[HISTORY: Adopted by the City Council of the City of Fairfax 5-8-1990. Amendments noted where applicable.]
The following procedures and guidelines are to account for the fixed assets of the City of Fairfax. This policy is for accounting purposes only and does not supersede any other policies which address assessments.
As used in this chapter, the following terms shall have the meanings indicated:
- ASSET LIFE
- This is the standard estimated useful life of an item. To be considered a fixed asset, an item must have a useful life greater than one year.
- ASSET VALUE
- This is the value of an item. The value will be based on the invoice plus additional costs of preparing the asset for use. To be considered a fixed asset, an item must have a value of greater than $1,000.
- BUILDINGS AND STRUCTURES
- A building or structure is a roofed and/or walled structure that is City-owned. For example, a picnic pavilion would be considered a structure although it may have no walls.
- A separate class of asset set up to specifically account for all computer equipment owned by the City. This category includes personal computers, printers, modems and any other computer-related item.
- A weapon from which a shot is discharged using gunpowder. This category is used to account for all firearms belonging to the Police Department.
- FIXED ASSET
- An item obtained by the City with a value of greater than $1,000 and an estimated useful life of greater than one year.
- FORFEITED PROPERTY
- Property seized by the Police Department that will be used by the City. The City policy on forfeited property should be followed.
- FURNITURE AND FIXTURES
- Assets that are used by people in any City facility that are considered furniture or fixtures. This category includes desks, chairs, credenzas, modular work stations, drinking fountains, etc.
- INVESTING SOURCE
- Fund type originally payable for general fixed asset or donation. Assets acquired before January 1, 2004, will not have a designated investing source.
- Any parcel of land that is City of Fairfax owned, whether developed or undeveloped.
- LAND EQUIPMENT
- Grading, roads and parking lots on City-owned property that will be capitalized.
- MACHINERY AND EQUIPMENT
- Includes motorized and nonmotorized equipment that has a primary function of the City of Fairfax street, park or utility maintenance. It includes items such as tractors, mowers, snow blowers, etc.
- OFFICE EQUIPMENT
- An item used by employees to perform a mechanized task in an office environment. For example, typewriters, telephones and adding machines. However, cameras, VCR's, cellular phones, refrigerators, microwaves, etc., are also included in this category. This category does not include computer equipment as there is a separate distinct category for computer equipment.
- PARK IMPROVEMENTS
- Improvements made to a City park that will be capitalized. This category would include items such as playground equipment, back stops, bleachers, flagpoles, etc.
- TOOLS AND OTHER EQUIPMENT
- This category includes all small tools and equipment such as chain saws, battery chargers, post drives and so on. Vehicle equipment as defined below is excluded from this category.
- VEHICLE EQUIPMENT
- Equipment that is installed in/on a motor vehicle such as radios, wing plows, sanders, lighting packages, radar units and tool boxes.
- Motorized vehicles owned by the City of Fairfax such as squad cars and trucks.
Identification tags will be affixed to almost all assets currently owned and subsequently acquired. Land, sewer and water mains, lift stations, wells and towers will not be tagged. Shotguns in the Police Department will not be tagged. All other assets should be tagged.
Upon receipt of an asset, the department head will request an asset number and identification tag from the Administration Department. The Department Head is responsible for affixing the tag in a conspicuous and readily accessible place.
Assets under the capitalization amount will not be tagged unless they are items that are considered easily portable and there is a significant threat of theft.
When a department acquires a new asset, the Department Head is responsible for completing an asset acquisition form and requesting an identification tag from the Administration Department.
Assets bought as a group (i.e., 50 chairs for the Council Chambers, etc.), with the intent of keeping them in the same location, will be treated as one asset. They will be entered under one identification number and the total cost will determine the capitalization value. If these assets are split at a later date, the same procedure for a new asset will apply.
The asset acquisition form shall contain the following information:
Description. The description should clearly describe the asset, keeping in mind that this description will be used to identify the asset in the future, without being too lengthy.
Expenditure account. This is the expenditure account that the invoice for the asset was coded to.
Location. This is the intended location in which the asset will be stored.
Acquisition code. This is the code which describes the funding source of the asset.
Activity code. This is the code which describes which department purchased the asset.
Function code. This is the code which describes the function of the department that owns the asset. Examples include general government, public safety, public works, etc.
Vendor. This is the name of the vendor from whom the asset was purchased.
Acquisition date. This is the date the asset was acquired.
Manufacturer. This is the name of the manufacturer of the asset, if applicable.
Model number. This is the model number assigned to the asset by the manufacturer, if applicable.
Serial number. This the serial number assigned to the asset by the manufacturer, if applicable.
Invoice number. This is the vendor's invoice number on the invoice of the asset.
Cost. This is the cost of the item. Cost will be based on the invoice plus additional cost of preparing the asset for use. Trade-in values will be use to reduce the carrying cost of the new asset.
The asset acquisition form should be signed by the Department Head.
Administration should input asset acquisition form information monthly.
The Administration Department is responsible for recording completed construction projects in the completed year.
When a department retires or transfers out an asset, the Department Head is responsible for completion of an asset retirement/transfer form. Administration is to receive a copy.
The fixed asset retirement/transfer form shall include the following information:
Asset number. This is the number that is assigned to the asset. There should be a tag on the asset with the number printed on it.
Asset description. The description should be detailed and should include year, model, model number, color, make, type and other pertinent information relating to the asset.
Department. This line refers to the department retiring or otherwise changing the asset.
Date of change. This is the date the change took place.
Type of change. The Department Head should state whether the asset was sold, transferred, destroyed or traded in.
If sold, amount of sale. Amount received if asset was sold. A copy of the cash receipt should be attached in this case.
If transferred, new department. Department receiving the asset.
New location. New location in which the asset will be stored or used.
If traded in, amount of trade in. Amount of trade-in allowance received if asset was traded in on a new item.
New item. Description of new item that trade was applied towards.
If destroyed, insurance compensation. Amount of compensation received from insurance, if the asset was destroyed as the result of an accident. A copy of the cash receipt should be attached in this case.
Description of destruction. How the asset was destroyed, examples would include junked, totaled in accident, stolen.
The asset identification tag should be removed before selling, destroying or trading in an asset and should be placed on the retirement/transfer form.
The asset retirement/transfer form should be signed by the Department Head.
Administration should input asset retirement/transfer form information monthly.
An annual report will be provided and a physical inventory taken of all fixed assets. The physical inventory will be a function of each department. Department Heads will be required to sign a form that the listing for their department has been verified and is complete and accurate.
It will be the responsibility of the Administration Department to value fixed assets based on generally accepted accounting principles.
For fixed assets that are purchased, cost will be based on the invoice plus additional costs of preparing the asset for use. Trade-in values will not be used to reduce the carrying cost of the new asset.
Assets purchased under a lease or installment method should be valued at the discounted present value of total payments. Additional costs will include those necessary so the asset is ready for use.
For assets acquired by donation, cost will be fair value on date of gift and any costs of preparing assets for use.
Property acquired under eminent domain will have a cost determined by the court plus any additional attorney fees, costs associated with preparing land for intended use.
The cost for assets acquired by forfeiture/seizure are based on the fair market value on date of forfeiture/seizure and additional cost associated with preparing the asset for intended use.
For all fixed assets, the additional costs of preparing the asset for intended use includes, but is not limited to, the following:
Land. Legal fees, appraisal and negotiation fees, surveying fees, site preparation costs, demolition of unwanted structures and damage payments;
Buildings and improvements. Architect fees, legal fees, appraisers, costs of fixtures, damage claims, insurance premiums, interest and related construction costs;
Machinery, equipment and furniture. Transportation charges and installation costs;
Motor vehicles. Transportation charges, painting and installation of additional equipment;
Park improvements. Physical improvements to park land that are not removable or do not increase the value of the land will not be capitalized, including trails, parking areas, grading, aglimed surfaces, drainage pipes, etc. Removable, replaceable fixtures or buildings such as fencing, play equipment and picnic shelters will be capitalized.
It will be the responsibility of the Department Head to inform the Administration Department of any additional cost associated with an asset.
January 1, 2004, asset listing were complied based on a physical inventory taken by the Administration and Department Heads, enterprise fixed assets listing were reconciled to audit work papers. Values were determined as follows:
Assets acquired December 31, 2003, or earlier had a minimum valuation of $1,000 to be considered a fixed asset.
No asset owned by the City shall be sold to an officer or employee of the City unless the sale conforms to Minnesota State Statute 15.054, as amended from time to time. Property, except real property, may be sold to an employee after reasonable public notice at a public auction or by sealed bid, if the employee is the highest bidder and is not directly involved in the auction sealed bid process.
Depreciation will be calculated using the straight-line method over the estimated useful life of assets. One-half year depreciation will be taken for the year of acquisition and 1/2 year of depreciation will be taken in the year of disposition (unless the asset is fully depreciated). Standard estimated useful lives are as follows: