Auxiliary Enterprise Financial Policy

POLICY MANUAL

POLICY TITLE: Auxiliary Enterprise Financial Policy
POLICY NUMBER: 7.10.1
EFFECTIVE: July 1, 2015

A. BACKGROUND:

Capital assets are generally high value, tangible and intangible assets used in operations and having a useful life of more than one year. In addition to their operational importance, capital assets are a significant portion of the overall financial assets of CCRI. Capital assets are also highly regulated by the State, RI Council on Postsecondary Education (RICPE), grant and contract terms, and professional accounting principles. For operational, financial, and compliance reasons, maintaining adequate physical and financial controls over capital assets is essential to the operation of CCRI. Legal title to all land and real estate assets is vested in the RICPE or the State of Rhode Island.

B. POLICY STATEMENT:      

The Community College of Rhode Island (CCRI) will maintain adequate and consistent policies, procedures, and accounting records for all capital assets that it owns or has custody of for a third party, in accordance with applicable Governmental Accounting Standards Board (GASB) Statements, U.S. Office of Management and Budget (OMB) regulations and guidelines, State regulations and guidelines, RICPE policy, grants and contracts.

Those capital assets that meet the threshold values, based on acquisition value, for various categories of CCRI capital assets listed below, will be capitalized:

  • Land (any dollar value)
  • Improvements to land (with a value of $50,000 or more)
  • Easements (valued at $50,000 or more)
  • Buildings (valued at $50,000 or more)
  • Building improvements (valued at $50,000 or more)
  • Leasehold Improvements (valued at $50,000 or more)
  • infrastructure (valued at $50,000 or more)
  • Vehicles (valued at $5,000 or more)
  • Machinery and Equipment (valued at $5,000 or more)
  • Capital leases (valued at $5,000 or more)
  • Works of art and historical treasures (valued at $5,000 or more)
  • Intangible assets (valued at $5,000 or more

Accounting records will provide adequate information on each individual capital asset to maintain accountability. Adequate information will include the following data elements, as applicable:

  • Capital asset sub-category, e.g., buildings
  • Description of the capital asset
  • Identification and/or serial number
  • Location
  • Source of acquisition
  • Date of acquisition
  • Cost of acquisition
  • Depreciation/amortization methodology
  • Depreciation/amortization charges
  • Accumulated depreciation
  • Net book value

The depreciation/amortization methodology applied will depend on the capital asset in question. Acceptable depreciation/amortization methodologies are:

  • Straight line depreciation/amortization with a mid-year convention based on asset lives
  • Methodologies published by the State Controller or other authoritative third parties, e.g., National Association of College and University Business Officers (NACUBO)
  • Methodologies based on actual asset data
  • For intangible assets that arise from contractual or other legal rights, the useful life should not exceed the period to which the service capacity of the asset is limited by contractual or legal provisions

Accounting records will be kept in a current and professional manner. Subsidiary ledgers will be reconciled to control accounts periodically but no less than annually. Physical inventories or equivalent cycle counts will be performed, valued, and reconciled to control accounts at least once every two years.

In addition to capitalized assets, as defined above, CCRI will maintain appropriate accounting records and physical custody over:

  • Construction in progress assets, through close-out and final acceptance
  • All grantor or third party provided capital assets, as required by the individual grant or contract
  • Specifically designated (by the Vice-President of Business Affairs) CCRI capital assets that fall below the capitalization levels established above

C. DEFINITIONS: 

Cost of acquisition: The cost or estimated cost of a capital asset when first placed into service at the College. Donated assets are recorded at their estimated fair value at the time received.

Building Improvements: Any improvements made to buildings used by the College and owned by RI Council on Postsecondary Education or the State of Rhode Island.

Capital assets: High value assets that are used in operations and have a useful life of more than one year. These include land, improvements to land, easements, buildings, building improvements, vehicles, machinery, equipment, work of arts and historical treasurers, infrastructures and other tangible and certain intangible assets that are used in operations.

Capitalize: To record an expenditure or contribution that may benefit a future period as an asset rather than to treat the expenditure as an expense for the period in which it occurs.

Capital Lease: A lease is a contractual agreement between a lessor and a lessee that coveys to the lessee the right to use specific property (real or personal), owned by the lessor, for a specific period of time in return for stipulated, and generally periodic, cash payments (rents). In cases where the ownership of the property reverts to the lessee at the conclusion of the lease, it becomes a capital lease.

Computer Software: Consists of programs and routines provided to facilitate the use of the computer. It includes application programs or routines written for a specific installation, but it is more commonly used to refer only to the general programming and operating aids, that may be furnished by a manufacturer or developed internally.

Construction in Progress: Cost of construction work undertaken but not yet completed or capitalized at the close of the accounting period.

Depreciation: The methodology for distributing the cost of tangible capital assets over the estimated useful life of the capitalized asset (which may be a group of assets) in a systemic and rational manner.

Grantor or Third Party Provided Capital Assets: Third party assets in the legal custody of the College pursuant to a grant, contract, or other legal arrangement. While the College does not have ownership of these assets, it is legally liable for them.

Intangible assets: Identifiable assets that possess all of the following characteristics:

  • Lack of physical substance
  • Non-financial nature, i.e., that is not in a monetary form or representing a monetary claim
  • Initial useful life in excess of one year

Examples of intangible assets include: easements, trademarks, copyrights, and computer software

Improvements to Land: Any improvements made to land used by the College and owned by RICPE or the State of Rhode Island.

Infrastructure: Long-lived capital assets that normally are stationary in nature and normally can be preserved for a significantly greater number of years than most capital assets. These include roads, bridges, tunnels, drainage systems, water and sewer systems, dams, and lighting systems, telecommunications system, gutters, curbs, streets, sidewalks, gas and electric utilities, solid waste disposal, waste water treatment, and similar assets that are immovable. Buildings, except those that are an ancillary part of a network of infrastructure assets, should not be considered infrastructure assets.

Leasehold Improvements: Any improvements made to buildings or real property leased by the College.

Machinery and Equipment (M&E): M&E assets are articles of expendable and tangible personal property. They include items such as:

  • Computer hardware: Consists of devices which can perform one or more of the following functions: data preparation; input to the computer; computation, control and primary storage; secondary storage; and output to the computer
  • Construction equipment: Tangible property and implement used to assemble/improve land, buildings and/or infrastructure assets
  • Education and recreational equipment: Furniture, implements and tangible property used for educating/teaching in a classroom; and/or implements used for rest and relaxation or social activities
  • Household furnishing and equipment: Furniture, property and accessories used in and around living quarters
  • Medical, surgical and lab equipment: Tangible property and implements used for medical treatment and/or experimental testing and analysis
  • Motor vehicles and automotive service equipment:
  • Motor vehicles-mechanized equipment used to transport people and other items.
  • Automotive Service Equipment-implements and tangible property used to test, diagnose and repair motor vehicles
  • Office furnishing and equipment: Furniture, implements and tangible property used in rooms within a building(s) for the conduct of trade, business, profession or government service

Specifically Designated Capital Assets: Assets that do not meet the requirements for capitalization but have significant value to operations or are considered susceptible to loss. Examples of such assets are: computer equipment valued at less than $5,000, audiovisual equipment, photocopiers, and laboratory equipment.

Tangible Assets: Assets having a physical form, e.g., cash, equipment, and land, or a financial nature, e.g., accounts receivable.

Works of Art and Historical Treasures: Unique individual assets. For those whose useful lives are diminished by display or educational or research applications, their value will be depreciated over their estimated useful lives. Depreciation is not required for collections or individual items that are inexhaustible.

POLICY APPLIES TO:

This policy is applicable to all CCRI employees involved in the procurement, transfer, disposal, use, custody, or recording of capital assets for the College.

EXCEPTIONS:

In emergencies or other special circumstances, policy exceptions may be made with the approval of the Vice-President of Business Affairs or his delegate. Such approved exceptions should be confirmed, in writing, within three business days. Authorization to use cycle count procedures in lieu of complete physical inventories must be obtained in advance from the Associate Commissioner for Finance and Management, RI Office of the Postsecondary Commissioner.

RESPONSIBLE DEPARTMENT: 

The Office of the Controller is responsible for implementing and maintaining this policy.

PROCEDURES: 

See Accounting Department Procedures Manual.

approved: 

___________________________________ ______________            5/9/2016

Dr. Meghan Hughes, President                                                  Date

Effort has been made to consolidate college policies to this website. This is an ongoing process.
If you have any questions about policies, please contact your supervisor.

This page developed and maintained by the Policy Committee. Send comments and suggestions to marketing@ccri.edu .


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Last Updated: 2/27/18