HomeMy WebLinkAboutMINUTES - 08072001 - HA.3 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
TO: BOARD OF COMMISSIONERS
FROM: Robert McEwan, Executive Director
DATE: AUGUST 7, 2001
SUBJECT: REVISED CAPITALIZATION POLICY FOR THE HOUSING AUTHORITY OF THE
COUNTY OF CONTRA COSTA
SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION
I. RECOMMENDED ACTION:
APPROVE the revised Capitalization Policy for the Housing Authority of the County of Contra
Costa to be consistent with the compliance requirements of the U. S. Department of Housing and
Urban Development (HUD).
II. FINANCIAL IMPACT:
None.
III. REASONS FOR RECOMMENDATION/BACKGROUND
The U. S. Department of Housing & Urban Development- Real Estate Assessment Center requires
the Housing Authority to submit electronically its Annual Financial Statements under Generally
Accepted Accounting Practices (GAAP). It recommends an application of the full accrual basis for
the GAAP financial statements disclosure and presentation. To be consistent with the preferred
full accrual basis, the Housing Authority has, from fiscal year ended March 31,2001, adopted the
application of"Full Accrual Basis Enterprise Model". The Enterprise Model requires that
expenditures for certain equipment be capitalized as fixed assets and depreciated over their
estimated useful lives.
The Housing Authority's current capitalization policy has been in effect since February 8, 1983 It is
necessary to change the current policy to incorporate the provisions of the Full Accrual Basis
Enterprise Model. This revised policy will raise the minimum capitalization amount for the Housing
Authority from $300 to $5,000 as recommended by Office of Management and Budget Circular A-
133, Part 3, F, "Equipment and Real Property Management".
CONTINUED ON ATTACHMENT: YES SIGNATURE
RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON August 7, 2001 APPROVED AS RECOMMENDED XXX OTHER
VOTE OF COMMISSIONERS
I HEREBY CERTIFY THAT THIS IS A
XXUNANIMOUS (ABSENT ----- ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD OF
COMMISSIONERS ON THE DATE SHOWN.
ATTESTED August 7, 2001
JOHN SWEETEN,CLERK OF
THE BOARD OF COMMISSIONERS
AND COUNTY ADMINISTRATOR
BY �1�(�l/W � EPUTY
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Approval of the revised policy requires that accounting book entries be made to write-off those
assets with original costs of less than $5,000. Also, those assets with original costs of more than
$5,000 will be partly or fully depreciated over their respective useful life from their original date of
service.
Attached for your review and approval is a copy of the revised Capitalization Policy.
IV. CONSEQUENCES OF NEGATIVE ACTION:
Should the Board of Commissioners elect not to approve the revised Capitalization Policy for the
Housing Authority of the County of Contra Costa, they would not be in compliance with the
requirements of HUD regulations.
bo-audit
Approval Date:
Revision Date:
CAPITALIZATION POLICY
k Minimum-Capitalization Amount:
In accordance with criteria set out below it is determined that a minimum capitalization
amount of$5,000 shall be applied'to justify capitalization of property and equipment,
With an estimateduseful life of 1 year or more, to fixed assets and maintaining
continuing-property records.
B. Ctiteria for•-Selection of Items-of Equipment to be capitalized:
The determination as to the selection of items of equipment to be capitalized as for
financial control purposes shall be based on sound principles of property management
after giving full consideration to the advantages of financial control.
In selecting items of equipment to be capitalized as `non-expendable' for budgetary and
financial control purposes, consideration shall be given to the following advantages of
financial control;
• Comparative data are available for financial planning purposes in the
purchase of new equipment or replacements.
• A source of-information is provided for insurance coverage and claims.
• A valid basis is provided for the comparison of physical inventories with the
records.
• A more effective basis,is provided for custodial accountability.
Examples of,the factors and standards relating to the nature of the expenditure and the
characteristics of-the property unit that shall be considered in establishing the criteria
include:.
• Retention of identity when put into use.
• Relatively long services, usually more than one year.
• Repeated use, rather than one-time use and no need for frequent
replacement.
• Sufficient value to justify-maintaining continuing monetary property records,
but the minimum-should not be so large that maintenance expense of current and
successive periods is distorted.
In selecting items of equipment to be capitalized as "non-expendable" for budgetary and
financial control purposes, consideration shall be given to the following.
Accordingly, as a minimum, the criteria established by the Housing Authority for the
selection of items to be capitalized shall provide for the classification of major items
such as, motor vehicles, power equipment, office furniture and equipment, and similar
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items of durable nature as non-expendable equipment for which financial control is to be
maintained. The ranges and the refrigerators generally do not meet the minimum
threshold of$5,000 and thus would not be capitalized. However, as.required by Housing
and Urban Development the ranges and the refrigerators would be separately tracked
by means memorandum book entries and annually, at fiscal year-end, reconciled to the
subsidiary continuing-records and the physical count.
C. Capitalization of Property for Financial Control Purposes.
All property purchased or constructed for the Development of a Project from borrowed
funds and all property donated for the development of a property shall be treated as
capitalized property.
D. Depreciation Method and the Useful life:
All the depreciable assets shall be depreciated over their useful life using the straight-
line method. The Housing authority has determined to apply useful life of each type of
fixed assets as enumerated below;
• Building 27.5 years
• Land improvements (fences, scrubs, roads etc) 10 years
• Office Furniture/equipment 5 years
• Autos/Trucks/other motor vehicles 5 years
• Computer hardware and software 3 years
E. Attachments: The following are attachments to this policy.
1. Attachment 1= General Policy and the Compliance Requirements.
2. Attachment 2- Classification of Real and Personal Property.
3. Attachment 3- Inventory of Equipment.
4. Attachment 4- OMB Circular A-133, Compliance Supplement, Part 3 F,
Equipment and Real Property Management.
5. Attachment 5- HUD REAC-Financial Data Schedule and Crosswalk Guide-
GAAP requirements.
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Revision Date:
ATTACHMENT 1- GENERAL POLICY AND THE COMPLIANCE REQUIREMENTS
The Housing Authority of Contra Costa shall establish and maintain complete and
accurate records of all real and personal property, acquired and held for projects under
contract with HUD and other federal and local agencies in accordance with the
principles, standards and compliance requirement of OMB Circular A-133, Compliance
Supplement-Provisional 6197, Part 3, F, 'Equipment and Real Property Management'.
See attachment 4. In addition, the method to be used to account for and control.of
capitalized items; equipment, materials and supplies shall be based on sound principles
of property management accounting and control. Succinctly stated, the basic control
criteria shall be-established to assure the following:
• property existence
• valuation
• accuracy
• classification and disclosure in Housing Authority's financial statements
Under HUD Accounting,-fixed assets are recorded at cost; all development and
modernization costs-are capitalized without consideration or separation between "soft"
and "hard" costs. Starting in FY beginning April 1, 2000, fixed assets shall be accounted
for in the Proprietary Fund, i.e. purchase of property, plant, and equipment is recorded
in accordance with the capitalization standards under the Enterprise Fund Method
(GAAP), as follows:
• Under the Enterprise Fund, all development costs and hard modernization
costs (costs that extend the useful life or utility of the assets) shall be capitalized.
• Hard modernization costs-are incurred for projects associated with the
purchase of the capital assets and major construction or improvements (e.g.
addition to a building or installation of a new boiler).
• All soft modernization costs (e.g. most management improvements, relocation
costs, admin costs, resident services) are expensed.
• Appropriate accounting entries are debited or credited for each type of fixed
asset transaction.
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Approval nate:
Revision Date:
ATTACHMENT 2- CLASSIFICATION OF REAL AND PERSONAL PROPERTY
A. Real Property. Real property comprises all land and buildings and all fixtures
permanently attached thereto, installed in a fixed position, such as elevators,
boilers, all heating equipment, except space heaters not connected to ducts or
pipes for the distribution of heat; water, gas, and electric meters; fixed cabinets,
shelving, and other built-in facilities, such as, fences, garbage stations, and other
similar appurtenances.
In connection with accounting for property, fixed assets are classified into 12
separate accounts:
1. Site Acquisition
2. Site Improvement
3. Dwelling Structures
4. Dwelling Equipment - Non-expendable
5. Dwelling Equipment— Expendable
6. Non dwelling Structures
7. Indirect Development Costs
8. Office Furniture and Equipment
9. Maintenance Equipment
10.Community Space Equipment
11.Automotive Equipment
12.Expendable Equipment
B. Personal Property— Personal Property encompasses all materials, supplies,
equipment, and fixtures which are not attached to the land or the buildings and
are not installed in a fixed position, such as ranges, water heaters, refrigerators,
screens, window shades, movable kitchen cabinets and tables, office equipment,
community space equipment, maintenance equipment, individual space heaters
not connected to ducts or pipes for the distribution of heat, and playground
equipment, benches, etc. not permanently installed in a fixed position.
For accounting purposes, personal property is treated in three general classes of
items as follows:
1. Materials and Supplies - defined as items of property which,
a. can be used only once, such as fuel, cleaning supplies, etc.;
b. are.spent in use, such as brooms, brushes, etc.; or
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c. lose their identity or become an integral part of other property when put
into use, such as nails, lumber, cement, repair parts, etc.
d. The term "Materials and Supplies" also includes items of small tools
and equipment having a useful life of one year or less.
2. Expendable Equipment - defined as items of equipment having a useful life of
more than one year, the cost of which, when purchased, is not treated as a
capital expenditure (e.g. small tool, calculator).
3. Non-expendable Equipment- defined as items of equipment that has a useful
life of more than one year, the cost of which is treated as a capital expenditure
and for which financial control is maintained through appropriate control accounts
in the general ledger.
Examples are:
a. Office fixtures; desks; file cabinets
b. Copiers; postage machine
c. Cellular phones; mobile radios
d, Maintenance equipment
e. Computer equipment (server), PCs, printers
f. Autos, trucks and vans
g. Non-dwelling equipment
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Approval Vate:
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ATTACHMENT 3- INVENTORY OF EQUIPMENT
Housing Authority of Contra Costa County shall take an annual physical inventory,
preferably at the fiscal year=end, of all items of non-expendable equipment and compare
thephysical inventory with the inventory records and reconciled to the general ledger.
The purpose of the physical inventory is to provide the Housing Authority with accurate
Valuation-to meet the following objectives:
Financial Reporting. Fulfill current fiscal reporting requirements, establish
audit compliance with Generally Accepted Accounting Principles (GAAP).
• Accountability and Control. Meet current requirements for accountability
and custodianship. Enhance operational efficiency through identification, control,
re-inventory and-maintenance of equipment.
• Insurance. Provide current insurable:values for placement and proof of loss
and a system for perpetuation of the conclusions.
Capital Expenditure Planning. Establish a basis for projecting capital asset
improvements and replacements to assist the Housing Authority in planning and
budgeting processes.
Differences between the amounts shown by the records and the amounts obtained
through a physical count arising out of errors, other than theft, destruction, or
obsolescence; shall be adjusted by means of inventory adjustment reports approved by
the Finance Director or the Accounting Manager.
Losses from theft destruction or obsolescence shall first be evaluated by Deputy
Director or the Facilities Manager, both for the accounting record and the administrative
controls to be used.
Inventory listings shall be retained pending audit for a period of three years, or, if
pending audit, three years after audit.
Generally, due-to the capitalization threshold of$5,000, Ranges and Refrigerators will
not be capitalized. However, HUD requires that these should be tracked and
accordingly general ledger tracking memorandum entries will be maintained. Also, the
Operation Department shall continue to maintain complete listing of ranges and
refrigerators inventory that would be annually'reconciled to the physical count as if they
are capitalized fixed assets, and the normal inventory procedures in this attachment will
be applicable.
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Ofhce of Management and Bue '. Page 1 of 108
ATTACHMENT 4
i.
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/.
TABLE OF CONTENTS
PART 1 -_13_A_CKGROUN_D, PURPOSE, AND APPLICABILITY
Background
Purpose and Applicability
Overview of this Supplement
How to Obtain Additional Guidance
PART 2 - MATRIY OF CONIPLIANCE REQ AR.ENIENTS
�p
PART 3 - COA1IPLIANC.E REQUIRE-1VIENTS
Introduction
A. Activities Allowed or Unallowed
B. Allowable Costs/Cost Principles
C. Cash Management
D Davis-Bacon Act
E. Eligibility
F. Equipment and Real Property Management
G. Matching, Level of Effort, Earmarking
H. Period of Availability of Federal Funds
I. Procurement and Suspension and Debarment
J. Program Income
K. Real Property Acquisition and Relocation Assistance
L. Reporting
M. Subrecipient Monitoring
N. Special Tests and Provisions
PART.4 - AGENCY PROGRAM REQUIRE_M_ _ENTS
Introduction
No. and Agency Name
10 United States Department of Agriculture (USDA)
10.551. - Food Stamm Program
10.557 - Special Supplemental Nutrition Program for Women, InYants' and Cliildten VyIC)
10.561 - State Administrative Funding for the Food Stamp Prograin
14 Department of Housing and Urban Development (HUD)
14.182 - Section_8 New Construction and Substantial Rehabilitation
14.218 - Community Development Block Grants/Entitlement Grants
14.219_- Community Development Block Grants/Small Cities Program
14.128 - Community.Development Block Grant/State's Program
14.231 - Emergency Shelter Grants Promm.
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(1) The population.or area served was eligible.
(2) The benefits paid to or on behalf of the individuals or area of service delivery were
calculated correctly.
3. Eligibilityfor subrecipients
a. If the determination of eligibility is based upon an approved application or plan, obtain a
copy of this document and identify the applicable eligibility requirements.
b. Select a sample of-the awards to subrecipients and perform procedures to verity that the
subrecipients were eligible and amounts awarded were within,funding limits.
F. EQUIPMENT AND REAL PROPERTY MANAGEMENT
Compliance Requirements
Equipment Management
Title to equipment acquired by a non-Federal entity with Federal awards vests with the non-
Federal entity. Equipment means tangible nonexpendable property, including exempt property,
charged directly to the award having a.useful life of more than one year and an acquisition cost 1
of$5000 or more per unit. However, consistent with a non-Federal entity's policy, lower limits
may be established.
A State shall use, manage, and dispose of equipment acquired under a Federal grant in
accordance with State laws and procedures. Subrecipients of States who are local governments
or Indian tribes shall use State laws and procedures for equipment acquired under a subgrant
from a State.
Local governments and Indian tribes shall follow the A-102 Common Rule for equipment
acquired under Federal awards received directly from a Federal awarding agency. Non-profit
organizations shall follow the provisions of OMB Circular A-110. Basically the A-102
Common Rule and OMB Circular A-110 require that equipment be used in the program which
acquired it or, when appropriate, other Federal programs. Equipment records shall be
maintained; a physical inventory of equipment shall be taken at least once every two years and
reconciled to the equipment records, an appropriate control system shall be used to safeguard
equipment, and equipment shall be adequately maintained. When equipment with a current per
unit fair market value in excess of$5000, is no longer needed for a Federal program, it may be
retained or sold with the Federal agency having a right to a proportionate (percent of Federal
participation in the cost of the original project) amount of the current fair market value. Proper
sales procedures shall be used that provide for competition to the extent practicable and result
in the highest possible return.
The requirements for equipment are contained in the A-102 Common Rule (§_.32), OMB
Circular A-110 (§_.34), Federal awarding agency program regulations, and the terms and
conditions of the award.
Real Property Management
Title to real property acquired by non-Federal entities with Federal awards vests with the non-
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Federal entity: Real property shall be used for the originally authorized purpose as long as
needed for that purpose. For non-Federat entities covered by OMB Circular A-I 10 and with
written approval Brom the Federal awarding agency, the real property may be used in other
federally-sponsored projects or programs that have purposes consistent with those authorized
for support by the Federal awarding agency. The non-Federal entity may not dispose of or
encumber the title to real property without the prior consent of the awarding agency.
When real property is no longer needed for the Federally-supported programs or projects, the
non-Federal entity shall request disposition instructions from the awarding agency. (For
purposes of this compliance requirement,the awarding agency for recipients under OMB
Circular A-110 or the A-102 Common Rule and subrecipients under OMB Circular A-110 is
the Federal agency providing the funding. The awarding agency for subrecipients under the A-
102 Common Rule is the pass-through entity.) When real property is sold, sales procedures
should provide for competition to the extent practicable and result in the highest possible
return. If sold, non-Federal entities are normally required to remit to the awarding agency the
Federal portion (based on the Federal participation in the project) of net sales proceeds. If
retained, the non-Federal entity shall normally compensate the awarding agency for the Federal
portion of the current fair market value of the property. Disposition instructions .may also
provide for transfer of title in which case, the non-Federal entity is entitled to compensation for
its percentage share of the current fair market value.
The requirements for real property are contained in the A-102 Common Rule (§_.31), OMB
Circular A-110 (§ 32), Federal awarding agency regulations, and the terms and conditions
of the award.
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Real Estate Assessment Center
PHA-Finance
FINANCIAL DATA SCHEDULE
LINE DEFINITIONS
AND
CROSSWALK GUIDE
January 31, 2000
/
Financial Data Schedule Line Definitions and Crosswalk Guide
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SUMMARY{]FCHANGES.................................................................................................................I
SUMMARY...................................................................................................................2
INTRODUCTION -_-__---____-'_--_-__-------_'__._--__-_-----3
GETTING STARTED.------_---_'_----_-__-_-_-_--__---...---_-_---_--.4
ACCOUNTING AND REPORTING STANDARDS_-._.-.--~-_----------.--'-6
ASSETS............................................................. ........................................................6
LIABILITIES
'--'---------~-------'—'-----'--'------6
REVENUE............ ....................................................................................................6
EXPENDITURES---___'__---_-_'--____----_-'_'---.-__6
FDS DEFINITIONS AND USING THIS GUIDE................................................7
ASSETS......................................................................................................................8
CURRENTASSETS................................................................................. ................@
ASSETS....................................................................................I6
LIABILITIES AND EQUITY..'__'-_--_------_---_'_-------_'21
LIABILITIES
______'_--______-_'_-_.---_'_-'--_---.--_--2I
CURRENT LIABILITIES-_-----__-.-----_---_----_-----_---2I
NON-CURRENT LIABILITIES............................................................................2M
EQUITY. ...'.............._........................................................._........'..........................''27
REVENUE...............................................................................................................3lEXPENSES '
-_____________________.___---------_-34
OTHER FINANCING SOURCES ...........................................................49
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DATACOLLECrION FORM..........................................................................................................56
APPENDIX A.-ACCOUNTING MfTH{}IJ DIFFERENCES----------.------..6O
APPENDIX 8' - FDS LINES REQUIRED BY FASS......................................................................64
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REAL CENTER
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Financial.Data Schedule i ine Definitions and Crosswalk Guide
INTRODUCTION
The Financial Data Schedule(FDS) was created in order to standardize the financial
information reported by Public Housing.Authorities (PHA)to the Department of Housing and
Urban Development(HUD),Real Estate Assessment Center(REAC). REAC currently requires
PHAs to report their accounting information using generally accepted accounting principles
(GAAP)based on either governmental or enterprise fund accounting. REAC will use the FDS
to analyze the PHA financial data,in conjunction with other performance measurements, to
help ensure the success of the PHA programs.
This guide is.to provide assistance with the preparation of the FDS. This guide is arranged
based on the FDS line.numbers and includes the following:
• a description or definition of the line item
• a summary of the amounts which should be reported on the line(by cross reference to the
current suggested chart of accounts per HUD handbook 7510.1 and changes shown in the
GAAP Conversion Guide)
PI-IAs are able to choose governmental fund accounting or enterprise fund accounting, as
appropriate. Enterprise fund accounting applies full accrual basis accounting. Government
fund accounting-applies either full accrual basis accounting or modified accrual basis
accounting. REAC has determined that full accrual basis accounting is the preferred method,
therefore this guide emphasizes that method. There are some differences in the way that assets,
liabilities;revenues and expenses are accounted for based on the method chosen. This guide
includes a table,as Appendix A,summarizing the differences by account category.
REAL ESTATE ASSESSMENT CENTER
3