Capitalized PERSONAL PROPERTY POLICY

INTRODUCTION

This document provides guidance for all National Oceanic and Atmospheric Administration (NOAA) offices for managing capitalized personal property accountability records. These procedures apply to the NOAA Headquarters Property Management Staff and regional Property Office Representatives (POR). The NOAA Personal Property Management Officer (PMO) is the approving official for capitalized personal property procedures.

DEFINITIONS

Acquisition Date - The date best documented as showing when, after title to the property is assumed by NOAA, that it is is ready to be placed into service (whether it is actually placed into service or not.) (Title is taken on the date shipped if it is purchased FOB factory.) The date the property is accepted for NOAA, or the date the property is received, or the date the property is placed in service, or other dates are acceptable as determined by the documentation that is available.

Acquisition Cost - All general PP&E shall be recorded at cost. Cost shall include all costs incurred to bring the PP&E to a form and location suitable for its intended use. The cost of acquiring property, plant, and equipment may include:

- Amounts paid to vendors;

- Transportation charges to the point of initial use;

- Handling and storage costs;

- Labor and other direct or indirect production costs (for assets produced or constructed);

- Engineering, architectural, and other outside services for designs, plans, specifications and surveys;

- Acquisition and preparation costs of buildings and other facilities;

- An appropriate share of the cost of the equipment and facilities used in construction work;

- Fixed equipment and related installation costs required for activities in a building or facility;

- Direct costs of inspection, supervision, and administration of construction contracts and construction work;

- Legal and recording fees and damage claims;

- Fair value of facilities and equipment donated to the government; and material amounts of interest costs paid.

Component - The characteristics of a component are:

- It may or may not be purchased separately from the main item of which it becomes a part.

- It becomes an essential part of the main item, allowing the main item to serve in ways it could not otherwise.

- It is not easily detached from the item of which it becomes a part.

Net Book Value (NBV) - The NBV is equal to the original acquisition cost of an asset, minus any accumulated depreciation.

On-Top Adjustment - Any property transaction processed in the Property Management Information System (Sunflower) after closeout which will affect the end-of-period balances, i.e., additions, deletions, and changes which affect the acquisition dates, the useful life, and/or the acquisition amounts of items acquired in the period before the closeout.

System - A system must work by itself as a stand-alone unit and must not lose its identity by becoming a part of another accountable item. Components assembled into one stand-alone unit can be defined as a system. A system performs one or more specific, well-defined functions. Characteristics of a system are:

- It retains its identity through the life of the item, i.e., items are not added or taken away from the system during its life which change what it does or its intended purpose. A unit can be a system even though components are taken away or added to the system, as long as the deletion or addition does not change what it does or the intended purpose of the system.

- If it were to be moved, it could only be relocated as a unit.

Supporting Documentation (Acquired Before October 1, 1993) -

The acquisition cost of an asset acquired before October 1, 1993, is supported if at least one of the following types of documentation exists in the file supporting the amount recorded (i.e., invoice, purchase order, receiving report, supported similar item, or other third party documentation). Otherwise, the asset is unsupported. Copies should be maintained by the Line Offices to support the valuations.

Click this link www.whitehouse.gov/omb/circulars/a076/a076sa3.html to determine the useful life for assets accepted after 10/1/2002 (Federal Supply Class)

Supporting Documentation (Acquired On or After October 1, 1993) -

An asset acquired by a purchase order is considered supported by documentation when a signed Commerce Department Receiving Report exists showing the date of acquisition and there is also in the file a copy of the final invoice or invoices showing the actual acquisition cost. In some instances, the invoice may be electronic. Also, in some instances, the signature and date of acquisition may appear on the invoice.

An asset acquired with a contract must be supported by a copy of an invoice and a copy of the contract. This may consist of an extract of the contract in cases where the contract is too large to maintain in the property files. However, the extract must be pertinent. There must also be a copy of a signed receiving report showing the date the property was accepted for the federal government.

An asset acquired from another federal agency must be supported by an approved transfer document, such as a DD-1348, DoD Single Line Item Release/Receipt Document, or a Transfer Order, Standard Form (SF)-122, showing the acceptance date. There must also be documentation supporting the valuation of the item.

The value of an asset acquired through donation or other method not involving the expenditure of NOAA moneys must be documented through any method which most accurately provides information on the current fair market value of the item being acquired such as proof from the donating body of original acquisition cost, original acquisition date and original expected useful life.

Click this link www.whitehouse.gov/omb/circulars/a076/a076sa3.html to determine the useful life for assets accepted after 10/1/2002 (Federal Supply Class)

CAPITALIZED PERSONAL PROPERTY ACCOUNTABILITY AND PROCEDURES.

Headquarters and Regional Personal Property Staff Offices will maintain a file Capitalized Personal Property assets.

The Financial or Capitalized Audit files will be organized by barcode number.

Capitalized personal property files must include the following:

- the latest fully-certified personal property physical inventory listing of capitalized property;

- a copy of the Financial Assets Global Information Report (asmn6030) for the asset, to include asset details, initial event details, and asset components, showing by their signature that it has been reviewed by the Personal Property Management Branch Chief, the NOAA Property Management Officer, and the Logistics Division Director.

- a copy of the CD-509 form signed by the Property Custodian.

- if a lease, the Lease Determination Worksheet and supporting documentation including the payment schedule completed by the Acquisition and Grants Office.

- if CWIP, a copy of a NOAA Form 37-6 signed by the Line Office Chief Financial Officer, Finance Office, and the NOAA Property Management Officer.

Click this link www.whitehouse.gov/omb/circulars/a076/a076sa3.html to determine the useful life for assets accepted after 10/1/2002 (Federal Supply Class)

Unsupported Asset Memorandum

If adequate supporting documentation of an asset acquired before October 1, 1993, is not available, the file must contain the following:

- unsupported asset memorandum from the Property Manager describing justification for the lack of documentation and describing what efforts were undertaken to acquire all documentation

- unsupported assets memoranda will declare how the cutoff date was established. As a result of the Chief Financial Officers' (CFO's) Act of 1990, a cutoff date of September 30, 1993, was established, since "...that was the first year financial statements were prepared and an Audit Survey was performed."

For items acquired 6 years and 3 months before establishing the file, NOAA's Filing-Disposition Handbook Section 403-01 states, "Procurement Document files (i.e., Finance copies of purchase orders, job orders, training requests, printing requisitions, FEDSTRIPS, and other procurement documents...including copies of supporting documents, invoices, vouchers, and any related logs) may be destroyed 6 years and 3 months after the period of the accounts". The memorandum will be signed and dated by the Line Office Property Manager or designated alternate. Documentation will be maintained by the Line Office Chief Financial Officer.

Headquarters/POR Certification

PORs must certify and include as part of the file, documents for each capitalized item, the asset’s acquisition cost, verification of the acquisition date, object class code, Federal Supply Classification, type of supporting documentation, and any remarks regarding the asset, including anything unusual, whether the costs are unsupported or whether the asset is excess to the needs of the organization. The document must be signed and dated for the record by the Headquarters Property Office Representative (NOAA Headquarters location), or POR (Region location), or designated alternate. Documentation is maintained at the Region where the procurement office that issued the order is located. If the property is located in a different Region, that Region maintains a file which references the documentation file located in the originating Region.

DISCLOSURE OF UNSUPPORTED AND EXCESS ASSET REPORTS.

Unsupported Assets - In the Sunflower property system, the "Unsupported" flag is used to identify unsupported assets. If the Unsupported Asset Memorandum is in the Custodian's capital asset file, the property office responsible for maintaining the valuation documentation enters a "Y" in the Unsupported flag field. This designation may be used to generate reports on the Sunflower system, e.g., identifying and totaling all unsupported assets for financial statement disclosure purposes.

Excess Assets - For those assets identified as excess to NOAA needs, the Personal Property Office creates a final event for the Financial Asset (but not the Inventory Asset). Sunflower will stop depreciation on these identified items.

VALUATION OF CAPITALIZED PERSONAL PROPERTY

To ensure that all property has been accurately recorded in Sunflower, at least once a month the Property Office must review capitalized property entered into Sunflower. PORs will verify the object class code, acquisition cost, the FSC, and acquisition dates.

Acquisition Date - In determining whether the correct acquisition date has been entered (see definitions), the following hierarchy shall be used in determining which is the best available documentation:

- date of acceptance

- date of receipt

- date placed in service

- other dates as determined and documented by the POR (such as the invoice date, the date shipped, etc.)

Recording the Acquisition Date

Generally speaking, the acquisition date is a date on which or after title to the property passed not just to NOAA, but to the U.S. Government. It is the date that NOAA agrees that it is acceptable for its intended use, that it is what was ordered or requested from a vendor. This is also the date that the property is ready to be placed into service (whether it actually is placed into service or not). The property will be entered into the NOAA Sunflower Assets Property Management Information System as an Inventory asset at that time.

Recording Depreciation

Property Being Placed Into Service - For capitalized property it is necessary to also consider when it is appropriate to start taking depreciation on the asset. Depreciation should start only when the asset is ready and available for its intended use, even if it is not actually in use. Therefore, a satellite that is launched and is ready for use, but is actually held in a parking orbit before it is placed into actual service, would be placed on the property records and depreciation would begin upon acceptance. A ship that is transferred from another agency and could be used for its intended use, but placed in fresh water storage instead, would be placed on the property records and depreciation would begin upon acceptance. In Sunflower, depreciation is calculated from the "Acquisition Date".

If an asset is being constructed or can not be placed into service until it is modified, and the construction or modification is handled as a CWIP project, the entire value of the asset should be carried under the CWIP project until the construction or modification is done. No part of the value of a newly-acquired asset would be capitalized on the property records initially. Once the modification has been accepted and the asset is placed into service, it would be transferred out of CWIP onto the property records as a Financial Asset and depreciation would start.

If an asset is acquired, but it is not ready to be placed into service for its intended function and it requires upgrades or renovations to be considered ready and it is not placed into CWIP, it is entered into the Sunflower property system. The ";Acquisition Date" field is entered based on when title passes, and the "Responsibility Begin Date" is the same date. The useful life of the asset should be set to zero. When the asset is declared ready for use, depreciation should begin. The date depreciation starts should be entered into the "Acquisition Date" field, the "Responsibility Begin Date" field should remain as it was, and the Useful Life should be set to the declared useful life of the asset. [Caution: Do not run the monthly depreciation for this asset until all of these steps have been taken.]

Property Removed from Active Service

If capitalized property is removed from active service for repair or refurbishment or for any other reason when the intention is that it will later be placed back into service, it will continue to depreciate, unless the property is placed into a CWIP project. Property should be placed into CWIP when the repair or refurbishment meets all four of the following criteria:

Property placed into a CWIP Project will be removed from the property records until it is returned to service.

Property undergoing routine maintenance and repair would receive no special treatment, but rather will continue to be depreciated. Routine maintenance and repair does not extend the useful life or increase the market value of an asset or increase its functionality. Costs for routine maintenance and repair are an expense.

Capitalized property will continue to depreciate until it is taken out of service with the intention that it will never be returned to service.

INCORRECT OBJECT CLASS CODES

Object Class Code - When incorrect object class codes are identified, the POR will take the following action:

- For items acquired during the current fiscal year, a memorandum will be sent to Finance requesting them to correct the object class code; the Property Office will ensure the object class code has been recorded correctly in Sunflower. However, the existing UPR record will not be deleted.

- For items acquired during prior years, the Property Office will correct the object class code in Sunflower, and the applicable UPR records will be corrected.

If the invoice has not been received in the Property Office, the Property Office will use the approved Finance invoice format requesting a copy of the certified payment invoice and a copy of the certified receiving reports, if applicable.

YEARLY PROCEDURES

Special Inventory of Capitalized Personal Property - During the third quarter of each FY, the Personal Property Office will ensure that a 100 percent physical inventory of all capitalized personal property assets are conducted. The Capitalized Inventory listing will be certified by the Property Custodians, Property Accountability Officers, and designated Line Office officials. The certified inventory listing shall be maintained in the capitalized personal property audit files and will be available for the interim audit.

Personal Property Acquisition Cutoff Procedures - Property Officers shall make every effort to ensure that no unreconciled payments for capitalized personal property remains on the UPR at the interim audit or the FY end cutoff dates.

On-Top Adjustments - Any Sunflower transactions made during the month after the end of the FY affecting end-of-prior-year balances shall be reported to Finance on a separate report.

PROPERTY ACQUIRED FROM OTHER FEDERAL AGENCIES

Property acquired from either other federal agencies or from other Commerce bureaus will be recorded at their NBVs to the losing entity and with the acquisition date being the date NOAA takes possession of the property. The remaining estimated useful life will be calculated and entered in the "Override: Service Life" field in Sunflower. NOTE: If the NBV amount of property being acquired from another Federal agency or DoC Bureau is not provided by the providing agency, the NBV can be computed by using the program on the NOAA Personal Property Home Page (http://titan.rdc.noaa.gov/prop/noaaprop/noaanbv.html).

Documentation will need to be acquired from the agency which is providing the equipment showing the original acquisition cost and original acquisition date or documentation of how the net book value was calculated. A written statement signed by an official of the agency from either their Property department, their Finance department, or their Procurement attesting to the net book value of the equipment will also be acceptable.

CLASSIFYING PROPERTY AS REAL OR PERSONAL

Background: The chief determination in classifying property as real or personal is whether or not the property constitutes a temporary or permanent improvement to the land. 41 CFR Sect. 101-47.103-12(5)(b) (Disposal of real property) excludes "prefabricated movable structures" from the definition of real property when slated for disposal. Trailers, garages, modular buildings, and generators meet the definition of a prefabricated structure or item and should be classified as personal property.

Federal appropriations law prohibits the construction of permanent facilities or fixtures on leased land; therefore, any fixtures constructed on leased land (federal, state, or private) must be treated as temporary improvements regardless of applicable state laws. (In any case, most state laws stipulate that facilities constructed by the lessee are considered a temporary improvement, because they must be removed when the lease terminates.) A clause should be inserted in the lease agreement stating that any structures placed on the land will remain the property of, and be disposed of, by the lessee.

Trailers, Garages, and Modular Buildings. Ttrailers, garages, and modular buildings, and similar prefabricated structures are to be classified as personal property.

Generators, Wiring, and Cabling Generators are to be considered personal property; they are by definition auxiliary, supplemental, temporary power sources for a facility. They are mounted on their own pads, in their own housing, and usually have minimal connection points to the building's systems.

Wiring and cabling improvements, such as upgrades to electrical or telephone systems, typically do not extend the useful life of a real property asset and are to be considered personal property. Unless installed during the initial construction of a building, in which case they should be included in the acquisition cost, these improvements will be expensed. These improvements are usually abandoned when no longer needed.

Security Equipment Security equipment, which includes cameras, closed circuit televisions, magnetic card readers, computer equipment, and building access control systems will be considered personal property.