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Business Procedures Manual

7.6 Infrastructure

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7.6.1 Infrastructure Definition

Infrastructure assets are long-lived capital assets that normally are stationary in nature and can be preserved for a significantly greater number of years than most capital assets. Infrastructure assets are often linear and continuous in nature.

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7.6.2 Infrastructure Improvements

Infrastructure improvements are capital events that materially extend the useful life or increase the value of the infrastructure, or both. Infrastructure improvements should be capitalized as betterments and recorded as an addition of value to the infrastructure if the improvement or addition of value is $100,000 or more. Depreciate the amount of improvement over the remaining life of the asset using the parent/child relationship in PeopleSoft. If the improvement increases the life of the asset, the asset takes on a new useful life. If the $100,000 was expended intermittently during the year, it should probably be considered an expense rather than a capital improvement. The determining factor in deciding between expensing or capitalizing the improvement is the intent.

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7.6.3 Jointly Funded Infrastructure

Infrastructure paid for jointly by the state and other governmental entities should be capitalized by the entity responsible for future maintenance.

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7.6.4 Maintenance Costs

Maintenance costs allow infrastructure to continue to be used during its originally established useful life. Maintenance costs are expensed in the period incurred.

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7.6.5 Preservation Costs

Preservation costs are generally considered to be those outlays that extend the useful life of an asset beyond its original estimated useful life, but do not increase the capacity or efficiency of the asset. Preservation costs should be capitalized if $100,000 or more. Since the useful life of the asset has been extended, the useful life of the asset should be changed.

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7.6.6 Additions and Improvements

Additions and improvements are those capital outlays that increase the capacity or efficiency of the asset. A change in capacity increases the level of service provided by an asset. For example, additional lanes can be added to a highway or the weight capacity of a bridge could be increased. A change in efficiency maintains the same service level, but at a reduced cost. For example, a heating and cooling plant could be reengineered so that it produces the same temperature changes at reduced cost. The cost of additions and improvements should be capitalized if $100,000 or more. If the $100,000 was expended intermittently during the year, it should probably be considered an expense rather than a capital addition or improvement. The determining factor in deciding between expensing or capitalizing the addition or improvement is the intent.

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7.6.7 Depreciation Methodology

The straight-line depreciation method (historical cost less residual value, divided by useful life) will be used for infrastructure assets.

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7.6.8 Capitalization Threshold

The capitalization threshold for infrastructure is $1,000,000 for major systems. Examples of major systems to be capitalized as infrastructure include:

Road Systems

Examples of items include, but are not limited to:

  • Pavements
  • Traffic control devices
  • Signage
  • Curbs
  • Sidewalks

Water Systems

Examples of items include, but are not limited to:

  • Main lines
  • Distribution lines
  • Fire hydrants
  • Water meters
  • Valves, joints, bends

Drainage Systems

Examples of items include, but are not limited to:

  • Catch basins
  • Storm drains
  • Inlets
  • Pipes
  • Detention/retention facilities
  • Junction boxes

Sewer Systems

Examples of items include, but are not limited to:

  • PVC pipe
  • Manholes
  • Laterals
  • Lift stations

Fiber Optic and Telephone Distribution Systems Between Buildings

Examples of items include, but are not limited to:

  • Fiber optic cable

Waterway Systems

Examples of items include, but are not limited to:

  • Canals
  • Wharves
  • Docks
  • Sea walls
  • Bulkheads
  • Boardwalks

If there are no major infrastructure systems at the institution, the infrastructure currently on the books should be removed in the current year’s operations. You must add a note to the financial statements for the current year explaining why the infrastructure was removed and how the removal changed the financial statements; for example, how the financial statements would have appeared if the infrastructure had not been removed.

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