Reso 1478 08/2015RESOLUTION NO. 1478
RESOLUTION OF THE BOARD OF DIRECTORS OF THE
VALLECITOS WATER DISTRICT ESTABLISHING A
CAPITAL ASSET POLICY FOR THE DISTRICT
WHEREAS, the Board of Directors of the Vallecitos Water District (District)
desires to establish formal capitalization policies and procedures for capital assets.
WHEREAS, the Capital Assets Policy of the District is as follows:
Section 1 — Introduction: The definition of Capital Assets is established by
Government Accounting Standards Board, Statement 34 "Basic Financial Statements
and Management's Discussion and Analysis for State and Local Governments."
This Capital Asset Policy sets forth the criteria necessary to determine the type of items
based on cost and nature of use that should be capitalized as a Capital Asset versus an
operating expense, as well as the appropriate capital asset classification and related
depreciation period for each capital asset classification. The Accounting Department
within Finance will be responsible for determining which costs are capitalized or
expensed, based upon accounting standards.
The District has a significant investment in a variety of capital assets which are used to
provide services to customers. The purpose of this policy is to ensure that the District's
capital assets are acquired, safeguarded, controlled, disposed of, and accounted for in
accordance with state and federal regulations, generally accepted accounting principles,
internal controls, and audit requirements. This policy addresses the following areas
related to capital assets:
A. Capitalization Threshold — §3
B. Asset types and lives - §4
C. Accounting - §5
D. Depreciation - §6
E. Management of assets - §7
F. Disposal - §8
Section 2 — Definitions:
Capital Asset - Non-financial assets that are used in operations and have an initial
useful life in excess of one year. Also known as "Fixed Asset".
Capitalization Threshold - The minimum cost which an asset must exceed in order to be
capitalized.
Capital Improvement Project (CIP) - The purchase, construction, replacement, addition
or major repair of public facilities and major equipment.
Resolution No. 1478 Page 2
Depreciation - The systematic process of allocating the cost of an asset to expense over
its estimated useful life.
Depreciation Method - Straight-line method, in conjunction with the mid -year
convention, is utilized for all depreciable capital assets of the District. Whereby an equal
amount of the asset's cost is expensed over the useful life.
Useful Life - The amount of time that an asset is expected to be in service and provide
benefit.
Section 3 — Capitalization Threshold: The capitalization threshold for individual
items is $10,000 with a useful life of one year or more, unless the Capital Asset is
purchased or acquired using Federal Grant Funds. Any Capital Asset acquired with
Federal Grant Funds must be capitalized if the cost is equal to or greater than $5,000.
Assets are capitalized if the cost exceeds the respective capitalization threshold. It is
the Project Manager's responsibility to know the funding source(s) for each project.
The acquisition of Capital Assets must follow District Purchasing Policies and
Procedures, Resolution No. 1423, adopted June 19, 2013, or as amended or
superseded thereafter.
Section 4 - Asset Types and Lives:
Asset Types
Asset Life
(in years)
Transmission and distribution systems
10-75
Wastewater systems
5-50
Buildings
50
Transportation equipment
8-15
Field and shop equipment
5-20
Office equipment
5-10
Section 5 — Accounting: Asset purchases will be accounted for in the Operating
Funds. Project numbers will be utilized in order to facilitate tracking of purchases,
budgets, and assets in the computerized accounting system.
The Accounting Department within Finance will track all assets in a subsidiary ledger
containing, at a minimum, Asset Name; Description; Cost; Year Placed in Service;
Depreciation to Date; Book Value; and Expected Life.
Section 6 — Depreciation: The Straight -Line Method of depreciation with the mid-
year convention for all depreciable capital assets will be utilized. (Land, intangible
assets, and construction -in -progress are not depreciated.) Depreciation is charged to
operations, based upon the estimated useful life of the asset. The Accounting
Department within Finance is responsible for tracking and recording depreciation.
Resolution No. 1478
Section 7 - Management of Assets: The department that requests and purchases
the assets is responsible for the operation and maintenance of the assets. Department
supervisors will periodically measure and quantify the condition of assets. Supervisors
must request funding during the budget process to support repair and replacement of
deteriorating capital assets and avoid a significant unfunded liability from deferred
maintenance.
Section 8 - Disposal of Assets: The disposition of capital assets must follow Vallecitos
Water District Resolution No. 1312, "Surplus Personal Property Policy", adopted
October 8, 2008, or as amended or superseded thereafter.
Any and all other Resolutions, Articles or Section of Resolutions, or Amendments
in conflict herewith are hereby rescinded.
PASSED, APPROVED AND ADOPTED by the Board of Directors of the
Vallecitos Water District at a regular meeting held on the 5th day of August, 2015, by the
following roll call vote:
AYES: ELITHARP, HERNANDEZ, MARTIN, SANNELLA, EVANS
NOES:
ABSTAIN:
ABSENT:
Betty . Evans, President
Board of Directors
Vallecitos Water District
ATTEST:
Tom Scaglione, Treasurer
Board of Directors
Vallecitos Water District