / Department Director's Signature: Date: Clerk-Treasurer's Signature: Revised 1/5/2004 Date: City of Carmel Invento Acquisition Notification SECTIONI Department Name: Transaction Date: 1) Purchase: 2) Transfer: 3) Location 5) Other: (Complete transfer Change: (Complete section) transfer/location section) Asset Number: Item: Manufacturer/Brand: Serial #: Model #: VlN #: .[Where Applicable} Location: Estimated Life Expectancy: Value of Asset: {Please attach or fo~,ard a copy of the invoice {miles, hours, months, years} with document cost, if donated fair market vatue) Department Transferred From: Previous Location of property: Permanent: Temporary: New Location of property: Transfer Date: Dept. Director's Signature: Date: Clerk-Treasurer's Signature: Date: Make a copy of this for your records and return the original to the Clerk-Treasurer's office. Revised: 1/5/2004