HomeMy WebLinkAbout2003-OR-18 ORDINANCE 2003-OR- 18
AN ORDINANCE ESTABLISHING A
FIXED ASSET CAPITALIZATION POLICY
IT IS HEREBY ORDAINED by the Common Council of the City of Jeffersonville,
Indiana, that
WItEREAS, the Common Council is the governing body of the City of Jeffersonville, in
Clark County, in the State of Indiana, and
WltEREAS, the Common Council of the City of Jeffersonville, Indiana so desires to
establish a capitalization policy for the City and its various Departments and Utilities.
NOW THEREFORE, BE IT ORDAINED by the governing body of the City of
Jeffersonville, in Clark County, in the State of Indiana:
SECTION 1. - 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 property, 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 that 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 outfight, as easements, or rights-of-
way for infrastructure. Examples of infrastructures are roads and streets, street lighting
systems, bridges, overpasses, sidewalks, curbs, parking meters, street signs, viaducts,
wharfs, and storm water collection.
Original cost of land will include 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 inspection.
A department will record donated land at fair marker 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 EQUIPMENT:
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 become a part of a basic structure
or building.
This city will capitalize and tag items with an individual value equal to or greater than
$250. Machinery combined with other machinery to form one trait 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 make 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 costs exceeds $250
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
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Examples include:
A work truck being equipped with screens, 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.
BUILDINGS:
A department will capitalize buildings at fifll cost with no subcategories for tracking the
cost of attachments. Examples of attachments are roofs, heating, cooling, plumbing,
lighting, or sprinkler system-s, 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 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 costs exceed $5,000
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.
Capital building costs will include preparation of land for the building, architectural and
engineering fees, bond issuance fees, interest cost (while under constmction), accounting
costs if material, and any costs directly attributable to the construction of a building.
A department will record donated buildings at fair market value one the date of transfer
with any associated costs.
Purchases made using Federal or State funding will follow the source funding policies
and above procedures.
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IMPROVEMENTS OTHER TIffiN BUILDINGS:
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.
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:
I) The total cost exceeds $5,000 and
2) The useful life 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 $5,000,
2) The asset's useful life is emended 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 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
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capital maintenance, public policy, management control, accountability and other
purposes.
The enterprise funds of the City of Jeffersonville, Indiana shall include the municipally
owned sewage utlifies. Operations 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 expenditures 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 a 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-constmction
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 apart 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 addition, an asset register (prescribed form 211) shall be maintained to provide a detail
record of the capital assets of the governmental unit.
SECTION $. - SAFEGUARDING OF ASSETS:
Be it ordained that accounting controls be designed and implemented to provide
reasonable assurances that:
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1. Capital expenditures made by the City, its various Departments and
Utilities be in accordance with management's authorization as
documented in the minutes.
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 accoumability for City
and Utility owned assets.
4. Access to assets be permitted in accordance with management's
authorization.
5. The 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.
This Ordinance shall be in full force and affect upon its adoption.
ORDAINED AND PASSED by the Common Council of the City of Jeffersonville,
Indiana this Iflrtqday of ~OQ~/ ,2003.
kxV~esiding Officer ' (2/
Presented by me to the Mayor of the City of Jeffersonville, Indiana, at [ I o'clock I~.M.
on the \'~ day of q-~C~ ~ ,2003, for consideration and action
thereon.
p'~gg~ ~, Clerk-Treasurer
Having examined the foregoing Ordinance and I do now, as Mayor of the City of
Jeffersonville, Indiana, approve said Ordinance and return the same to the Clerk-
Treasurer this [~zS~_ day of .k t o ~ ,2003.
Thomas R_ Galligati, M[ay~r
ATTEST:
Peggy Wil~¥,-r~lerk-Treasurer