Agencies often undertake building renovation, addition or improvement
projects that either enhance the asset's functionality (effectiveness or
efficiency), or extend the asset's expected useful life. These projects
include costs for architectural and engineering design, project management,
duplicating, blueprinting, materials and other ancillary services. Currently
these types of expenditures are coded under the appropriate service or
commodity expenditure subobject codes. Coding these transactions in this
manner allows STARS to capture services for 1099-reporting purposes as
required by the Internal Revenue Service. Under the current coding guidelines,
agencies that have buildings and other structures must maintain a separate
tracking system to associate these "project" expenditures with the
appropriate building in order to capitalize these expenditures in accordance
with previously issued policies regarding capital assets. These expenditures
must then be manually added to the cost of the asset within the agency's fixed
asset system using Form DA-83, (Corrections and Additions to Inventory
Records).
To eliminate the need for agencies to maintain a separate "system" to track these expenditures, the Division of Accounts and Reports is revising subobject codes in the 2XXX series and establishing new subobject codes in the 4XXX series effective July 1, 2002. The new subobject codes will be used to process the expenditure in STARS. However, agencies should record these costs for asset reporting as subobject code 4200 (buildings and improvements) and 4400 (land nonstructural improvements) as appropriate. The following subobject codes are being revised to reflect the non-capital designation:
The following subobject codes are being added for services relating to land and buildings:
A summary of these subobject codes may be found on the Attachment A of this circular. The new subobject codes will follow the same pattern used for other capital assets. Building and improvement projects less than $5,000 will continue to use the 22XX, 24XX, 27XX, or 34XX subobject code. These are classified as "non-capital" expenditures. Subobject codes 42X9 or 44X9 will be for land, buildings or improvements more than $4,999.99 but less than $100,000. These are capital, but non-inventory, and will not appear on the agency's monthly Capital Asset Expenditure Report (DAFR 8460). They will still be reportable on Form DA-84 (Land Inventory) or DA-86 (Buildings and Improvement Inventory) pursuant to K.S.A. 75-3516. Subobject codes 42X0 or 44X0 will be used for land, building or improvements projects greater than or equal to $100,000. They are capital and inventory items and will appear on the agency's Capital Asset Expenditure Report (DAFR 8460). All payment vouchers submitted to the Division of Accounts and Reports must clearly indicate if the payment is a maintenance repair or a capital improvement. Please state on the face of the voucher "Total improvement greater than or equal to $100,000", "Total improvement amount greater than or equal to $5,000 and less than $100,000", or "Total improvement amount less than $5,000" as appropriate. Please note that pursuant to K.S.A. 75-3516, the Director of Accounts and Reports shall maintain a master list of real property owned by the State agencies regardless of the cost or value. The records must include the acreage, location by city and county, a brief legal description and the use and purpose of each lot, tract or parcel of land held by a state agency. Buildings or improvements of $5,000 or more will be required to be included on the master list of real property. It will be up to the agency's discretion to determine if improvements less than $5,000 are added to the master list of real property. Accounts and Reports will continue to provide the agencies with a printout of their real property each year and the agencies will make the additions or deletions using Form DA-84 and DA-86. Policy and Procedure Manual Filing No. 7,002 and 11,749 will be updated to reflect the subobject code changes and additions. DB:gb Attachment: Expenditure Subobject Coding for Capitalization of Land and Buildings (.pdf)
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