The URL can be used to link to this page

Home My WebLink AboutMINUTES - 01282003 - C48 Contra BOARD OF SUPERVISORSCosta _ : FROM: JOHN SWEETEN, County Administrator ouni e° DATE: January 28, 2003 SUBJECT: CAPITALIZATION THRESHOLD FOR 1 ASSETS RELATED T BUILDINGS AND BUILDING IMPROVEMENT'S € € S T( ; R � I ENDATION(S) ACic RC � � IFtCAT€ a RECOMMENDATION: APPROVE the recommendation of the Finance Committee and the Auditor-Controller to raise the threshold for the capitalization of fixed assets related to buildings and building improvements from $5,000 to $100,000, effective July 1, 2003. BACKGROUND: In December 2051, the CAO was seat a request by the Auditor-Controller's Office to approve tie€r recommendation to modify the "Fixed Asset Threshold for Buildings and Building Improvements." The threshold for the definition of a capitalized "fixed asset" with respect to buildings and building improvements is currently set at$5,000 for permanent structures and $5,000 for additions, structural betterments, and ground improvements. (See Administrative Bulletin 200.5, Section ll.) The recommended change is a threshold of$100,0M The Auditor-Controller's Office doted that "The new threshold primarily affects the reporting of fixed assets in the Consolidated Annual Financial Report ( AFP). The new threshold will Satisfy the information needs of users of the CAFR as well as reduce the Cost and difficulty of maintaining accounts for Smaller projects." As defined by the State "Accounting Standards and Procedures for Counties," a building improvement materially adds to the value of property or appreciably extends its life. Therefore, before a building project Can be capitalized, it must meet both the threshold (currently $5,000); and it must also extend the life and/or improve the value of the building. General Services and Public Works make the decision to capitalize a building improvement based on engineering and physical analysis. if a building project (such as painting, Carpeting, landscape partitions, etc.) does not constitute a fixed asset because it does not materially add to the Value of a property or extend its life, it is not capitalized--regardless of Cost. CONTINUED CN ATTACHMENT: YES SIGNATURE: �� m,n • � RECOMMENDATION OF COUNTY ADMIMSTRATOR RECOM ENOATION OF BOARO' OItl MITTS APPROVE OTHER I'll f E ACTION OF BO#4ON;A"��TA��T r �Ci.� APPROVED AS RECOMMENDED OTHER �. r VOTE OF SUPERVISORS I HEREBY CERT€ `? THAT THIS IS A TRUE ASIC -CORRECT COPY OF AN ACTION WAKEN AND ENTERED ON MINUTES OF UNANIMOUS NxONE THE BOARD OF SUPERVISORS ON THE DATE SHOWN. �,�A�� 5,A�S��€T � AYES: NOES: ASSENT: ABSTAIN: Contact .0 y E?P�C7-1Q 4 Cc Auditor-Contrc5er ATTESTED J��A�Y 28, 2003 i_0 _SWEETEN,CLERK OF THE BOARD 0 UPERV:SORS Coun y Adrn€r;strata, Consolidated Fire District BY: d �; ;c T ��RUTY Gy ' Capitalization ThresholdlB.O.-®jan. 28, 2003 v Many building projects costing less than $100,000 that are. currently classified as maintenance, do not add to the glue of the building and are expensed in the department's budget. The project is not capitalized and depreciation is not required. However, if a building project is determined to be a fixed assets the department is required to make an appropriation adjustment, and the budget for the project is transferred to budget unit 0111 - Pleat Acquisition, By raising the capitalization threshold to $100,000, building projects costing less than $100,000 would not have to be analyzed or evaluated as tied assets. Projects costing less than $100,000, seen if considered "fixed assets" that either extend the useful life or improve property, would not be capitalized, just as "fled assets" costing less than $5,000 are not currently capitalized. The result would be that smaller projects (under 100,000) would not require separate budgets, cast accounting, and depreciation. Currently, only the buildings and building improvements of the Enterprise Funds (hospital and Airport) are depreciated for financial statements. The vast € ajority of County buildings and building improvements are not depreciated. However, due to GASB 34, depreciation requirements have changed dramatically, as all County buildings and building improvements require individual depreciation schedules. The time and cost of depreciation tracking have increased, particularly for the Auditor's office, where the calculations are made. Eliminating small capital projects would b helpful in this regard. The purpose of GASB 34 is to make the County's CAFR more relevant and understandable to its citizens; taxpayers, and creditors. By identifying infrastructure and capital assets on the balance sheet, the public will realize how much is actually invested in the County. It would certainly be more € eaningful to the public and beneficial to the capital projects accountant and administrator, as well as the Auditor's Office, if only those projects costing $100,000 or greater are capitalized. Although most of the capital projects are greater than $100,000, there would be some projects currently considered capital that would be treated as maintenance or betterments. The result would be less handling of the numbers (accountingwork). An additional benefit of expensing maintenance and betterments as operating expense would also accrue to EHSD or other departments that receive State or Federal :monies because they could claire reimbursement sooner. Rather than claiming reimbursement over the life of the asset, claims for reimbursement would be made in the year the expense occurred. For example, a carpeting project at a cost of $50,000 with a useful life of 10 years could be reimbursed the year the expense occurs, rather than at the rate of $5,000 a year for 10 years, This practice is particularly beneficial in difficult financial times.