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HomeMy WebLinkAboutResolutions - 1998.04.23 - 25259MISCELLANEOUS RESOLUTION #98084 April 23, 1998 BY: Finance Committee, Sue Ann Douglas, Chairperson IN RE: DEPARTMENT OF MANAGEMENT & BUDGET - REVISE FISCAL POLICIES MANUAL TO INCLUDE GENERAL FIXED ASSETS ACCOUNT GROUP To the Oakland County Board of Commissioners Chairperson, Ladies and Gentlemen: WHEREAS, Misc. Resolution #90095 dated April 5, 1990, the Oakland County Board of Commissioners adopted the Fiscal Policy Manual recommended by the County Executive and authorized the Department of Management & Budget and the County Treasurer, respectively, to be responsible for implementation of the policies enumerated therein; and WHEREAS the aforementioned published policies regarding the General Fixed Assets Account Group (GFAAG) do not reflect current requirements promulgated by the Governmental Accounting Standards Board (GASB); and WHEREAS the Fiscal Services Division has prepared an updated version of Policies and Procedures for GFAAG that are consistent with contemporary Governmental Accounting and Financial Reporting Standards; and WHEREAS the proposed revision would increase the capitalization threshold for General Fixed Assets from $500 to $5,000, reducing the number of items to be inventoried on a biennial basis from over 3,000 to fewer than 300 while sustaining records on 91% of the over $110 million in asset valuation; and WHEREAS, according to the Certified Public Accounting firm, KPMG Peat Marwick, LLP, "Experience has shown that redefining the threshold to eliminate low dollar items results in improved accuracy and less costly maintenance and record keeping without loss of financial accountability."; and WHEREAS, so as not to jeopardize accountability of non-capitalized assets for insurance purposes, the Risk Management Office will maintain a video inventory of physical assets to substantiate future claims if necessary. NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners approves the revised Fiscal Policy Manual to include an updated version of Policies and Procedures for the General Fixed Asset Account Group (GFAAG) that are consistent with contemporary Governmental Accounting and Financial Reporting Standards. BE IT FURTHER RESOLVED that Section III (Accounting and Budget Policies), Subsection B2 (Fixed Assets) of the Fiscal Policies Manual be replaced with the attached GFAAG Policies and Procedures. Chairperson, on behalf of the Finance Committee, I move adoption of the foregoing resolution. FINANCE COMMITTEE FINANCE: Motion carried unanimously on a roll call vote with Amos absent. GENERAL FIXED ASSETS ACCOUNT GROUP (GFAAG) Policies and Procedures Policies Authority Codification of Governmental Accounting and Financial Reporting Standards; GASB; 1996, Section 1300 and 1400. Purpose The focus of governmental funds is the flow of current (spendable) financial resources. Accordingly, the balance sheets of governmental funds report only financial assets. Nevertheless, users of financial statements still have an interest in a government's fixed assets, despite their nonfinancial character. Therefore, the Governmental Accounting Standards Board (GASB) Codification of Governmental Accounting and Financial Reporting Standards, Section 1400.106, requires that fixed assets, other than those accounted for in proprietary funds or trusts funds, be reported in the General Fixed Assets Account Group (GFAAG). It is important to note that the GFAAG is not a fund and does not report results of operations. Rather, the GFAAG is simply a list of a government's general fixed assets. Additions to and deletions from the GFAAG are disclosed in the note to the financial statements. Capitalization The capitalization threshold as determined by the Board of Commissioners is $5,000 for general fixed assets in the General Fixed Asset Account Group (GFAAG) with a minimum useful life of three years. Classification A government's general fixed assets should be reported by asset category. The asset categories used are: Land Buildings Equipment Vehicles Infrastructure Construction in Progress The fixed asset major class will be listed under the aforementioned asset category. The use of the major class "general" is not acceptable. Infrastructure fixed assets are normally immovable and of value only to the government. The improvements other than buildings will be reported as part of the County's fixed assets Infrastructure. Examples of infrastructure are: Roads, bridges, curbs & gutters, streets and sidewalks, drainage systems, solid waste disposal & waste water treatment, flood control and drainage, etc. Infrastructure does not include moveable equipment (e.g. picnic tables). Estimated Useful Life The length of depreciation should be determined by the useful life of the asset based on a minimum of three years. The following can be used as a guide: Buildings Copier Machines Information systems Computers-personal Peripheral equipment Computers-mainframe servers (over $50,000) Furniture Vehicles Heavy Trucks Infrastructure Leased Equipment 40 years 4 years 3 years 3 years 5 years 10 years 4 years 5 years 20 years or based and calculated on engineering study Length of Lease Cost Fixed assets should be recorded at their historical cost. Cost for this purpose, includes not only the purchase price or cost of construction, but also any other charges incurred "to place the asset in its intended location and condition for use" and based on actual invoices. Assets acquired through contribution or donation should be recorded in the General Fixed Asset Account Group at their fair market value on the date of donation if the fair market value is $5,000 or over. If land and building are acquired as a single parcel, the value of the land should be determined separately from the building and only that amount carried in the land account, the value of the building should be carried in the building account. If razing a structure is required, that cost should be carried in the land account. Infrastructure costs will be based on construction costs. It will consist of all costs relating to developing the infrastructure and putting it into service. o r Accounting The cost of a general fixed asset will be reflected as an expenditure in the appropriate governmental fund. In the General Fixed Asset Account Group, the cost of the asset will be recorded and offset by the Investment in General Fixed Asset Account. Any long term debt incurred for the asset will be recorded simultaneously in the General Long Term Debt Account Group. The book basis of assets traded in for new assets does not affect the basis of the new asset. The fair value of final invoice cost before the reduction in cost resulting from the trade-in of the old asset should be the carrying value in the General Fixed Asset Account Group for the new asset. Betterments and Improvements, such as major additions or major repairs and rehabilitations, that increase the economic life or expand the fixed asset's usefulness should be capitalized. Two approaches of capitalization can be applied: The cost of betterment may be added to the asset and the new value will be depreciated over the new estimated useful life arising from the betterment -or- The betterment may be considered as a new cost to be depreciated separately from the original asset. Normal repairs to maintain the asset in its present condition should be recorded as an expenditure and should not be capitalized. Depreciation The goal of a depreciable method is to appropriately reflect the actual occurrence of economical loss as it take place over the projected life of an asset. All purchases of equipment and buildings will use the straight line method of depreciation. Under this method, the asset cost will be divided by the expected useful life. The exception to this rule is vehicles. The sum of the years' digits method of depreciation will be used for vehicles (automobiles, trucks, etc.). Equipment depreciation will start the month the invoice is paid or when the asset is put into service, whichever comes first. If the equipment is disposed of before it is fully depreciated, depreciation will not be charged for the month of disposal. Depreciation of a new building will start in the month the building is either occupied or utilized. The authority and the value to be initially established will be obtained from the department responsible for the construction. Depreciation of general fixed assets will be calculated and accumulated depreciation will be recorded in the General Fixed Asset Account Group but will not be recorded in the governmental related fund. Recording depreciation will increase the Accumulated Depreciation Account and decrease the Investment in General Fixed Asset Account. Asset Identification All existing and future purchases of fixed assets will be assigned a tag number for tracking purposes. If possible, a bar coded county tag will be attached to the assets. If it is not possible to physically attach the tag (infrastructure), the tag number will be assigned for identification purposes. A biennial physical inventory of all fixed assets will be conducted and reported. The process of tagging and conducting a physical inventory will be the responsibility of the general fixed asset system supervisor. Disposal The supervisor of the general fixed asset system is notified if an asset is disposed of regardless of the method (sold, scrapped, missing, etc.) so the necessary adjustment can be made in the General Fixed Asset Account Group. The Accumulated Depreciation Account is decreased and the Investment in General Fixed Asset Account is increased for any depreciation taken on the asset disposed of. The Asset Account and the Investment in General Fixed Asset Account should be reduced by the total cost of the asset as originally recorded in the General Fixed Asset Account Group. If any proceeds are received from the disposal of the asset, the amount is recorded in the appropriate governmental fund as revenue. An accounting gain or loss is not recognized on the disposition. PROCEDURES FOR PERFORMANCE ASSET MANAGEMENT (PAM) The general fixed asset supervisor is responsible for administering, maintaining, and reporting all general fixed asset data within Performance Asset Management in accordance with GAAP. The user department custodian is responsible for: Reporting to the general fixed asset supervisor if the asset changes room, is transferred to another section, or loaned to another department Reporting to the general fixed asset supervisor any changes in asset condition or availability Initiating relocation or disposal processing Coordinating physical movement of asset to Materials Management (storage) Completing the required form pertaining to the asset change and forwarding to the general fixed asset supervisor (referenced form developed and available from Fiscal Services) The Materials Management custodian is responsible for: Tagging the fixed asset Reporting asset reassignment if removed from storage to a user department to the general fixed asset supervisor Processing the asset disposal if the asset was in storage Reporting dispositions resulting from auctions or sales as scrap or junk to the general fixed asset supervisor Acquisition Procedures Purchased If the asset is purchased, an automated interface from Performance Accounting passes the data from the acquisition transaction to Performance Asset Management. The general fixed asset supervisor reviews the transaction and determines if indeed the purchase is a general fixed asset. If correct, the asset is recorded as a general fixed asset in Performance Asset Management. The general fixed asset supervisor reports the acquisition to Materials Management to be tagged. Donated If a donated asset is valued at over $2,000, as approved by the Board of Commissioners, it is included in a Miscellaneous Resolution. Upon receipt of the Miscellaneous Resolution, Fiscal Services is responsible for forwarding any information pertaining to donated equipment to the general fixed asset supervisor. If the fair market value of the donated asset is $5,000 or over, the general fixed asset supervisor records the asset data into Performance Asset Management and reports the acquisition to Materials Management to be tagged. Construction in Progress For projects under construction, the supervisor of Capital Projects is responsible for reporting updated information to the general fixed asset supervisor. The supervisor of Capital Projects assigns a number to the project or building, which is included in the fixed asset record. The general fixed asset supervisor records the updated information into Performance Asset Management. Found It is the responsibility of the user department custodian to notify the general fixed asset supervisor if an asset previously reported as missing is found. The general fixed asset supervisor updates the asset record in Performance Asset Management. Transfers Procedures The general fixed asset supervisor must be notified of any relocation of a fixed asset by the user department. The appropriate form must be completed by the user department and approved by the department head for the asset transfer to occur. The forms are available and may be obtained from the general fixed asset supervisor at Fiscal Services. After completion, all forms are to be forwarded to the general fixed asset supervisor for modification in Performance Asset Management to reflect the move. For transfers within or between departments, both the department relinquishing the asset and the department receiving the asset are required to complete the transfer form, which is available through Fiscal Services. The form must also be signed for approval by both department heads. The completed form is sent to the general fixed asset supervisor. For transfers of an asset into storage at Materials Management, either for reassignment or disposal, the user department is responsible for initiating the transfer. The user department custodian is required to complete the relevant form available through Fiscal Services, obtain department head approval, and forward the completed form to the general fixed asset manager. The user department custodian is responsible to coordinate the physical movement of the asset with Materials Management. If the asset is removed from Materials Management storage for reassignment, both the Materials Management custodian and the user department custodian obtaining the asset must complete the relevant form (available through Fiscal Services) and forward it to the general fixed asset supervisor. Disposal Fixed asset disposal methods include sold, missing, stolen/police report, scrapped, cannibalized, traded in, or transferred out. Regardless of the disposal method applicable to the fixed asset disposition, the user department must complete a form (available through Fiscal Services) and obtain department head approval for the disposition to be recorded. The user department custodian forwards the completed form to the general fixed asset supervisor. The general fixed asset supervisor will update the asset record in Performance Asset Management. If the asset has been transferred to Materials Management for auction, the Materials Management custodian prepares the asset for auction. The Materials Management custodian is responsible for reporting the disposition resulting from the auction to the general fixed asset supervisor who, in turn, updates the fixed asset record in Performance Asset Management. • .., . . Inventorying A biennial physical inventory of all general fixed assets will be conducted by the general fixed asset supervisor. The general fixed asset supervisor will mail a form to the departments in possession of fixed asset property requesting a current listing of all general fixed assets on hand. Upon completion of the physical inventory, the listing must be signed by the responsible department head and returned to the general fixed asset supervisor. The general fixed asset supervisor reviews and verifies the listing with the asset records in Performance Asset Management. Any discrepancies are resolved by the general fixed asset supervisor with the responsible department head. The original signed general fixed asset listing is retained and filed by the general fixed asset supervisor for auditing purposes. V • I HEREBY •."ROVE ilip OREGOING RESOLuTinm 9401111111•nn-- ,/"..e0A-r L. Brooks Patterson. ty Executive Date L. Brooks Patterson. Ctty Executive Date Allen, County Clerk Resolution #98084 April 23, 1998 Moved by Douglas supported by Jensen the resolution be adopted. AYES: Douglas, Garfield, Gregory, Holbert, Huntoon, Jacobs, Jensen, Johnson, Kaczmar, Kingzett, Law, McCulloch, McPherson, Millard, Moffitt, Obrecht, Palmer, Powers, Schmid, Taub, Wolf, Amos, Coleman, Devine, Dingeldey. (25) NAYS: None. (0) A sufficient majority having voted therefor, the resolution was adopted. STATE OF MICHIGAN) COUNTY OF OAKLAND) I, Lynn D. Allen, Clerk of the County of Oakland, do hereby certify that the foregoing resolution is a true and accurate copy of a resolution adopted by the Oakland County Board of Commissioners on April 23, 1998 with the original record thereof now remaining in my office. In Testimony Whereof, I have hereunto set my hand and affixed the seal of the County of Oakland at Pontiac, Michigan this 23rd day of April 1998.