FIACCT 12-04_00 Internal Service Funds – Fixed Asset Acquisition

Effective: July 1, 1988
Revised: June 12, 2017
Reviewed: June 12, 2017

Purpose

This policy accomplishes the following purposes:

A. It defines the state policy for the acquisition of fixed assets through purchase or transfer by Internal Service Funds (ISFs).

B. It defines the state policy for ISF fixed asset classification and estimated useful lives.

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Background

ISFs used to accumulate unused capital acquisition authority without limit until the 2004 Legislature
amended the Budgetary Procedures Act with Senate Bill 15. The law now requires that unused ISF capital
acquisition authority lapse at the end of a fiscal year. See Utah Code, Section 63J-1-411.

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Policy

A. See the FIACCT 09 Fixed Assets section, for a list of fixed asset policies, which apply to all state agencies—including ISFs—regarding fixed asset definitions, betterment additions and repairs, the capitalization of component unit and grouped assets, dispositions, and leases.

B. An ISF must submit to the Legislature during the regular budgetary process a budget for fixed asset purchases. See the FIACCT 12-02.00 Internal Service Funds – Budget Requests and Compliance policy for more details on the budget request process requirements and forms. See the FIACCT 12-
03.00 Internal Service Funds – Fixed Assets Funding and Deficit Working Capital policy for more guidelines regarding the funding for fixed assets.

C. Per Utah Code sections 63J-1-410 (8) (a) and 63J-1-411, ISFs may not exceed the level of capital acquisition authority approved by the Legislature for a fiscal year. An ISF’s authority to acquire capital assets shall lapse if the capital asset is not purchased in the fiscal year in which the authorization is included in the appropriation act. However, an ISF may request the Legislature to identify the authority to acquire the capital asset as non-lapsing authority for a specific one-time project for a limited period of time. This can be done in the Legislature’s initial appropriation to the agency or in a supplemental appropriation as described below.

An ISF may request that approved capital acquisition authority be retained as non-lapsing authorization if the ISF includes a one-time projects list as part of their budget request. The one-time projects list must be submitted to the Governor’s Office of Management and Budget (GOMB) for the annual general session of the Legislature immediately before the end of the fiscal year in which the ISF may have unused capital acquisition authority. The GOMB will review this one-time projects list, and it shall identify and prioritize any approved one-time projects in the budget submitted to the Legislature. The Legislature will review this one-time projects list and shall identify and include in the appropriation act any authorized one-time projects and their priority.

D. In accordance with Utah Code section 63J-1-410 (8) (f) (i), money to purchase fixed assets or fixed assets acquired through agency appropriation may not be transferred from a state agency to an ISF unless the transfer has been approved by the Legislature except as provided for in item E below. ISFs may not purchase fixed assets and transfer them to non-ISF agencies without legislative approval.

E. Vehicles acquired by agencies from appropriated funds or monies appropriated to agencies to be used for vehicle purchases may be transferred to the DAS Division of Fleet Operations ISF. Vehicle purchases that will increase the DAS Division of Fleet Operations fleet for a state agency must be specifically approved by the Legislature and the cash to purchase these vehicles must be transferred to the DAS Division of Fleet Operations from the state agency before the vehicle is purchased. The amount transferred will become part of the DAS Division of Fleet Operations ISF’s contributed capital.

F. Vehicles acquired with funding from sources other than state appropriations or acquired through the federal surplus property donation program may be transferred to the DAS Division of Fleet Operations ISF. Unless otherwise approved by the Legislature, these vehicles shall be accounted for by the DAS Division of Fleet Operations as vehicles that will not be replaced and the user agency will not be charged a rate that includes amounts that covers depreciation or future replacement.

G. The ISFs will comply with the DAS Division of Purchasing rules and other administrative procedures when purchasing equipment. Proposed purchases of data processing equipment must also be reviewed by the Chief Information Officer of the State.

H. Assets acquired by ISFs with a cost of $5,000 or more and a useful life of one year or more shall be capitalized. Assets with a cost of less than $5,000 shall be expensed when purchased.

I. If an ISF has a significant number of assets with a cost of less than $5,000 and the $5,000 capitalization level causes inconsistency between revenue collection and purchasing cash outlays, the ISF may request an exception to the $5,000 capitalization level. Requests for a lower capitalization level should be sent to the Director of Finance for approval. Requests for a capitalization level of less than $1,000 will not be approved. If an ISF is granted a capitalization level exception, this level shall be used consistently in the accounting system, for financial reporting, and in budget requests.

J. Fixed assets shall be tagged with a departmental ID tag including an identifying ID number. The inventory tag design and numbering are the responsibility of the ISF.

K. ISFs shall record all their fixed assets on the FINET Fixed Asset System and comply with the policies and procedures as stated in the FIACCT 09 Fixed Assets section.

L. The ISFs shall develop their own policy for the control of fixed assets with a cost of less than $5,000 which are susceptible to loss or theft. These assets may be maintained on the FINET Fixed Asset System as Information Only Assets.

M. A physical inventory of fixed assets shall be done by the ISFs a minimum of once every fiscal year. See the policies and procedures on this in the FIACCT 09 Fixed Assets section. The ISF may also wish to inventory assets with a cost of less than $5,000 for inventory control and to verify claims for loss filed with the DAS Division of Risk Management.

N. Fixed assets shall be depreciated over the useful life of the asset measured in years. Depreciation used shall be based on the Fixed Assets Standard Useful Life Table in the FIXED ASSET policy section of this manual. Written requests for exceptions to the useful life as stated in the table may be made to the Director of the DAS Division of Finance. Requests for exceptions must include justification for exception. Similar assets should generally use a similar depreciation rate. Fixed assets that are acquired through transfer from another agency shall also be depreciated over the remaining useful life of the asset. In accordance with federal regulations, assets purchased with federal funds and transferred to an ISF may not be depreciated.

O. Depreciation expense will be included in user rate calculations and recovered through charges for services. In accordance with federal regulations, depreciation expense for assets purchased with federal funds may not be included in user rate calculations and recovered again through charges for services.

P. When a fixed asset is sold or disposed of, the asset shall be removed from the FINET Fixed Asset System by processing a FD transaction, which will automatically post the appropriate entries.

Q. Fixed asset records shall be maintained for audit purposes. Documentation for fixed asset purchases shall be maintained in accordance with approved record retention schedules.

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Procedures