Title
Approval of an Updated Village Capital Asset Policy
History
The Finance Department has completed a comprehensive review and modernization of the Village of Orland Park's Capital Asset Policy, which has not been updated in several years. Local governments must follow strict rules set by the Governmental Accounting Standards Board (GASB). Over recent years, accounting standards have evolved significantly; most notably regarding leased property (GASB 87) and cloud-based software or subscription IT services (GASB 96).
Our previous policy predated these modern standards and relied on a single, one-size-fits-all dollar threshold. The proposed new policy replaces those outdated guidelines with a framework that complies with current accounting standards, streamlines internal processes, and establishes clearer accountability across all departments to protect taxpayer assets.
The detailed capitalization thresholds and category breakdowns are outlined below:
• Land: Must be capitalized regardless of the value or cost.
• Buildings: Must be capitalized at costs greater than $25,000.
• Infrastructure: Must be capitalized when the useful life is 3 years or greater and the cost is $250,000 or more.
• Betterments and Improvements (Capital Assets): Defined as a single item with a useful life of 2 years or greater with specific acquisition costs:
* Building Improvements: $50,000 or more
* Infrastructure Improvements: $250,000 or more
* Machinery and Equipment Improvements: $25,000 or more
* Land Improvements (non-indefinite): $250,000 or more
• Machinery and Equipment: Defined as a single item with an acquisition cost of $25,000 or more and a useful life of 2 years or longer (includes machinery, equipment, and off-road vehicles).
• Vehicles: Must be capitalized when the useful life is 4 years or greater, the cost is $25,000 or greater, and it is self-propelled with primary use on public streets and is street legal.
• Acquisition Cost Inclusions: The capitalized cost of an asset includes all costs necessary to acquire, prepare, and place the asset into its intended use (e.g., delivery, installation, required modifications/upfitting, high-value snowplows, and necessary operational components).
• Intangible Assets: Must be capitalized when the useful life is 3 years or greater and the cost is $100,000.
• Lease Contracts (GASB 87): Capitalized if the total amount is over $50,000 for the original expected life of the lease.
• SBITAs (GASB 96): Capitalized if the total amount is over $50,000 for the original expected life of the arrangement.
Financial Impact
There is no direct expenditure or financial cost associated with adopting this updated policy. However, maintaining a modern, compliant policy prevents costly audit findings, ensures accurate financial reporting, and protects the Village's strong fiscal reputation and credit ratings. Furthermore, raising outdated dollar thresholds reduces administrative staff time spent tracking low-value items.
Recommended Action/Motion
This policy update ensures compliance with modern accounting standards, improves internal tracking controls, and establishes clear operational guidelines for Village departments.
I move to recommend to the VIllage Board approving the updated Village of Orland Park Capital Asset Policy as presented by staff.