State of Connecticut
Office of the State Comptroller |
PROPERTY CONTROL MANUAL
This page last updated on September 8, 2021.
POLICIES
Questions regarding this chapter should be directed to the following: | ||
---|---|---|
Asset and Inventory Mailbox | osc.assets@ct.gov | |
Elizabeth Daly, CPPA | 860-702-3436 | elizabeth.l.daly@ct.gov |
Capitalization Policy
The Office of the State Comptroller has established
a statewide policy for the capitalization of assets controlled by agencies.
If the asset meets the following criteria it will be deemed an asset and
will be disclosed on the Office of the State Comptroller's annual financial
statements:
1. Separate
Capital assets are assets that:
1. are used in operations and
2. have an initial useful life that extends beyond a single reporting
period.
Capital assets includes both tangible assets (land, buildings, building improvements, vehicles, machinery, equipment, works of art, historical treasures, and infrastructure) and intangible assets (easements, software, water rights, etc.). Real property (land, building and building improvements) is recorded as a capital asset regardless of cost.
2. Valuation
An asset must meet the capitalization threshold. Agencies desiring to capitalize assets with a value less than the capitalization threshold due to programmatic requirements or other justifiable reasons, should write to the Office of the State Comptroller for an exception to the capitalization threshold limit, stating the reason and justification for the exception. If an item is in a storage area or warehouse and meets the capital threshold, it is to be treated as an asset.
Controllable Property Policy
Controllable property is property with a
unit value less than the capitalization threshold, an expected useful life
beyond a single reporting period and/or, at the discretion of the agency
head requires identity and control. It is mandatory that each agency
maintains a written listing of controllable property that has been approved
by the agency head or designee. Such assets must be identified and
controlled because of their sensitive, portable, and theft-prone nature. The
item must be tagged and maintained on the agency's perpetual inventory.
Different color or style tags can be used to separate controllable items
from capitalized items. Controllable items are to be coded as minor
equipment.
Similar to capitalized property, controllable property is subject to the requirements of this manual regarding security, maintenance and utilization. These assets will be flagged with a control indicator in order to distinguish them from capitalized assets. Controllable assets must be inventoried on a regular basis, possibly more frequently than capitalized assets due to the nature of the items listed. Examples of sensitive, portable and theft-prone items are listed below; however this list is only a suggestion. Individual agencies may add or delete items in this list based on the nature of their business.
Audio Visual Equipment | Firearms and Weapons | Small but Expensive Tools | |
Cameras | Measuring or Metering Devices | Shop Equipment | |
Cell phones | Radios | Telephones | |
Computer Equipment and Accessories | Scientific Equipment |
Tangible Assets
Tangible assets have physical substance and include
buildings (real property) and their contents, inventories, personal
property, and vehicles.
Intangible Assets
Intangible assets that meet the capitalization
threshold must be capitalized. These costs are incurred in the same manner
as the tangible assets and should be depreciated over their useful life.
Intangible Assets are recorded in the same manner as capitalized tangible
assets and require a property record.
Appraisals: Art
Appraisals for works of art and historical treasures are
no longer a mandatory requirement, but highly recommended when resources are
available. It is recommended that appraisals for all permanent collection
pieces exceeding $10,000 should be conducted every five (5) years by an
expert in the field.
Collections of art capitalized as of June 30, 1999 will continue to be capitalized. To be a collection according to GASB 34 the following conditions are to be met:
1. Held for public exhibition, education, or research in furtherance of
public service, rather than financial gain.
2. Protected, kept unencumbered,
cared for, and preserved subject to an organizational policy that requires
the proceeds from sales of collection items to be used to acquire other
items for collections.
Capital Asset Expenditure STARS Reporting and EPM Report (Core-CT Agencies)
CO-59 detail/summary information can be obtained directly from The Statewide Analytical Reporting System (STARS) Fixed Assets Overview Interactive Dashboard. Additionally EPM reports may be used as a tools to assist state agencies in compiling the Annual Physical Inventory of all Real and Personal Property, CO-59.
Capital Equipment Purchase Fund
The Capital Equipment Purchase Fund
(CEPF) is authorized pursuant to Section 4a-9 of the Connecticut General
Statutes. The Secretary of the Office of Policy and Management administers
the fund. "The fund shall be used for the purpose of acquiring, by purchase
or the exercise of prepayment or purchase options in existinglong term
leases entered into by the state, capital equipment with an anticipated
remaining useful life of not less than five years from the date of purchase
and (1) to the extent of not more than two million nine hundred thousand
dollars, payment for projects under subsection (a) of section 4-67f, and (2)
to the extent of not more than one hundred thousand dollars, payment for
awards under subsection (b) of said section."
Subsection (a) of Section 4-67f provides that OPM shall increase efficiencies through capital investment and energy efficiency measures. State agencies can request funding for capital purchases from the Office of Policy and Management.
A state agency may purchase necessary data processing equipment that has a unit price of less than the capital threshold from the Capital Equipment Purchase Fund, provided such equipment has a useful life of not less than five years. See Office of the State Comptroller Memorandum No. 2015-05 http://osc.ct.gov/2015memos/numbered/201505.htm.
Depreciation
Defined as the systematic allocation of the cost of a fixed
asset over its estimated service life to the periods that are benefited by
the use of the asset. Depreciation is calculated over the realistic useful
lives of the assets using the straight-line method on a yearly basis. The
straight-line method is generally preferred for financial statements because
it accumulates depreciation evenly over the asset's life. The Office of the
State Comptroller requires depreciation to be calculated on a straight-line
basis for Statewide reporting purposes. Also, refer to the section on GASB
34 in this chapter.
Equipment with Component Parts (This section is optional for agencies to
use.)
Parent/child relationship in Core-CT. A component part is that part of
a unit of equipment that cannot be used independently of the remaining piece
of equipment or is physically connected to the major asset. This definition
applies even though the component part may meet the capitalization criteria
by itself.
For example: A CPU box is used for simplification purposes, this "box" actually contains boards for CPU and all ancillary equipment, speakers, etc. Various boards or cards can be purchased to increase the functions of the CPU such as a network interface card, fax modem card, external tape drive card, etc. This is considered to be one unit consisting of multiple parts - none of which can be used independently. Therefore, the total cost of the CPU should be capitalized and tagged. The asset description would show a CPU consisting of the box and multiple cards.
Under normal conditions, if one of the cards had to be replaced, it would either be covered under a maintenance contract and no cost would be incurred, but the property control record must be corrected or the replacement piece would be purchased and an appropriate change would be made to the original equipment description.
Enhancements to the CPU simply increase the cost of the CPU. Change the property control record to reflect the additional cost.
Certain equipment components may be used with a large number of different equipment items. For example, a telephoto camera lens may be used on any of a number of cameras separately inventoried and tagged by the agency. EDP equipment is another area in which there would be equipment components, such as a printer connected to a server. The key difference here is that these items can operate on many different pieces of equipment, and the equipment to which they are attached can operate independent of the component (e.g. the camera can operate without the telephoto lens and the server can operate without the printer). Therefore, in the truest sense, the item is not a constituent piece of equipment. In these instances, if the item meets the capitalization criteria as an individual item, it should be separately recorded and tagged as an asset.
Due care and diligence should be exercised in determining whether an item is truly a component. If deemed to be a component, it should be included as part of the cost and description of the overall asset. If it is not, it should be recorded as a separate piece of equipment with its own cost and description. The majority of the items will probably fall into the latter category.
Government Accounting Standards Board (GASB) Statement No. 34 Requires
Group Control Items (This section is optional for agencies to use.)
Group
control items are those assets that have multiple parts and must be
accounted for as an asset. Assets may be controlled by group within location
if the original unit cost meets the capitalization threshold. A group
control number (one tag number) is assigned for the group but they should be
tagged for identification as a State asset. Group items may be tracked by
total number of units at a location, and not by individual units.
A detailed example would be modular furniture associated with providing an open office workstation. If fifteen (15) panels plus shelves, rolling files, lighting, etc. were required to create an office area, and the aggregate cost met the capitalization criteria, but the individual cost per item did not, the item(s) would be capitalized. One group control number would be assigned for the entire system (the workstation) with multiple parts.
Intangible Assets
The Governmental Accounting Standards Board's (GASB)
Statement No. 51 Accounting and Financial Reporting for Intangible Assets
defines intangible assets and how they are to be handled for reporting
purposes. An intangible asset is an asset that possesses all of the
following characteristics:
All intangible assets that meet the definition in GASB 51 should be classified as capital assets. All guidance related to capital assets should be applied to intangible assets. Since intangible assets are considered capital assets, they are not reported as assets in governmental fund financial statements. Intangible assets are recorded in the same manner as capital assets, are subject to depreciation and if applicable, impairment.
Internally Generated Intangible Assets are created or produced by the State or are acquired from a third party but require more than minimal incremental effort on the part of the State to begin to achieve their expected level of service capacity.
Costs of internally generated intangible assets must meet certain conditions before any costs are capitalized. These conditions include:
Only costs that meet these criteria are capitalized. Costs incurred prior to meeting these criteria are expensed.
Easements
An easement is the right of one party to use the property of
another party. An easement is an intangible asset that has an indefinite
useful life or has a useful life of 25 years or more. Permanent easements
are considered intangible assets. When land is the primary purchase and an
easement is included, the easement should be included as part of the
purchase price and reported as land owned by the State.
Each permanent land easement that is acquired should be identified as an asset. Executive branch agencies using the Core-CT Asset Management Module should record the easement with the correct asset profile. See http://www.core-ct.state.ct.us/financials/asset/xls/updtd_asst_prfls.xls
Software
Internally Generated Software
Internally generated software is an
intangible asset. Software that is developed in-house by the agency or a
third party contractor hired by the agency is considered internally
generated software. When an agency purchases commercial software and then
has it modified using more than minimal incremental effort before being put
into operation, this software is also considered internally generated
software. Software is considered internally generated if it is created or
produced by the government, an entity contracted by the government, or if
they are acquired from a third party but require more than minimal
incremental effort on the part of the government to begin to achieve their
expected level of service capacity. Government websites are considered
Internally Generated Software if it meets the criteria of an intangible
asset.
Since computer software is a common type of internally generated intangible asset, GASB 51 also provides specific guidance for applying the specified conditions approach to internally generated computer software. The activities of developing and installing internally generated computer software typically fall into the following stages:
1. Preliminary project stage
Activities in this stage include conceptual
formulation and evaluation of alternatives, the determination of the
existence of needed technology, and the final selection of alternatives for
the development of the software. These costs are expensed.
2. Application development stage
Activities in this stage include the
design of the chosen path, including software configuration and software
interfaces, coding, installation to hardware, and testing, including the
parallel processing phase. These costs are capitalized. Costs associated for
training that occur in the application development stage are expensed as
incurred.
3. Post-implementation/operation stage
Activities in this stage include
application training and software maintenance. Any costs during the
post-implementation/operation stage should be expensed as incurred.
Data Conversion is considered an activity of the application development stage only to the extent it is determined to be necessary to make the computer software operational. Otherwise data conversion is considered an activity of the post-implementation/operation stage.
All of the conditions in the specified condition's approach are considered to be met when activities in the preliminary project stage are completed and management implicitly or explicitly authorizes and commits to funding. Intangible assets are depreciated except those with an indefinite useful life. The software must meet the capitalization threshold to be capitalized.
Licensed Software
Licensed software that meets the capitalization
threshold is considered an intangible asset and must be capitalized. The
individual license must meet the capitalization threshold. The renewal of
the licensed software should not be added to the original cost but should be
expensed. Any maintenance costs or minor unspecified upgrades associated
with the software are to be expensed. If the software license requires an
annual renewal, the annual renewal is expensed. Any upgrades to existing
software should be capitalized as additions and the old version costs should
be retired as deletions.
Software Reporting
Agency internally generated software that meets the
capital threshold and is owned by the state, is reported on the CO-59 as
SOFTWARE OWNED BY THE STATE. Executive Branch agencies must record agency
developed software in the Core-CT Asset Management Module.
Licensed software that meets the capital threshold must be capitalized and be reported on the CO-59 as LICENSED SOFTWARE.
Other Intangible Assets
Other intangible assets include trademarks,
copyrights, rights of way, websites, patents, etc. All intangible assets are
to be treated as capitalized if they meet the capitalization threshold.
Leases
GASB 87 defines a lease as a contract that conveys control of the right
to use another entity’s nonfinancial asset, referred to as the underlying
asset, as stipulated in the contract for period of time in an exchange or
exchange-like transaction. Nonfinancial assets include but are not limited
to buildings, land, vehicles, and equipment. Any contract that meets this
definition should be accounted for under the leases guidance, unless
specifically excluded in this Statement. Beginning July 1, 2021 agencies will be required to record the underlying
asset of the lease that meets the capital threshold of $5,000 for personal property
and any leased real property (regardless of cost) as an intangible asset.
Leases that transfer ownership and do not contain termination clauses (financed purchase of the underlying asset) do not meet the GASB 87 definition of a lease.
GASB 87 does not apply to:
The lease term is defined as the period during which a lessee has a noncancelable right to use an underlying asset, plus the following periods, if applicable:
A fiscal funding or cancellation clause should affect the lease term only when it is reasonably certain that the clause will be exercised.
Lessees and lessors should reassess the lease term only if one or more of the following occur:
Easements are only to be included under GASB 87 if the easement meets the lease definition and is for a period of time for an exchange or exchange-like transaction.
If a lease involves multiple underlying assets, lessees and lessors in certain cases should account for each underlying asset as a separate lease contract.
Short-Term Leases
A short-term lease is defined as a lease that, at the
commencement of the lease term, has a maximum possible term under the lease
contract of 12 months (or less), including any options to extend, regardless
of their probability of being exercised. Lessees and lessors should
recognize short-term lease payments as outflows of resources or inflows of
resources, respectively, based on the payment provisions of the lease
contract.
Maintenance of Property
In order to properly perform the property
management function, the agency should oversee all costs incurred for the
maintenance of its property. By reviewing and controlling maintenance costs,
the agency can demonstrate stewardship over its available resources. Being
able to capture maintenance costs associated with a particular asset is
essential in providing management with the information necessary to make
allocation of resource decisions such as:
Also, the agency would have available detailed information about each asset regarding maintenance contract dates (e.g., inception, expiration, renewal, warranty), maintenance contract number, and maintenance cost. Controlling maintenance contracts and cost is essential in ensuring that the property management function is appropriately addressed.
Property of the US Government
Separate records should be maintained of
all property of the United States Government for which the State is held
accountable. The records should be segregated because of the various types
of information required for insurance purposes and cost analysis. However,
all items under this category will be retained at the agency.
Inventory Policy
Inventory is an asset on the balance sheet. The best way
to view inventory is to think of it as cash, an asset of the State.
Inventory must be accounted for because its value may change over time.
Factors that influence inventory value include depreciation, deterioration,
obsolescence, changes in customer preferences, demand, and supply. The
Inventory System must assure that the State's resources are effectively
utilized by not carrying excessive inventory levels.
All agencies that have inventory that meets the capitalization threshold will have an inventory system and must report the inventory on the CO-59. All inventory systems, including agencies wishing to use the Core-CT Inventory Module must have the system approved by the Office of the State Comptroller's Fiscal Policy Statewide Services Unit. Agencies may send all the requests and questions to the Asset Management Mailbox, osc.assets@ct.gov.
Agencies must do a cost evaluation to determine if it is beneficial to retain inventory. Is the benefit of storing the inventory worth the cost? The staff time involved, personnel costs, overhead costs of the storage area, are among the costs that should be considered before establishing an inventory. The items stored collectively must meet the capitalization threshold and the storage area must be secured.
Each inventory control system must:
Agencies will:
INTERNAL AGENCY PROCEDURES
General Information
All State agencies must have policies and procedures
in place to ensure that all assets currently owned, purchased under a lease,
or certain non-owned property in possession of the state where insurance is
required be properly recorded and reported by each respective state agency.
This manual establishes guidelines for providing adequate oversight.
Property on Loan Policy
Property owned by the State may be removed from
its assigned location only with prior written permission from the
appropriate agency head. State assets are not intended to be used for
personal reasons. Loan permission is to be granted only in order to conduct
State business. The asset may be loaned if the agency head is convinced that
the removal of the asset will not:
The "Record of Property On Loan Form" - CO-1079 must be completed. An individual who has been authorized to use a State asset on loan must sign the form. One copy is retained by the division or department loaning the asset, one copy is to be sent to the Property Control Unit and the final copy should be given to the individual authorized to use the asset. The individual will be responsible for theft or other cause and/or any damage to the asset. They will provide due care and security for the asset until it is returned to the agency. In the event of any loss or damage, the procedures as prescribed in Chapter 8 regarding "Report of Adjustment to Real and Personal Property" Form, CO-853 must be adhered to.
Assets should not leave State premises unless an inventory tag is on the asset. The division or department should maintain the forms. The forms should be numbered consecutively. It is the responsibility of the unit to follow up on an asset out on loan. If the asset has not been returned by the expected date indicated, procedures should include making direct contact by letter or phone on a weekly basis with the individual until the asset is returned. Assets should not be loaned for extended periods of time and all assets should be returned to the agency during a physical inventory.
Firearms Inventory Control Policy
Each agency must establish written
internal procedures regarding firearms that include the agency's property
control unit and cover the destruction of firearms. Firearms are to be
reported on the agency's inventory regardless of the fair market value or
cost; all firearms are considered controllable at a minimum or be reported
as a capitalized item.
Each agency must ensure that all firearms are properly stored in a secure manner in accordance with Connecticut General Statutes, Section 29-37i - Responsibilities regarding the storage of loaded firearms with respect to minors. Firearms loaned to another State agency or a municipality must be documented. The Record of Equipment on Loan Form (CO-1079) or facsimile must be completed.
All seized or confiscated items held in storage by the agency pending disposition will be exempt from this inventory control. Seized or confiscated firearms that are subsequently issued (assigned) to agency personnel, or used by the agency, for training purposes, must be added to the agency inventory.
Safeguarding State Property
Safeguarding State property is important to
prevent theft and loss of State property that must be replaced by expending
additional State funds. Agencies must review the adequacy of existing
physical safeguards designed to protect State property. This is the
responsibility of the property person and the property custodian.
Appropriate safeguards must be implemented to prevent potential losses.
All questions regarding assets and inventory are to be directed to the Office of the State Comptroller's Asset Mailbox at osc.assets@ct.gov.