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City of Orono 7 0 5 6 Financial Management Policies Policy 7 - Fixed Asset 7-1. SCOPE The City of Orono establishes and maintains a capital asset system to ensure adequate accounting procedure and record and to provide users with consistent and comparable asset information for current and future periods. 7-2. DEFINITION Capital assets are assets that: 1)are used in City operations; 2) have an initial life in excess of one year; 3) are valued over $10,000. The term embraces both tangible assets (land, buildings, site & building improvements, machinery & equipment, infrastructure) and intangible assets (easements, software, mineral rights). Assets acquired for the purpose of sale or investments do not qualify as capital assets, regardless of their form, because they are not used in operations. 7-3. POLICY Fixed asset purchases or construction projects all require City Council approval. The Council action approving the project or purchase is the first step in the recording of the asset. Assets that are purchased for an Enterprise Fund are all coded to account code 16500 which is titled "Fixed Assets—Const in Progress". This includes all engineering and legal bills and other ancillary costs associated with the asset/project. This coding is done by the Finance Director. A report detail report is run identifying these assets after the close of the year to identify any additional assets that were purchased after the insurance application was processed. Enterprise Fund assets are added to the appropriate schedule. Other fixed assets are paid for from the various construction funds (402 — 437), unless otherwise instructed. Reports are generated for these funds similar to the detail reports that are run for the enterprise funds. In the case of the construction funds, any engineering/legal fees are coded directly to the cost of the asset. These reports are then used to update the General Fixed Asset Schedule (GFA). In the case of the Police Department, fixed assets are coded to object codes 500 — 580. Reports for these items are reviewed at the close of the year. These assets are added to the GFA listing at year end. Assets that are disposed of are generally tracked by the revenue lines associated with the sale of equipment. If an asset is traded in on the new asset, the trade in value is recorded as a revenue and the new asset is recorded at its full price. This way, the disposal of the 7-1