Finance Policies

Purpose

Capital assets purchased or constructed by Glen Ellyn Public Library represent a major investment by the taxpayers. The purpose of this policy is to set forth the accounting policy as to how capital assets are to be accounted for and reported.

Capital Asset Definition

Capital assets are major assets that benefit more than a single accounting period. They are considered real or personal property that have a value equal to or greater than the capitalization threshold and have an estimated life of greater than one year. They include such items as land, buildings, improvements other than buildings, furnishings and equipment, infrastructure, construction or development in progress, and vehicles.

Capitalization Thresholds

The library will capitalize all assets with an estimated useful life in excess of one year and a cost of $20,000 or more. With regard to asset repairs and improvements, costs incurred in the amount of $20,000 or more will be capitalized if the repair or improvement extends the useful life of the asset or significantly increases the service capacity or usefulness of the asset. The Finance/HR Director bears the responsibility for recording new additions of capital assets. Additions will primarily be substantiated through paid invoice files and will be reviewed and updated on an annual basis.

Estimated Useful Lives

“Estimated useful life” means the estimated number of years that an asset will be able to be used. Estimated useful life is used to allocate the cost of the asset over the period of time in which the library is expected to receive benefit from the asset. The periodic charge of the benefit is called depreciation expense and is reported in the government-wide financial statements of the library. The following table sets forth the useful life of each category of capital asset that is depreciated.

Capital Asset Classification

Assumed Useful Life
Buildings
40 years

Improvements
15 – 25 years

Equipment
5 – 15 years

Furniture
10 – 15 years

Vehicles
8 – 10 years

Recording Capital Assets

Capital assets are to be reported and depreciated in the government-wide financial statements. All assets that meet the above definitions and thresholds will be recorded at historical costs or estimated historical cost. In the case of a donated asset, it shall be recorded at its estimated fair value at the time of acquisition. The following parameters further refine the recording of capital assets:

Land is recorded at historical cost and is not depreciated.

Expenditures classified as construction in progress will be recorded at historical cost and will not begin to be depreciated until the construction is complete and the expenditure is reclassified to another capital asset classification.

Depreciation

Depreciation is the allocation of the total acquisition cost of a capital asset over its estimated useful life. Glen Ellyn Public Library will use the straight-line method of depreciation, with an assumed salvage value of zero. Maintaining and recording depreciation will be the responsibility of the Finance/HR Director.

Inventory Records

Glen Ellyn Public Library will maintain an accurate, complete, and up-to-date record of all capital assets. Each inventory record will include: description, year of acquisition, method of acquisition, funding source, cost, and estimated useful life. The library will ensure completeness and accuracy of its inventory records through physical counts, review of purchase records, and other methods deemed necessary.

In accordance with the provisions of GASB 54 , the library has created a Fund Balance Policy.

Fund balance measures the net financial resources available to finance expenditures of future periods. It is the policy of Glen Ellyn Public Library to maintain a fund balance of at least six months (“Cash Flow Commitment”). The Cash flow Commitment in the General Fund is adjusted annually with the adoption of the annual budget and is calculated as six months (50%) of General Fund expenditures (not including transfers to fund capital projects).

It is also the policy of Glen Ellyn Public Library to assign a portion of Fund Balance to the amount of debt service payments for governmental debt for the following year, if necessary. These funds may be assigned in either of the General Fund or the Debt Service Fund (“Debt Service Assignment”).

After 2011, the annual budget (appropriation) will include a contribution to (or drawdown from) Cash Flow Commitment and Debt Service Assignment to assure compliance with this policy. The levels of other restrictions, commitments, and assignments will fluctuate depending on activity.

Brginning in 2012, unassigned fund balance shall be transferred to the Building, Equipment, and Maintenance Fund (Fund 50) at year end.

This policy may be amended from time to time according to the wishes of Glen Ellyn Public Library Board of Trustees.

The library will spend the most restricted dollars before less restricted, in the following order: Nonspendable (if funds become spendable), Restricted, Committed, Assigned, and Unassigned.

The Library Director will determine if a portion of fund balance should be assigned.

Purpose and Scope

The purpose of this policy statement is to outline the responsibilities, general objectives, and specific guidelines for management of public funds by Glen Ellyn Public Library. Its scope is all funds of the library.

Responsibilities

All investment policies and procedure of Glen Ellyn Public Library will be in accordance with Illinois law. The authority of the library Board of Trustees to control and invest public funds is defined in the Illinois Public Funds Investment Act and the investments permitted are described therein. Administration and execution of these policies are the responsibility of the Treasurer, who is hereby delegated as “Chief Investment Officer” of the library acting under the authority of the library Board of Trustees.

Delegation of Authority

Administrative responsibility for the investment program is delegated by the Chief Investment Officer. The Library Director and Finance/HR Director are responsible for establishing internal controls and written procedures for the operation of the investment program. Investment decisions are made in conjunction with the Chief Investment Officer of the library.

“Prudent Person” Standard

All library investment activities administered by Glen Ellyn Public Library Board shall use a “prudent person” standard of care. Public funds shall be handled with judgment and care, under circumstances then prevailing, which persons knowledgeable of investment and treasury management practices and persons of prudence, discretion, and intelligence exercise in the management of their own affairs, not for speculation, but for investment, considering the safety of their capital as well as the possible income to be derived.

Objectives

The following objectives, in priority order, will be considered in selecting financial institutions and investment instruments

• Safety of principal
• Liquidity
• Rate of return

Guidelines

The following guidelines shall be used to meet the general investment objectives:

Safety

Authorized investments include and will primarily consist of: Certificates of Deposit, Treasury Bills and other securities guaranteed by the U.S. government, participation in the State of Illinois Public Treasurer’s Investment Pool and Illinois Metropolitan Investment Fund.

All deposits with financial institutions other than those secured by the FDIC shall be fully collateralized at not less than one hundred ten percent (110%) of the fair market value of the funds secured. Pledged collateral will be held either by the library or in safekeeping and evidenced by the safekeeping agreement. If collateral is held in safekeeping, it shall be held by a third party acceptable to the library or by an escrow agent of the pledging institution.

Custody of any investments in US Government securities other than those of the US Treasury will be held by a third party custodian rather than the original investment broker.

Liquidity

The investment structure shall remain sufficiently liquid to assure that the operating requirements of the library are met in a timely fashion.

Rate of Return

The library Board will seek to regularly take advantage of the highest rate of return available from approved securities. The library will endeavor to keep all available cash invested in interest-bearing accounts.

Maintaining the Public Trust

The library will avoid any transaction that might impair its public confidence. Diversification will be sought in order to minimize the risk of loss associated with any individual security type or individual financial institution.

Reporting

Fund balances and the status of such accounts will be reported at each regularly scheduled meeting of the library Board and at least quarterly include information regarding securities in the portfolio. At least annually, the Chief Investment Officer shall review this policy for any needed modifications and report to the Board on the investment portfolio, its effectiveness in meeting the library’s need for safety, liquidity, rate of return, diversification, and general performance.

Annual Audit

The required annual examination of the financial statements of the library will include an examination of the application of the library’s treasury management. The examination shall include an evaluation of controls in place to prevent the possible loss of funds arising from fraud, error, misrepresentation, theft, or imprudent actions by the employees or agents of the library.

Conflicts of Interest

Officers and employees involved in the investment process shall refrain from personal business activities that might conflict with the proper execution and management of this investment program, or that could impair their ability to make impartial decisions, or that could give the appearance of impropriety.