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. ~ <br />;~ <br />• ORANGE COUNTY <br />OARD OF COMMISSIONERS <br />ACTION AGENDA ITEM ABSTRACT <br />Meeting Date: June 5, 2001 <br />SUBJECT: Fixed Asset <br />DEPARTMENT: Finance, Purchasing <br />and Central Services <br />Action Age da <br />Item No. ~_ <br />~dment <br />PUBLIC HEARING: (YIN) No <br />ATTACHMENT(S): INFORMATION CONTACT: <br />Pam Jones, ext 2650 <br />Amended Policy Ken Chavlous, ext 2450 <br />TELEPHONE NUMBERS: <br />Hillsborough 732181 <br />Chapel Hill 968.4501 <br />Durham 688 T331 <br />Mebane 336-227-2031 <br />PURPOSE: To consider adoption of an amendment to the policy regarding the valuation of <br />fixed assets for accounting and financial reporting purposes to bring the County in compliance <br />with GASB Statement 34. <br />BACKGROUND: In 1997, the Government Finance Officer's Association (GFOA) developed a <br />"recommended practice" that governments formally adopt fixed asset capitalization policies <br />establishing the capitalization threshold for assets at $1,000. This threshold doubled the <br />original recommendation of $500. The key concept underlying this guidance by the GFOA was <br />that fixed asset systems that attempted to incorporate data on numerous smaller assets were <br />often costly and difficult to maintain and operate. In addition, the GFOA views capitalization as <br />primarily a financial reporting issue, since most governments have controls in place to account <br />for small value items. In June 1998, staff recommended and the Board formally adopted a fixed <br />asset capitalization policy that followed the GFOA recommendation. By adopting the policy with <br />the $1,000 threshold. County staff was able to "clean up" the fixed asset system by eliminating <br />many items of immaterial value and subsequently reduce the time involved in the inventory, <br />accounting and financial reporting processes while maintaining control over the smaller assets <br />at the departmental level. <br />The GFOA recently amended its fixed asset capitalization "recommended practice" increasing <br />the threshold to $5,000. It is advised that governments issuing Comprehensive Annual <br />Financial Reports (CAFR) follow this recommendation. Staff mentioned, in the fall presentation <br />of the County's CAFR, the upcoming financial reporting requirements associated with the <br />Governmental Accounting Standards Board (GASB) Statement 34. One of the major <br />components of GASB 34 is the requirement to depreciate assets. Increasing the County's fixed <br />asset limit will significantly reduce the work Involved in this aspect of the GASB 34 <br />implementation. As was the case with the last fixed asset action, processes are already in <br />