02. Resolution 4704 - Fixed Asset PolicyCity of Kalispell
Post Office Be. 1997 - Kalispell, Montana 59903-1997 - Telephone (406)758-7700 Fax(406)758-7758
D: Mayor Kennedy and City Council Members
FROM:
SUBJECT:
MEETING DATE:
Amy Robertson, Finance Director
Chris Kukulski, City Manager
New Reporting requirement -Fixed asset policy
June 3, 2002
BACKGROUND: The Governmental Accounting Standards Board (GASB) has adopted
Statement 34, also called GASB 34 for the financial reporting requirements for all state and
local governments. The most challenging change to the accounting policies for governments is
the requirement to record infrastructure assets. We have good audited records for water, sewer
and storms systems. We have not recorded any asset items or values for streets, alleys,
sidewalks, lights and other infrastructure that was not an enterprise fund asset. The public works
department has a street maintenance program which we hope to use to identify the street assets.
Coming up with acceptable (to the auditors) values to record will be the difficult part. We must
use historical costs and then depreciate. Since I've been doing the accounting for the City, I have
recorded park improvements, new ballfields, ISTEA trails, etc. in our General Fixed Asset Group
of Accounts. We are now going into that program and establishing a life for these assets so that
we can record deprecation. We have approximately $18,500,000 in historically costed assets on
the books.
The reason this is being brought to Council is that we previously adopted Resolution 4452
establishing a policy for the capitalization of fixed assets. The policy formally excluded
infrastructure assets and so now needs to be changed. Our current policy for fixed assets
requires a life of five years and a value above $2,000. GFOA (Government Finance Officers
Association) has recommendations which I have incorporated into the Resolution. The most
notable change moves the capitalization value to $5,000 which is the federal fixed asset threshold
also.
FISCAL EFFECTS: Changing the threshold will change classification of some items in
the budget for reporting purposes only. On the financial statements, the recording of
infrastructure assets will improve the City's value on the new Statement of Net Assets. This
statement replaces the Balance Sheet.
RECOMMENDATION: Adoption of Resolution
ALTERNATIVES: As suggested by Council.
Finance Director
Chris A. Kukulski
City Manager
RESOLUTION NO. 4704
A RESOLUTION AMENDING RESOLUTION NO. 4452 BY ESTABLISHING A POLICY
FOR THE RECORDING OF INFRASTRUCTURE ASSETS AND CAPITALIZATION OF
FIXED ASSETS.
WHEREAS, on March 15, 1999, Council passed Resolution No. 4452
which established a policy for the capitalization of
fixed assets, and
WHEREAS, the Governmental Accounting Standards Board has adopted
Statement 34, which now requires capitalization of
infrastructure assets.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF
KALISPELL, MONTANA, AS FOLLOWS:
SECTION I. Resolution No. 4452 is hereby amended by
adding the following:
Fixed Assets shall be capitalized in accordance with the
following:
All purchased fixed assets are valued at cost where historical
records are available and at estimated historical cost where
no historical records exist. Donated fixed assets are valued
at their estimated fair market value on the date received. The
costs of normal maintenance and repairs that do not add to the
value of the assets or extend asset lives are not capitalized.
Improvements are capitalized and, in the proprietary funds,
depreciated over the remaining useful lives of the related
assets.
General fixed assets are not capitalized in the funds used to
acquire or construct them. Instead, capital acquisition and
construction are reflected as expenditures in governmental
funds, and the related assets are reported in the general
fixed assets account group. GASB 34 governmental reporting
requirements will blend General Fixed Assets with the
governmental funds for reporting purposes.
Public domain or infrastructure fixed assets will now be
included in the general fixed assets account group following
the recommended practices of the Government Finance Officer's
Association and GASB 34 reporting requirements. Public domain
or infra -structure assets include roads, bridges, curbs and
gutters, streets and sidewalks, lighting systems and similar
assets that are immovable and of value only to the
governmental unit.
Fixed assets purchased or acquired by proprietary fund types
are recorded in the individual fund making the purchase. Any
fixed assets donated specifically for an enterprise fund are
also recorded in that individual fund. Depreciation has been
provided for the property, plant and equipment of the
proprietary funds using the straight line method. The useful
lives of these assets follow industry standards.
Tangible capital -type items should only be capitalized only if
they have an estimated useful life of at least five years
following the date of acquisition. Capitalization thresholds
are best applied to individual items rather than to groups of
similar items (e.g., desks and tables).
The capitalization threshold of $5,000 for any individual
item is recommended by the GFOA (Government Finance Officer's
Association) and is adopted here. $5,000 is the capitalization
threshold for federal projects and reimbursements.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF
THE CITY OF KALISPELL, MONTANA, THIS 3RD DAY OF JUNE, 2002.
Pamela B. Kennedy
Mayor
ATTEST:
Theresa White
City Clerk