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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