Resolution No. 22-18RESOLUTION NO. 22-18
A RESOLUTION OF THE CITY OF ATLANTIC BEACH, FLORIDA
ADOPTING A CAPITAL ASSET POLICY AND PROVIDING AN
EFFECTIVE DATE
WHEREAS, the City of Atlantic Beach would like to formally adopt written financial
policies; and
WHEREAS, the City of Atlantic Beach wishes to adopt a capital asset policy to provide
control and accountability over the City's capital assets.
NOW, THEREFORE, BE IT RESOLVED by the City Commission of the City of
Atlantic Beach as follows, that
1. The capital asset policy attached hereto is hereby adopted.
2. This Resolution shall take effect immediately upon its passage and adoption by
the City Commission of the City of Atlantic Beach, Florida.
PASSED by the City Commission of the City of Atlantic Beach, Florida this 28`" day of
February 2022.
Approved as to form and correctness
. �w /d�,—
B en M. Iiur&n
City Attorney
ATTEST:
Donna L. Bartle
City Clerk
�l
Ellen Glasser
Mayor/Presiding Officer
CITY OF ATLANTIC BEACH
Capital Asset Policy
I. Obiective
The purpose of the capital asset policy is: 1) to provide control and accountability over capital
assets, and 2) to gather and maintain information for the preparation of the Annual Comprehensive
Financial Report in conformity with Generally Accepted Accounting Principles (GAAP) and
Governmental Accounting Standards Board Statements (GASB) No. 34 — Basic Financial
Statements and Management's Discussion and Analysis for State and Local Governments and
GASB No. 51 — Accounting and Financial Reporting for Intangible Capital Assets.
This guide will help determine whether an item qualifies as a capital assets, how to account for its
acquisition, how to monitor its activity, and its final disposition. The following guidelines and
procedures will document a capital asset system designed to reflect the statutory requirements from
Section 274 Florida Statutes and Chapter 69I-73 of the Florida Administrative Code provided by
the Department of Financial Services of the State of Florida, and thereby increase control over
those assets for which the city has stewardship responsibility.
II. Definition
GASB Statement No. 34 notes that the term "capital assets" are assets that 1) are used in
operations and 2) have an initial useful life in excess of one year. This term encompasses both
tangible assets (land, land improvements, buildings, building improvements, vehicles, machinery,
equipment, works of art, historical treasures, infrastructure) and intangible assets (easements,
software, water rights).
Capital Assets Types:
• Land
• Buildings
• Infrastructure
• Improvements Other Than Buildings
• Equipment and Vehicles
• Construction in Progress
• Intangible Assets - Easements, right of way
• Intangible Assets — Software, patents, trademarks
Capital Asset Accounts with Definitions and Examples:
Land
Land is defined as the surface or crust of the earth, which may be used to support structures
or grow crops, grass, shrubs, and trees. Land is characterized as having an inexhaustible
life. All expenditures made to acquire land and ready it for its intended use should be
considered as part of the land cost.
Examples:
• Purchase price or, if donated, the fair market value, or a reasonable and equitable estimate
of such value on the date of acquisition
• Professional fees (title search, real estate commissions, legal, escrow, appraisal, and
surveying services, environmental assessments, etc.)
• Permanent work to the land, such as land clearing, excavation, fill, grading, drainage, etc.
• Removal, relocation, or reconstruction of property of others on the land so that the land
may be used differently
• Accrued and unpaid taxes at date of purchase
If the land and a structure are acquired as a single purchase, the value of the land should be
determined separately from the structure. This is important as land is not depreciable, while
the structure and improvements are depreciable.
Buildings
A building is defined as 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 mobile. Building
improvements are defined as capital improvements if they add value to the existing capital
asset by extending the useful life or increasing the capital asset's ability to provide service.
Examples:
Purchased Buildings:
• Original purchase price
• Expenses for the initial remodeling, reconditioning or altering a purchased building to
make it ready to use for the purpose of which it was acquired (this does not include an
interior only remodeling performed at a later date)
• Environmental compliance (i.e. asbestos abatement)
• Professional fees (appraisal, engineering, architectural etc.)
• Payment of unpaid or accrued taxes on the building only at the date of purchase, if
applicable
• Cancellation or buyout of existing leases on the building
Constructed Buildings:
• Completed project costs
• Interest accrued during construction for enterprise type activities
• Cost of excavation, grading or filling of existing land necessary for a specific building
• Expenses incurred for the preparation of plans, specifications, blueprints, etc.
• Cost of building permits
• Professional fees (architect, engineer, legal, etc.)
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Building Improvements:
• Structures attached to the building during the project (enclosed patios, sunrooms, garages,
carports, enclosed stairwells, etc. that actually increase the square footage of the building)
• Upgrades that will increase useful life of the building (i.e. reinforcement of floors and walls
to add 25% to useful life of the building)
• The following are examples of `Building Maintenance Expense' and should be paid from
operating expense object codes — not capital expense object codes:
Building Maintenance Expense:
• Adding, removing and/or moving walls that are not increasing the actual square footage of
the building
• Replacing an existing HVAC unit
• Plumbing or electrical repairs
• Any periodic maintenance (cleaning, pest control, etc.)
• Interior decoration (draperies, blinds, curtain rods, etc.)
• Exterior decoration (detachable awnings, uncovered porches, decorative fences, etc.)
• Maintenance -type interior/exterior renovations (repainting, replacement of tile or carpet,
fixture refinishing, replacement of deteriorated siding, roof, or masonry section, etc.)
• Replacement of a part or component of a building with a new part of the same type and
performance capabilities (i.e. water heater)
Infrastructure
Infrastructure assets are long-lived capital assets that are normally stationary in nature and
can normally be preserved for a significantly greater number of years than most capital
assets.
Examples:
• Highways and rest areas
• Roads, streets, sidewalks etc. (does not include pavers)
• Bridges, railroads, tunnels
• Canals, waterways, etc.
• Dams, drainage systems
• Street lighting systems
• Paved parking areas
• Signage
• Easements (permanent right authorizing the city to use or cross the land or a portion thereof,
which is owned by someone else, for a specified purpose)
• Land use rights
• Right -of -Ways (permanent right to build, use and make improvements on land or a portion
thereof, which is owned by someone else, for a specific purpose, such as a roadway)
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When distinguishing between Capital Improvements and Maintenance of existing capital
assets consider the following:
Capital Improvements- Add additional value to the asset. Such added value is achieved
either by:
1. Lengthening the useful life of an existing capital asset or
2. Increasing the capital asset's ability to provide service
(i.e., greater effectiveness or efficiency).
Examples of Capital Improvements:
• Clay pipes with a useful life of 30 years, after 25 years the City re -lines them with material
that has 50 years of useful life
• Widening a road from two lanes to four lanes
Maintenance - retains the value of a capital asset rather than providing additional value.
Maintenance is considered non -capital, operating expenses that are incurred to keep capital
assets in normal operating condition, to help maintain the original intended use of the
capital asset, and do not extend the life of the capital asset beyond the expected useful life
at acquisition.
Examples of Maintenance:
• Resurfacing a road every 10 years to meet its life expectancy of 50 years
• Replacing a roof on a building every 20 years to meet its life expectancy of 80 years
• Installing a new transformer to provide customers with service in an established
development to meet its life expectancy of 30 years
• Replacing HVAC unit in a building every 10 years to meet its life expectancy of 80 years.
Improvements other than buildings
This asset class is used for permanent (i.e. non -moveable) capital improvements, other than
buildings, that add value to land, but do not have an indefinite useful life.
Examples:
• Water and sewer systems, both new and extensions to previous non -customers
• Capital work order imports
• Retaining walls
• Permanent landscaping, including pavers
• Recreation areas & athletic fields
• Golf courses
• Paths and trails
• Tennis courts, swimming pools, etc.
In regards to City of Atlantic Beach Utilities, removal and replacement of minor items will
be considered maintenance except:
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1. If the minor items are replaced as part of a larger project exceeding $5,000, then
they are capitalized
2. If the minor item itself exceeds $5,000 in value such as replacing a substation
breaker and it increases the life of the capital asset or results in a betterment
Equipment & Vehicles
Equipment is defined as a capital or movable tangible capital asset to be used for operations
and meets all of the following criteria:
• It retains its original shape, appearance, and character with use
• It does not lose its identity through fabrication or integration into a different or more
complex unit or substance
• It is nonexpendable (if the item is damaged or some of its parts are lost or worn out,
it is more feasible to repair the item than to replace it)
• Under normal condition of use, it can be expected to serve its principal purpose for
at least two years
Examples:
• Construction equipment
• Vehicles
• Public Safety Vehicles
• IT and office equipment (servers, copiers, scanners, etc.)
• Playground equipment
• Safety equipment
• Movable sheds/utility buildings
Examples of expenditures to be capitalized as part of equipment acquisition:
• Original contract or invoice price
• Freight charges
• Taxes, if imposed on the acquisition
• Installation charges
• Additional vehicle items which are purchased and installed when item is originally
placed into service, which are not usable without the vehicle which include":
o Light bars on police vehicles
o Cages in police vehicles
o Lift buckets on fire trucks
Exclude:
o Electronics which can be moved to other vehicles, laptops, radios etc.
o Small equipment which can be used independently or on another vehicle, axes,
fire hoses etc.
• Charges for initial testing and preparation for use
• Parts associated with the construction of equipment
"The costs of extended warranties and vehicle title fees should not be included in the
capitalization calculation.
Construction In Progress
Most capital projects will be paid from this classification. This major class of capital assets
is used for costs incurred to construct or develop a tangible or intangible capital project
before it is substantially ready to be placed into service (at which time Finance will reclass
the capital asset(s) into the appropriate major classification).
If there is any possibility that a project may cross fiscal years, it must be placed into the
above construction in progress object code in order to track and report the expenditures of
the project by the appropriate fiscal years.
Intangible Assets
GASB Statement No. 51 identifies an intangible asset as having the following three
required characteristics:
• It lacks physical substance—in other words, you cannot touch it, except in cases
where the intangible is carried on a tangible item (for example, software on a DVD).
• It is nonfinancial in nature—that is, it has value, but is not in a monetary form like
cash or securities, nor is it a claim or right to assets in a monetary form like
receivables, nor a prepayment for goods or services.
• Its initial useful life extends beyond a single fiscal reporting period.
Examples:
■ Software, capitalization threshold will be applied on a per license basis
■ Patents
■ Trademarks
Small and Attractive Assets
Small and attractive assets are those assets that are particularly at risk or vulnerable to loss and
cost less than $5,000. Departments have discretion in defining small and attractive assets in many
instances; however, departments must include, at a minimum, the following assets of $1,000 or
more as small and attractive.
i. Communications equipment; both audio and video
ii. Cameras and photographic projection equipment
iii. Computer systems, laptops, notebook, and tablet computers
iv. Other data processing accessory equipment and components (scanners, etc.)
v. Stereos, radios, televisions, audio recorders and players, video recorders
and players.
vi. Small hand-held tools (saws, trimmers, drills, etc.)
The small and attractive assets that do not fall within the capitalization threshold will be expensed.
The assets will be tracked and recorded by each department in control of those assets. Computer
systems, laptops, notebook, tablet computers and phones will be tracked by IT department.
Tracking should include serial number, description, and location. This information should be
forwarded to the Finance Department when items are transferred to another department or disposed
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utilizing the Disposal of Small and Attractive Items and/or Transfer of Small and Attractive Items
form(s).
III. Policy
It is the City's policy to maintain accountability over all capital assets having a life of more
than one year AND costing $5,000 or more. Assets such as roads, sidewalks, drainage are
considered infrastructure and are capitalized when their initial costs exceed $25,000 and estimated
useful lives of more than five years. Please see the table below for a quick reference guide:
CAPITAL ASSET TYPE THRESHOLD
Land Capitalize All*
Buildings $25,000
Infrastructure (Easements, ROW, Roads) $5,000
Improvements Other Than Buildings $25,000
Equipment and Vehicles $5,000
Construction in Progress Not Applicable
Intangible Assets (Software) $5,000
*Please note that all land, easements and right-of-ways must be recorded in the City's
capital asset system for financial reporting purposes, even if the item has been donated to the City
and funds were not expensed in the acquisition of the item.
The City utilizes a Capital Improvement Program (CIP) as a multi-year prioritizing and budgetary
tool. The CIP is scheduled over ten years and is concerned with proposed capital improvement
projects and capital equipment acquisitions. It forecasts projects that will require the dedication
of substantial resources and aids in the development of financial strategies to accomplish them.
Only those projects scheduled during the first year are funded and adopted as part of the City's
annual budget.
IV. Roles & Responsibilities
The Finance Department is responsible for the record keeping of the City's capital assets. The
objectives of the Finance Department include the oversight of all capital asset additions, related
depreciation, asset transfers and disposals. Departments maintain physical custody of the assets
and are accountable for their safekeeping. Employees are responsible for exercising reasonable
care in the operation and maintenance of City property.
a. Departments are responsible for approving the purchase invoice indicating that the item
has been received in good condition and that the serial number (or other identification
number), description and cost match the item received and the price agreed upon.
b. Departments maintain physical inventories and report changes in status to the Finance
Department utilizing the Disposals of Capital Assets and/or Transfers of Capital Assets
form(s) (see section on asset disposal). A complete physical inventory must be completed
annually.
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c. Departments are responsible for ensuring proper budgeting and purchasing guidelines are
followed in the procurement of capital assets.
d. Finance Department has the following additional responsibilities: Pays the invoice, assigns
a unique City Identification number (asset tag) to the asset. The assigned asset tag number
will follow the property throughout its life in the City's capital asset system. The
information on the newly purchased capital asset is inputted into the City's capital asset
software system.
V. Tauina Assets
a. In order to accurately identify and maintain capital assets, whenever feasible, each piece
of property will be tagged with the City Identification number (ID) in a visible place. Such
markings will be removed or obliterated only with the item is sold, scrapped, or otherwise
disposed of. Should the ID number be removed or defaced, the item shall be marked again
with the original number (obtained from the inventory listing).
b. Property tags are not affixed to sidewalks, streets, infrastructure, capital projects, and like
assets that are not separately identifiable. Capital assets that are not physically tagged will
still be assigned an asset tag number which will be recorded in the capital asset system.
c. If the asset is purchased with grant funds, this will be reflected in the capital asset system
as means of acquisition, and noted the grant guidelines for the selling or surplusing such
assets.
VI. Inventory
a. On or before July 1st of each year, the Finance Department will supply the Department
Directors a current listing of assets related to their respective departments. Department
Directors shall assign a department representative to conduct a physical inventory of all
assets that will be reviewed by the supervisor to test its validity All items listed on the Asset
Inventory List must be verified and accounted for as to description, serial number, model
number, and location. The Department Director or their designee will approve the Asset
Inventory List indicating that all assets are verified and accounted for and return to the
Finance Department within the designated time frame.
b. Missing items must be properly explained and noted as "missing", etc. on the inventory
listing.
c. After the Asset Inventory List sheets are received by the Finance Department, a
representative from the Finance Department will conduct a random test samplings of assets
found on the Department's list.
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d. At the time of transfer or disposal (which may occur at any time during the year), any items
to be disposed or transferred must have the Disposals of Capital Assets and/or Transfers of
Capital Assets form(s) completed, signed by the Department Director and submitted to the
Finance Director for processing.
e. At the completion of the annual inventory process, the inventory results will be forwarded
to the City Manager for review.
VII. Capital Asset Acquisition
Capital assets are acquired by the City in several different ways:
a. By the direct purchase of the asset
b. By donation from private individuals, state, or other governmental agencies
c. By the direct purchase of an asset using grant, state or federal funds
d. By lease -purchase agreements
e. By purchase through construction contracts
f. By in-house fabrication
g. Acquired through foreclosure on liens, or through the forfeiture and seizure process
i. An acquisition by donation is recorded at estimated fair value at the time of
acquisition. Fair value in the case of vehicles is determined by blue book
prices. In the case of equipment, use of market prices of identical or similar
equipment of the same age or condition will determine the fair market value.
Land or buildings should be appraised in order to determine fair market
value.
ii. Purchase of capital assets using state or federal grant funds shall be
accounted for in the same manner as capital assets acquired with City funds.
Department Directors are responsible to ensure any special requirements or
conditions required by the grant are followed.
iii. Equipment that is constructed by combining or assembling modular
components and/or materials into one identifiable unit is referred to as
fabricated equipment. When completed, each component loses its
individual identity and the end product becomes an identifiable single unit.
In order to be capitalized, the finished product must have a unit cost of
$5,000 or more and a life expectancy greater than one year. If a piece of
equipment is to be fabricated, the cost of its components plus all materials,
supplies, and services from outside vendors will be aggregated to value the
capital asset. Internal labor costs will not be taken into consideration and
will be expensed at the time incurred. At the conclusion of the project, the
Department Director will notify the Finance Director that there will be no
further purchases and that the project has been completed.
Z
iv. Assets acquired through foreclosure on liens or through the forfeiture and
seizure process should be recorded at the lower of (a) the cost (original lien
amount, interest and penalties, and the cost of sale foregone), or (b) the fair
market value of the asset.
VIII. Capital Asset Disposal
The purpose of this section is to establish procedures for the transfer and disposal of excess and
surplus property consistent with the requirements set forth in Florida Statutes Chapter 274. It is
also the purpose to maximize returns on excess and surplus property by transferring the property
or disposing of it through public auction, trade-in, or donation. All efforts will be made to recover
as much taxpayer money as possible.
When a City department or division determines that City -owned property should be classified as
surplus property, an e-mail should be immediately sent to the Accountant or the Finance Director.
The e-mail should include all relevant information necessary to identify the property. The item(s)
need to be secured in a temporary storage area, until final disposition has been authorized.
Prior to disposition, the Finance Director will provide the City Commission with a list of
capitalized property that management has determined is no longer viable for use in City operations.
The City Commission will be asked to formally declare the items surplus property, so the City
may dispose of it according to the guidelines set forth in this policy.
The value of capitalized property represents the cost of the item on the acquisition date and in no
way reflects the current value. Depreciated value (straight-line depreciation over the items
estimated useful life) diminishes the item's value significantly and therefore, the actual loss is
reduced.
Methods of Disposition
Determination of the disposal method that is in the best interest of the City will be made by the
applicable department head and evaluated and approved by the Finance Director. Possible disposal
options in order of preference to the City are:
a. transferred to another City department for their use; or,
b. cannibalize the property for spare parts utilization and any unusable remains will be
recycled, sold or deposited in an appropriate waste disposal site, e.g., hazardous waste
disposal site for those items deemed hazardous; or,
c. destroy the property if it is without commercial value and is determined to be unfit for sale
and of no usable value to the City, in an appropriate waste disposal site, or,
d. trade the property in as a credit towards the purchase of a new item, or,
e. sell or donate the property to any private nonprofit agency; or,
f. sell or donate the property to another governmental agency; or,sell or cooperatively sell the
property by public auction to the general public, or,
g. sell the property by competitive award or thru a sealed bid process.
Required Information
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A Property Disposal Sheet will be forwarded to the Accountant within two business days of
disposition (see example attached). The Property Disposal Sheet shall include the following
information:
a. Date of disposition.
b. Authority for disposition: 1) capitalized items - action by the City Commission properly
recorded in the minutes as required by Section 274.07, Florida Statutes; and, 2) non -
capitalized items — written approval by the City Manager. A copy of applicable
documentation should be attached.
c. Manner of disposition (transferred, cannibalized, scrapped, destroyed, traded, donated, or
sold).
d. Identity of the employee(s) witnessing the disposition, if cannibalized, scrapped, or
destroyed. Item(s) to be destroyed cannot be left in an unattended City dumpster. To
prevent inappropriate access to these items, the designated employee must witness removal
of the item(s) by the City's waste contractor.
e. The dollar amount received, if by outright sale by the governmental unit. A copy of
applicable documentation should be attached.
f. For items disposed of as a result of casualty loss (destroyed, damaged beyond repair, etc.),
the value of insurance proceeds. A copy of applicable documentation should be attached.
Transfer of Property Records
Upon receipt of the Property Disposal Sheet, the Accountant will remove the individual property
record for each capitalized item disposed from the City's property records. The provisions of
Chapter 119, Florida Statutes, shall govern destruction of such records.
Remainder of page intentionally left blank
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IX. Capital Asset Depreciation Method
The City utilizes the straight-line depreciation method using a full -month convention for all capital
assets. Under this method, the basis of the capital asset is written off evenly over the useful life of
the capital asset. See useful life table at the end of this section.
A construction in process asset (CIP) reflects the cost of construction work undertaken, but not yet
completed. For construction in process assets, no depreciation is recorded until the asset is placed
in service. Upon substantial completion, the asset will be reclassified to the appropriate general
ledger asset account and should be capitalized and depreciated.
Capital Asset Group
Depreciable Life
Land Improvements (Landscaping)
10
Buildings
40
Office Furniture
20
Camera Equipment
5
Police Vehicles
5
Pick Up Trucks
10
Police Radio Equipment
5
Non -Police Sedans
10
Tractors
15
Front End Loaders
15
Backhoes
15
Trailers
15
Riding Lawnmowers
5
Public Works Maintenance Equipment
20
Infrastructure:
Paved Streets
50
Sidewalks
30
Sidewalks/Bikepaths
30
Bike Lanes
50
Open ditches
25
Storm Sewers
50
Street Signs
15
Water Lines
50
Sewer Lines
50
Park Equipment
10
X. Review and Update
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This policy shall be reviewed and updated, if necessary, by the Finance Director of the City on an
annual basis.
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City of Atlantic Beach
Captial Asset Disposal Request Form
Date of Request: Serial No.
Asset Tag #:
Department:
tion of Item tncivaina iusancation Tor a
Reason for Disposal Request:
Not Working &
Beyond Repair
tJot Working -
Needs Repair
Workin -Obsolete
Vv`orkin -Good
Vvorki -Fa€r
Finance Department Use Only:
Date Sent to Commission
Approved:
Current Book Value
Amound Sold ForlTrade In
Date Entered into System:
Denied:
Vehicle VIN No.
Location:
Form Completed By:
Disposition Method:
On.ine Auction/Sold Date:
Cannibalised
Date:
Donated
Date:
Destro ed
Date:
Traded In
Date:
Transferred
1 Date:
Entered By:
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