R-87-11 Res Adopting Capital Asset Policy and ProceduresRESOLUTION NO.K 4111
A RESOLUTION ADOPTING A CAPITAL ASSET POLICY AND PROCEDURES
WHEREAS, the Village of Lemont desires to adopt a Capital Asset Policy and Procedures; and,
WHEREAS, the President and Board of Trustees find that adopting the attached Village
of Lemont Capital Asset Policy and Procedures is in the interest of the public.
NOW, THEREFORE, BE IT RESOLVED BY THE PRESIDENT AND BOARD
OF TRUSTEES as follows:
SECTION 1: That the Village of Lemont Capital Asset Policy and Procedures, attached as
Exhibit A hereto is hereby adopted.
SECTION 2: This Resolution shall be in full force and effect from and after its passage
as provided by law.
SECTION 3: The Village Clerk of the Village of Lemont shall certify to the adoption of
this Resolution and cause the same to be published.
PASSED AND APPROVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF
THE VILLAGE OF LEMONT, COUNTIES OF COOK, WILL AND DUPAGE,
ILLINOIS on this 28th day of November 2011.
PRESIDENT AND VILLAGE BOARD MEMBERS:
Debby Blatzer
Paul Chialdikas
Clifford Miklos
Ron Stapleton
Rick Sniegowski
Jeanette Virgilio
ATTEST:
AYES: NAYS: ABSENT: ABSTAIN
V
v
1/
v
CHARLENE M. SMOLLEN
Village Clerk
BRIAN K. REAVES
President
Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
TABLE OF CONTENTS
A. Purpose 1
B. Definitions •• 1
C. Capitalization Threshold 2
D. Depreciation Method 2
E. Useful Lives 3
F. Intangibles 3
G. Improvement, Repairs and Maintenance Expenses 4
H. Department Responsibilities 4
I. Capital Asset Additions .................... 4
J. Sales and /or Retirement of Assets 4
K. Physical Inventory 5
L. Small Inventory Asset Procedures 5
M. Year End Accounting 5
Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
A. Purpose
The Capital Asset Policy and Procedures provides guidelines to establish and maintain capital
asset records that comply with governmental financial reporting standards, provides for adequate
stewardship over Village resources, and provides centralized documentation for insurance and
asset management purposes.
B. Definitions
1. Accumulated Depreciation — the total reduction in value over time of an asset since its
acquisition, which is recorded for financial statement purposes.
2. Acquisition Costs - assets should be recorded and reported at historical costs, which include
the vendor's invoice, initial installation cost, modifications, attachments, accessories or
apparatus necessary to make the asset usable and render it into service. Historical costs also
include ancillary charges such as site preparation costs and professional fees.
3. Capital Assets - capital assets are tangible and intangible assets acquired for use in
operations that will benefit the Village for more than a single fiscal period.
4. Construction in Progress - an asset that is comprised of the substantially incomplete
construction costs of, typically, a road, water system or building. Depreciation is not
applied to construction in progress.
5. Depreciation — a method for allocating the acquisition cost of capital assets over time.
Generally Accepted Accounting Principles (GAAP) requires that the value of capital assets
must be written off as an expense over the useful life of the asset.
6. Disposition - the final status of an asset when it is removed from the capital asset account
and is no longer physically located on the Village's property. This can be upon sale, scrap
or donation.
7. General Capital Asset Group - general fixed assets are those capital assets which are
acquired or constructed through governmental fund resources and used to provide general
government services. As a result of GASB 34 pronouncement, these assets which meet the
minimum capitalization threshold are capitalized and depreciated over the estimated useful
lives.
8. Infrastructure - infrastructure shall include roads (including curbs and gutters), bridges,
water and sewer mains, pumping stations, lift stations, traffic lights, streetlights,
stormwater, right of ways, easements, etc.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
9. Leased Equipment - leased equipment should be capitalized if the lease agreement meets
any one of the following criteria:
a. The 1eu,;,; _'in _ ' nership of the property to the Village by the end of the
lease.
b. The lease contains a bargain purchase option.
c. The lease term is 75 percent or more of the estimated economic lite of me leased
property.
d. The present value of the minimum lease payments at the inception of the lease,
excluding executor costs, equals at least 90 percent of the fair value of the leased
property.
10. Net Book Value — the difference between the acquisition cost and accumulated
depreciation.
11. Proprietary Capital Assets - assets acquired or constructed by proprietary funds (Water
and Sewer Fund, Parking Fund) and meet the minimum capitalization threshold, are
capitalized and depreciated over their estimated useful lives. Depreciation is computed
using the straight -line method.
12. Surplus equipment — An item or items that are no longer needed or required.
13. Useful Life — The period over which a capital asset has utility to the Village in performing
the function for which it was purchased.
C. Capitalization Threshold
The capitalization threshold or minimum value of an asset at the time of acquisition is
established at $50,000 for infrastructure and easements and $10,000 for all other assets. The
threshold is applied on an individual basis. All tangible and intangible capital assets that
exceed the threshold will be capitalized and depreciated over the asset's useful life.
D. Depreciation Method
All capital assets are depreciated using the straight line method. All assets are depreciated
based on the date the asset is placed in service with the exception of infrastructure, which is .
depreciated with a full year of depreciation in the year the asset is placed in service. If an asset
is not fully depreciated upon disposal, the depreciation is calculated to the date of disposal for
all assets other than infrastructure, for which no depreciation is recorded in the year of disposal.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
E. Useful Lives
Useful lives will be reviewed annually by the Finance Department. The Village depreciates
over the following useful lives:
Assets Years
Buildings and improvements 50
Water, sewer & stormwater infrastructure 65
Bridges 50
Other infrastructure 10 -20
Land improvements 20
Machinery and equipment 5 - 30
Computer software 5 - 20
Vehicles 5 - 7
Water and sewerage systems 20 - 50
F. Intangibles
The Village is in possession of assets that may be considered intangibles assets, including
computer software and easements. The Village will account for intangibles in accordance with
GASB Statement No. 51, Accounting and Financial Reporting for Intangible Assets. Computer
software will be capitalized if the acquisition cost meets the capitalization threshold.
Easements will be accounted for as follows:
1. A temporary easement will not be recognized as a capital asset.
2. A permanent easement will be recognized as a capital asset subject to all the following
conditions:
a. The easement is evidenced by a final plat of subdivision and acceptance of
related improvements, if appropriate. Any final plat of subdivision should
include the total acreage of easements accepted by the Village.
b. A permanent easement will be valued at 10% of the current land -cash fee rate
for improved land of equivalent acreage.
c. A permanent easement will be capitalized if it has a value of $50,000 or more.
Easements will be aggregated within a general area (e.g., a subdivision) for the
purposes of determining whether the $50,000 threshold is met.
d. A permanent easement associated with a proprietary fund activity will be
recorded in the appropriate proprietary fund. Other permanent easements will
be recorded in the general fixed asset account group for inclusion in the
Village's government -wide financial statements.
e. The value of a permanent easement will not be amortized.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
G. Improvement, Repair and Maintenance Expenses
Routine repair and maintenance costs will be expensed as incurred and will not be capitalized.
Street regrinding, patching, etc. is considered maintenance and will not be capitalized. Repairs
of water and sewer assets will not be capitalized unless the repairs materially extend the life of
the original asset.
II. Department Responsibilities
Departments are responsible for protecting and controlling the use of Village assets assigned to
their department. The department will be responsible for completing an Asset Control Sheet
upon acquisition, disposition or transfer of an asset. All Asset Control Sheets must be
submitted to the Finance Department with supporting documentation.
I. Capital Asset Additions
The Village may acquire assets through purchase, lease or donation. When an asset is
purchased or leased, the department will forward a copy of the invoice to the Finance
Department for payment. The Finance Department will identify assets that meet the
capitalization requirements. The Finance Department will assign a unique inventory control
number to the asset, assign an inventory ID tag (if applicable) and start an Asset Control Sheet
which will be forwarded along with the inventory tag to the responsible department for
completion. The Department is responsible for completing the Asset Control Sheet and
returning to the Finance Department. The Finance Department will then enter the information
into the capital asset software system. Individual assets as well as infrastructure are included as
entries in the capital asset software.
The Village may also acquire assets through donations (e.g., developer conveyance). Prior to
acceptance, the Village must obtain documentation of the value of the asset being donated.
When a donation is accepted through the Village ordinance or resolution process, the Finance
Department will obtain the supporting documentation and enter the information into the capital
asset software system.
Inventory tags are to be used when feasible. The tags should be placed on the principal body of
the asset and removed only when the item is sold, scrapped, or otherwise disposed of.
F. Sales and /or Retirements of Assets
Disposal, sale or retirement of an asset may only occur after the asset is declared surplus and
approved by the Village Board. When a capital asset is disposed of, its cost and accumulated
depreciation are removed from the Village's books and a gain or loss, if any, is recognized.
The department head will document the disposal on the Asset Control Sheet and forward to the
finance department. The finance department will remove the item from the capital asset
software system and record the disposal in the general ledger.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
G. Physical Inventory
The Village and each department will conduct a physical inventory at least once per year at
fiscal year -end. The Finance Department will provide each department with an inventory
worksheet identifying all capital assets under their control. Each department will be
responsible for completing the physical inventory of the items, verifying the existence and
condition of each item on the worksheet, and making note of any additions, deletions, or leases
of property that are not reflected on the list. The final list will be reviewed by the department
head, who will sign as acknowledgement of their approval and then returned to the Finance
Department. The inventory should be performed by a team including at least one
representative from the department and one individual from an independent department not
responsible for the safeguarding of assets.
The Finance Department will perform a sample verification of the physical inventory items and
reconcile the listings to the capital asset software system.
H. Small Inventory Asset Procedures
Assets that do not meet the capitalization requirements, but qualify as a small asset for
inventory tracking, shall be expensed when purchased. Small assets include all computer
equipment, office equipment, and any other department specific items that are designated as
small asset items by the Department Head. These items will be maintained in the capital asset
software for inventory tracking purposes only. The item will be noted on a Small Inventory
Asset Control Sheet for processing. The department heads will be responsible for completing a
Small Inventory Asset Control Sheet and submitting this to the Finance Department along with
the invoice for payment. The Finance Department will enter the information into the capital
asset software, but designate the item as a non - capital asset inventory item. The departments
will maintain control over their small inventory asset listing.
I. Year End Accounting
At year -end the Finance Department will generate the following reports from the capital asset
software system:
1. Property Accounting Summary — this report summarizes the original cost, accumulated
depreciation and book value in a summarized format. Separate reports are generated for
the governmental funds and proprietary funds.
2. Net Changes Summary — this report summarizes the additions and disposals in a
summarized format.
3. Depreciation Detail — this report includes the beginning accumulated depreciation,
current year depreciation and ending accumulated depreciation in detail.
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Village of Lemont
Capital Asset Policy and Procedures
Adopted: November 28, 2011
The Finance Department will prepare the necessary journal entries to record changes in capital
assets and depreciation. In addition, the Finance Department will prepare all journal entries
necessary to present the general fixed asset account group in the government -wide financial
statements, in accordance with GASB Statement No. 34.
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