Adopt amended Capital Asset Administration Policy to establish intangible capital asset thresholds. (No general fund impact) (Rinde)

Adopt amended Capital Asset Administration Policy to establish intangible capital asset thresholds. 

The policy on Capital Asset Administration describes the process for development of the capital improvement plan, roles and responsibilities, as well as defines the accounting treatment of capital assets, such as the thresholds for capitalization of fixed assets. This item is intended to update the fixed asset thresholds for specific items (leases and software) along with other minor revisions to the policy to bring current. 

In the past year, the County faces two additional accounting standards that require the County to begin to account for the right to use certain intangible assets, including certain leases and software-based information technology arrangements (SBITA). In these types of arrangements, the County has obligated itself via a contract or agreement to pay for the utilization of this space or software. As these arrangements can be large, long-term, and difficult to change, the Government Accounting Standards Board (GASB) determined through GASB87 and GASB96 that local governments need to account for these agreements recognizing an intangible right to use and to record a liability. The local agency then consumes that right-to-use the facility or software over the time period where access is received while the liability is liquidated as payments are made pursuant to the agreement or contract. 

This represents an additional accounting burden to identify these agreements, track the asset and liability over their life, and to perform financial reporting on these individual arrangements. As a result, local governments are allowed to establish an accounting threshold for these types of intangible assets for when these arrangements are significant enough to require this additional accounting treatment. After consulting with the external auditors, other peer counties, and extensive review of these accounting standards, the Department of Financial Services recommends establishing a capitalization threshold of $100,000 for GASB87 Lease arrangements and GASB96 Software Based Subscription Arrangements. The attached Capital Asset Administration Policy contains these changes in a redline version as well as contains a clean version for the Board's consideration. 

Should the Board not approve these policy changes, this would require the Department of Financial Services to perform additional accounting and financial reporting for every lease and software agreement regardless of the dollar amount. This would result in inefficiencies of not focusing effort on the most significant arrangements and may require a re-evaluation of the accounting staff needed to perform these new standards. With this policy change, staff believe these additional accounting burdens can be accomplished with existing staff. 

The Department of Financial Services (DFS) collaborated with the County Administrator's Office on this recommendation. In addition, DFS obtained input from the County's external audit firm LSL and the staff Capital Improvement Committee before bringing this forward. 

Not applicable.