‘Every child deserves to be the best they can be’
Scope: EMLC Academy Trust & Academies within the TrustVersion:
V1 – 17/12/15 / Filename:
EMLC Academy Trust Capital Assets Policy
Approval:
This policy was ratified by the EMLC Academy Trust on 17th December 2015 / Next Review:
16th December 2018
This policy will be reviewed every three years by the Finance Group and approved by the Strategic Board.
Owner:
EMLC Academy Trust Strategic Board / Union Status:
Not applicable
Policy type:
Non-statutory / Replaces Academy’s current policy
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Capital Assets Policy
1. Purpose
The Trustees are responsible for safeguarding the company’s assets. This policy is designed to ensure that the Trust has a complete and accurate record of its assets in terms of value, location, age and condition, and to further ensure that this information is correctly recorded in the accounting records of the Trust.
An accurate record of assets also assists the Trust in ensuring that it has sufficient insurance cover in place, and that it is paying the appropriate premiums for its insurance.
Good internal controls promote the prevention or timely detection of theft or misuse of company assets. Every member of staff has an individual duty to act in the best interests of the company as a whole, which includes the responsible use and care of assets under their control or within their workspace.
2. Scope
This policy applies to all assets owned by the Trust at all of its sites, such as in its academies, schools and at its central offices.
3. Definition of a Fixed Asset
A Fixed Asset is any tangible asset purchased for use in the day-to-day operations of the Trust from which an economic benefit will be derived over a period greater than one year. Fixed Assets include items of property and equipment such as buildings, office furniture, fixtures, computers and other related technological equipment.
As a rule of thumb, assets costing more than £500 are capitalised, although price is not the only criteria. Assets costing less than £500 may also be capitalised if they have an economic life of more than one year and if it is felt appropriate to do so, e.g. printers and computer equipment. In the same way, an item which costs more than £500 but will be used up within a year is not a capital asset and is expensed in the period acquired.
Bulk purchases of similar items that have an aggregate value of £500 or more are recorded as a fixed asset regardless of individual price of item. For example, if an academy purchases 20 desks at £50 each the total purchase of £1,000 will be considered a fixed asset purchase. The total cost will be depreciated over the life of the assets.
At the time a fixed asset is acquired, its cost is capitalised and subsequently depreciated utilising the straight-line method over the asset’s estimated useful life (see section on depreciation below).
There are several types of capital assets. Specifically:
• Moveable equipment, such as furniture
• Fixed equipment, such as fixtures
• Buildings and their components
• Building Improvements, including department renovations
• Land (not depreciated)
• Land Improvements
• Infrastructure
• Software
• Computer Hardware, peripheral equipment and other electronics
Moveable Equipment
These items are not permanently affixed to a part of the building. Examples include chairs, desks, filing cabinets, bookcases, etc. Some moveable equipment consists of more than one component. For example, a computer, keyboard etc. The assembled components may be considered one time and recorded as a single capital asset.
Fixed Equipment
These items are permanently affixed to a building but separate from the building itself. Examples are light fixtures, water fountains, fire control apparatus, etc.
Buildings and their Components
Buildings are roofed structures used for permanent shelter of persons, furniture and equipment. Examples of building components are plumbing, electrical system, elevators, and HVAC systems.
Building Improvements and Renovations
Major improvement projects that will extend the useful life of the asset, increase the efficiency, or add new capabilities will be capitalised. An example of this would be adding a new roof. All costs including parts and labour will be included in the total cost of the project.
Parts and labour utilised to perform minor repairs on an existing asset of the Trust are considered period costs and expensed in the period incurred. This type of work is considered routine maintenance. Examples of this type of maintenance would be painting an office, replacing a tap on a sink, or replacing carpet in an office.
Land
Land does not get depreciated over time. The acquired value is recorded for the cost of the land. Demolition costs are considered land costs.
Land Improvements
Land improvements are modifications to outside areas. Examples include, installing paved areas, car parks and fences.
Infrastructure
Infrastructure is defined as an underlying base or foundation, for example sewer pipes and fibre-optics.
Software
Computer software refers to programs designed to cause a computer to perform a desired function. Software licenses are normally expensed in the year of purchase.
Hardware, Peripheral and Electronics
Computer hardware includes all parts designed in order for the computer to function as intended. It includes but is not limited to hard drives, monitors, key boards, printers and scanners. Other electronics include backup peripherals, cameras, cellular phones, etc.
Whilst computer keyboards and other peripherals may not individually cost £500 or over, when purchased as a set alongside a PC or laptop, all the items (including delivery and set-up costs) can be capitalised as one item.
4. Purchasing of Fixed Assets
(i) Capital funding
Capital expenditure is made from the Capital Fund of the academy. Income for the Capital Fund can come from several sources, such as Devolved Formula Capital (DFC), Capital Investment Fund (CIF), cash donations, etc.
The use of certain types of Capital Funding is “restricted”, which means the money can only be spent on the specific project for which the money was intended when it was granted to the academy, e.g. CIF bid income must only be used to fund the specific capital project described within the bid.
Other types of capital funding, such as DFC, are “unrestricted” and therefore may be spent on any project or item, so long as it is capital expenditure and not revenue expenditure.
None of the above has any effect on the annual revenue income budget for the academy as Capital Funding sits outside of the day to day expenditure.
However, if there is insufficient in the Capital Fund to support the capital expenditure of an academy, the academy may allocate some of its annual revenue budget to the project. This reduces the amount of revenue income available to pay for staff costs, overhead and curriculum requirements, so it must be budgeted for and approved through local and Trust governance at the time the budget is set.
In ALL cases, capital expenditure must be appropriately authorised and must follow the appropriate procurement route, both as described below.
(ii) Authorisation of capital expenditure
Capital funding is a scarce resource and academies have many demands upon this funding, including building repairs, boilers and heating systems, IT infrastructure and hardware to name a few.
Each academy has its individual Asset Management Plan which sets out and prioritises the requirements of the academy in terms of large maintenance and capital projects.
All capital funding bids and capital expenditure should be approved by the LGB, and expenditure on major capital items taken to the Strategic Board for approval. This is to ensure co-ordination of effort and the most effective use of the funds available.
Once this prior approval has been given, the existing sign-off limits within the academy may be used for approval of the purchase order and completion invoices.
(iii) Procurement
Procurement of capital items and contractors for capital work must be performed in line with the procurement guidelines in the EMLC Academy Trust Financial Handbook.
Unauthorised Related Parties may not be used for any purchases, and this also applies to capital purchases.
5. Depreciation
Depreciation is provided at rates calculated to write off the cost of fixed assets less their estimated residual value, over their expected useful lives on the following bases:
Long term Leasehold Property 2% straight line
Fixtures and fittings 20% straight line
Office / computer equipment 33% straight line
Depreciation is applied to the cost of the asset from the month of purchase.
6. Disposal and Movement of Assets
Disposal of Fixed Assets:
A fixed asset may no longer be required due to:
· Excess of useful life
· Lack of need
· Obsolescence
· Wear, damage or deterioration
· Excess cost of maintenance
· Loss or theft
It is the responsibility of the Principal to ascertain the status of the asset. Items which are unsafe or too costly to repair can be disposed of responsibly, recycling where possible. If the asset is still in a useable condition it can be sold. An invoice for sale must be raised to the buyer and VAT should be charged if the Trust is VAT registered and if it is appropriate to do so. This should be discussed with the Chief Financial Officer to ensure the correct VAT treatment is applied.
If contemplating giving away or selling items to members of staff (or other related parties), a fair system should be employed to decide on how best to distribute or allocate the item(s).
The best price should always be sought whether selling externally or within the organisation, obtaining best Value for Money.
Any loss or theft should be reported to the central Trust in case an insurance claim can be made.
The Fixed Asset Register should be updated to reflect the disposal.
The School Business Manager will notify the Trust central office of the disposal so that the accounting records can be amended accordingly. The accumulated depreciation and remaining book value of the asset are written off, and any gain or loss is recorded in the income and expenditure account.
Movement of Fixed Assets
Often it is necessary for academies to move fixed assets from one location to another. Movement of the asset should be recorded on the Fixed Asset Register. There is no effect on the accounting records.
7. Valuation of assets
Purchased Assets
The value of the asset is determined by including the purchase price of the item, transportation costs, installation costs, and any other direct expenses incurred by the Trust in obtaining the asset.
Donated Assets
All donations whether cash or equipment must be recorded. See separate Gifts policy.
Leased Assets
All leases must gain prior approval at Trust level.
There are two types of lease, as defined under relevant financial reporting standards:
· Finance leases (which are a form of borrowing and require prior written approval from the Secretary of State)
· Operating leases (which do not involve borrowing).
Assets acquired through an operating lease are not the property of the Trust and should not appear in the Fixed Asset Register. Lease payments are expensed in the year they are incurred.
Assets acquired through a Finance Lease may need to be included in the Fixed Asset Register. This will be determined by the Chief Financial Officer.
If there is any doubt as to whether or not a particular lease does or does not involve an element of borrowing the issue should be resolved by contacting the Trust financial staff.
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