Montevallo council raises capitalization threshold to $5,000 to reduce accounting burden

The Montevallo City Council unanimously adopted a resolution on Feb. 9 that raises the city's capitalization threshold for capital assets from $250 to $5,000.

The council passed RESOLUTION 02092026-134 on a motion by Council Member Lelia Mitchell, seconded by Council Member Kenneth Dukes; the vote was recorded as all ayes. The resolution amends the city's fiscal and accounting policies to set the new per-asset threshold for capitalization and depreciation at $5,000.

The packet for the meeting included a memorandum from the city's auditors, Dent Moses, LLP, which recommended the increase. The memo said that, under GASB Statement No. 34, capital assets should be reported when they are material and provide future economic benefit, and that the current $250 threshold "results in capitalization and depreciation of a large volume of low-cost items that are not material to the government-wide financial statements." The firm recommended a $5,000 threshold to balance financial-statement relevance with administrative efficiency.

City officials said increasing the threshold will reduce the administrative burden of tracking and depreciating small, low-value items and allow staff to focus capital-asset processes on assets that matter to financial reporting and operational decision-making. The resolution states the city accepts the auditors' recommendation and will update the city's fiscal and accounting policies accordingly; the action was attested by City Clerk Steve Gilbert.

The change takes effect as recorded in the updated policy on file with the city clerk. The resolution and auditor memorandum are included in the meeting record.