Policy and Procedures for Capital Assets



Policy and Procedures for Capital AssetsBACKGROUND INFORMATIONNote – The Capitalization Policy establishes the accounting for the PHA’s assets based on the capitalization criteria. This Capital Assets policy addresses the policy and procedures for the control and safeguarding of physical assets. Specifically, the PHA’s capitalization policy sets criteria that when met, the cost is recorded as?capital assets, and if not met, the amount is charged to?expenses?when incurred.PHAs are responsible for all assets in their control. This responsibility includes the safeguarding and physical security of the assets, maintaining the assets in good working condition, and the safe use of the assets.The PHA’s physical assets can be organized into the following three (3) categories. The PHA is required to maintain a list and track capitalized and non-capitalized assets. The three categories of assets are:Capitalized Assets – Assets where the cost and other criteria meet the PHA’s capitalization threshold are recorded as a capital asset and a depreciation schedule must be applied.Non-capitalized Assets – Assets whose costs are at least $300 but less than the threshold amount provided in the PHA’s capitalization policy and have a useful life of two years or more. These non-capitalized assets are recorded in the PHA’s books as an expense.Other Physical Assets – Assets whose costs are less than $300 (e.g., desk calculator or a $200 fax machine, etc.) and the PHA is not required to maintain a list of these assets.Note – Appliances are always categorized as a non-capitalized asset but are tracked differently than other non-capitalized assets as different control procedures apply to appliances.Capital asset tracking and annual inventorying is limited to items that are not attached to a building or structure (i.e., cars, high value tools, machinery, computer servers etc.). Building improvements and modernization transactions that have been capitalized, such as a roof repair, repaving of a parking lot, or a new security fence are monitored and controlled through daily walkthroughs and inspections. In addition, while the capital assets policy covers maintenance tools and equipment over $300, the policies and procedures for the purchase, use, safeguarding and valuation of maintenance inventory is described in a separate policy and procedure (see Maintenance Inventory policy).The capital assets policy specifically discusses the policy and procedures associated with the PHA’s capitalized and non-capitalized assets. This policy applies to all PHA programs, including federal and non-federal programs. The exception are programs that are managed by a third-party entity where the partnership agreements, regulatory agreements, and/or financial agreements may have their own capital assets policy.This document provides two (2) samples of a PHA capital assets policy and associated procedures.Sample 1 – PHA With Manual System. This sample provides an example capital assets policy for a small PHA that uses a fee accountant. The depreciation schedule is maintained by the fee accountant. Additional equipment items (i.e., non-capitalized assets) with a minimum cost of $300 and have a useful life of two years or more are tracked for control purposes. All capital and non-capitalized assets are tracked using an Excel spreadsheet by the staff of the PHA.Sample 2 – PHA With Software System. This sample provides an example capital assets policy for a larger PHA with multiple projects and programs. The PHA typically maintains an in-house Finance department and tracks capital assets in a module in the PHA’s software system. Due to the PHA’s size and the number of capital assets, a system is established describing the timetables and procedures to gather the needed data.PHAs can simply cut and paste either or both samples into their policy and procedures documents and modify as needed.ITEMS FOR CONSIDERATIONThe following provides items that the PHA needs to consider when developing the policy and procedures for capital assets and the major assumptions that were used to develop the sample policy and procedures.Assumption – A minimum cost of $300 and a useful life of two or more years was used for the purpose of tracking fixed assets. (All PHAs)Note – When setting the minimum cost threshold, the PHA should understand that the higher the amount set by the PHA, less items will be tracked through an annual inventory count. Therefore, the PHA will need to rely on other compensating controls, such as sign out sheets, observation, locked cages, personnel policies, etc. for the safeguarding of assets that are not inventoried.Assumption – A PHA with a manual system uses a fee accountant to track capital assets on a depreciation schedule. (PHAs with Manual System)Assumption – There is a system limitation for PHAs using a capital assets software module. The assumption is that all items entered in the software module must be depreciated. That is, a PHA cannot use the software system to enter and track non-capitalized assets. (PHAs with Software System)Assumption – The PHA uses the full accrual method of accounting as an enterprise fund. (All PHAs)SAMPLE 1 – CAPITAL ASSETS: PHA WITH MANUAL SYSTEMCAPITAL ASSETS POLICYCapital assets are assets where the cost and other criteria meet the PHA’s established capitalization policy. These assets are depreciated and tracked and controlled based on the PHA’s depreciation schedule. In addition, capitalized assets are assets whose cost are at least $300 and have an anticipated useful life of two years or more. Capitalized assets must be tracked through the annual inventory process and verified to the PHA’s list of capitalized assets. Appliances are a subset of non-capitalized assets that will be tracked and verified through the annual inspection process.The PHA shall own all property purchased with PHA funds and all property received as gifts or donations. The PHA shall exercise responsibility of ownership for such property.PHA assets should only be used to conduct official PHA operations. Use of PHA equipment for personal use is strictly prohibited. In addition, use of assets will only be allowed by the project or program which purchased the asset.This policy applies to all PHA programs, including federal and non-federal programs. Programs that are managed by a third-party entity where the partnership agreements, regulatory agreements, and/or financial agreements may have their own capital asset policy are the exceptions to this policy.CAPITAL ASSET PROCEDURESThe implementation of the capital asset policy is organized into the following sections:Tracking of Capitalized and Non-Capitalized AssetsConducting an Annual InventoryAccounting for AssetsTracking of Capitalized and Non-Capitalized AssetsAll assets that have been categorized as a capitalized or non-capitalized asset will be tracked. All capitalized or non-capitalized assets are tracked using an Excel spreadsheet. The Excel spreadsheet will track the following information for each capitalized or non-capitalized asset.Item name and descriptionSerial numberPurchase date and vendorPurchase amountWarranty information (if applicable)Program for which the item was purchased/chargedLocation of assetConducting an Annual InventoryThe PHA will compile annually a list of capitalized and non-capitalized non-appliance equipment using an Excel spreadsheet. The PHA will conduct capitalized and non-capitalized non-appliance inventory count six months into the PHA’s fiscal year.The PHA will also compile and track appliances using an Excel spreadsheet. In addition to the required information, the spreadsheet will identify the unit number and address where the appliance is located. Appliances will be confirmed during the annual inspection process.The condition of the non-appliance equipment and appliances will be noted in the Excel documents using the following measurements: Good, Need of Repair, or Needs Replaced. Note - A classification of Need of Repair or Needs Replaced does not provide a PHA authorization to purchase or repair an item.The Excel lists will be signed, dated, and provided to the Board of Commissioners.Capitalized or non-capitalized assets that cannot be located will be reported to the Board of Commissioners for further investigation. Accounting for AssetsThe annual inventory lists will be provided to the fee accountant on an annual basis for reconciliation to the depreciation schedule.SAMPLE 2 – CAPITAL ASSETS: PHA WITH SOFTWARE SYSTEMCAPITAL ASSETS POLICYCapital assets are assets where the cost and other criteria meet the PHA’s established capitalization policy. These assets are depreciated and tracked and controlled based on the PHA’s depreciation schedule. In addition, capitalized assets are assets whose cost are at least $300 and have an anticipated useful life of two years or more. Capitalized assets must be tracked through the annual inventory process and verified to the PHA’s list of capitalized assets. Appliances are a subset of non-capitalized assets that will be tracked and verified through the annual inspection process.The PHA shall own all property purchased with PHA funds and all property received as gifts or donations. The PHA shall exercise responsibility of ownership for such property.PHA assets should only be used to conduct official PHA operations. Use of PHA equipment for personal use is strictly prohibited. In addition, use of assets will only be allowed by the project or program which purchased the asset.This policy applies to all PHA programs, including federal and non-federal programs. Programs that are managed by a third-party entity where the partnership agreements, regulatory agreements, and/or financial agreements may have their own capital asset policy are the exceptions to this policy.Capital Asset Procedures Implementation of the capital asset policy is divided in the following sections:Tracking of Capitalized and Non-Capitalized AssetsConducting an Annual InventoryAccounting for AssetsTracking of Capitalized and Non-Capitalized AssetsAll assets that have been categorized as a capitalized or non-capitalized will be tracked.Upon receipt of the purchase order, shipping records, invoices, etc. the Finance department will enter the information into the capital assets module as determined by the PHA’s capitalization policy.The capitalized asset will be tracked in the capital assets module of the XXX software system. The software system will track the following information for each capitalized asset.Item name and descriptionSerial numberPurchase date and vendorPurchase amountWarranty information (if applicable)Program for which the item was purchased/chargedLocation of assetThe Finance department will maintain an Excel list for all non-capitalized assets. This list will include similar information as tracked for each capitalized asset in the capital assets module.For those items that are required to be tracked, the Finance department will create the inventory tag number (tag) and provide the tag to the Procurement department. The Procurement department is responsible for ensuring that the item is properly tagged. For those systems that can store photographs, the Procurement department will be responsible for photographing the item and attaching the photograph in the system.Transfers of assets will be accomplished through approval of the deputy director, asset manager, or program manager. Once the item is approved and transferred, the Finance department will be notified. The Finance department will update the location of the item in the PHA’s software system.Conducting an Annual InventoryBecause of the PHA’s size, department managers or project managers are responsible for conducting an annual inventory of their capital and non-capital assets.Annual inventories of capitalized and non-capitalized assets (excluding appliances) are to be completed and turned into the Finance department in the ninth month of the PHA’s fiscal year.The serial number and location of each appliance will be confirmed on an ongoing basis by the project manager as part the annual inspection process with an inventory report prepared and submitted to the Finance department quarterly.Capitalized or non-capitalized assets that cannot be located will be reported to the Executive Director for further investigation. Disposition of equipment and the method used to dispose of the item will be included in the report.Accounting for AssetsAnnual inventory lists will be provided to the Finance department by project and/or program. ................
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