HomeMy WebLinkAboutNB 2a INVEN ASSETS 10-21-81AGENDA
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BATE: October 12, 1981 ~'~~'/
TO:
FROM:
S UBJ ECT:
Bill Huston, City Managef~A~
Ron Nault, Finance Direct~
Request For Authorization To Conduct Appraisal & Inventory Of Assets Of
Water System & Physical Inventory Of General Fixed Assets Of The City
BACKGROUND
In order to comply with the financial reporting requirements of the govern-
ment code as enforced by the State Controller's office and the guidelines
established in the governmental accounting, auditing, and financial report-
ing manual, the City must report the activities of the Water System in an
Enterprise Fund. By definition, an Enterprise Fund is established "where
the intent of the governing body is that the costs (expenses, including
depreciation) of providing goods or services to the general public on a
continuing basis be financed or recovered primarily through' user charges."
In order to comply with the legal and professional requirements of enter-
prise accounting, we must fairly state the value of the assets and distrib-
ute these values among the categories of depreciable and non-depreciable
assets. The most appropriate way of accomplishing this is through an
appraisal process which will assign a value to all the assets and provide
an accurate basis for depreciation.
Accounting for depreciation in governmental enterprise accounting does not
have a direct correlation to rate setting as in private accounting. It does
provide management a basis of accounting for capital maintenance, public
policy decisions and accountability. An accurate depreciation schedule will
allow for analysis of the future revenue needs of the system, which will
have impact on rate setting.
The appraisal process and reports may also have added value in relationship
to the Engineering study requested by the Public Works Department. We can
coordinate the scope of work with the City Engineer to maximize its utility.
It is estimated that an appraisal can be conducted for $15,000. It will
take approximately 90 days to complete. I would recommend that it be funded
from the $45,000 appropriated for the Engineering study of the system.
Bill Huston
October 12, 1981
Page 2
The second part of this request concerns the general fixed assets of the
City. There is every indication that the fixed assets of the City, some
$7 million according to the financial reports, have never been physically
inventoried. From a management standpoint, we do not know how accurate
that number is, nor can we assign proprietary responsibility for the assets.
It would also be to the City's benefit for insurance purposes to have a
detail listing with completed descriptions and replacements costs on all
our assets.
It should cost approximately $6,000 to conduct a physical inventory of
the general fixed assets of the City and generate the asset reports.
After the initial report is established, we hope to maintain the records
on our in-house computer utilizing PADS programs. Additional physical
inventories should be conducted every three or four years to varify the
accuracy of the records. It will require an additional appropriation to
provide funding for this project.
RECOMMENDATIONS
To authorize an appraisal of the City Water System and approve the
expenditure of $15,000 from the Engineering Study adopted in the
1981-1982 Water Capital Improvement Budget. It is felt at this
time that ~he Engineering Study can be initiated for the balance
of the $45,000 appropriation. If necessary, we will approach
Council with a request for additional funds.
Authorize a physical inventory of the general fixed assets of the
City and appropriate $6,000 from the unappropriated reserves of the
general fund for this purpgse.
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