NO: 01-07-OMB ORIG

AGENCY: Office of Management and Budget

EFF DATE: 07-01-99

EXP DATE: Indefinite

SUPERSEDES: 00-15-OMB

SUBJECT: Fixed Assets

ATTENTION: Directors of Administration and Fiscal Officers

FOR INFORMATION CONTACT: James Kelly
PHONE: (609) 633-3910

Purpose

This Circular Letter prescribes policies to account for fixed assets
in accordance with generally accepted accounting principles (GAAP).

Introduction

In order to comply with generally accepted accounting principles (GAAP)
concerning reporting requirements for fixed assets, as set forth by the
Governmental Accounting Standards Board (GASB), the State has established
the Revised Fixed Assets System (RFAS) which replaced the New Jersey
Fixed Asset System (NJFAS). The RFAS is based on NJFAS with improvements
for update and reporting. The RFAS accumulates fixed asset data which is
ultimately reflected in the General Fixed Asset Account Group (GFAAG)
within the Comprehensive Annual Financial Report (CAFR). The RFAS is an
automated system designed to report and account for fixed asset activity
for the various State agencies. The system is not intended to include
the fixed assets of the autonomous colleges, universities, and
authorities which are accounted for and reported separately. The
Department of the Treasury, Office of Management and Budget (OMB),
maintains the central system and produces the consolidated reports
required for the financial reports and audits. These reports are based
on the asset transactions reported by agencies directly responsible for
the inventory and maintenance of the asset.

Capitalization Policy

Assets that meet the following criteria must be recorded in the RFAS:

1. An asset that is classified as land, land improvements, buildings,
   building improvements, or equipment.
   
   
2. An asset with an original unit cost of at least $25,000 for land
   improvements, $30,000 for motor vehicles, $20,000 for all other
   equipment, and $100,000 for building improvements, which result in the
   replacement of the original components. All land must be capitalized.
   All buildings are to be capitalized except those structures that are
   temporary in nature and that are under $20,000 in value.
   
   
3. An asset with a useful life of one year or greater.

Reporting Responsibilities

1. All building construction, renovation or demolition of buildings, or
   the purchase and/or sale of property that is not coordinated through the
   Office of Design and Construction or the Office of Property and Lease
   Management, is the responsibility of the applicable agency and therefore
   must be reported by that agency.
   
   
2. The acquisition of an asset through a series of regular contract
   payments, i.e., installment purchases of qualifying assets, as well as an
   asset acquired through Certificates of Participation or "Master Lease"
   financing, should be reported the same as a purchase of an asset.

Documentation Requirements

1. System definitions and instructions for asset additions and/or
   retirements are available on-line via the HELP screen in the RFAS.
   
   
2. Agencies are required to maintain supporting documents for all fixed
   asset transactions that meet the capitalization criteria.
   
   
3. The source of funding, or combination of sources of funding must be
   identified.
   
   
4. Each asset must be identified and entered into the RFAS by a unique
   individual number; the number may be a tag number issued by OMB, a
   license number in the case of a vehicle or another number approved by
   OMB.

Reporting Process

OMB Responsibilities:

1. OMB has developed a standardized fixed asset reporting system, RFAS,
   which is required to be used for all fixed asset additions and deletions.
   OMB provides continuing technical support to the agencies in using the
   RFAS.
   
   
2. OMB will provide each appropriate party with an inventory of assets
   that are in the RFAS. The asset listing should be reconciled to the June
   30 physical inventory.

Agency Responsibilities:

1. Each agency will designate a unit and personnel responsible for
   updating RFAS.
   
   
2. Each agency is required to maintain an internal system that is
   capable of running the RFAS program.
   
   
3. Each agency will submit a diskette to OMB, which will identify all
   assets added or retired as entered on the agency's version of the RFAS
   program.
   
   
4. Each agency will also be responsible for conducting an annual
   physical inventory of fixed assets, which must be reconciled to the RFAS.
   A preliminary inventory including the first six months of transactions
   should be submitted to OMB by May 31 of each year. A complete physical
   inventory listing as of June 30 must be submitted to OMB prior to July 31
   of each year.