Lead Department: Finance Action Officer: Seth Larson, Controller. Briefing: 1/12/2016 Public Hearing: None Action: 1/26/2016

Transcription

1 Briefing Sheet Capital Asset Capitalization Version: 1 Lead Department: Finance Action Officer: Seth Larson, Controller Subject: General Fixed Asset Capitalization Policy Revisions Briefing: 1/12/2016 Public Hearing: None Action: 1/26/2016 Item Schedule Schedule 1: Brief twice vote once (six weeks) Schedule 2: Brief once vote once (two weeks) Schedule 3: No briefing required (one week) Select One Updates/History of Briefing: Not Applicable Executive Summary and Background Information: North Carolina General Statutes require local governments to maintain a ledger or group of accounts in which to record the details relating to General Fixed Assets of the unit or Public authority. In 2003, the General Accounting Standards Board (GASB) issued Statement 34, which is related to infrastructure and capital assets and required governmental financial statements to become more like the financial statements prepared by private enterprises. Morrisville Town Council approved Resolution Changing the Capitalization for General Fixed Assets on April 28, 2003 to establish capitalization thresholds and useful lives for various fixed assets in relation to GASB 34, but has not updated them since that time. The FY2015 audit findings noted a deficiency related to the capital asset subledger and the ability to clearly identify a specific asset, along with a recommendation to conduct an inventory of capital assets on a regular basis to ensure the capital asset subledger accurately reflects the assets owned by the Town. Additionally, the capitalization policy should be reviewed regularly by management to ensure that depreciable lives are updated and accurately reflect useful lives of assets. They should consistently apply the threshold for capitalization to ensure that assets in the subledger are above the threshold and those that do not meet the thresholds are properly expensed in the correct period. Staff has developed a work plan designed to comply with all statutory requirements and increased control over those assets for which the Town has stewardship responsibility. Resolution recommends a new capitalization threshold for Town capital assets. A physical inventory of all Town assets is projected to begin in February. The chart below represents the new dollar threshold and useful life by asset type: Updated: January 7, of 4

2 Classes of Fixed Assets Defined Asset Type Useful Life Land N/A N/A Dollar Threshold Land N/A N/A Improvements Buildings 20 Year $50, Year 30 Year 50 Year Infrastructure 30 Year $100, Year Other 10 Year $50,000 Improvements 20 Year 30 Year Equipment 3 Year $5,000 & Fixtures 5 Year 10 Year Vehicles 3 Year $10, Year Potential Options: None Attachments: ATTH 01 Resolution Changing the Capitalization for General Fixed Assets Staff Recommendation: Staff recommends approval Advisory Board/Committee Review: None Updated: January 7, of 4

3 Board/Committee Recommendation: N/A Advisory Board/Committee Meeting Date and Minutes: N/A Meeting Perspectives and Goals Adopted by the Council: Perspectives Goals Serve the Community Promote an Environmentally Sensitive & Livable Community Provide a Safe Community Deliver Quality Services Foster a Healthy Community Run the Operations Enhance Community Preparedness & Responsiveness Maximize Partnership Opportunities Provide Courteous & Responsive Customer Service Model a Positive Town Image Deliver Efficient Services Cultivate Community Involvement & Access Manage the Resources Maintain Fiscal Strength Maximize Utilization & Resources Invest in Infrastructure & Transportation Develop Personnel Develop a Skilled & Diverse Workforce Create a Positive & Rewarding Work Culture Perspectives and Goals Additional Comments: None Resource Impact: Staff time required if item is approved: Other Potential Impacts: N/A High Staff Coordination: Check the box for those required to comment on left. To comment-click in the box and select. (Update is used when information has significantly changed from the first briefing.) Required Staff Member Briefing Update Town Manager Agree No Comment Assistant Town Manager Agree No Comment Town Clerk Reviewed No Comment Public Information Officer Reviewed No Comment Senior Director Special Projects Agree No Comment Budget Manager Reviewed No Comment Updated: January 7, of 4

4 Controller Originator No Comment Information Technology Director No Comment No Comment Contracting and Purchasing Manager No Comment No Comment Senior Director Development Services No Comment No Comment Planning Director No Comment No Comment Town Engineer No Comment No Comment Building Codes Administrator No Comment No Comment Economic Development No Comment No Comment Risk Manager/Safety Officer No Comment No Comment Police Chief No Comment No Comment Fire Chief No Comment No Comment Parks & Recreation Director No Comment No Comment Public Works Director No Comment No Comment Town Attorney No Comment No Comment Human Resources Manager No Comment No Comment Disagree or comment, explain: Public Information Plan: Public Hearing Newspaper Notice Public Forum/Input Session Press Release Morrisville Connection E-News Distribution Social Media (Twitter, Facebook, etc.) Website Notice Special Mailing Banners Posted Flyers Posted Survey Automated Phone Call None Required Other: Updated: January 7, of 4

5 TOWN OF MORRISVILLE * PO BOX 166 * MORRISVILLE, NC RESOLUTION OF THE MORRISVILLE TOWN COUNCIL CHANGING CAPITAL ASSET CAPITIALIZATION THRESHOLD WHEREAS, North Carolina General Statute (b)(8) requires local governments to maintain a ledger or group of accounts in which to record the details relating to the capital assets of the unit or public authority ; and WHEREAS, the intent of capitalizing assets owned by the Town is to spread the cost of an asset over the useful life of the asset rather than show the entire acquisition cost as an expense in the year it was acquired; and WHEREAS, the capitalization of an asset is accomplished by recording the full value (cost) on the balance sheet, showing each year, as an expense (depreciation), that part of the asset which is used (consumed) during a particular twelve month period, and tracking on the balance sheet the sum of the annual expenses (accumulated depreciation) charged since the asset was first acquired and placed into service; and WHEREAS, the Morrisville Town Council had previously adopted general fixed asset capitalization threshholds that are in need of update; and WHEREAS, accounting classisfications of capital assets are; (1) Land Improvements; (2) Buildings; (3) Infrastructure; (4) Other Improvements; (5) Equipment & Fixtures; (6) Vehicles; and WHEREAS, GASB 34 allows for the use of multiple thresholds such that different levels could be set for different classes of assets; and WHEREAS, recommended and proposed capitalization thresholds include; (1) Buildings $50,000; (2) Infrastructure $100,000; (3) Other Improvements $50,000; (4) Equipment & Fixtures $5,000; (5) Vehicles $10,000; and WHEREAS, depreciation schedules will be prepared and reviewed annually, along with an organizational inventory on a regular basis: NOW, THEREFORE, BE IT RESOLVED THAT THE MORRISVILLE TOWN COUNCIL hereby establishes capitalization thresholds of (1) Buildings $50,000; (2) Infrastructure $100,000; (3) Other Improvements $50,000; (4) Equipment & Fixtures $5,000; (5) Vehicles $10,000. Page 1 of 2

6 BE IT FURTHER RESOLVED, that the useful lives for each category of asset are (1) Buildings 20, 25, 30 and 50 year; (2) Infrastructure 30 and 50 year; (3) Other Improvements 10, 20 and 30 year; (4) Equipment & Fixtures 3, 5 and 10 year; and (5) Vehicles 3 and 10 year. Land and Land Improvements are capitalized with an unlimited useful life and are not depreciated. Adopted this the 26 th day of January, Mark Stohlman, Mayor ATTEST: Erin L. Hudson, Town Clerk

7

8