Asset Disposalasset-disposal-banner

Purpose:

Texas Christian University maintains a process to sell and document asset disposals. Disposal is defined as the sale, exchange, trade-in, or any other form of surrender whether for compensation or not.

Ownership of Assets:

All assets purchased with University Funds are the property of the University and not a specific department, faculty or staff member’s personal property. University funds include, but are not limited to, grant funds, gift funds, endowed funds, restricted, or unrestricted funds.

All assets donated or gifted to TCU are the property of the University and not a specific faculty or staff member’s personal property

Assets Subject to this Policy:

Assets donated or gifted to TCU have different disposal procedures. (See Donated/Gift Property Disposal Procedure – currently in draft)

Equipment is subject to this policy. Equipment is defined as tangible property that is used in the operations of a business. Examples are copiers, fax machines, printers. (See Equipment Tracking and Monitoring Policy for additional distinction between Supplies and Equipment)

Supplies are not subject to this policy as long as they meet the following criteria. Supplies are consumable items which commonly have a short life with a need to be replaced often. Examples are pens, paper, notebooks, and folders.

Vehicles are governed by the guidelines for Capital Equipment (See below).

Approval Levels:

Budget Managers approve all asset disposals where the original purchase price was $500 to $2,500. (No form is necessary for assets under $500)

Assets whose original purchase price was $2,500 to $10,000 require a second signature from their supervisor, whether Department head, Dean, or the Associate Provost for Academic Planning and Budgeting.

Assets, whose original purchase price was $10,000 and over, which are capitalized, and any other assets subject to TCU’s capitalization policy, need Vice Chancellor approval for disposal.

Any asset to be disposed, which was funded by tax exempt bonds, must receive the approval of the Vice Chancellor of Finance and Administration.

Disposal methods and Documentation:

SALE

A. Academic Departments should contact their Department head, Dean, and the Associate Provost for Academic Planning/Budgeting in the Provost’s office, about how the sale is conducted. The Dean, Department head, or their designee will conduct negotiations for the sale

B. All other departments should contact their Budget Manager/or Department Head’s office as to how the sale is to be conducted. The Budget Manager, Department head, or their designee will conduct negotiations for the sale

C. An independent valuation is to be documented and the sale should be conducted in an arm’s length transaction where the parties act independently of and have no relationship to each other, exhibiting no conflicts of interest. Documentation should include a description of the property to be disposed including (see Asset Disposal Form):

• Condition of the asset
• Cost of the asset
• Current location
• Date acquired (age)
• Depreciated value ( from Assistant Director of Accounting)
• Funding source of the original acquisition (e.g. grant, endowment, University general operating fund, tax exempt bonds)
• Reason for disposal

D. The original Asset Disposal form should be retained by the department and a copy attached to the deposit form when the proceeds are deposited with the cashiers. A copy also needs to be forwarded to the Assistant Director of Accounting.

EXCHANGES OR TRADE-INS

Exchanges/Trade-ins are conducted according to the same requirements in Paragraphs A and B above for Sales. A copy of the Asset Disposal Form should be routed to the Assistant Director of Accounting, to update the asset.

DISPOSAL WITH NO COMPENSATION

Surrender of assets without any compensation occurs when the condition of the asset does not justify a sale or exchange. If an asset warrants being thrown away, document the condition of the asset using the Asset Disposal Form with the same approval outlined in the Approval Levels section above. A copy of the approved form should be sent to the Assistant Director of Accounting so she can retire the asset from the accounting records of the University. If the Asset to be disposed is a capitalized asset, a copy of the form should be sent to the Vice Chancellor of Finance and Administration for informational purposes.

DEPARTMENTAL TRANSFERS (Sales) OF ASSETS

If one department at TCU would like to purchase or transfer assets from their department to another department, the transaction is subject to the same requirements as listed under Sales and Approval Levels above. In this instance, a cash transaction will not take place. The transaction will be recorded as a journal entry with a credit to the selling department and a debit to the purchasing department. Account 4900 will be used for the selling department. Documentation may be sent to Sheri Kline in accounting to record the journal entry, with a copy of the documentation to the Assistant Director of Accounting, and the Manager of Accountability and Control. Sales tax is not an issue with this type of transaction.

PAYMENT AT TIME OF DISPOSAL

When a sale occurs, the asset will be transferred to the purchaser upon receipt of payment. Generally, the University does not invoice for a sale transaction except with approval of the Vice Chancellor of Finance and Administration or the Associate Vice Chancellor and Controller.

Vehicle Replacement/Disposal

Vehicle replacement decisions are made through the Capital Projects and Planning Committee (CPPC). The Director of Facility Services documents vehicle replacement and maintenance, and submits to the CPPC for approval.

When a trade in occurs, the dealership values the vehicle and applies the value to the purchase price of the replacement vehicle.

If a vehicle is to be sold, the Director of Facility Services:

•  Receives a wholesale appraisal from a dealership and the vehicle is offered for sale at the wholesale appraisal value plus tax burden.
•  Uses the NADA or Black book to value the vehicle
•  Uses the Kelley Blue book to value the vehicle

The Fleet Manager determines if a used vehicle will be sold vs. traded in with the purchase of the replacement vehicle. If the vehicle is saleable the Fleet Manager will sell it. If not, it will be traded in. The criteria used to determine salability are condition of the vehicle, which includes age, mileage, running condition, and appearance.

TCU is not in the vehicle resale business. If a vehicle originally determined to be sold is not sold in a reasonable time, the Fleet manger will trade it in with another replacement vehicle transaction or request a dealership to provide a wholesale quote and to sell it at auction.

Purchases and disposal of vehicles is governed by guidelines for capital equipment.

Projections for purchase and disposal of vehicles are submitted by the Fleet Manager. Proceeds from sales are returned to the fleet budget account.

CPPC only funds the difference between trade in value and cost of new vehicles. Sales proceeds go back to the fleet budget for the purchases.

After Disposal:

A. Any proceeds should be deposited with the cashiers and the Journal entry should be to account 4410, and the departmental budget or Department 22160 which is the General Fund of the University (except Technology Resources, see below). Please attach a copy of the Asset Disposal form to the deposit form, send a copy to the Assistant Director of Accounting, and retain the original with departmental records.

B. TCU is required to pay sales tax on some types of asset sales. At the end of the year, the Accounting and Tax Manager will charge the appropriate sales tax amount to the departmental budget or Department 22160 in account 6465. The sales tax rate is 8.25%. The Journal entry notation should include “Sale of …” description of the asset. If the asset is capitalized the Assistant Director of Accounting will need to “retire” it at the end of the year and the notation of the sale will help her.

C. The Accounting and Tax Manger should be contacted so she can determine gains and losses on asset sales. (Cindy Mulkey ext. 5115). The Accounting and Tax Manager monitors asset sales for financial reporting purposes and maintains a log of gains and losses. Please send a copy of the Asset Disposal form to the Accounting and Tax Manager.

Accounting for Disposals

A. Near the end of every fiscal year, the Financial Services Department sends out inquiries to heads of the various departments, such as Physical Plant, Music, Engineering, Athletics, Residence Halls, etc., to determine the status of any assets which may have been retired during the past fiscal year.

B. These individuals are emailed a spreadsheet which shows the assets for which they are responsible, and the department heads are asked to notify Financial Services whether or not these assets are still in service. Particular attention is paid to assets which no longer have any book value and/or have exceeded their useful life. Based upon the results of these inquiries, a list of retirements is compiled. A journal entry is then made in the Asset Management system to retire assets that are no longer in service. Each department is responsible for the disposal of the asset. If an Asset Disposal Form has not been forwarded to Meredith Brunson, Assistant Director of Accounting, a form would accompany based upon the response to the emailed spreadsheet.

D. Vehicles are accounted for differently. When new vehicles are purchased during the year, trade-ins or sales of existing vehicles can occur and the entry to retire the vehicle is made at that time. The Assistant Director of Accounting is to be notified when a vehicle trade-in or sale occurs.

E. When computer technology assets exceed their useful life, they must be properly decommissioned by Technology Resources (TR) prior to their disposal. Departments should notify TR for assistance with the decommissioning process by calling the Information Commons Help Desk at x6855. For additional information on Technology Resources policies please see the web page at www.tr.tcu.edu

F. Technology Resources will account for their sale of assets through their budget department, when the sale is part of the University replacement program. And generally, if a department or grant funded the computer purchase, the department can request that if the old computer is sold, those sales proceeds go back to the budget of the original purchasing department.

G. If the number of computers exceeds 3, then a determination needs to be made if the equipment should really be on the replacement list. If the IT staff determines that these computers should now be on the replacement program, the funds from sale will revert to IT, not the department and the new computers will be placed on the four year replacement cycle. This is likely to occur if a department funded the purchase of computers to establish a student lab before the time that labs were included in the IT Replacement program. If IT is providing the replacement for the computers sold, the proceeds from the sale of the old computers goes to IT, not the department, since IT is the department funding the replacement. If the department is replacing the computers because IT does not considered them part of the replacement cycle (student workers, adjuncts, etc.) then the proceeds could go back to the department assuming the number is 3 or fewer in a given year. Ultimately, the Chief Technology Officer (Bryan Lucas) is the final decision point on computers.

H. No Asset Disposal Form is required by Technology Resources due to the department’s current process.

I. If the computer was purchased with grant money, the approval of the NSF, NIH, etc. is needed before proceeding.

J. Any disposal of furniture purchased with departmental funds must be handled by Joe Laster in Physical Plant. The proceeds will be used to offset the purchase of new furniture.

Lost or Stolen Property

All lost or stolen property with a cost over $500 is to be documented and reported to Campus police and to Financial Services. The Assistant Director of Accounting in Financial Services will review the property cost and take appropriate action for asset retirement in the financial system. Lost/stolen Property Form

Employee Separation from the University

Budget Managers/ Unit Heads, or Deans/Department Managers are responsible for obtaining any departmental purchased assets (such as lap top computers or iPads) that an employee may have in their possession when they separate from the University. All assets purchased with University Funds are the property of the University and not a specific faculty or staff member’s personal property.