Administrative Policy 13-1 Inventory and Control of Fixed Assets

Section 13 Auditing

Policy 13-1 INVENTORY & CONTROL OF FIXED ASSETS

DISTRIBUTION:     ALL Departments       

SUBJECT:               INVENTORY & CONTROL OF FIXED ASSETS

PURPOSE:                The purpose of this policy is to define and control fixed assets.

PROCEDURES:       The following procedures are established for the acquisition, transfer, and disposal of fixed assets.

I.    DEFINITION

A.        A fixed asset is any item with a monetary value of $5,000.00 or more and a useful life of one year or longer.  Controlled items will be considered fixed assets regardless of value. 

Controlled items are defined as:

1. Weapons including, but not limited to, firearms, tasers, replicas and animal control devices.
2. Sensitive electronics including, but not limited to, computers, laptops, tablets, and police radios.
3. Land and buildings.

B.        An addition or improvement to an existing fixed asset will be considered as a fixed asset purchase. An addition is a physical addition that did not exist as part of the original fixed asset. An improvement consists of replacing some significant part which results in an increase in the overall original life or value of the original asset.

C.        The Finance Department will make the final determination as to whether or not an item is a fixed asset.

D.        All fixed assets must be budgeted and purchased from the Capital Outlay account group (300 Accounts) with the exception of controlled items. Controlled items with a value less than $5,000.00 will be purchased out of Supplies, Tools and Equipment (201 account).   

II.     VALUATION

Fixed assets will be accounted for at cost, or if the cost cannot be determined, at estimated cost.  The cost of a fixed asset includes not only its purchase price or construction cost, but also any charges necessary to place the asset in its intended location and condition for use. These extra charges include such costs as freight, transportation charges, and site preparation expenditures.  Construction cost includes materials as well as labor. Donated fixed assets will be recorded at their estimated fair market value at the time received. When an item is donated, a statement from the donor should accompany the item stating that the item is being donated to the City by the donor and what the donor estimates the value of the item is at the time of donation.

III.    RESPONSIBILITY

A.        Department Directors are responsible for inventory and control of all fixed assets in their department. Division Supervisors are immediately responsible for control and accountability of all fixed assets on their inventory.

B.        Finance is responsible for maintaining inventory records.

C.        Auditing is responsible for obtaining an annual certification (of inventory) of fixed assets from each department/division. A physical inventory of fixed assets will be completed by Auditing in the event of a Department Director leaving the City of Lawton employment. The cost of any item not located during the physical inventory by Auditing will be deducted from the director’s final pay. 

D.        The Contracts and Payables Supervisor is responsible for disposal of fixed assets.

E.         Equipment Maintenance is responsible for obtaining tags for City vehicles. The Equipment Maintenance Superintendent determines the disposition of motive equipment, inspects motive equipment upon acquisition, maintains maintenance records, and prepares vehicles for auction.

IV.    ACQUISITION

A.        Fixed assets may be acquired by outright purchase, construction, lease-purchase agreement, installment purchase contract, or donation. Items purchased outright or donated will be recorded at time of acquisition. Items purchased on a lease-purchase agreement or installment purchase contract will be recorded at the inception of the agreement. Items that are constructed in the division will be placed on inventory at the time of construction.

B.        Upon receipt of a fixed asset, the following actions will be taken to add the item to the inventory:

1.         The appropriate Division Supervisor will submit an inventory control form, Inventory Acquisition/Transfer 07-709, to Finance. The inventory form must be completely filled out by the Division submitting the form except for the inventory number. 

2.         Upon receipt of the inventory form, Finance will assign an inventory number and a bar code number; and the item will be added to inventory records.

3.         The division will receive a computer printout showing the addition of the item, the inventory number assigned to the item and a bar code label.

4.         The Division Supervisor will be responsible for affixing the bar code label on the item.

EXCEPTION - MOTIVE EQUIPMENT

The following procedures apply to acquisition of motor vehicles:

1.         Prior to award of a contract by the City Council, Financial Services will advise the Division Supervisor to prepare a requisition to encumber funds.

2.         Following award by City Council, the Financial Services Division will process the requisition.

3.         Financial Services will obtain required signatures and make distribution of the contract.  A copy of the P.O. will be attached to the contract which is forwarded to the vendor. 

4.         The Financial Services Division is responsible for placing the order for motor vehicles. The P.O. and contract sent to the vendor constitutes the order request. A letter order will be attached to the P.O. for all vehicle orders.

5.         Upon delivery, the Equipment Maintenance Superintendent and the user Division Supervisor will inspect the vehicle to determine whether specifications are met.  Signatures of the different division representatives on the invoice constitutes acceptance of the vehicle.

6.         Upon delivery and acceptance, the division will sign the invoice and forward to Financial Services so that payment to the vendor can be processed. Finance will assign an inventory number and Equipment Maintenance will obtain a vehicle license tag and title. Titles to all City vehicles will be maintained in the Finance Department.

7.         Upon receipt of a vehicle, the Division Supervisor will make arrangements with Equipment Maintenance to obtain special markings and equipment.

V.    TRANSFER OF FIXED ASSETS (Form 07-709)

A.        A fixed asset may be transferred from one division to another within the same department. The Department Director or Division Supervisor is the approving authority for this type of transfer.

B.        The City Manager must approve interdepartmental transfers of motive equipment (vehicles).

C.        The losing division is responsible for submitting an inventory control form to Finance to complete the transfer. Both the gaining and losing Division Supervisor must sign/date the form. For interdepartmental transfers, both losing and gaining Department Directors must also sign.

D.        Upon receipt of the form, Finance will enter the changes. Both divisions will receive a computer printout showing the transfer.

VI.    DISPOSAL OF FIXED ASSETS (Form 07-710)

Fixed assets can be removed from the inventory by: auction, sale through sealed bidding, trade-in, scrapping, or administrative action by the City Manager. The losing division must submit to Finance Department Form 07-710 for any item disposed of under this section. 

A.        Sale by Auction: The City has at least one auction each year to dispose of surplus property. Prior to the auction date divisions will deliver property to the Financial Services Division. An inventory control form will be forwarded with the property so that it can be removed from the division’s inventory records. The losing division will receive a printout reflecting the transaction.

B.        Sale by Sealed Bids: Department Directors will request sale of surplus property through sealed bids by memorandum to the Financial Services Division, who will administer the bidding process, and prepare an agenda item for City Council consideration.

C.        Trade-In: A Department Director and/or Division Supervisor may believe that an item will be of more value to the City if used as a trade-in. If this option is decided upon, the division must identify the item as a trade-in so that it can be included in the bid packet. Financial Services will list the item on the bid sheet so that vendors can specify trade-in allowance. 

D.        Scrapping: If a Department Director or Division Supervisor determines that an item no longer has value, and would not provide revenue through sale, the item can be scrapped or otherwise destroyed. An inventory control form must be submitted to the Finance Department. The losing division will receive a printout reflecting the transaction.

E.         Administrative Action: If an item is lost or stolen, the Division Supervisor must fill out a Report of Lost/Stolen Property. A police report must accompany the Report of Lost/Stolen Property if the item has been stolen. The report is forwarded through the Department Director and Internal Auditor to the City Manager. Upon approval by the City Manager, the Finance Department will remove the item from the inventory, and so advise the Department Director and Division Supervisor.

NOTE CONCERNING DISPOSAL OF MOTIVE EQUIPMENT:

A vehicle to be disposed of will be transferred to Equipment Maintenance Division by inventory action. The Equipment Maintenance Superintendent will determine whether it should be retained for salvage or otherwise disposed of. If, upon inspection of the vehicle, the Equipment Maintenance Superintendent determines that the vehicle is in good condition and should be retained in City service a notice will be sent by the Equipment Maintenance Superintendent to departments/divisions advising that the vehicle is available for transfer. The City Manager must approve interdepartmental transfers. If more than one division requests the vehicle, the City Manager will make the determination as to which division the vehicle will be assigned.  If no one wants the vehicle, the Equipment Maintenance Superintendent can either retain it for cannibalization, or hold it for auction. 

Prior to disposal of any City vehicles the Equipment Maintenance Division will remove the City of Lawton decal, State inspection sticker, and license plate, and paint over the red stripe.  Cost of materials will be charged back to the losing division. Upon removal, the license plate will be retained by Equipment Maintenance for one year.

Vehicle maintenance records will be retained by the Equipment Maintenance Division for three years after removal of the vehicle from the City inventory. A copy of the records will be provided to the buyer upon request.

VII.    ANNUAL CERTIFICATION OF INVENTORY

An annual certification of the physical inventory of fixed assets will be performed by each department/division once a year. 

The Department Director and/or Division Supervisor will be responsible for conducting an annual inventory of their respective areas. The Auditing Division will send an inventory list to each Department Director with a memo instructing the department/division to check for possession of items listed. The Department Director and the employee who actually performed the physical inventory will sign and date the completed inventory and return the list to the Auditing Division.  Any items missing from the inventory list must be handled at the time of the certification of inventory. Once the Auditing Division has completed their review of the completed inventory the department/division will be provided with an updated inventory list reflecting any changes made as a result of the annual certification of inventory.

If a Division has possession of fixed assets which do not belong to the City, the following special provisions apply:

A.        A fixed asset that belongs to a city employee and is being used by the employee must be clearly marked to show ownership.

B.        Any fixed asset that belongs to a non-employee, company, group, institute, etc., must be clearly marked showing ownership and also be listed on separate inventory maintained by the Division Supervisor. This separate inventory list must be kept current and made available at the time of the Division’s annual certification of inventory.

All fixed assets that are not marked as belonging to someone else will be included on the Division’s inventory list.

If an inventory item is “on loan” to another division for 6 months or more, the item will become part of the inventory of the receiving division. Transfer forms should be completed to formalize the change.

If, during the inventory or at any other time, an item cannot be located:

A.    The Division Supervisor will complete a Lost/Damaged Property Report initiated through the Finance Department and forward it through the Department Director, Finance Director, and City Manager.

B.    The City Manager will review, and take appropriate action and Finance will delete the item from the inventory.

C.    The Division Supervisor and Department Director will receive a printout showing deletion of the item.

REFERENCE:    None

RESPONSIBLE DEPARTMENT:    Finance

RESCISSION:    This policy supersedes Administrative Policy 13-1 dated October 9, 2007, and will remain in effect until rescinded.

Jerry Ihler

City Manager

July 1, 2017

(Admin 13-1, Amended, 07/01/2017, Prior Text; Admin 13-1, Amended, 10/09/2007, Prior Text; Admin 13-1, Amended, 07/01/2006, Prior Text)