Capital Assests (BF-21, Rev. 7)City Of
ADMINISTRATIVE
SUBJECT:
POLICIES AND
Delray
PROCEDURES
Capital Assets
MANUAL
Beach
NUMBER
BF - 21
REVISIONS
7
EFFECTIVE DATE:
09/25/2017
PAGE
8 pages
SUPERCEDES
AP Y:
BF -21, Rev 6
(10/01/2015)
Neal de Jesus, Interim City Manager
BF -21.0 Purpose:
The purpose of this procedure is to provide effective guidelines, set responsibilities for
the acquisition, depreciation and disposal of the city's capital assets including setting
procedures to monitor and account for small and attractive assets.
BF -21.1 Capital /Fixed Assets and Capitalization Thresholds:
A capital /fixed asset is real or personal property that has a cost equal to or greater than
$5,000 ($50,000 for software) and has 'an estimated useful life extending beyond one
year. The City of Delray Beach reports capital assets under the following categories:
1. Land and land improvements
2. Buildings and building improvements
3. Infrastructure and infrastructure improvements
4. Improvements other than buildings
5. Property under capital lease
6. Construction work in progress
7. Furniture, machinery and equipment
8. Computer software
BF -21.2 Capital /Fixed Asset Definitions and Categories:
A. Land and Land Improvements
Land is the surface or crust of the earth, which can be used to support structures,
and may be used to grow grass, shrubs, and trees.
Land improvements consist of betterments, site preparation, and site
improvements that ready land for its intended use. The cost associated with land
improvements is added to the cost of land. Land and land improvements should
not be depreciated.
Budget & Finance
Fixed Asset Policy
Page 2 of 8
Examples of items to be capitalized as land and land improvements are:
1. Purchase price or fair market value at time of gift
2. Commissions
3. Professional fees (i.e. title searches, architect, legal, engineering,
appraisal, surveying, environmental assessments, etc.)
4. Land excavation, fill, grading, and drainage
5. Demolition of existing buildings and improvements (less salvage)
6. Removal, relocation, or reconstruction of property of others (i.e. railroad,
telephone, and power lines, etc.)
Items such as roads, bridges, and paved parking lots are not considered land
improvements but are considered infrastructure.
B. Buildings and Building Improvements
A building is a structure that is permanently attached to the land, has a roof, is
partially or completely enclosed by walls, and is not intended to be transportable
or moveable. A building is generally used to house persons, property, and
fixtures attached to and forming a permanent part of such a structure.
Building improvements are capital events that materially extend the useful life of
a building or increase the value of a building, or both beyond one year. Building
improvements should not include maintenance and repairs done in the normal
course of business.
Examples of items to be capitalized as buildings and building improvements are:
1. Original purchase price of the building
2. Expenses for remodeling, reconditioning, or altering a purchased
building to make it ready to use for the purpose for which it was
acquired
3. Environmental compliance (i.e. asbestos abatement)
4. Professional fees (i.e. legal, architect, inspections, and title searches)
5. Cancellation or buyout of existing leases
6. Completed project costs of constructed buildings
7. Cost of building permits
8. Permanently attached fixtures or machinery that cannot be removed
without impairing the use of the building
9. Additions to buildings (i.e. expansions, extensions, or enlargements)
10. Conversion of attics and basements to usable space
11. Structures attached to the building such as covered patios, garages
and enclosed stairwells
12.Installation or upgrade of heating and cooling systems, including
ceiling fans and attic vents
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Fixed Asset Policy
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13.Original installation or upgrade of wall or ceiling covering such as
carpeting, tiles, paneling or parquet
14. Structural changes such as reinforcement of floors or walls,, installation
or replacement of beams, rafters, joists, steel grids, or other interior
framing
15. Installation or upgrade of window or doorframe, upgrading of windows
or doors, built -in closet and cabinets
16. Interior renovation associated with casings, baseboard, light fixtures
and ceiling trim
17. Exterior renovation such as installation or replacement of siding,
roofing, or masonry
18. Installation or upgrade of plumbing and electrical wiring
19. Installation or upgrade of phone or closed circuit television systems,
networks, fiber optic cable, or wiring required in the installation of
equipment (that will remain in the building)
Examples of items to be considered maintenance and repairs and not capitalized
as buildings are:
1. Adding, removing, and /or moving of walls relating to renovation
projects that are not considered major rehabilitation projects and do
not increase the value of the building
2. Improvement projects of minimal or no added life expectancy and /or
value to the building
3. Plumbing or electrical repairs
4. Cleaning, pest extermination, or other periodic maintenance
5. Interior decorations such as draperies, blinds, curtain rods and
wallpaper
6. Exterior decoration such as detachable awnings, uncovered porches
and decorative fences
7. Maintenance -type interior renovation such as repainting, touch -up
plastering, replacement of carpet, tile, or panel sections, sink and
fixture refinishing
8. Maintenance -type exterior renovation such as repainting, replacement
of sections of deteriorated siding, roof, or masonry
The list of examples provided above is not intended to be all- inclusive.
C. Infrastructure and Infrastructure Improvements
Infrastructure assets are long -lived capital assets that normally are stationary in
nature and normally can be preserved for a significantly greater number of years
than most capital assets. Examples of infrastructure assets include roads,
bridges, drainage systems, water and sewer systems, and street lighting
systems. Infrastructure assets shall be capitalized and depreciated.
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Fixed Asset Policy
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Improvements made to infrastructure assets that extend the useful lives or
increase the value of the assets, or both, beyond one year should be capitalized.
D. Property under Capital Lease
Assets shall be capitalized if the lease agreement meets any one of the following
criteria:
1. The lease transfers ownership of the property to the lessee by the end
of the lease term.
2. The lease contains a bargain purchase option.
3. The lease term is equal to 75 percent or more of the estimated
economic life of the leased property.
4. The present value of the minimum lease payments at the inception of
the lease equals at least 90 percent of the fair value of the leased
asset.
A lease that does not meet any of the above capitalization requirements should
be reported separately as an operating lease for inclusion in the city -wide
financial statements.
E. Construction Work in Progress
Construction work in progress reflects the economic construction activity status
of buildings and other structures, infrastructure, additions, alterations,
reconstruction, and installation, which are substantially incomplete. The cost of
construction work in progress should not be depreciated. Construction work in
progress assets should be capitalized to their appropriate capital asset
categories upon the earlier occurrence of execution of substantial completion
contract documents, occupancy, or when the assets are placed into service. It is
the finance department's responsibility to track all costs related to construction
work in progress so that the final value of the constructed asset is correctly
captured. Departments should not use multiyear appropriations for a project to
circumvent the capitalization threshold for the project.
F. Furniture, Machinery and Equipment
Furniture, machinery and equipment include fixed or movable tangible assets to
be used for operations, the benefits of which extend beyond one year from date
of receipt. Examples of furniture and equipment are machinery, computers,
printers, radios, and vehicles.
G. Computer Software
Computer software that is either purchased or internally developed shall be
capitalized as fixed assets if the cost of the computer software exceeds $50,000.
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Fixed Asset Policy
Page 5 of 8
Capitalization of computer software includes software license fees if the total
dollar amount of the fee divided by the number of units served (terminals)
exceeds the threshold.
For internally developed software, only costs associated with the application
development phase shall be capitalized. Costs associated with the preliminary
project and the post - implementation /operating phases should be expensed as
incurred. Costs to develop or obtain software that allows for access or
conversion of old data by new information systems should also be capitalized.
General and administrative costs and overhead expenditures associated with
software development shall not be capitalized.
BF -21.3 Physical Asset Inventorv:
A biennial physical inventory shall be taken and reviewed by the assigned custodian in
each department. The inventory is taken using a preprinted fixed asset register with
any variances between the register /listing and physical inventory reconciled as follows:
1. Identify those assets that were purchased or transferred in but not added
to or changed on the individual fixed asset records or listing of small
attractive assets.
2. Investigate the disposal or transfer out of assets not located. If the asset
is not found, then the department will report the incident to the
Department Director and a report needs to accompany the capital asset
disposition form submitted to the Finance Department.
3. If the asset is not at the end of its useful life (not fully depreciated) a police
report will be filed.
BF -21.4 Depreciating Capital /Fixed Assets:
Capital /fixed assets shall be depreciated over their estimated useful lives unless they
are:
1. Inexhaustible (i.e. land and land improvements)
2. Construction work in progress
It is the responsibility of the finance department to estimate the useful life of each
capital /fixed asset. For city -wide financial statement purposes, the straight -line method
will be used to calculate depreciation for each capital asset recorded in the property
system starting with the month that the asset is received by the city. The finance
department is responsible for recording the assets in the correct general ledger
codes /account numbers.
BF -21.3 Reporting Capital /Fixed Assets:
Capital /fixed assets should be reported at purchase cost. The cost of a capital /fixed
asset should include ancillary charges necessary to place the asset into its intended
Budget & Finance
Fixed Asset Policy
Page 6 of 8
location and condition for use. Ancillary charges include costs that are directly
attributable to asset acquisition, such as, freight and transportation charges, site
preparation costs, and professional fees.
Donated capital/fixed assets should be reported at their estimated fair market value at
the time of acquisition plus ancillary charges, if any.
When the historical /purchase cost of a capital /fixed asset is not practicably
determinable, the estimated historical cost of the asset should be determined by
appropriate methods and recorded. Estimated historical costs should be so identified in
the record.
The basis of valuation for capital assets constructed by the city should be the costs of
material, direct labor, and overhead costs identifiable to the project.
The finance department is responsible for correctly reporting these assets at the date of
acquisition. Any improvements made to a capital asset that extends the useful life of
the asset beyond one year should be capitalized.
BF -21.4 Procedure for Acquisitions by Donation or Confiscation:
When the custodian department is assured that the confiscated or donated item will
become part of its inventory, the department will send a memorandum to the Finance
Department detailing the following information:
1. Description of item (including class, number of units, name, make or
manufacturer, year, model number)
2. Identification number (serial number)
3. Fair market value of item (if known)
4. Date item was acquired
5. Location of item
The Finance Department will assist in valuation based upon Generally Accepted
Accounting Practices (GAAP).
BF -21.5 Transfer of Fixed Assets:
Whenever a fixed asset is transferred from one custodian department to another,
Section XVII of the Purchasing Manual should be followed and a 'Property Disposition,
Release of Custody Form" shall be completed (Exhibit A).
Accounting of transfers will be made in compliance with Generally Accepted Accounting
Practices.
Budget & Finance
Fixed Asset Policy
Page 7 of 8
BF -21.6 Surplus and Scrap Disposal:
Disposal of non -real property is governed by Section 36.08 of the City's Code of
Ordinances and is not regulated by this policy.
Relinquishing city real property (land) is governed by Section 36.12 of the City's Code of
Ordinances and is not regulated by this policy.
BF -21.7 Partnering with a Non - Profit Organization for Surplus Property Disposal:
In certain circumstances, the City might wish to provide usable items to a non - profit
organization as opposed to disposing as governed by Section 36.08 of the City's Code
of Ordinances. In order to do so, there must be documentation as to why it is in the
best interest of the city to partner with the non - profit as opposed to selling. This
documentation along with any information from a non - profit organization and the
disposal form must be signed of by the department and forwarded to the City Manager
or designee for approval.
When the asset is transferred to an agency it is the responsibility of the custodian
department to get all required documentation from the non - profit organization.
BF -21.8 Small Attractive Assets:
Property that is highly prone to theft must be safeguarded and controlled. An annual
inventory of such items shall be maintained by the individual departments. Inventory
sheets shall be turned in to the finance department for asset list verification.
Sensitive items include but are not limited to:
1. Computer equipment, (Pads, Notebooks
2. Laptop and desktop computers
3. Weed Whackers
4. Power tools
5. Chain saws
6. Televisions and DVD players
7. Two -way radios
8. Cell phones
9. Guns
10. Lawnmowers and leaf blowers
11. Video and Digital Cameras
12. Global Positioning System (GPS) equipment
EXHIBIT A
RECEIPTIDELIVERY OF DONATION
DATE-:
TO: City of Delray Beach Finance Department
Attention Finance Department
100 N.W. 1st Avenue
Delray Beaoh, Florida 33444
FROM: (Agency Donating Assets) to the Cityj
The City of Delray Beach Is a municipality within the State of Florida, Any a ontributionstdonations given
to the City would be considered tax deductible, The City's Federal Tax LD. # Is 60- 60003D3.
This Is to acknowledge receipt and delivery of the following items which have been donated to the City of
Delray Beach. Please provide the "fair market value" of the Items listed below that you will be donating.
Quantity Desorlotion Model # Serial # Fair Market Value
Thank you for your donation,
Signature for Delivery of Donation Print Name for Delivery of Donation Date
Signature for Receipt of Donation Print Name for Receipt of Donation Data
Me=
P;lfinflnootFOrm$AReceipl- Delivery of Dona119n,0*007 122/09
PROPERTY DISPOSITION AND RELEASE OF CUSTODY FORM EXHIBIT n
Originating DeparimenUDivislon: Dale:
DISPOSALS TOW For
completed PabnoWorks
by Dept Use ONLY
Asset#
Description
Model
Serial 9—
Condition
Dlspoattlon
PdntLasiNome
AesetReleasa personnel (OrtginaBng Depl };
Dole;
Signature
PdntLasiNome
Ssrvloa Personnel(1TIPW}:
Dato
Signature
PdalLOst Nams
Disposglon {puelbwodcsy
_ ._ _ _
Date:
Signature
Print Lost Namo
CONDITION (FOR DEPT, USE): ArUnused B- Not Repalrable CdUsable O= Cannibalized Mepalrable R�Retlred
DISPOSITION (FOR PUBLIC WORKS USE ONLY): 1=Auolloned 2= Thrown Away, 3 =80d Strap 0Transforrod 6=01her
TRANSFERS
Transferred to Department Name;
Recelving Department Head or designee etgnature:
Asset
Deoorl flon
Model
00401 ft
slgnatoro
PdntLasiNome
AesetReleasa personnel (OrtginaBng Depl };
Dole;
CERTIFICATION SIGNATURES (ALL SIGNATURES ARE REQUIRED FOR AUDITING AND ACCOUNTING PURPOSES.)
DepodmoraHead or Dsslgnw
Date•
slgnatoro
PdntLasiNome
AesetReleasa personnel (OrtginaBng Depl };
Dole;
Signature
PdntLasiNome
Ssrvloa Personnel(1TIPW}:
Dato
Signature
PdalLOst Nams
Disposglon {puelbwodcsy
_ ._ _ _
Date:
Signature
Print Lost Namo
Slgnature Print Lasl Name
DISTRIBUTION; White- Pohlbwodat Canary- Ffaanco Pink - Depanment Goldenrod - Trans fore ONLY (Reoolvingbopadment)
P:IFinenceTormAptopedy Dlspos8lon Form 07- 21-0"w$dl
EXHIBIT C
RECEIPT OF DONATION
TO: City of Delray Beach Finance Department
Attention:
100 N.W. First Avenue
Delray Beach, Florida 33444
FROM: (Agency Requesting the Donation)
Date:
This is to acknowledge recelpt of the following City of Delray Beach equipment which has been
donated to our organization, The City established the "fair market value" reflected below.
QtY
Item
Description
Model
Number
Serial
Number
Fair Market
Value
TOTAL DONATION
Signature
Print Name
P;\Pleanceftfli Recelplof 0onalbn of EquipmentdOWA07.2249
Date