Res.#02-042 - Establishing a Capitalization Limit for the Recording & Depreciation of Fixed Assets (GASB34)

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Capitalization Limit The council will need to establish a capitalization limit through motion or resolution. The limit can be up to $5,000. The higher the limit, the easier it will be to maintain fixed asset records (eliminating the need to schedule nuisance items.) However, the council should be aware that all items not depreciated will be purchased through the regular annual budget process. Setting the limit too high could adversely impact the annual budget. At the last exit conference, the city's auditors recommended the amount of $2,500. My research was done with that limit in mind. It seems like a reasonable amount for this organization. A resolution is attached. Infrastructure As you are aware, the GASB 34 statement requires the city to schedule and depreciate its infrastructure assets. For Centerville, this essentially means streets, and water, sewer and sanitary systems. The attached schedule does not include streets and street lights. It also does not include utility systems, which will be accounted for within the city's enterprise funds. The city does not have a current comprehensive inventory of its streets and utility systems. It will be very difficult to establish asset values to any degree of accuracy without an engineering study. Updated street and utilities plans will greatly aid staff in planning for the future, and will enable the city to more accurately plan for the financing of its infrastructure needs. Engineering studies were budgeted for in the city's street and water accounts. Attached are the latest engineering proposals for the same. A resolution or motion will be required to engage the city's engineering firm for these studies. Results As a result of this research we were able to update the city's insurance records, which proved to be beneficial. The city's financial statement will more accurately reflect the value of the General Fixed Assets Account Group, and we will be in a position to easily meet the GASB 34 implementation deadline. Keep in mind that the fixed assets report is still unaudited; however, it appears that the city's general fixed assets account group has been understated by approximately $1.4 million.