Fixed Asset Accounting for Municipalities: How to Acquire, Track, and Report

This article is adapted from CKH Group’s CPE accredited course, Acquire, Track, Report: Fixed Assets for Municipal Finance, originally presented on September 29, 2026. Reading this article is not eligible for CPE Credit. 

Every quarter, CKH Group offers a free CPE-accredited course for local government finance professionals covering practical accounting topics that we encounter every day while working with municipalities across the Southeast. Acquire, Track, Report: Fixed Assets for Municipal Finance focused on the full lifecycle of municipal fixed assets, from determining what should be capitalized to tracking depreciation, recording disposals, reconciling schedules, and preparing for audit.

The course was presented by Jenelle Gordon, Government Operations Coordinator at CKH Group, and Samantha Glover, Government Accountant at CKH Group, with special guest Mark Massey, Clerk of Council for the City of Savannah.

As Massey put it during the session, “The record is the work. If it isn’t documented, it didn’t happen. And if it can’t be found, it can’t be trusted.”

That idea sits at the center of good fixed asset accounting. Your records should be able to tell the full story of an asset from the day it is purchased and placed into service through depreciation, transfer, and eventual disposal. This guide breaks down that process and highlights the practices that can help municipalities keep their fixed asset records accurate, complete, and audit-ready.

You can also download or watch a recording of the presentation or other past CPE courses on our CPE program page.

What Is a Fixed Asset?

A capital assets is the large umbrella term for long term assets that provide value for more than one year. They fall into two general categories of assets:

• Tangible assets, including land, buildings, vehicles, equipment, and infrastructure.
• Intangible assets, including certain software rights, easements, patents, and other nonphysical assets with financial value.

Fixed assets are the tangible assets. For purposes of our training, municipalities are primarily concerned with tangible capital assets: the long-term physical resources the government owns and uses to provide services.

Fixed Asset vs. Operating Expense

Operating expenses are usually consumed immediately or within the fiscal year, such as copier paper, fuel, and printer ink. A purchase should generally be treated as a fixed asset when it has a useful life greater than one year, and its cost exceeds the municipality’s established capitalization threshold.

Purchases that do not meet both criteria are typically treated as operating expenditures in the current period.

What Is a Capitalization Threshold?

A capitalization threshold is the minimum cost at which a municipality begins treating a qualifying purchase as a capital asset. Local governments establish their own thresholds within the framework of their applicable laws and accounting policies. The threshold helps prevent an impractical result: attempting to depreciate and maintain fixed asset records for every individual item the government expects to use for more than a year.

A $5,000 threshold is a common threshold example, although the appropriate amount depends on the government’s size, policies and circumstances. Whatever threshold a municipality establishes, it should be documented and applied consistently.

The Fixed Asset Lifecycle

Every fixed asset has a financial lifecycle. One simple way to think about that lifecycle is in three chapters:

1. 1. Purchase: The municipality plans, funds, and acquires the asset.
   2. Depreciation: The asset is placed in service and its cost is allocated over its useful life.
   3. Disposal: The asset is retired, sold, traded, or otherwise removed from service.

Each stage creates different accounting and documentation requirements. Following and tracking the asset from beginning to end is what allows a municipality’s financial records to continue reflecting what it actually owns.

Planning and Purchasing a Municipal Fixed Asset

The accounting process for a capital asset often begins well before the municipality cuts a check. Larger capital projects may move through several stages before an asset is finally placed into service.

1. Identify the Capital Project: Capital needs are often identified through a multi-year Capital Improvement Plan, or CIP.

2. Identify the Funding Source: Before procurement begins, the municipality needs to know how the project will be funded. This is particularly important because municipal funding sources frequently carry legal or administrative restrictions. Additionally, it helps identify where the fixed assets will depreciate

3. Obtain a Cost Estimate: An engineering or other professional estimate can help establish the expected cost and timeline, but the final bid may differ significantly from the preliminary estimate, particularly if material or labor costs change before procurement is complete.

4. Complete the Bid and Procurement Process: Once funding and project expectations are established, the municipality can move through its required procurement process.

5. Make Upfront Payments and Track Construction in Progress: Grant funding does not eliminate the need for available cash. Many federal and state grants operate on a reimbursement basis, meaning the municipality may need to pay contractors first and wait 30, 60, 90 days, or longer for reimbursement.

For projects that are not yet complete, costs may initially be accumulated as Construction in Progress (CIP).

6. Place the Asset in Service: Once construction is complete and the asset is ready for its intended use, the municipality can move the completed project out of Construction in Progress and begin depreciation if applicable.

Major Fixed Asset Classes

Municipal fixed assets are generally organized into broad classes. Accurate classification becomes important not only for financial presentation but also for depreciation calculations, reconciliations, and year-end reporting.

Four of the most common are:

• • Land: parks, green spaces, undeveloped property, etc. Unlike most other fixed assets, land is not depreciated.
  • Buildings and Improvements: city halls, libraries, fire stations, public safety facilities, other municipal buildings, and capital improvements.
  • Equipment and Vehicles: police cruisers, fire trucks, sanitation trucks, etc
  • Infrastructure: long-lived, generally stationary assets that support public services, such as roads, bridges, water mains, and stormwater infrastructure

Maintenance vs. Capital Improvements

Routine maintenance keeps an asset in its normal operating condition, wheras a capital improvement significantly extends an asset’s useful life, improves its capacity, or otherwise provides a substantial long-term benefit.

Filling a pothole is maintenance, while completely repaving a road may qualify as a capital improvement depending on the municipality’s policies and circumstances.

How to Determine Capitalized cost

The capitalized cost of a fixed asset is not necessarily the amount printed on the original invoice. Generally, the recorded cost also includes the necessary and reasonable expenditures required to acquire the asset and place it into service.

Consider a new police cruiser:

Although the vehicle itself cost $45,000, the municipality needed to incur another $6,500 before it could actually function as the intended police vehicle. The fixed asset would therefore be recorded at a total cost of $51,500 in this example.

How to Calculate Depreciation on Fixed Assets

Depreciation allocates the cost of a capital asset over its estimated useful life.

There are four main types of depreciation methods:

• • Straight Line
  • Double Declining Balance
  • Units of Production
  • Sum-of-the-years’-digits

Many governments use straight-line depreciation because of its simplicity and consistency. The basic formula is:

(Asset Cost – Salvage Value) ÷ Useful Life = Annual Depreciation

Depreciation continues over the asset’s useful life according to the municipality’s accounting policies. Two important exceptions are worth remembering: Land generally does not depreciated and construction in process is not depreciated until the completed asset is placed into service.

Accounting for Fixed Asset Disposals

The fixed asset lifecycle does not end when depreciation reaches zero.

When an asset is sold, scrapped, traded in, or otherwise retired, it must also be removed from the municipality’s accounting records. These are the three things that must occur:

1. 1. Remove the fixed asset’s original historical cost.
   2. Remove the related accumulated depreciation.
   3. Recognize the sale proceeds and resulting gain or loss.

However, assets should not simply disappear from the fixed asset schedule. Municipalities should follow their established approval procedures, including any required formal declaration by the council, and ensure the finance department receives documentation of the disposal. All adjustments should be traceable, with a clear reason and documentation.

The Three Core Fixed Asset Documents

Although the exact format will differ by municipality and accounting system, finance departments generally rely on three core records for fixed asset accounting that answer three main questions.

1. 1. Fixed Asset Schedule or Registry – What do we own?
   2. Fixed Asset Rollforward – What changed during the year?
   3. Depreciation Schedule – How much of each asset’s recorded cost has been used over time?

Municipalities typically track these items in either and ERP system or Excel, though ERP systems are preferred because spreadsheets introduce additional risks such as overwritten cells, broken formulas, and incorrect ranges.

What Is a Fixed Asset Schedule/Fixed Asset Registry?

A fixed asset schedule, sometimes called a fixed asset register or registry, is the detailed list of the individual capital assets owned by the municipality.

For each asset, the schedule should generally include information such as: Asset description, fund, department, acquisition date, placed-in-service date, historical cost, useful life, depreciation method, accumulated depreciation, net book value, or other identifying information

The fixed asset schedule provides the detailed support behind capital asset balances appearing on financial reports. It should also be treated as a living record.

Fixed Asset Schedule Example

How to Review a Fixed Asset Schedule

A spreadsheet can calculate perfectly and still contain inaccurate information. A periodic fixed asset review should therefore look beyond formulas and confirm that the schedule reflects what the municipality actually owns.

1. 1. Verify additions and accounting details.Trace new assets to supporting documentation such as invoices, contracts, or purchase records, and confirm key information such as asset class, historical cost, useful life, and other fields that affect depreciation.
   2. Review changes and older assets.Make sure transfers, reclassifications, and other adjustments are documented, and pay particular attention to fully depreciated, duplicate, or stale assets. This can help identify ghost assets that remain on the books even though they have been sold, scrapped, lost, or otherwise removed.
   3. Compare records and communicate with departments.Cross-check the fixed asset schedule against insurance listings, departmental inventories, vehicle lists, and disposal records. Finance should also have a process for departments to report when assets are purchased, transferred, damaged, completed, retired, or sold.

What Is a Fixed Asset Rollforward?

A fixed asset rollforward explains how the prior year fixed asset belance became the current year’s ending balance; it summarizes the changes in capital asset balances during the reporting period. The rollforward will typically address both gross asset cost and accumulated depreciation

A basic rollforward follows this formula:

Beginning Balance + Additions – Disposals +/- Transfers and Adjustments = Ending Balance

One of the most important controls occurs at the very beginning of this process: The current year’s beginning balance should agree to the prior year’s audited ending balance. If it does not, stop and investigate. Building an entire current-year rollforward on an incorrect beginning balance only carries the unresolved discrepancy forward.

Example Fixed Asset Rollforward Example:

What is a Depreciation Schedule?

A depreciation schedule is the detailed record used to calculate how the cost of each depreciable fixed asset is allocated over its useful life.

For each asset, the depreciation schedule should generally show historical cost, useful life, depreciation method, current-year depreciation, accumulated depreciation, and net book value.

Net book value is calculated by subtracting accumulated depreciation from the asset’s historical cost. It is important to remember that net book value is an accounting figure, not necessarily the asset’s fair market value. A fully depreciated vehicle, for example, may have a net book value of $0 while still being in service or capable of being sold. The depreciation schedule should also reflect when depreciation actually begins and ends.

Like the fixed asset schedule and rollforward, the depreciation schedule should ultimately reconcile back to the municipality’s accounting records. Current-year depreciation expense and accumulated depreciation totals should agree with the corresponding amounts in the general ledger.

Depreciation Schedule Example

How to Reconcile Fixed Assets to the General Ledger

Reconciliation is one of the most important steps in municipal fixed asset accounting. At year-end, the fixed asset schedules should not exist as a separate universe from the government’s general ledger.

At minimum:

• • The historical cost totals on the fixed asset schedule should agree to the related capital asset accounts in the general ledger.
  • The accumulated depreciation totals should agree to the accumulated depreciation accounts in the general ledger.
  • The current-year depreciation expense should agree to the depreciation expense recorded in the general ledger.

A difference between the fixed asset schedule and the general ledger is a sign that something somewhere in the process needs to be investigated. Common causes may include a missing addition or disposal, a direct journal entry that was not reflected on the schedule, incorrect asset information, prior-year adjustments, or a broken spreadsheet formula.

The important thing is to identify and document the cause rather than simply forcing the records to agree. Do not plug the difference. Correcting the underlying issue helps keep the current-year records accurate and prevents the same problem from carrying forward.

Keeping Fixed Asset Records Audit-Ready

Ultimately, good fixed asset accounting comes down to keeping the records aligned with what the municipality actually owns and uses.

Maintain the fixed asset schedule throughout the year, communicate additions and disposals between departments and finance, reconcile balances regularly, and retain documentation that supports significant changes. Regular physical inventories can also help identify assets that have been sold, scrapped, transferred, or otherwise removed without making their way off the books.

When those processes happen consistently throughout the year, fixed asset reporting becomes much easier to manage and support when audit time arrives.

Need Help With Municipal Fixed Asset Accounting?

Fixed asset accounting is only one part of managing the financial operations of a local government. CKH Group works with municipalities across the Southeast on accounting support, financial reporting, audit preparation, reconciliations, and other day-to-day government finance needs.

If your municipality needs additional accounting support or help preparing for an upcoming audit, contact CKH Group to speak with our government team.

The information provided is for general educational and informational purposes only and does not constitute financial, legal, or tax advice. The tax rules and regulations are complex and subject to change. Before taking any form of action, you should consult your own tax, legal, and accounting advisors who understand your particular situation. CKH Group will not be held liable for any harm/errors/claims arising any tax, legal, or financial consequences you may incur. Whilst every effort has been taken to ensure the accuracy of the contents, we will not be held accountable for any changes that are beyond our control.