Table of Contents: Chapter 8

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809 FLEET DIVISION INTERNAL SERVICES FUND POLICY

809.1 Purpose

Outline procedures for Fleet Division (FLEET) to adequately prepare new vehicles and mobile equipment for service, obtain proper titles, initiate the maintenance and Vehicle and Equipment Replacement Program (VERP) files, and provide the necessary information to properly record disposals and transfers.

809.2 Receiving Vehicles and Mobile Equipment

809.2.1 All new vehicles and mobile equipment shall be routed through Fleet Division based upon specifications developed by the department, unless approved prior to purchase by Fleet Division and the user department.

809.2.2 All new vehicles and mobile equipment will be delivered to the Central Garage for inspection and preparation prior to being placed into service unless otherwise agreed upon by the Fleet Manager and the Department Director or their designee.

809.2.3 An asset number will be assigned and all paperwork necessary will be prepared to record the item as an insured asset of the City; and a master maintenance file will be initiated by Fleet Division.

809.2.4 The receiving document (green sheet) will be sent by Purchasing to the applicable receiving department for final sign off for payment upon arrival of the unit.

809.2.5 Upon delivery of the newly purchased unit, a staff member from the department will inspect the item to ensure that the requirements of the specifications have been met.

809.2.6 Upon acceptance of the unit, the department representative and the Fleet Manager will sign the receiving copy of the purchase order, which will be on file at Fleet Division. Fleet Division will return it immediately to Accounts Payable for payment authorization.

809.2.7 A Capital Asset Tracking Form will be completed by Fleet Division and distributed to the Insurance Manager, Finance (attached to the green receiving), and the appropriate Department Director.

809.2.8 The item will be added to the appropriate VERP account by the Fleet Division.

809.3 Disputes and Non-acceptance

If the delivered unit is deemed as unacceptable, the Purchasing Agent will be notified immediately by the department and will be responsible for resolving any and all disputes, corrections, or adjustments.

809.4 Obtaining Titles

809.4.1 All documentation necessary to obtain legal title to the vehicle will be delivered to the Fleet Division which will be responsible for the titling and licensing of all City owned vehicles.

809.4.2 All vehicles must be titled as follows: City of Lee's Summit, 207 SW Market, Lee's Summit, MO 64063. A copy of all title documentation shall be kept in the Vehicle Master File at Fleet Division with the original(s) being forwarded to the City Clerk's Office.

809.4.3 Other ownership documentation (bills of sale, MSO, etc.) shall be forwarded to the Purchasing Division for filing.

809.5 New Capital Purchases

Initial capital purchases are budgeted in the departmental capital account, subject to Council approval. The Fleet Division is responsible for handling purchases, working with the department for specifications in accordance with the Capital Asset Policy.

809.6 VERP Replacement

Replacement funding is provided through an annual charge to each department for the assets used by the department based on the estimated replacement cost and the life cycle. These payment are made to a dedicated fund.

809.6.1 Basic Funding Assumptions

809.6.1.1 A fixed amount will be set aside each year for each replacement.

809.6.1.2 The amount set aside grows by a certain percentage each year until the accumulated fund balance approximates the amount needed in the year for the replacement due to interest and future payments.

809.6.1.3 New expansion equipment will not be funded in the replacement fund until the initial purchase was funded by the user fund/department.

809.6.1.4 Prior budget approval is required for purchase as a capital expenditure.

809.6.1.5 Surplus funds will not be used for expansion items, but will adjust the VERP payments in subsequent years.

809.6.1.6 The Administration and Finance departments will maintain balances for each department/enterprise fund including the individual payments made on each vehicle/equipment and the funds from the disposition (salvage value) as well as any adjustments such as departmental transfers or insurance claims. The salvage value for the vehicle or equipment is credited to the appropriate department VERP account.

809.6.1.7 If a department/enterprise fund does not have adequate funding for replacement of a like item (such as when the replacement cost exceeds the inflationary rate established in the formula) or the salvage value falls below the estimated amount, the vehicle/equipment cannot be replaced unless approved by through the budget process as an upgrade.

Vehicles/equipment will not be upgraded without Administration approval, and when necessary, Council approval. An upgrade is a change in equipment or vehicles to a higher classification, which is generally more expensive.

809.6.1.8 If a vehicle or piece of equipment exceeds the estimated salvage value the individual department VERP fund balance will be credited with the amount in the following fiscal year.

809.6.2 Replacement Payments. The replacement payment is calculated by factoring in the unit price as delivered, expected service life, residual value, and anticipated inflation to replace the original unit.

Administration manages the fund balance for each VERP account to ensure that the payments remain fairly level each year, with a positive fund balance. Each Department Director or assigned designee will be consulted annually on the VERP as a part of the budget process. Data used to compute the replacement payments is a result of the recommendation by the Fleet Manager and the user department.

809.6.3 Formula

( (Replacement Cost - Salvage Value) x Annual Inflation) ) / Life Cycle = Annual VERP payment

Example: 8,775 - 1,755 = 7,020 x (5% per year @ 5 years) = 8,960 ¸ 5 = 1,792 annual payment

Purchase Price (New Capital): Dollar amount paid for total delivered vehicle plus equipment and accessories charged on the Capital Asset Account (800) - includes all costs to place unit in service. This may not include all add-ons, which may not be part of the VERP vehicle unit (such as radios).
Salvage Value: Estimated residual resale value at end of life term of
unit.
Appreciation: Replacement cost including annual inflation
percentage.
Service Life: Useful life cycle/expectancy based on the miles
and/or hours and maintenance requirements.

809.7 Fleet Overhead Payments

The overhead payment is comprised of the Fleet Division Budget (salaries, utilities, supplies, fleet insurance, motor pool VERP replacement payment, etc.). The user department will receive an estimated payment to fund the overhead costs of the Fleet Division based on a two-year average for actual shop labor hours by department, adjusted at end of fiscal year based on actual totals.

809.8 Parts and Supplies

All auto parts and supplies used in maintenance are budgeted in the department vehicle maintenance and repair account. These commodities are billed directly to the department account and are not included in the Fleet Division budget.

809.9 Disposal of Vehicles and Equipment

809.9.1 Upon retirement of a fleet unit, the Fleet Division shall complete a Capital Asset Tracking Form so that a determination can be made as to the method of disposal.

809.9.2 Fleet Division, Purchasing Division, and the using department shall be responsible determining the method of disposal of retired fleet units and equipment.

809.9.3 The department shall arrange for the preparation of vehicle or heavy equipment unit for disposal including removal of City decals, markings, added equipment such as radios, etc.

809.9.4 Purchasing shall arrange for the sale or disposal of the unit and shall prepare all necessary documentation to effect the sale of the unit including guaranteed buy-backs. This documentation shall include titles, bills of sale, release forms, etc. Any advertising for bids shall be accomplished through the Purchasing Division. Cash receipts from the sale of all City property shall be collected by the Purchasing Division and forwarded through the proper channels to Collections.

809.9.5 Upon disposal, a copy of the Capital Asset Tracking Form shall be provided by the Fleet Division to the Insurance Manager and Finance.

809.9.6 The item will be deleted on the appropriate VERP account by the Fleet Division.

809.10 Disposal through Bid Process

809.10.1 Any vehicle/equipment disposed of through a bid process shall require the purchaser of the vehicle/equipment be present at the Purchasing Division to sign the Release Form and pay for the purchase, unless other arrangements have been approved by Purchasing and the Law Department. Both the receipt/bill of sale and the release form shall be notarized. Copies of this documentation shall be presented to Fleet Division in order to release the unit to the purchaser or his/her agent.

809.10.2 Upon disposal, a copy of the Capital Asset Tracking Form shall be provided by the Fleet Division to the Insurance Manager and Finance.

809.11 Disposal through Auction

809.11.1 Sales of vehicles/equipment sold through a licensed auction shall be handled by the Fleet Division, with oversight from the Purchasing Division. Property disposed of at Auction will not require the Bill of Sale or Release Form prior to obtaining title. Fleet Division or Purchasing must submit a Capital Asset Tracking Form to the City Clerk's Office in order to obtain the title and shall forward copies of the tracking form to Finance and Insurance.

809.11.2 The Fleet Manager and using department shall be responsible for setting a minimum bid based upon the VERP salvage value or other best available data prior to the item being taken to auction.

809.11.3 The Fleet Division shall be informed by Purchasing of the amount of the sale receipts from auction to update the VERP files.

809.11.4 Upon disposal, a copy of the Capital Asset Tracking Form shall be provided by the Fleet Division to the Insurance Manager and Finance.