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A T T E S T :
" T e r e s a G l e n n , J e r k - T r e a s u r e r
ORDINANCE 1998 -4
AN ORDINANCE ESTABLISBI NG A FIXED ASSET •
CAPITALIZATION POLICY
BE IT ORDAINED AND ADOPTED by the Common Council of the City of
Greencastle, Indiana, that:
WHEREAS, the Common Council is the governing body of the City of Greencastle, in
Putnam County, in the State of Indiana, and
WHEREAS, the Common Council of the City of Greencastle, Indiana so desires to
establish a capitalization policy for the City and its various Departments and Utilities (Enterprise
Funds).
NOW THEREFORE, BE IT ORDAINED by the governing body of the City of
Greencastle, in Putnam County, in the State of Indiana:
SECTION I. - DEFINITIONS AND PROVISIONS:
For the purpose of this ordinance, the following definitions shall apply unless the context
clearly indicates or requires a different meaning.
"Tangible Assets ". Assets that can be observed by one or more of the physical senses.
They may be seen and touched and, in some environments, heard and smelled.
"Fixed Asset ". Tangible assets of a durable nature employed in the operating activities
of the unit and that are relatively permanent and are needed for the production or sale of goods
or services are termed.propeity, plant and equipment or 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, furniture and fixtures).
"Capital Outlays ". Expenditures which benefit both the current and future fiscal
periods. 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 government's general fixed assets.
LAND
This City will capitalize all land purchases, regardless of cost.
Exceptions to land capitalization are land purchased outright, as 0
easements, or rights -of -way for infrastructure. Examples of
infrastructures are roads and streets, street lighting systems, bridges,
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overpasses, sidewalks, curbs, parking meters, street signs, viaducts, wharfs, and storm
water collections.
Original cost of land will included the full value given to the seller,
including relocation, legal services incidental to the purchase (including title
work and opinion), appraisal and negotiation fees, surveying and costs for
preparing the land for its intended purpose (including contractors and or City
workers [salary and benefits]), such as demolishing buildings, excavating, clean
up, and/or inspections.
A department will record donated land at fair market value on the date of
transfer plus any associated costs.
Purchases made using Federal or State funding will follow the source
funding policies and above procedures.
MACHINERY AND EOUIPMENT:
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
O become a part of a basic structure or building.
This City will capitalize items with an individual value equal to or greater
than $750.00. Machinery combined with other machinery to form one unit with a
total value greater than the above mentioned limit will be one unit.
Shipping charges, consultant fees, and any other cost directly associated
with the purchase, delivery, or set up, (including contractors and /or City works
[salary and benefits], which makes such equipment operable for its intended
purpose will be capitalized. .
Improvements or renovations to existing machinery and equipment will be
capitalized only if the result of the change meets all of the following conditions:
1) total cost exceeds $750.00,
2) the useful life is extended two or more years, and
3) the total costs will be greater than the current book value and less
than the fair market value.
Examples include:
e A work truck being equipped with sirens, lights or radios for use as a
single unit throughout its life expectancy is considered one unit.
If police cars are constantly changing light bars or radios to other vehicles,
the City will capitalize each piece of equipment separately, if it meets the
required dollar amount
A department's computer (CPU, monitor, keyboard, and printer) is
considered one unit.
A department will record donated machinery and equipment at fair market
value on the date of transfer with any associated costs.
Purchases made using Federal or State funding will follow the source
funding policies and above procedures.
BITILDINGS:
A department will capitalize buildings at full cost with no subcategories
for tracking the cost of attachments. Examples of attachments are roofs, heating,
cooling, plumbing, lighting, or sprinkler systems, or any part of the basic
building. The department will include the cost of items designed or purchased
exclusively for the building.
A department's new building will be capitalized only if it meets the
following conditions:
1) the total cost exceeds $5,000.00, and
2) the useful life is greater than two years.
A department 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 $5,000.00
2) the 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.
MPROVEMENTS OMER THAN BU LDINGS
The definition of this group is improvements to land for better enjoyment,
attached or not easily removed, and will have a life expectancy of greater than
two years.
Examples are walks, parking areas and drives, golf cart paths, fencing,
retaining walls, pools, outside fountains, planter underground sprinkler systems,
and other similar items. 0
Improvements do not include roads, streets, or assets that are of value only
® to the public. For example, Main Street is a public street with greatest value to
the public. Roads or drives upon City -owned land that provide support to our
facilities are assets. A sidewalk down the road for public enjoyment is an
infrastructure improvement and is not capitalized. However, sidewalks installed
upon City -owned land for use by the public and for the support of our facility
are capital assets.
This City will capitalize new improvements other than buildings only if it
meets the following conditions:
1) the total cost exceeds $5,000.00, and
2) the useful like is greater than two years.
A department will capitalize improvements or renovations to existing
improvements other than buildings only if the result meets the following
conditions:
1) the total cost exceeds 55,000.00,
2) the asset's useful like 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 on the date of transfer with any associated costs.
Purchases made using Federal or State funding will follow the source of
funding policies and above procedures.
"Historical Cost ". The cash equivalent price exchanged for goods or services at the
date of acquisition. Land, buildings, equipment, and most inventories are common examples of
items recognized under the historical cost attribute.
"Enterprise Funds ". Those funds used to account for operations (a) that are financed
and operated in a manner similar to private business enterprise - where the intent of the
governing body is that the costs (expenses, including depreciation) of providing goods or
services to the general public on a continuing basis be financed or recovered primarily through
user charges; or (b) where the governing body has decided that periodic determination of
revenues earned, expenses incurred, and/or net income is appropriate for capital maintenance,
public policy, management control, accountability and other purposes.
The enterprise funds of the City of Greencastle, Indiana shall include the municipally
owned water and sewage utilities. Operation of these utilities shall require enterprise fund
® accounting and reporting.
SECTION 2. - RECORDING AND ACCOUNTING
The City and its various departments 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 Cities and Towns Accounting manual. The cost of property, plant and equipment includes
all expenditures necessary to put the asset into position and ready 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.
The City's municipally owned utilities shall record acquisition of Fixed Assets in
accordance with generally accepted accounting principles. When an asset is purchased for cash,
the acquisition is simply recorded at the amount of cash paid, including all outlays relating to its
purchase and preparation for intended use. Assets may be acquired under a number of other
arrangements including:
1. Assets acquired for lump -sum purchase price
2. Purchase on deferred payment contract
3. Acquisition under capital lease
4. Acquisition by exchange of nonmonetary assets
5. Acquisition by issuance of securities
6. Acquisition by self - construction
7. Acquisition by donation or discovery
Some of these arrangements present special problems relating to the cost to be recorded, for
example, in utility accounting, interest during a period of construction has long been recognized
as a part of the asset cost. Reference to an intermediate accounting manual will illustrate the
recording of acquisition of assets under the aforementioned acquisition arrangements. For
purposes of recording fixed assets of the utilities the valuation of assets shall be based on
historical cost.
In additions, an asset register (prescribed form 211) shall be maintained to provide a
detail record of the capital assets of the governmental unit.
SECTION 3. - SAFEGUARDING ASSETS:
Be it ordained that accounting controls be designed and implemented to provide
reasonable assurances that:
Capital expenditures made by the City, its various Departments and utilities be in
accordance with management's authorization as documented in the minutes.
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2. Transactions of the utilities be recorded as necessary to permit preparation of
financial statements in conformity with generally accepted principles. •
3. Adequate detail records be maintained to assure accountability for City and
Utility owned assets.
4. Access to assets be permitted in accordance with management's authorization.
O
S. That recorded accountability for assets be compared with the existing assets at
least every two years and appropriate action be taken with respect to any
differences.
��PASSED ADOPTED by the Common Council of the City of Greencastle, Indiana,
this - �-` day of Cc� 1998.
AT T:
Pamela S. Jones, Cle -T surer
Nancy A. hael, Mayor
Presented by me to the Mayor of the City of Greencastle, Indiana, at S� o'clock P.M. on
the Z` day of �j 1998.
Pamela S. Jones, Clerk -Tr urer
Approved and signed by me this / day of
o'clock p.m.
A
Pamela S. Jones, Clerk-'frea6r6r
1998, at S —
ancy A. Echael, Mayor
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