HomeMy Public PortalAbout2013.051 (04-16-13)RESOLUTION NO. 2013.051
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LYNWOOD ADOPTING
A CAPITAL ASSET POLICY
WHEREAS, the term of "capital assets" is used to describe assets that are used
in operations and that have initial lives extending beyond a single reporting period and a
monetary cost at or exceeding established threshold; and
WHEREAS, items whose value is $5,000 or more with a useful life of three
years or more shall be capitalized; and
WHEREAS, items with short useful lives (oneyear or less) or of small monetary
value are properly reported as an "expense" in the period in which they are purchased
and not as a "capital item "; and
WHEREAS, it is incumbent upon Department Heads to maintain adequate
control over all of a government resources, including capital assets, to minimize the risk
of Toss or misuse; and
WHEREAS, capitalization is primarily a financial reporting issue.
NOW,,THEREFORE, THE CITY COUNCIL OF THE CITY OF LYNWOOD
DOES HEREBY FIND, ORDER AND RESOLVE AS FOLLOWS:
Section 1. That the City Council approves the attached Capital Asset Policy
and directs staff to implement said policy.
Section 2. This Resolution shall become effective immediately upon its
adoption.
PASSED, APPROVED AND = ADOPTED this 16th day of April, 2013.
ATTEST:
Sa ador Alatorre, Mayor
.�II.s..ri/aI
Maria Quinonez, C y Clerk Roger L.'� aley, y Manager
APPROVED AS TO FORM:
Fred Galante, City Attorney
STATE OF CALIFORNIA )
) SS.
COUNTY OF LOS ANGELES )
APPROVED AS TO CONTENT:
Amanda Roberson, Director
Finance
I, the undersigned City Clerk of the City of Lynwood, do hereby, certify that, the
above and foregoing resolution was duly adopted by the City Council of the City of
Lynwood at a regular meeting held in the City Hall of said City on the 16th day of .Apriil
2013, and passed by the following vote:
AYES: COUNCIL MEMBERS CASTRO, SANTILLAN -BEAS, MORTON,
RODRIGUEZ AND ALATORRE
NOES:, NONE
ABSENT: NONE
ABSTAIN: NONE
Maria Quinonez, City Clerk
STATE OF CALIFORNIA
) SS
COUNTY OF LOS ANGELES )
I, the undersigned City Clerk of the City of Lynwood, and Clerk of the City Council
of said City, do hereby certify that the above and forgoing is a full, true and correct copy
of Resolution No. 2013.051 on file in my office and that said Resolution was adopted on
the date and by the vote therein stated. Dated this 16th day of April, 2013.
Maria Quinonez, City Clerk
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
PURPOSE
The purpose of this policy is to ensure adequate accounting, safeguarding, tracking,
and appropriate use of the City's fixed assets.
POLICY
The Finance & Administration Department is responsible for the implementation and
enforcement of this policy.
SCOPE
All City Departments are subject to the provisions of this policy. This policy includes the
following sections:
• Purchasing of Fixed Assets
• Accounting for Fixed Assets
• Tagging of Fixed Assets
• Safeguarding of Fixed Assets
• Physical Inventory
• Asset Transfers
• Retirement/Disposal of Fixed Assets
PURCHASING OF FIXED ASSETS
Purchases of fixed assets should follow the procedures as defined in Lynwood
Municipal Code Section 6 -3 — Purchasing.
Prior to purchasing a fixed asset, the requesting department must complete and submit
a requisition in the EDEN Financial System. The requisition should include a detailed
description of the asset. The requisition must be approved by the Department Head to
generate a purchase order. Once the purchase order is generated by the Finance &
Administration Department, all required signatures must be obtained (based on the
dollar amount). The esimated expense for the requested asset should already be
included in the current year's budget. This can be verified by reviewing your specific
Division's budget or by contacting the Finance & Administration Department
(Purchasing Division). If asset is not in the budget, you must contact the Finance &
Administration Department to determine appropriate action.
Invoices for purchased assets must be properly coded with the correct General Ledger
account number to ensure that the assets can be properly classified in EDEN.
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
Purchases of Information Technology Assets
The Information Systems Manager should be notified prior to , the purchase of any
information technology assets. Information technology ,assets include purchases of
iPads, iPhones, and printers.
ACCOUNTING FOR FIXED ASSETS
Capitalization Policy
In general, all fixed assets, including land, buildings, machinery and equipment, with an
original cost of $5,000 or more, will be recorded as a capital asset.. All costs associated,
with the purchase or construction. of an asset should be considered to .deterrnineltie
total asset price, including expenditures for freight and transportation, site:; preparation,
installation, professional fees, and legal fees directly attributable to .asset acquisition: If
the value of the asset is $5,000 or more and has a useful life of three years :or more, the
asset will be capitalized. Specific capitalization requirements are described: below.
• The capitalization threshold is _generally applied. to individual ;units of-.fixed,
assets. If the total purchase amount of item, is over $5,000, the: item should be
recorded as a capital asset. For example, ten desks purchased through,a_single
purchase order each costing $1,000 would not qualify for capitalization. even
though the total cost of $10,000 exceeds the threshold of $5;000.
The capitalization threshold will generally not be applied to components,of fixed
assets. For example, a keyboard, monitor, and, central -processing unit
purchased as components of a computer system will not be evaluated
individually against the capitalization threshold. The entire_computer'systemwill
be treated as a single fixed asset.
• Repairs to fixed assets will generally not be subject to capitalization unless the
repair extends the useful life of the asset: Repairs- that :extend, the useful life of
an asset will be subject to the capitalization Policy" and will be evaluated
separately.
• Improvements to existing fixed assets will be presumed (by definition)aomextend
the useful life of the related fixed asset and; therefore, will be : subject to
capitalization only if the cost of the improvement meets the $5,000 threshold:
An improvement to a fixed asset that had an original,, cost;of-Iess:-than :;$5,000;
but now exceeds the threshold as a result of the improvement, should.''be
combined as a single asset at the total cost (original cost- plus the cost of the
improvement) and capitalized.
Capital projects will be capitalized as "construction in progress" until' completed.
Costs to be capitalized include direct costs, such as labor, materials, and
transportation. Indirect costs such as engineering and construction management,
2
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
and ancillary costs such as construction period interest should also be capitalized.
Capital projects will be established in two categories, governmental and enterprise
funds. Projects funded by governmental funds will be recorded in the CIP Fund (i.e.
Fund 4011). Projects funded by Enterprise Funds will be recorded within the fund
(i.e. Water Fund).
Depreciation
Fixed assets will be depreciated using the following guidelines:
Each fixed asset will be added to one of the following categories.
EDEN G/L LL
Account
Number
Category Description
18101
Land - Any real property such as land, easements, land
lease, etc.
18115
Buildings - Structures permanently affixed to land
18135
Improvements other'than Buildings - Land improvements
such as parking lot pavement and improvements,
fencing, etc.
-18150
Machinery and Equipment - Tools such as saws, lathes,
and items used in construction, repair, or manufacturing,
and special purpose equipment such as items in an audio .
visual or television studio. This category may include
special purpose vehicles such as dump trucks and
delivery vans. _ _ ._
18131
Automotive Equipment - Automobiles and small trucks
18133
Furniture and Fixtures — Office furniture, file cabinets, etc
used to furnish a office.
18155
Office Equipment - Computers,, fax machines,
calculators, etc.
Funds 4011
and 4051
_their
Capital Improvement Project (CIP) in progress - Holding
account for expenditures that will be categorized upon
completion._and placement in service..
Salvage value. Salvage value is ignored.
Computer Software. Computer software is not capitalized because of its short useful
life and the high annual maintenance and upgrade costs.
Depreciation Method. The straight -line method of depreciation will be used. Refer to
Attachment A for a summary of estimated useful lives by asset type.
3
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
TAGGING OF FIXED ASSETS
The purpose of tagging assets is to provide an efficient_ mechanism to track :fixed
assets. A tag is a bar coded label that is affixed to each asset that is to be inventoried.
The tag should be placed in an inconspicuous, but accessible place On the asset, for
example, on the back of a computer component or the inside leg of a chair.
Why Tag An Asset?
A. To provide accountability for the assets, ensuring the .asset assigned to. a
Division or Department is controlled and accounted •for by. a specific.
department/person.
B. To help determine asset replacement cost and life.
C. To provide the City's outside auditors with a mechanism to verify.that the.,City
is in control of fixed assets and to provide an accurate" record of the City's
capital expenditures.
Should the Asset Be Tagged?
A. Yes, if cost of asset is $5,000 or more and the useful life is greater than one
year.
B. Yes, if it is physically possible /practical to tag and meets the dollar and life
guidelines.
C. Yes, if it is an asset that is handled frequently,, has a high cost, and /or is likely
to be stolen (i.e. information technology assets).
D. Yes, if the asset needs to be controlled due to .high incidence of
theft/misplacement / borrowing.
E. Generally no, if the asset cost is Tess than-$5; 000. However, the_.Department
Head and /or Finance may choose to tag items that cost less than the$5,000.
F. No, if the asset will be used up within one year.
Who is Responsible for Tagging the Asset?
The Information Technology Division within the Finance & Administration, ,Department,
with assistance from the Divisions and Departments, will be responsible for tagging .
fixed assets.
The respective Department should notify the Finance &.Administration Department as
soon as the asset is received so that the asset can be tagged. The Finance &
4
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
Administration Department should enter the tag number and location of the asset in
EDEN in a timely manner. The tags are pre- numbered and issued in sequential order.
The Finance & Administration Department will also review the activity within the capital
asset general ledger accounts and warrant registers on a monthly basis to verify that all
capital assets have been apprrporiately tagged and entered into EDEN.
SAFEGUARDING OF FIXED ASSETS (INVENTORY CONTROL)
Department Heads are responsible for safeguarding fixed assets under their control
from theft or Toss. However, the Finance & Administration Department is responsible for
establishing and maintaining systems and procedures that enable Department Heads to
properly safeguard assets.
In general, Inventory Control is applied only to movable fixed assets such as machinery
and equipment and office furniture and not to land, buildings, or other immovable fixed
assets. Fixed assets subject to inventory control will be accounted for and controlled
through the same systems and procedures used to account for and control fixed assets
subject to capitalization.
Fixed assets will be subject to inventory control if they meet at least one of the following
criteria:
a. The original cost of the fixed asset is equal to or greater than $5,000.
b. Any asset that cost Tess than $5,000 as requested from a department. This
may include certain machinery and equipment that, due to portability, value
outside of the office, or character, are susceptible to theft or loss. It may also
include an asset that has been requested by a department to be controlled in
order to satisfy an internal (operational) or external requirement. For
example, Information Systems may wish to inventory all computer hardware
and software to establish replacement and upgrade requirements for both
hardware and software.
c. An asset required to be controlled and separately reported pursuant to grant
conditions or other externally imposed reporting requirement. For example, a
grant program that has funded the acquisition of a fixed asset may impose a
requirement that the fixed asset be tracked and identified as a grant- funded
asset.
PHYSICAL INVENTORY OF FIXED ASSETS
On an annual basis, the Finance & Administration Department will conduct a City -wide
physical inventory. A sample of assets will be selected from EDEN and verified for
existence. In addition, a sample of assets will be selected by Division (on -site during
the actual physical inventory) and verified back to EDEN.
5
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
ASSET TRANSFERS
When transferring an asset to another department, location, or building:
1. Use the "Fixed Asset Transfer /Disposal" Form (see Attachnient� E):
2. Complete the form and obtain Finance & , Adninistration approval prior _ to
transferring the asset.
3. Ensure the completed form includes the correct department and 1ocationl, as ;well`
as the tag number.
RETIRMENT /DISPOSAL OF AN ASSET
When retiring /disposing an asset
1. Use the "Fixed Asset Transfer /Disposal" Form
asset is being sold.
2. Submit the completed form to the Finance &
approval. Do not bring the asset to Finance.
. Include,the sale value, if the
Administration= Department for
3. Once the Fixed Asset Transfer /Disposal Form has been completed and
approved, contact the Building Maintence Division or :Information Technology
Division (depending on the asset type) to coordinate asset,pick -up.
4. •Upon`retirement/disposal of asset, the Building Maintence .Division or Information
Technology Division will return a copy of the above .form- to the Finance, &
Administration Department.
5. Finance will remove the asset from EDEN.
6
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
ATTACHMENT A
ESTIMATED USEFUL LIVE BY ASSET TYPE
The following table identifies the estimated useful life of each asset type. For
infrastructure assets, an estimated useful life for each type of asset was determined
using engineering standards, taking into consideration necessary maintenance for each
asset type. In essence, the estimated useful file of each asset type was tailored based
on the unique attributes of the City of Lynwood. For assets not included, the table can
be used as a guide for assets with enough similarity to estimate the useful life of the
assets.
Asset Type
Alleys
Appliances /Food Service Equipment
Athletic Equipment
Audio Visual Equipment
Bike /Jogging Paths (Concrete)
Bike /Jogging Paths (Dirt)
Books, Multi -Media Materials
Bus Shelters
Business Machines
Communications Equipment
Computer Equipment
Computer Software
Construction Equipment
Curb and Gutters
Custodial Equipment
Grounds, Agricultural Equipment
HVAC
Machinery and Tools
Medians
Outdoors Recreational Equipment
Parking Lots
Pavement
Photocopiers
Right -of -Way
Sewer Lines
Sidewalks
Stage and Auditorium Equipment
Street Lights
Swimming Pool
7
Estimated Useful Life
35 years
10 years
10 years
7 years
30 years
10 years
5 years
40 years
7 years
10 years
5 years
5 years
12 years
50 years
15 years
15 years
20 years
15 years
50 years
15 years
15 years
35 years
5 years
N/A
75 years
50 years
20 years
50 years
20 years
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
Tennis Courts 20 years
Traffic Signals 50 years.
Trees N /A*
Water Booster Stations 75 years.
Water Lines 75 ,years,
Water Reservoir 75 years
Water Wells 75 years
*N /A - Not Applicable. Asset is not subject to depreciation.
CITY OF LYNWOOD
CAPITAL ASSETS POLICY
FIXED ASSET TRANSFER/DISPOSAL FORM
Date:._
Please mark one: Transfer ( i Disposal
Asset Description:
Asset Tag Number:
ATTACHMENT B
TRANSFER ONLY:
From (Current Department):
To (New Department):
New Physical Location (i.e. Finance Manager's Office):
DISPOSAL ONLY:
Department:
Reason for Disposal (i.e. Sold, Broken):
Selling Price (If Applicable):
Date Sold. (If Applicable):
If item was sold, please provide authorization to sell (i.e. Authorized by Resolution #):
Please attach a copy of the payment received and receipt from the Water Billing
Division.
9