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BIRCH BAY WATER & SEWER DISTRICT

COMMISSION POLICY

SUBJECT: CAPITAL ASSETS

Purpose

This policy is established to provide guidelines to ensure adequate stewardship over District resources through control and accountability of capital assets, and to collect and maintain complete and accurate capital assets information.

The District operates on a Cash Basis and so does not have Capital Assets and Depreciation on the Balance Sheet. The District does keep a subsidiary Fixed Asset system and is required to track assets.

Definitions

Fixed Assets Fixed assets are tangible, non-consumable items including, but not limited to: land, buildings, water lines, lift stations, machinery, equipment and vehicles owned by the District valued at $5,000 or more with a life expectancy of over one year. The value of the fixed asset includes the purchase price, or the construction costs, plus sales tax, as well as costs to acquire (shipping and handling), install, secure, and prepare an item for its intended use.

The original purchase of a software program is considered a fixed asset if it meets the $5,000 threshold established. Improvements to an existing asset that extends the life of the asset are capitalized and depreciated over the remaining useful life of the related asset.

Small & Attractive Assets Small and attractive assets are assets valued at less than $5,000 that are defined as high risk for theft. These assets are not normally consumed within one year. These assets may include items in one or more of the following categories:

  1. Portable and marketable, either alone or as a component unit.
  2. Can be utilized for personal gain.
  3. Are repeatedly reported as lost and/or stolen within the industry and society.

Requirements

The State of Washington Office of State Auditor BARS Manual for Cash Basis entities states, in part:

Capital Asset Tracking System (Chapter 7, Section A) a district that owns capital assets must establish and maintain a tracking system for them.

  1. The tracking system must adhere to the formal asset policies approved by the governing body.
  2. It must contain the following information:
    1. Inventory list containing capital assets owned by the district.
    2. Individual information record for each capital asset.
  3. Reconciliation of asset records and performance of a physical inventory.
  4. Maintain a method with controls over additions and deletions to the capital asset tracking system.
  5. Have a method to track changes in custody and assign responsibility for the assets.

Capitalization Threshold

All assets with a cost of $5,000 or more shall be capitalized. Although Small & Attractive Assets (those costing less than $5,000) do not meet the District’s capitalization threshold, they are considered assets for purposes of marking and identification, record-keeping, and tracking.

Improvement/Repair/Maintenance Expenses

Routine repair and maintenance costs will be expensed as they are incurred and will not be capitalized. Major repairs will be capitalized if they result in improvements to the District’s capital assets.

Depreciation Method and Expected Useful Life of Assets

All assets are depreciated using the straight-line method of depreciation. The District will use the IRS Publication 946 Table of Class Lives and Recovery Periods to determine the life of acquired assets. The estimated life of acquired assets is assigned in the following manner:

  • Lift Station Electrical & Mechanical- 20 years
  • Lift Station Structures — 50 years
  • Office Equipment electrical- 5 years
  • Office Furniture, Fixtures, and Equipment non-electrical — 10 years
  • Plans & Studies — 5-15 years
  • Reservoir Structures and Improvements — 50 years
  • Shop Tools — l0 years
  • Telemetry/SCADA — l0 years
  • Treatment Plant Electrical & Mechanical- 20 years
  • Treatment Plant Structures — 50 years
  • Vehicles — 10 years
  • Wastewater Services — 20 years
  • Wastewater Cast Iron, Ductile Iron & Concrete Mains — 50 years
  • Wastewater PVC Mains — 50 years
  • Water Meters — l0 years
  • Water Mains — 50 years
  • Water Hydrants — 40 years
  • Water Pump Equipment- 20 years
  • Water Rights — not depreciated
  • Water Services — 20 years

Revision of Expected Useful Life

The District may need to revise the expected useful life of some of the capital assets. If this is the case, the rate should be recalculated based on the remaining useful life at the time of the revision, and the new rate should be applied in the present and future accounting periods. No changes should be made to financial records of previous years for revised estimates.

New Assets

All assets fitting descriptions of a fixed asset, or small and attractive asset, shall be recorded on asset listings maintained by the District Treasurer. Information included in the asset listing should be Make, Model, Serial Number, and like description.

Disposal of Surplus Items

Before a capital or small and attractive asset is sold or otherwise disposed of, it must first be determined if the asset had originally been purchased with grant monies. If this is the case, the District must refer to the grant agreement and follow prescribed procedures for disposition.

The Board must first declare a capital or small and attractive asset surplus before it can be sold, or disposed of in any manner. If the asset is to be sold, it will then be sold in accordance with applicable state law. If the asset is no longer in working order and cannot reasonably be repaired for re-sale, the department manager, along with one other employee will properly dispose of the asset. The department manager will complete an Asset Disposition sheet which will be given to the District Treasurer, who shall remove the asset from the asset tracking system.

Lost, Stolen, or Missing Property

When suspected or known losses of capital assets or small and attractive items occur, the department head shall be notified. The department head shall notify the General Manager and the District Treasurer, and if determined the asset has been stolen, the appropriate authorities shall be notified.

Approved: 6/28/12

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