2003-28RESOLUTION NO 2603- 2 8
A RESOLUTION ANUMING THE VELA AGE OF BUFFALO GROVE
IP'lXLD ASSET AND CAPITAL MURMUM
CAMAUMMMON POLICY
WHEREAS, this resolution amends the threshold that dictates when expendit = may be capitalized in
accordance with generally accepted accounting Principles, and;
WHEREAS, a responsibility exists to makdain stawardaiiip over the resources that are used to deliver,
govermnent services, aid;
WHEREAS, the Village needs to establish a different threshold for specific assets classes in order to
maintain effective managerial control.
NOW, THEREFORE, BE ff RESOLVED BY THE PRESIDENT AND BOARD OF TRUSTEES OF THE
VILLAGE OF BUFFALO GROVE, COOK AND LAKE COUNTIES, II IdN01S as follows:
1. The Village of Buffalo Grove does hereby amend a Fixed Asset and Capital Equipment Capitalization
Policy that will provide for the valuation of capital assets for balance sheet purposes at a minimum
value of $5,000 per individual piece of equipment, and a minimum value of $25,000 for capital
construction or land. improvements.
2. Equipment items costing less than 55,000 but more than $100 will continue to be placed lute inventory
for property control purposes.
AYES:
NAYES:
ABSENT:
PASSED:
ATTEST:
V' Clerk
6 — Braiman, Glover, Berman, Johnson, Kahn, Trilling
0 — None
0 — None
April 21, 2003 .APPROVED: April 21, 2001
.r: • Lau
Village President
VILLAGE OF BUFFALO QlWVE
FIXED ASSET AND CAPITAL EQUW%WNT
CAPITALIZATION POLICY
Purmse and Overview:
Government exists to provide services to its citizens and as part of that duty, a responsibility exists to
maintain stewardship over the resources that are used to Mend efficiently. went Appropriate r fixed eit
is necessary to ensure that these assets are used properly
procedures will be established and revised from time - to-time in order to be assured that assets are
adequately controlled.
The purpose of recording the general fixed assets of the Village are primarily for stewardship purposes, in
order to provide for physical and dollar control, and for an accounting of general governmental capital
planning and acquisitions over the years. Also, generally accepted accounting principles as they apply to
public entities require the Inclusion of financial data regarding fixed and general asset accounting within the
village's Comprehensive Annual Financial Report.
Assets included within a fixed asset control system should possess the following attributes:
1. They must be tangible
2. Have a useful life of greater than one year
3. Be of a "significant' dollar value
The general purpose given to recording fixed and general wets is to facilitate the protective custody of the
property. , A good system permits the fixation of responsibility of custody and for the proper use of specific
assets within the using department(s). The taking of an actual physical inventory on a regular basis can
increase the control capabilities of the Village's system and help insure overall integrity. Other purposes
usually cited for asset control is:
1. Insuring assets for risk management purposes
2. Centralizing asset documentation and reporting systems
3. Developing estimates for asset replacement purposes
4. Allowing for completeness of financial statements uisfion, declaration of surplus and
5. Providing for management of fixed assets regarding acct
disposition.
The end purpose of this Policy will be to provide a guide to the organization, inventory and reporting of data
for the Village of Buffalo Grove's Fixed and General Asset Management System.
Asset Control Policy:
The following will apply regarding asset control policies for the Village of Buffalo Grove:
1. All assets acquired by the Village will be recorded within the Fixed Asset Management
System maintained within Lotus Notes as an independent database. Assets to be controUed
should be acquired as a capital acquisition and possess a significant value. The minimum
value for control purposes will be $5,000 per individual piece of equipment. Equipment
carrying a value less than $5,000 will be accounted for internally based the type of asset
and upon the discretion of the Department Director. The capitalization threshold for capital
construction and/or infrastructure improvements will be $25,000.
2. The cost of the NOW will include the actual purchase price plus any other additional charges
Incurred to put the asset into service. Absent any data on original cost, a realistic estimate
will be used. New capital construction will be value as the sum of all charges and costs to
put the asset into service. nt All changes
3. Responsibility for all asset control will be assigned to the individual department.
in the inventory for whatever reason must be reported by that department.
4. The system will be maintained by the Department of Finance and General Services but will
be available within the MIS network within Lotus Notes as a read -only database. Finance
will input new acquisitions as well as deletions and transfers. The status of all assets will
be posted through an Inventory Control Record.
5. The department initiating an acquisition, deletion or transfer of an asset should notify the
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Finance Department of these events. Changes to the database will be initiated as
appropriate.
6. All asset acquisitions should be by purchase order unless they are for assets donated or
contributed to the Village. All deletionslretirements will be declared surplus by ordinance.
Such ordinances will be prepared by the Finance Department.
7. All asset acquisitionis will be identified, when appropriate, with tags provided by the Finance
Department. Tags will be affixed to the asset acquired by department personnel.
8. At a minimum once per year, an inventory will be conducted of all assets. This
will be prior to the conclusion of the fiscal year and will be used for posting to the Village's
financial records and for preparation of any surplus declaration.
9. Any final inventory values will be considered the official financial record of the Village
subject to independent review and audit.
Costing of General Fixed Assets:
General fixed assets should be recorded at their ongginai cam; if original cost is unknown, an estimate will
be acceptable if reasonable and customary for similar assets. As stated, an asset that is to be included
within the inventory should have a significant value. The significant value test is mostly subjective, and
accordingly, it is necessary to exercise some level of judgement in determining which items should be
treated as controlled assets. The judgement will be minimized when controls are improved when
capitalization policies are in place and accepted.
Maintaining the System:
Accounting for additions can be accomplished through several methods. Data from purchasing records for
all assets that are quantified are to be noted on the departmental requisition/purchase order for identification
and entry into the database. Accounting for deletions can be more difficult because of trade -ins, transfers,
retirements, loss or strip downs for spare parts. The database will be considered The primary link between
the individual asset and the general ledger fixed asset accounts. it should be possif�the� reconcile
be included
in the fixed asset database with the general ledger control account(s). The basic
as part of the asset record will be as follows.
1. Description of the asset
2. Model and serial numbers
3. Date acquired/deletedhhanged
4. Purchasing department as well as locution of the asset
5. Estimated useful life
6. Cost, purchase order number, vendor
7. Asset control number
8. Date, method and authorization for disposition
Other information may be requested, as is determined necessary to maintain the control system.
Once the asset control system is in place and operational, it will be necessary to perform periodic reviews
to determine whether the system has been properly established, supported and functioning. The objective
of an inventory is to determine if the assets are still in service, on -hand and to make any corrective actions
as soon as possible. In addition to what is assumed would be a full departmental inventory, periodic review
can consist of any of the following:
1. Reconciling the asset control ledgers to the Village's general ledger
2. Tracing a random sample of assets from the database to the physical location of assets
3. Taking the database list and tracing a random sample of entries to actual assets
Tagging of Assets:
There will be two primary considerations when a decision is made to tag an asset. First, is it Important the
identify this individual asset from another of a similar kind? Will records need to be changed each time
asset moves to a new location of is retired? If the answer is yes to both questions, the assets should and
will be tagged.
Inventory control numbers will be assigned in consecutive order without regard to type of asset or location.
The use of a permanent number (unless lost and replaced) permits control over an asset throughout its
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useful life regardless of status until such asset Is retired or disposed of. Once an asset is disposed, the
number wiN be retired and not reissued. Placement location will be left to the discretion of the department.
Ideally, tags will be placed where they are accessible and not subject to defacement or marring by normal
activity.
Anytime the status of an asset is affected, the Inventory Control Record (attacheM must be completed by
the Initiating department. With an aoquisition, the Record will be prepared by the Department of Finance
and General Services although this does not preclude a punting department from preparing a Record in
the case of a donation or acquisition that may be occur. With an acquisition, a copy of the Record will be
returned to the purchasing department with an assigned control tag.
November, 1997
April, 2003