Property Transfers

3 Accounting

3.9 Interfund Activities

3.9.2 Property Transfers RCW 43.09.210 requires that, when property is transferred between funds of the same local government, it should be paid for at its full value by the fund which receives it. This requirement applies only if the capital assets were acquired with restricted resources. The following rules are intended to clarify the application of this statute and provide other guidance related to the property transfers:

1. When a local government wishes to acquire capital assets for an internal service fund, such as the Equipment Rental and Revolving Fund, the budgets of the contributing funds should specifically identify the item(s) of equipment to be purchased. Documentation of the equipment purchase must be adequate to show that the funds originally budgeted for a specific piece of equipment were actually used for the purchase of that item.

If the asset is purchased from the contributing fund resources, the transaction in the internal service fund should be accounted for as a capital contribution (DR Capital Asset/CR Capital Contributions).

When nonmonetary assets are contributed or transferred within the government, the assets must be recorded at book value. If governments transfer assets acquired with restricted resources, they must track their usage and disposal to assure that one fund is not benefitting from another.

The transfer of assets between the governmental fund and an internal service fund must be approved by the local government’s legislative body.

2. The transfer of general capital assets (originally purchased with unrestricted resources) between two governmental funds of the same government should be accounted for merely as a change in location and/or custodian because the assets are not owned by the particular funds. Such transfers are not subject to budgetary control, but the assets should be declared surplus to the needs of the relinquishing fund and the transfer approved by the local government's legislative body. GASB Statement 48 enunciates the principle that the reported value of an asset can neither decrease or increase simply as the result of movement within the financial reporting entity. If the resources involved with the original purchase were restricted, the capital assets must be paid for by the receiving fund.

3. The transfer of assets between the governmental fund and an enterprise fund should be budgeted and accounted for as a sale and purchase of property. Proceeds of such sale should be deposited to the fund which originally paid for the item or to the general (current expense) fund at the discretion of the legislative body unless a particular statute requires another treatment. The capital asset should be reported in the recipient fund at the same net book value previously reported (i.e., historical cost less accumulated depreciation) in the government-wide statement of net position or proprietary funds.