This page provides detailed guidance to help local governments in Washington State develop and adopt asset management policies, including key questions to consider and sample policies.
It is part of MRSC’s Financial Policies Tool Kit, created in partnership with the State Auditor’s Office Center for Government Innovation.
What is Asset Management?
Local governments have a wide variety of assets, ranging from capital or fixed assets such as major government facilities, infrastructure, and equipment to non-capital items such as computers and tools that are considered small and attractive assets. Each of these assets is essential to the delivery of services, quality of life, health, and safety of the citizens within your jurisdiction.
Local government has an inherent responsibility to safeguard its assets and to develop a system of asset management that considers oversight and control in addition to the short-term and long-term maintenance, repair, and replacement of these assets for continued performance and reduced life cycle costs.
The Washington State Auditor’s Office requires some form of asset management for all local governments, regardless of size. Without an asset management policy, the public’s money (assets both large and small) can be lost or wasted.
Key Components of an Asset Management Policy
An effective asset management policy should, at a minimum, address the following areas:
- Scope and purpose
- Definitions
- Capitalization threshold
- Additions, transfers, disposals, and losses
- Inventory and periodic assessment of condition
- Maintenance and repair
Scope and Purpose
The scope and purpose statement is the opening statement of your policy. It should set a clear and concise picture of your jurisdiction's objectives. For example, something like:
This policy is established to provide guidelines that will ensure good stewardship over City resources through a uniform method of accountability and inventory of the assets of the city.
An asset management policy is dependent on a clear understanding of what the term “assets” means in your jurisdiction, and what types of assets your jurisdiction has. Defining the terms used throughout the policy will ensure that those responsible for implementing the policy have a clear understanding of the requirements.
For “cash basis” accounting and reporting entities in particular, it is important to clarify within the scope and purpose statement the objectives of the asset management system. While GAAP entities are required to account for and report capital assets in their financial statements, cash basis entities do not record assets within their financials except to expense them when purchased. As a result, the focus for cash basis entities is on management of the public asset to ensure its safekeeping at the lowest life cycle cost.
Capitalization Threshold
Your policy should establish a capitalization threshold, or dollar limit. Purchases above this threshold will be classified as capital assets, while purchases below this threshold are considered operating costs.
Some jurisdictions use a cost method, establishing a flat dollar amount, while others may set different thresholds for different types of assets. Below are examples of each method. The exact thresholds are up to the jurisdiction, but federal guidance is $5,000 so most entities set their capitalization thresholds to meet this standard for grant compliance. Small jurisdictions may have thresholds well below this level.
Example of Capitalization Threshold: Cost Method |
All non-infrastructure assets with a cost of $5,000 or more, and infrastructure additions where individual items cost $5,000 or more, will be capitalized. Although Small and Attractive Assets (assets costing less than $5,000) do not meet the city’s capitalization threshold, due to ease of conversion to private use, they are considered assets for purposes of marking and identification, records keeping, and tracking. |
Example of Capitalization Threshold: Types of Assets |
ASSET CLASS |
THRESHOLD ($) |
Land |
0 |
Buildings, Building Improvements, and Building Fixtures |
5,000 |
Improvements Other Than Buildings |
5,000 |
Infrastructure |
5,000 |
Machinery and Equipment |
5,000 |
Artwork |
0 |
Construction-In-Progress |
5,000 |
Intangible Assets |
5,000 |
Additions, Transfers, Disposals, and Losses
Over time, a jurisdiction will acquire new assets, transfer certain assets to other departments, dispose of old or unneeded assets, and occasionally lose assets. Your asset management policy should consider how to report all of these changes to your Finance Department.
Inventory and Periodic Assessment of Condition
A periodic inventory of all assets is a key component of the asset management policy. This component should provide written inventory instructions and frequency of inventory.
In addition, a periodic measurement of the physical condition of the asset should be conducted. Physical condition inventories typically occur less frequently than the overall asset inventories.
Maintenance and Repair
The SAO BARS manual (GAAP) chapter on Capital Asset Management System Requirements states in item 3.3.9.20:
As a steward of public property, officials have the obligation not only to safeguard assets from loss but also to ensure that they are not neglected, wasted, or misused. The local government should not find itself surprised by building or equipment repair or maintenance requirements or by predictable problems with down time and availability of spare parts.
Budgetary pressures often curb the proper investment of time and funds to maintain the assets to a level that will ensure its full life cycle expectancy. A local government's financial plans should address the continuing investment of operating funds to maintain its capital assets.
Examples of Asset Management Policies
Below are some examples of asset management policies that may be useful, with an emphasis on small and mid-size jurisdictions. Many jurisdictions incorporate small and attractive assets into their general asset management policies, but some have adopted separate policies.
City Asset Management Policies (General)
City Small and Attractive Asset Policies
County Asset Management Policies
Special Purpose District Asset Management Policies
Inventory and Disposition Forms and Checklists
- Ephrata:
- Asset Control Form – Includes asset identification information, purchase details, department/location, and estimated life
- Fixed Asset Disposal/Transfer Form – Used to record the sale, auction, donation, scrapping, or theft of items over $5,000
- Small and Attractive Assets Disposal/Transfer Form – Used to record the sale, auction, donation, scrapping, or theft of items of $5,000 or less
- Kirkland Asset Disposition Form – Used to record the surplusing, trade-in, transfer, damage, loss, or theft of any asset, including small and attractive assets as well as larger items and vehicles over the capitalization threshold
- MRSC Sample Inventory Forms (2017) – Sample inventory control worksheets for capital/fixed assets, small and attractive assets, and public works shop
Asset Management RFPs
Recommended Resources
Below are some useful resources from the State Auditor's Office (SAO) and Government Finance Officers Association (GFOA) to help you develop asset management policies.