101. General Purposes: Capital assets are items of physical property of significant value which have usefulness that extends beyond the year in which they are acquired. Capital assets include land, structures and improvements, infrastructure, vehicles, and certain equipment. Capital asset accounting safeguards investments, fixes equipment custody, provides data for financial reporting and retirement policies, and assures compliance with State and Federal laws, budget requirements, and policies of the Board of Supervisors. 102. Definitions and Capitalization Policies: Capital assets are those that provide an economic benefit to the County and provide that benefit over a number of future periods. This does not include investment securities or other financial instruments. Economic benefit means the County will realize either an increase in revenues or a decrease in expenditures through the use of the asset. The terms long-lived asset, fixed asset, and capital asset may be used interchangeably. Most capital assets have physical substance - these are tangible. Those assets that do not have physical substance (i. e. , easements, rights-of-way, mineral rights) are called intangible capital assets. Capitalization refers to the act of reporting outlays as capital assets based on certain criteria. The capitalization limit is the dollar amount below which capitalization does not occur even if the expenditure otherwise fits the definition of a capital asset. If a lease agreement meets one or more of the following four criteria, the lease is classified as a capital lease-purchase: a. By the end of the lease term, ownership of the leased property is transferred to the County, b. The lease contains a bargain purchase option, c. The lease term is substantially (75% or more) equal to the estimated useful life of the leased property, or d. At the inception of the lease, the present value of the minimum lease payments is 90%or more of the fair value of the leased property. The cost records of physical property shall be established (capitalized) in accordance with the following policies:102. 1 Land: Land is the investment, held in fee title, in real estate, other than structures and improvements, including that acquired for infrastructure purposes. Land is capitalized regardless of cost and should be reported at fair value at date of acquisition. Include: a. Appraisal negotiation, title search and surveying fees b. Cost of obtaining consents and payments for condemnation costs c. Filing costs d. Clearing land or demolishing or removing existing structures e. Relocation cost of landowner if land was acquired by condemnation 102. 21. Structures and Improvements: Capital assets with physical properties of a permanent nature, such as buildings, structural attachments, storage tanks, reservoirs, parking areas are included in this category. Structures and improvements are capitalized when the cost, including expenditures for acquisition, exceeds $5,000. Include: a. Architect fees b. Permits and licenses c. Condemnation costs d. Insurance during construction e. Cost of fixtures attached to and forming a permanent part of the structure. Fixtures are permanent attachments to structures which are not intended to be removed. Examples: a. Boilers b. Lighting fixtures c. Plumbing d. Shelving - if attached e. Air conditioners 102. 22 New Construction:Newly constructed structures and improvements are capitalized when costs, including interest costs, site preparation, architect and other preparation fees, exceed $5,000. 102. 23 Additions: Additions are extensions of an existing unit which increases that units capacity (i. e. , a new wing on the health center). Costs should include the same items as new construction. 102. 24 Betterments: Capitalized expenditures (betterments) are defined as expenditures which materially add to the value of property or appreciably extend its life. The cost of a replacement of an existing component with one of higher quality (i. e. , replacement of an asphalt roof with a tile roof) is to be added to the value of the asset when the original cost of the replaced component can be specifically identified. The original cost of the component is to be deleted and the new cost capitalized. If the original cost of the component being improved cannot be specifically identified, the expenditure is treated as maintenance. Replacing part of an existing asset with another of like quality is not a betterment, even though the useful life of an asset may be maintained or extended. All betterments are capitalized when cost exceeds $5,000. 102. 25 Maintenance: Expenditures which neither materially add to the value of property nor appreciably prolong its life, but merely keep it in an ordinary efficient operating condition are considered maintenance costs andshall not be capitalized. All new construction, additions, and betterments not qualifying for capitalization as prescribed above are charged to Maintenance in the department’s budget. Exception: When the total cost of the project, including materials and labor, is such that the CAO defines the project as “major”, the project will be accounted for in the Capital Projects Fund as Major Maintenance. In this instance, the cost may or may not be transferred to an individual department’s budget at the discretion of the Board of Supervisors. 102. 3 Infrastructure:Long-lived assets valued in excess of $100,000 that normally are stationary in nature and can be preserved for a significantly greater number of years than other capital assets are infrastructure. Examples: a. Roads, highways, bridges and tunnels b. Curbs, sidewalks, fire hydrants, guardrails, landscaping and streetlights c. Drainage, irrigation and sewer systems d. Airport runways Original historical cost may be estimated when records are unavailable or inadequate. Expenditures that are capital in nature (addition and improvements) should be capitalized as part of the infrastructure asset if they increase the capacity or efficiency of the related infrastructure asset and costs exceed $5,000. Include: a. Engineering fees b. Surveyor fees c. Architect fees d. Permits and licenses e. Appurtenances (i. e. , traffic signs, signals, street signs, and grade separations) Exception: Parking meters and portable traffic signals are considered equipment. 102. 4 Equipment and Vehicles: Tangible personal property which is movable or, if attached, is readily detachable without appreciable impairment to the unit to which it is attached, and has a useful life of more than one (1) year and a value of $5,000 (dollars) or more is included in this category. Equipment and vehicles should be recorded at historical cost which should include capitalized interest or ancillary charges necessary to place the asset into its intended location and condition for use. Include: a. Preparation costs b. Freight or other transportation charges c. Sales, use and transportation taxes d. Installation costs (professional fees) 102.9 Computer Software and Other Intangible Property: GASB 51 requires that governments capitalize intangible assets in their accounting and reporting. To be an intangible asset, the asset should lack a physical substance, be nonfinancial in nature which is not in the form of cash or investments, nor a prepayment for goods and services, and have an innitial useful life extending beyond a single reporting period. CAPITALIZATION THRESHOLD EXCEPTIONS: All other county fixed assets are capitalized only if they are $5,000 or more, however; intangible assets, which will include computer software will not be considered for capitalization unless they are individually of a value of $100,000 or more. Eamples: a. Easements, Right-of Way b. Water Rights, Timer Rights c. Patents, Trademarks d. Computer Software (do not include bundled packages) One common type of intangible asset is computer software, which includes Internally Generated Software. Internally Generated Software is an aset that is created or produced by the government or an entity contracted by the government -OR- acquired from an third party but requires more than "minimal incremental effort" to achieve expected level of service capacity. Outlays incurred related to Internally Generated Software that are considered identifiable should be capitalized ONLY during the Application Development Stage. Outlays incurred prior to and after the Application Development Stage should be expensed as incurred. (See stages below): 1) Preliminary Project Stage: includes conceptual formulation and evaluation of alternatives. The determination of the existance of needed technology, and the final selection of alternatives for the development of the software. 2) Application Development Stage: includes the design of the chosen path, including software configuration, coding, interfaces and installation of hardware. 3) Post-Implementation/Operation Stage: demonstration of the current intention, ability, and presence of effort to complete or, in the case of a multiyear project, continue development of the intangible asset. 103. Land Acquisition and Disposal: The cost of land includes the expenditures incurred for acquisition as defined in Section 102. 1. The department will advise the Property Manger by memorandum of any receipts from sale of salvage resulting from preparing a parcel of land for use, stating the dollar amount received, date of sale, Record of Deposit (CR) number, and location of the land. The amount received is credited against the cost of the land. The amount received will be recognized using revenue source code 8010. 103. 1 Acquisition by Purchase: The department submits an Acquisition of Real Property form, including the parcel number of the property, to the CAO’s office. If the request to purchase is approved, the Acquisition of Real Property form will be submitted to the Property Manager for inclusion in the capital asset inventory. 103. 2 Acquisition by Lease-Purchase:When a lease agreement will result in the acquisition of land, the department submits an Acquisition of Real Property form to the CAO’s Office during the budget process or to the BOS, if not included in the adopted budget. The form will provide the same data as specified for an Acquisition by Purchase. When the lease-purchase is approved and the County has taken title to the property, the Acquisition of Real Property form will be submitted to the Property Manager for inclusion in the capital asset inventory. 103. 3 Acquisition by Gift (Donation): After property has been accepted by the Board of Supervisors, the department submits an Acquisition of Real Property form, providing the same data as specified for an Acquisition by Purchase, to the Property Manager for inclusion in the capital asset inventory, noting the property was acquired by donation. The estimated fair market value at the date of receipt, as determined by appraisal or from the Assessor’s records, is stated in lieu of a purchase price. There is no charge to the department’s budget unless there are related costs, such as appraisal fees. 103. 4 Acquisition by Condemnation or Eminent Domain: When land is acquired by condemnation or eminent domain,the department submits an Acquisition of Real Property form, providing the same data as specified for an Acquisition by Purchase, to the Property Manager for inclusion in the capital asset inventory, noting the property was acquired by condemnation or eminent domain. The estimated fair market value at the date of receipt or the actual price paid, whichever is greater, is used in lieu of a purchase price. 103. 5 Disposal by Sale:The department submits a Disposal of Real Property form to the CAO’s Office. If the disposal is approved, the Disposal of Real Property form will be submitted to the Property Manager for deletion from the capital asset inventory. The sale date and price, property description including the parcel number, and Record of Deposit (CR) number must be reported. 103. 6 Disposal by Condemnation or Eminent Domain: When an agency disposes of land by condemnation or eminent domain, the department submits a Disposal of Real Property form to the Property Manager for deletion from the capital asset inventory, noting the property was disposed of by condemnation or eminent domain. The “sale” date and price, property description and Record of Deposit (CR) number must be reported. The estimated fair market value at the date of receipt or the actual price paid, whichever is greater, is used in lieu of a sale price. 103. 7 Trade: When a parcel of County-owned land is traded for a parcel of land owned by another agency or private party, the department submits both an Acquisition of Real Property form for the parcel being acquired, and a Disposal of Real Property form for the parcel being disposed of to the CAO’s Office. If the request to trade is approved, both forms will be submitted to the Property Manager for appropriate entries to the capital asset inventory. These two forms must be annotated for cross-referencing purposes. 104. Structures and Improvements Acquisition and Disposal: The cost of structures or improvements includes all expenditures in connection with its acquisition as defined in Section 102. 21. 104. 1 Acquisition by Purchase:The department submits an Acquisition of Real Property form, including the parcel number of the land on which the structure is located, to the CAO’s office. If the request to purchase is approved, the Acquisition of Real Property form will be submitted to the Property Manager for inclusion in the capital asset inventory. 104. 2 Acquisition by Construction-by-Contract. All contracts or purchase orders covering construction of structures and improvements are accounted for in the Capital Projects Fund. Costs should include capitalizable interest costs and site preparation. All or a portion of the costs may be transferredto the individual department’s budget at the discretion of the Board of Supervisors. When a construction-by-contract project has been completed, a Notice of Completion will be submitted to the Property Manager for inclusion in the capital asset inventory. If a construction-by-contract project is only partially completed at the end of a fiscal year, a Notice of Construction in Progress listing all costs incurred through June 30 will be submitted to the Auditor-Controller’s Office not later than July 31. When the project has been completed a Notice of Completion stating all costs, including those incurred in and reported for the prior fiscal year, is submitted to the Property Manager as above. 104. 3 Acquisition by Construction-by-Force-AccountWhen an improvement or structure is constructed by County employees, it is referred to as construction-by-force-account. The department which performs the work of constructing a structure or improvement by force account is responsible for and must maintain an accurate record of the costs of all materials, supplies, and any outside services attributableto the project, including maintaining time cards for the accumulation of the direct labor costs involved. Also to be included are employee benefit costs and other indirect costs related to those employees direct labor costs (i. e. , vehicles used, phone charges, office supplies). If some services are supplied by another County department, those costs are to be transferred to the department responsible for the construction-by-force-account. If more than one department will benefit from the construction-by-force-account, some charges may be transferred to other beneficiary departments. When the project has been completed a Notice of Completion will be submitted to the Property Manager for inclusion in the capital asset inventory. If a construction-by-force-account is only partially completed at the end of a fiscal year, a Notice of Construction in Progress listing all costs incurred through June 30 will be submitted to the Auditor-Controller’s Office not later than July 31. When the project has been completed a Notice of Completion stating all costs, including those incurred in and reported for the prior fiscal year, is submitted to the Property Manager as above. 104. 4 Acquisition by Lease-Purchase:When a lease agreement will result in the acquisition of structures or improvements, the department submits an Acquisition of Real Property form to the CAO’s Office during the budget process or to the BOS if not included in the adopted budget. The form will provide the same data as specified for an Acquisition by Purchase. When the lease-purchase is approved and the County has taken possession of the property, the Acquisition of Real Property form will be submitted to the Property Manager for inclusion in the capital asset inventory. 104. 5 Acquisition by Gift (Donation): After property has been accepted by the Board of Supervisors, the department submits an Acquisition of Real Property form, providing the same data as specified for an Acquisition by Purchase, to the Property Manager for inclusion in the capital asset inventory, noting the property was acquired by donation. The estimated fair market value at the date of receipt, as determined by appraisal or from the Assessor’s records, is stated in lieu of a purchase price. There is no charge to the department’s budget unless there are related costs, such as appraisal fees. 104. 6 Acquisition by Condemnation or Eminent Domain: When a structure is acquired by condemnation or eminent domain,the department submits an Acquisition of Real Property form, providing the same data as specified for an Acquisition by Purchase, to the Property Manager for inclusion in the capital asset inventory, noting the property was acquired by condemnation or eminent domain. The estimated fair market value at the date of receipt or the actual price paid, whichever is greater, is used in lieu of a purchase price. 104. 7 Replacement for Betterment: When a part of an existing structure or improvement is replaced by a betterment, the cost of the replaced part is deducted from the original structure and the betterment is added to the capital asset inventory as a new item. The department will include in the final Notice of Completion submitted to the Property Manager, an identification of the item being replaced, and an estimate of its original cost. 104. 8 Disposal by Sale: When an agency disposes of astructure or improvement, the department submits a Disposal of Real Property form to the Property Manager and the Tulare County Clerk Recorder’s Office. The sale date and price, property description and Record of Deposit (CR) number must be reported. 104. 9 Disposal by Condemnation or Eminent Domain: When an agency disposes of astructure by condemnation or eminent domain, the department submits a Disposal of Real Property form to the Property Manager for removal from the capital asset inventory, noting the property was disposed of by condemnation or eminent domain. The “sale” date and price, property description and Record of Deposit (CR) number must be reported. The estimated fair market value at the date of disposal or the actual price received, whichever is greater, is used in lieu of a sale price. 104. 10 Trade: When a structure is traded for a parcel of land owned by another agency or private party, the department submits both an Acquisition of Real Property form for the parcel being acquired, and a Disposal of Real Property form for the parcel being disposed of to the CAO’s Office. If the request to trade is approved, both forms will be submitted to the Property Manager for appropriate entries to the capital asset inventory. These two forms must be annotated for cross-referencing purposes. 105. Infrastructure Acquisition and Disposal:All infrastructure acquisition and disposal are under the control of the Resource Management Agency, with the exception of land and structure acquisitions and dispositions. 105. 1Land and Structure Acquisition and Disposal:All acquisitions and dispositions of land and structures will be reported as described in sections 103 and 104. 105. 2 Acquisition by Purchase: For infrastructure assets other than land and structures, the department submits a Request for Fixed Asset form to the CAO’s Office. If the request to purchase is approved, the acquisition will be recorded in infrastructure inventory. 105. 3 Acquisition by Lease-Purchase:When a lease agreement results in the acquisition of an infrastructure asset other than land and structures, the department will submit a Request for Fixed Asset form to the CAO’s Office. When the contract has been approved, the department submits a journal voucher (including the number of the BOS resolution on which the contract was approved) and RMA will be record the item in infrastructure asset inventory. 105. 4 Acquisition by Gift (Donation): After property has been accepted by the Board of Supervisors, the department submits a Request for Fixed Assetform to RMA for inclusion in the infrastructure asset inventory, providing the same data as specified for an Acquisition by Purchase for inclusion in the infrastructure asset inventory, noting the property was acquired by donation. The estimated fair market value at the date of receipt, as determined by appraisal or other reasonable method, is stated in lieu of a purchase price. There is no charge to the department’s budget unless there are related costs, such as appraisal fees. 105. 5 Acquisition by Construction-by-Contract. All contracts or purchase orders covering construction of infrastructure are accounted for in the Capital Projects, Roads, or other appropriate fund. Costs should include capitalizable interest costs and site preparation. All or a portion of the costs may be transferred to the individual department’s budget at the discretion of the Board of Supervisors. When a construction-by-contract project has been completed, a Notice of Completion will be submitted to RMA for inclusion in the infrastructure asset inventory. If a construction-by-contract project is only partially completed at the end of a fiscal year, a Notice of Construction in Progress listing all costs incurred through June 30 will be submitted to the Auditor-Controller’s Office not later than July 31. When the project has been completed a Notice of Completion stating all costs, including those incurred in and reported for the prior fiscal year, is submitted to RMA as above. 105. 6 Acquisition by Construction-by-Force-AccountWhen infrastructure is constructed by County employees, it is referred to as construction-by-force-account. The department which performs the work of constructing the item by force account is responsible for and must maintain an accurate record of the costs of all materials, supplies, and any outside services attributable to the project, including maintaining time cards for the accumulation of the direct labor costs involved. Also to be included are employee benefit costs and other indirect related costs (i. e. , vehicles used, phone charges, office supplies). If some services are supplied by another County department, those costs are to be transferred to the department responsible for the construction-by-force-account. When the project has been completed a Notice of Completion will be submitted to RMA for inclusion in the infrastructure asset inventory. If a construction-by-force-account is only partially completed at the end of a fiscal year, a Notice of Construction in Progress listing all costs incurred through June 30 will be submitted to the Auditor-Controller’s Office not later than July 31. When the project has been completed a Notice of Completion stating all costs, including those incurred in and reported for the prior fiscal year, is submitted to RMA as above. 105. 7 Acquisition by Condemnation or Eminent Domain: When an infrastructure asset other than land or structures is acquired by condemnation or eminent domain, the department submits an Acquisition of Fixed Asset form to RMA, providing the same data as specified for an Acquisition by Purchase. 105. 8 Replacement for Betterment:When a part of an existing infrastructure asset is replaced by a betterment, the cost of the replaced part must be deducted from the infrastructure asset and the betterment is added to the infrastructure asset inventory as a new item. The department will include in the final Notice of Completion submitted to RM, an identification of the item being replaced, and an estimate of its original cost. 105. 9 Disposal by Sale: When an agency disposes of infrastructure, the department submits a Disposal of Fixed Asset form to RMA for removal from the infrastructure asset inventory. The sale date and price, property description and Record of Deposit (CR) number must be reported. 105. 10 Disposal by Condemnation or Eminent Domain: When an agency disposes of an infrastructure asset by condemnation or eminent domain, the department submits a Disposal of Fixed Asset form to RMA for removal from the infrastructure asset inventory, noting the property was disposed of by condemnation or eminent domain. The “sale” date and price, property description and Record of Deposit (CR) number must be reported. The estimated fair market value at the date of disposal or the actual price received, whichever is greater, is used in lieu of a sale price. 106. Equipment and Vehicle Acquisition and Disposal: The cost of an item of equipment includes the purchase price or manufacture cost; freight or other transportation costs; sales, use or transportation taxes; and installation costs. Discounts taken in paying for equipment are deducted from the purchase price or manufacture cost. Credits for trade-ins or rent-purchase allowances are deducted from total costs when charging equipment to department budgets, but are not deducted when recording the costs of equipment items in the capital asset accounts. 106. 1 Acquisition by Purchase: The department submits a Request for Acquisition of Fixed Asset form to the CAO’s Office during the budget process or to the Board, if not approved in the adopted budget. If the acquisition of equipment or vehicles is to replace a current asset, then a Surplus Request form must be filled out and attached to the Request form. If the request to purchase is approved, the Surplus Request form will be submitted to the Purchasing Agent so the current asset can be disposed of in accordance with Government Code and CountyOrdinance. When the purchase is completed,the Purchasing Agent will add the item to the capital asset inventory. 106. 2 Acquisition by Lease-Purchase: When lease agreement will result in the acquisition of equipment or vehicles, the department submits a Request for Acquisition of Fixed Asset form to the CAO’s Office during the budget process or to the Board, if not approved in the adopted budget. If the acquisition of equipment or vehicles is to replace a current asset, then a Surplus Request form must be filled out and attached to the Request form. If the request to purchase is approved, the Surplus Request form will be submitted to the Purchasing Agent so the current asset can be disposed of in accordance with Government Code and County Ordinance. When the equipment is delivered, the department submits a journal voucher (including the number of the BOS resolution approving the contract) to the Auditor-Controller’s Office to record delivery and the Purchasing Agent will add the item to the capital asset inventory. 106. 3 Acquisition by Gift (Donation): After property has been accepted by the Board of Supervisors, the department submits an Acquisition of Fixed Asset form providing the same data as specified for an Acquisition by Purchase to the Purchasing Agent for inclusion in the capital asset inventory, noting the property was acquired by donation. The estimated fair market value at the date of receipt, as determined by appraisal is stated in lieu of a purchase price. There is no charge to the department’s budget unless there are related costs, such as appraisal fees or installation costs. 106. 4 Acquisition by Manufacture-by-Force-Account: All costs of manufacturing and/or installing equipment by force-account, including direct labor and indirect costs, shall be recorded by the department responsible for the manufacture. If some services are supplied by another County department, those costs are to be transferred to the department responsible for the manufacture-by-force-account. A Notice of Completion will be submitted to the Purchasing Agent for inclusion in the capital asset inventory. If a manufacture-by-force-account is only partially completed at the end of a fiscal year, a Notice of Construction in Progress listing all costs incurred through June 30 will be submitted to the Auditor-Controller’s Office not later than July 31. When the project has been completed a Notice of Completion stating all costs, including those incurred in and reported for the prior fiscal year, is submitted to the Purchasing Agent for inclusion in the capital asset inventory. 106. 5 Acquisition by “Discovery”: At any time, such as during the equipment inventory, that a department finds equipment or vehicles in its custody that is not on its equipment inventory, the department must notify the Purchasing Agent by written memorandum describing the item and the circumstances of its discovery. If, after investigation, it is found that the item is the property of the County, but not included in the County’s capital asset inventory, the Purchasing Agent will take appropriate action to record the item at its estimated current market value if its original cost is unknown. 106. 6 Disposal or Donation of Surplus Equipment:Surplus property is assets no longer needed for use by an office or department. These assets no longer needed can be declared as “surplus” by the using agency, but only the Purchasing Agent,with the approval of the CAO, can actually transfer items to a surplus pool and dispose of said property. The Purchasing Agent decides whether the property should be disposed of as County surplus property or retained within the County. Upon transfer to the surplus pool inventory items shall be removed from the departmental inventory from which they have been transferred, and the Purchasing Agent shall maintain a perpetual inventory of all items contained in the surplus pool (2. 38. 170 Prior code 770) until disposed of. See Procedures for Surplus Property (Appendix B). 106. 7 Lost/Stolen Equipment: When an item of equipment has been determined to have been lost or stolen, the department submits an Inventory Adjustment form, giving a complete detailed report signed by the department head of the loss to the Purchasing Agent who will remove the item from the capital asset inventory. 106. 8 Interdepartmental Transfers : For those departments who wish to transfer responsibility for an item to another department, the department in possession of the item shall submit an Inventory Adjustment Request form for transfers of equipment between departments to the Purchasing Agent. The Inventory Adjustment Request formmust be completed (including the accounting line to which the property will be transferred to) and signed by both departments in order to transfer an asset from one department to another. 106. 9 Trade-in:When a department wishes to trade-in an existing item of equipment for credit against the purchase price of a new item of equipment, an Inventory Adjustment Request form must be submitted to the Purchasing Agent together with the requisition for the purchase of the new item. The Purchasing Agent will arrange to pick up the traded-in item when the new item is delivered. The necessary adjustments to the fixed asset inventory will be recorded by the Purchasing Agent. 107. Equipment Control: All County equipment (whether capitalized or not) shall be identified and controlled. 107. 1Individual Records: An individual record of each item should be maintained. See Recording Capital Asset Transactions (Appendix C). 107. 2 Tagging of Equipment:Some ofthe devices available for the tagging and /or numbering of assets include: a. Metal tags with pre-coated adhesive on the back b. Metal tags affixed with rivets or nails c. Decals d. Stenciled numbers e. Die-stamped numbers Capital asset items with a value of $5,000 or more shall be assigned tag numbers by the Purchasing Agent. All tag numbers are recorded in the appropriate log before the tag is sent to the department. This record should include: a. Tag number and date of issue b. Department and purchase order number c. Description of the item There are some items for which a number may not be practical. Judgement must be exercised as to which equipment is best left unnumbered or if another numbering system for the asset type may be more appropriate or practical. In this situation, it will be the responsibility of the department to identify the property as County property in some other way. Whatever the decision, the asset is to be recorded on the fixed asset inventory. Examples of items for which a number may not be practical are: a. Equipment habitually coated with dirt and grease. b. Certain medical and laboratory instruments. c. Unique items, readily identifiable. 107. 3 Vehicles: Automobiles, trucks, heavy equipment, and trailers, etc. , will be marked by the department immediately upon receipt with serial/identification numbers, by decal, or other appropriate means. The department shall advise the Purchasing Agent by memorandum the description and identification number of each. When the registration and license plate are received from DMV and an In Service form or memo is received with the assigned unit number from Motor Pool, then the vehicles are entered onto the capital asset inventory. All motor vehicles owned or operated by the County of Tulare for official business of the County shall display the number assigned to the vehicle and the following words: “Property of Tulare County, For Official Use Only” in such a manner as to be plainly visible. Such markings may be in the form of a decal affixed to the vehicle. This shall not apply to private vehicles on mileage contracts nor to any vehicle rented for short-term use on County business. 107. 4 Unmarked Vehicles: Certain County vehicles assigned to those County officers, department heads or employees designated by Resolution of the Board of Supervisors are exempt from the above policy. Such designation of exemption shall be based upon the Board’s determination that public identification as a County-owned vehicle in official use will impede the performance of duties by personnel operating such vehicles or that it would expose County officers or employees using such vehicles to an unreasonable risk of danger to personal safety. Applications for authorization to use unmarked vehicles shall be filed with the County Administrative Officer who shall review the same and present are commendation to the Board of Supervisors. All exempt vehicles shall be inventoried. 107. 5 Equipment Under $5,000:Departments are required to establish inventory control that will ensure that County assets valued at less than $5,000 are safeguarded. The system will be reviewed as part of the departments audit to ensure that it provides proper control and information for the department head to certify the inventory as required by Government Code Section 24051. For the purposes of thissection, equipment is defined as moveable personal property with a useful life of one year or longer. 107. 6 Department Audits:A review of the inventory control system will be performed as a part of the department’s audit. The review will include a verification of a sample of items of both capitalized equipment ($5,000 or more in cost and on the Purchasing Agent’s capital asset inventory and non-capitalized equipment (less than $5,000 in cost and on the departmentmaintained equipment list). Verification that lease-purchases have been properly reported and recorded by the department will also be required. 107. 7 Inventory Filing : Government Code section 24051 requires department heads to file with the Purchasing Agent and the Tulare County Clerk Recorder an inventory of all County property in their possession. The County Auditor requires that this be done annually. Between June 25th and July 1st preceding the month in which the inventories are to be certified, the Purchasing Agent will furnish each department an inventory of capitalized equipment. The inventory of equipment costing less than $5,000 must be furnished by the department. The complete inventory must be filed by the 10th of July each fiscal year with the Purchasing Agent and the Tulare County Clerk Recorder. Each department will conduct a physical inventory of all equipment in its possession, noting any exceptions on the Purchasing Agent’s capitalized equipment inventory or the department’s list of equipment costing less than $5,000. A naffidavit shall be signed under oath by the department head in the presence of the Auditor-Controller, the Tulare County Clerk Recorder, any other County Officer or sworn deputy as specified in Government Code Section 24000, or before a Notary Public. The affidavit, the Purchasing Agent’s capitalized equipment inventory, and the department’s list of equipment costing less than $5,000 shall be returned to the Purchasing Agent and filed with the Tulare County Clerk Recorder. 107. 8 Inventory Adjustment Requests:An Inventory Adjustment Request form will be submitted to the Purchasing Agent under the following circumstances: a. If any item cannot be located during the physical inventory b. If an item is to be deleted due to sale, trade-in, donation, or discard. c. If a change in the information regarding an item is required, such as: Change of location code, serial number, or description Change error in original cost (must have documentation to validate change) Correct data entry errors 108 Budgeting: Accurate budgeting for the acquisition of new capital assets is the first important step to appropriate accounting for capital assets. A clear understanding of what is included in a capital asset inventory is essential. Departments will budget for capital assets in the 4xxx, 5xxx, or 7xxx object codes. DO NOT pay, or budget for capital assets out of the 2xxx expenditure accounts. DO NOT pay, or budget fornon-capital assets in4xxx,5xxx, or 7xxx object codes. See the Summary Guidelines for Budgeting of Capital Assets (Appendix A). Appendix A Summary Guidelines for Budgeting of Capital Assets Capital (fixed) assets are items of property of significant value which have a useful life of more than one year. Capital assets include land, land improvements, buildings, building improvements, additions, betterments, equipment and vehicles. 1Land is real estate other than buildings and improvements. Land is recorded regardless of cost and is purchased from a 4xxx object code. The cost of land should include: 1. Appraisal negotiation, title search and surveying fees, 2. Cost of obtaining consents and payments for condemnation costs, 3. Filing costs 4. Cost of demolishing or relocating structures. 2 Buildings are structures of a somewhat permanent nature. Buildings are recorded regardless of cost and are purchased from a 5xxx object code. The cost of purchased building would include: 1. All cost indicated on escrow documents (except property taxes), 2. Remodeling prior to occupancy, and any other costs necessary to prepare the building for occupancy. The cost of a constructed building should include: 1. Architect or planning fees, 2. Costs of permits and license, 3. Construction costs and 4. Insurance costs during construction. 3 Building Improvements are fixtures attached to and forming a permanent part of the building. Examples would include boilers, lighting fixtures, plumbing, attached shelving, and air conditioners. Building improvements included during construction or purchased as part of an existing structure are included in the cost of the building as discussed above. Building improvements added after occupancy of the building are recorded as building improvements if the cost exceeds $5,000 and if the item is not a replacement (see Maintenance). Building improvements are purchased from a 5xxx object code. 4 Additions are extensions of existing units like a new wing on a building. Additions are recorded regardless of cost and should be purchased from a 5xxx object code. 5 Betterments are items which materially add to the value of property or appreciably extend it’s life. A Betterment is the replacement of an existing component with one of higher quality. For example, the replacement of an asphalt roof with a tile roof, or the replacement of an old swamp cooler with a modern climate control system. Betterments should be recorded if the cost exceeds $5,000. If the betterment pertains to a building, it should be purchased from a 5xxx object code. If the betterment pertains to equipment or vehicles, it should be purchased from a 7xxx object code. 6 InfrastructureSee sections 2 - 5. 7 Equipment and vehicles are tangible personal property which is movable and has a useful life of more than one year. Equipment and vehicles are recorded if the cost exceed $5,000 per item. The purchase of a group of like items that, individually, do not exceed $5,000 is not recorded even though the cost of the group is over $5,000. For example, the purchase of three copy machines at $4,000 each would not be recorded because each copy machine is less than $5,000. On the other hand, the purchase of components of equipment should be added together to form one capital asset if that combined total exceeds $5,000, even if each component is under $5,000. For example, the purchase of a copy machine and a extra capacity feed tray would be combined to one asset because the sum of the components exceeds $5,000, even though the copy machine was $4,000 and the extra capacity feed tray was $1,500. If components are designed to be used together, like a new phone system, then the cost of the components should be combined to determine if the item is a fixed asset. Equipments and vehicles should be purchased from a 7xxx object code. The cost of equipment and vehicles should include: 1. Preparation costs and installation costs, 2. Freight or other transportation costs, and 3. Sales, use or transportation taxes. 8. In-house installation of capital assets presents a special challenge. As we all know, the installation of a phone system, for instance, by our own telecommunications department is an inter-fund service. All inter-fund services will continue to be purchased in the appropriate 3xxx, 3500 or 3600 object codes. 9. Lease-Purchase Agreements are used to acquire capital assets over an extended period of time. In the year of acquisition, budget must be established in the appropriate 4xxx, 5xxx, or 7xxx object code for the full cost of the item. A corresponding budget must be established in revenue source code 8400 for the same amount to avoid any impact on net county cost. Each year in which payments against the agreement are to be made, budgets will be esablished in object codes 3035 and 3045 to account for the payments of principal and interest, respectively. In the contract does not distinguish between principal and interest portions, object code 3035 will be used. A copy of any new lease-purchase agreement entered into must be sent to the Auditor - Controller’s Office. 10. Maintenance neither materially adds to the value of or extends the life of an item. Maintenance keeps an item in ordinary efficient operating condition. Replacing part of an existing asset with another of like quality is maintenance even if the cost exceeds $5,000. Examples would include replacement of an existing air conditioner or boiler, or the replacement of an existing asphalt roof with a new asphalt roof. Maintenance is purchased in a 2xxx object code. 11. It is County policy not to record as capital assets any of the following regardless of cost: 1. Personal computers, 2. Software, 3. Partitions and work stations, 4. Library books, or 5. Works or art, historical treasures, and similar assets described as a “collection”. Appendix A Summary Guidelines for Budgeting of Capital Assets In Summary: Capital Asset TypeObject Code Land 4xxx Land Improvements 4xxx Buildings 5xxx Building Improvements 5xxx Additions 5xxx Betterments - buildings 5xxx Betterments - equipment or vehicles 7xxx Infrastructure 5xxx Equipment 7xxx Vehicles 7xxx In-house Installations 33xx, 35xx, 36xx Lease-Purchases 7xxx, 8400, 3035, 3045 Maintenance 2xxx PC’s software and workstations 2xxx Appendix B Procedures for Surplus Property Surplus property is assets no longer needed for use by an office or department. These assets no longer needed can be declared as “surplus” by the using agency, but only the Purchasing Agent,with the approval of the Administrative Officer, can actually transfer items to a surplus pool and dispose of said property. Thereafter and upon such transfer, said items or articles shall be carried on the inventory of such office, department or institution to which the equipment has been transferred. All items or articles transferred from any County department to the surplus pool referred to in this paragraph shall be removed from the departmental inventory from which the same has been transferred, and the Purchasing Agent shall maintain a perpetual inventory of all items contained in said “surplus pool” (2. 38. 170 Prior code 770) until disposed of. The Purchasing Agent decides whether the property should be disposed of as County surplus property or retained within the County. The Purchasing Agent shall supply an Inventory Adjustment Request form to the declaring agency (section 1-03-1340 Tulare Co. ). The appropriate box at the top the form must be marked to indicate the nature of the request. The form shall contain the quantity, description, serial number, date of purchase and such other pertinent information as may be required by the Purchasing Agent, and shall be filed with the Purchasing Agent Section 1-03-1345 of the County Ord. Code provides: If the surplus items complies with the need and has been approved by the County Administrative Officer, the Purchasing Agent may authorize the transfer, and the departmental and county inventories shall be adjusted accordingly. Gov code 25504 provides - The County Purchasing Agent may, by direct sale or otherwise, sell, lease, or dispose of any personal property belonging to the County not required for public use. The action is subject to regulations as may be provided by the Board of Supervisors. The Purchasing Agent shall deposit the proceeds from the sale, etc into the County treasury for use by the County. Appendix C Recording Capital Asset Transactions Capital Asset inventories are maintained in three separate departments. The inventory of land and structures is maintained by the Property Management Division of the Resource Management Agency. This Division is involved in the acquisition and disposition of any land or structures owned by the County. The inventory of Equipment and Vehicles is maintained by the Purchasing Agent which is involved in the acquisition and disposition of all equipment and vehicles owned by the County. The inventory of Infrastructure is maintained by the Roads Division of the Resource Management Agency which is involved in the acquisition, maintenance, and disposition of all County infrastructure. Individual records will be maintained for all Capital Assets and will include: a. Date of acquisition or completion b. Date placed in service, if different from above c. Asset number d. Asset description, including parcel numbers for land or model numbers e. Serial numbers, vehicle ID numbers, or other manufacturer’s identification f. Cost (see definitions in section 102) g. Expected life and salvage value, if any h. Department acquiring item, including agency, organization, and activity codes i. Funding source, if by grant or donation or lease-purchase j. Current fiscal year depreciation, where applicable k. Accumulated depreciation from acquisition to date If an individual item is disposed of during a given fiscal year, additional information is needed: a. Date of disposition b. Sale price At each fiscal year end, current inventories as of June 30 will be supplied to the Auditor’s Office on or before July 31 of the subsequent fiscal year. Each inventory listing will identify beginning balances, additions, dispositions, and ending balances for both the inventory and the depreciation of inventory, where applicable.