ACQUISITION OF PROPERTY
|Questions regarding this chapter should be directed
to the following:
|Asset and Inventory Mailbox
|Elizabeth Daly, CPPA
|Fiscal Policy Statewide Services
Assets may be acquired by various methods. These methods include purchase,
donation, and construction and are discussed below.
- The cost of personal property acquired through purchase includes
ancillary costs such as freight and transportation charges, site preparation
expenditures, professional fees, and legal claims directly attributable to
asset acquisition. The cost does not include warranties or training on the
use of the property.
- For example: If an equipment item was purchased for $4975 and there are
charges such as shipping, and/or installation for the item on the purchase
order, bringing the cost equal to or greater than capitalization threshold,
then the item would be capitalized, inventoried, and reported on the CO-59.
- Acquisitions through the Capital Equipment Purchases Fund, Fund 12051
Account for these assets like any other capital purchase.
- Data processing equipment purchased with a unit price of less than the
capitalization threshold, a useful life of not less than five years and is
procured with Capital Equipment Purchase Fund dollars will be coded as minor
equipment and will not be capitalized. It is recommended that such items be
designated as controllable property.
- The cost of land and buildings acquired through purchase includes
not only the contract price but also such other ancillary related costs as
taxes and other liens assumed, title search costs, legal fees, surveying,
filling, grading, drainage, and other costs of preparation for the use
- Trade-In of State Property
In an effort to upgrade equipment, a State agency may explore the
feasibility of exchanging like items through the process of trading-in
(including vehicles), as opposed to transfer or sale, when it is in the best
economical interest of the State as determined by the owning agency.
- Firearms, Weapons, and Ammunition
Any agencies with surplus firearms, weapons, and/or ammunition should
complete a DPS-293-C Surrendered Firearms Log Sheet, a court order
(if applicable) and a National Crime Information Center (NCIC) report
for any firearms that are deemed surplus to their needs. Once this
information has been compiled, contact the Firearms Recovery Unit at the
Department of Emergency Services and Public Protection (DESPP) at
203-630-5600 to arrange a drop off. The options for scheduling are Tuesdays
or Wednesdays from 10am-3pm and the time of the process varies based on the
number of items being turned in.
- Acquisition by Donation
Property acquired by donation is capitalized if it meets the established
criteria.The asset is recorded at the price that would be paid to
acquire an asset with equivalent service potential in an orderly market
transaction at the acquisition date, or the amount at which a liability
could be liquidated with the counterparty at the acquisition date is
referred to as acquisition value. The following assets should be
measured at acquisition value:
- Donated capital
assets, as provided in paragraph 18 of Statement 34, as amended
- Donated works of art,
historical treasures, and similar assets as provided in paragraph 27 of
- Capital assets that a
government receives in a service concession arrangement as provided in
paragraph 9 of Statement 60.
- Construction by Contract
All costs of an asset acquired by contract must be recorded whenever any
portion of construction work in-process is placed in the custody of the
State agency. The cost should be recorded separately to the assigned
building number. A building can be in one of the following five stages of
- 1. Construction in Progress
The building is not occupied. In these instances the cumulative cost
of projects in process does not have to be reported to the Office of the
State Comptroller via the CO-59. Instead, this information is reported
to the Office of the State Comptroller via customized GAAP closing
package requests that are sent out at fiscal year end to facilitate the
preparation of the State's Comprehensive Annual Financial Report. As the
Department of Administrative Services, Division of Construction Services
administers most capital projects, construction in progress data is
maintained at the Department of Administrative Services. For capital
projects that are administered by other State agencies, construction in
progress information would be maintained at that agency.
- 2. Partially Complete
A component portion of a capital project (e.g., a new wing or floor)
is substantially complete or complete and ready for use. A letter from
the Department of Administrative Services, Division of Construction
Services is issued declaring that the project is partially complete and
ready for use, describing the areas that are partially complete,
transferring ownership of the completed component to the client agency,
and stating the approximate cost. This approximate cost figure for the
partially completed project is used for insurance purposes and also for
reporting by the client agency to the Office of the State Comptroller
via the CO-59. The client agency records the estimated costs of the
asset that is stated in the letter from the Department of Administrative
Services, Division of Construction Services in the addition column on
- 3. Substantially Complete
An entire project is substantially complete and now under the client
agency's custody, and ready for occupancy. The Department of
Administrative Services, Division of Construction Services issues a
letter, "Certificate of Substantial Completion". An estimated cost of
the project to date is included in the letter, which is used for
insurance purposes and for reporting by the client agency to the Office
of the State Comptroller on the CO-59. In order to avoid duplicate
reporting of capital project costs on the CO-59, it is important that
the client agency delete the construction-in-progress costs previously
reported to the Office of the State Comptroller and add the estimated
cost included in the Certificate of Substantial Completion to the CO-59.
- 4. Completed
The Department of Administrative Services, Division of Construction
Services prepares a "Certificate of Completion" when a building is
entirely completed that indicates the final construction contract cost,
pending potential closeout or contingency costs. It includes, unlike the
"Certificate of Substantial Completion", certain additional project
costs. Examples of these adjunct costs are additions or deletions to the
original construction contract, design and DAS fees, and other project
costs like telecommunication, hazardous material removal as part of
major renovation that increases the economic life of the building, or
construction performed separately by a contractor other than the major
contractor. Project costs previously reported to the Office of the State
Comptroller via the CO-59 should be adjusted, as part of the CO-59
reporting process, to reflect the final cost of the completed capital
- If the completed project cost memorandum is not attached to the
"Certificate of Completion", the agency should contact the Department of
Administrative Services, Division of Construction Services to obtain the
actual cost of the building.
- Costs should not be based upon a percentage of construction
completion, but on actual costs as reconciled with the Department of
Administrative Services, Division of Construction Services or, for
lesser projects and those not controlled by the Department of
Administrative Services, those actual costs maintained at the agency
level. Project costs should include all costs pertaining to the project.
- Do not include non-capital, repair expense items. Routine repair,
and maintenance; including replacements and renovation costs that are
incurred to maintain the asset in its operating condition and that do
not increase the asset's economic benefits over those originally
intended are not to be included and are expensed. For example, roof
replacement, painting, and paint removal are not capital costs.
- 5. Final closeout
This occurs when all foreseen project contingencies have been
resolved and all project costs have been finalized.
- Agency (self) Administered Projects
The same project cost accounting rules apply to agency administered
projects as discussed in the previous "Construction by Contract" section.
The difference is that the Department of Administrative Services, Division
of Construction Services has less, and conceivably no oversight of the
project, and therefore it is the responsibility of the agency to properly
account for and report their capital project expenditures.
- Construction by Agency
The principal factors to be considered in recording the cost of assets
constructed by an agency's own labor force is based upon the use of cost
- Additions, Renovations, Improvements and Repairs to Assets
All additions, renovations, or improvements, which increase the economic
benefits to be derived from an asset, will be capitalized. The expenditures
must clearly and significantly enhance the value.
Routine repair and maintenance; including replacements, return the asset
to its original condition. Agencies should treat any maintenance or repair
that returns a capital asset to its original condition, regardless of the
amount spent, as an expense. These costs do not increase the asset's
Building additions or renovations are a large portion of the State's
capital projects. The completed Construction in Progress records will
provide support for the total cost of a building, including the project (or
projects) under which it was built and the projects which represent
additions or renovations.
A few examples will illustrate this point:
A. Repair and Maintenance
A roof is worn out and needs to be replaced and costs $100,000 to
repair. This repair will not be capitalized because it merely restores
the building to its original status.
- B. Improvement
Same situation as above except that the State decides to install a
significantly better roof with solar collection panels at a cost of
1) determining the cost of the replacement if it were to be done and
2) subtracting this amount from the total cost of the renovation
determines the capitalized amount.
- $750,000 for solar roof
$100,000 for replacement roof
$650,000 add to the value of the building
- Agency personnel will review capital projects and determine which
are true additions or betterments to existing buildings versus those
which are merely repairs and maintenance. This decision must be made on
a case-by-case basis.
For capital projects that do not require a certificate of
completion, record the asset when final payment has been made.
4. Miscellaneous Acquisitions
- Acquisition by Foreclosure
Property acquired in this manner should be recorded at appraised value
at time of acquisition. The cost data should include the total amount of all
taxes, liens, and other claims surrendered, plus all other costs incidental
to acquiring ownership and perfecting the title.
- Acquisition by Eminent Domain
Eminent domain is the right of the State to appropriate private property
for public use, usually with compensation to the owner. The property should
be recorded as if acquired through purchase. The cost would be the amount of
compensation paid to the owner and other ancillary charges.
- Acquisition Methods Intangible Assets
Intangible Assets may be:
- Internally Generated
- The acquisition cost of an intangible asset is based on actual cost or
fair value and the capitalized amount is recorded. Regardless of the method
of acquisition, all ancillary costs of the intangible asset are to be
included in the total costs. Donated intangible assets are recorded at the
fair value at time of acquisition plus ancillary charges required acquiring
the asset. Constructed or Internally Generated: Direct cost of materials,
components, contracted services, professional fees & services, in-house
employee payroll and fringe benefit costs directly allocable to the project.
Do not include any training costs. If acquisition costs are not readily
available, historical cost estimation methods can be used.
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