Resolution of the CMU No. 615 dated 26 May 2021 (Procedure 615) sets out the procedure and terms for granting subsidies from the state budget to local budgets for design, construction, repair and acquisition of housing and premises to promote family-type care and other forms of upbringing in family-like environments, support for small group homes and the provision of housing for orphans, children deprived of parental care and persons from among them.
Purchasing housing for family-type children’s homes
LSG can purchase FTCHs both in the case of creating new ones and for the temporary accommodation of displaced (evacuated) family-type children’s homes.
One of the prerequisites for granting this subsidy is that local self-government bodies must record the purchased real estate on their balance sheet for:
- Accommodation of persons, except for residential premises acquired and transferred to persons as property (Clause 5.10 of Procedure 615);
- Accommodation of temporarily displaced (evacuated) family-type children’s homes (Clause 51.13 of Procedure 615).
Costs of registering a building as an FTCH
Expenditures related to the registration of ownership rights to housing, the land plot where the housing is located, and the payment of taxes, fees and charges stipulated by law shall be covered by local budgets and/or other sources not prohibited by law (Clause 6.10 of Procedure 615).
Housing status
Residential buildings and residential premises in other buildings are added to the housing stock upon acceptance into service by the State Acceptance Commission, registration and technical inventory (Resolution of the Council of Ministers of the Ukrainian SSR “On the Procedure for State Registration of the Housing Stock” No. 105 dated 11 March 1985).
A building provided as an FTCH must be used in accordance with the procedure established by law for the use of service accommodation (Article 461 of the Housing Code of Ukraine).
Therefore, the LSG body must add the FTCH building to the housing stock.
Owner, managing authority and balance holder for FTCHs
The owner of the acquired FTCH is undoubtedly the territorial municipality represented by the relevant council.
At a plenary meeting, the city council passes a decision to transfer certain powers regarding the administration of municipal property to other bodies (Article 26(1)(31) of the Law of Ukraine “On Local Self-Government in Ukraine” No. 280/97-ВР dated 21 May 1997).
The administrative body may be the council itself or one of its executive bodies, which may also be balance sheet holders; alternatively, the building can be transferred for use to another institution, organisation or enterprise by decision of the council.
What is the ground for recognition in the balance sheet?
The right of ownership and use of residential real estate arises upon state registration of this right, as certified by an extract from the State Register of Real Property Rights.
A building to be used as an FTCH is recorded by the balance holder in accordance with the accounting policy approved by that balance holder.
Is this a commercial or investment property?
This naturally raises the question of what type of property a building for an FTCH should be classified as. Is it a commercial or investment property? Criteria for distinguishing between commercial and investment property should be specified by public institutions in their accounting policies.
According to the definition given in Clause 4, Section I of National Regulation (Standard) of Accounting in the Public Sector NP(S)BODS 129 (Investment Real Property):
- investment property means real property (a plot of land, a building or part thereof) held by the owner or lessee under a financial lease agreement for the purpose of receiving rental payments and/or increasing equity;
- commercial property means real property, such as a building, held by the owner or tenant for use in the production and/or supply of goods, in the provision of services and/or for administrative purposes.
In the case of purchasing a building to be used as an FTCH, it should be classified as a commercial property, since the LSG exercises its powers regarding social protection and support for vulnerable populations.
An FTCH building as an asset for accounting purposes
Buildings intended for DBST are recorded in sub-account 1013 “Buildings, structures and transmission devices”, which records buildings, including residential ones, simultaneously reflecting the increase in contributed capital in sub-account 51 “Contributed capital”.
To register a building to be used as an FTCH on the balance sheet of the balance holder, the following documents are required:
- Extract from the State Register of Real Property Rights;
- deed of purchase of a building to be used as an FTCH (if the balance holder is the city council or its executive body that made the purchase);
- Fixed Assets Acceptance Certificate as per a standard form approved by Order of the Ministry of Finance No. 818 dated 13 September 2016;
- Fixed Assets Acceptance Certificate as per a standard form approved by Order of the Ministry of Finance No. 818 dated 13 September 2016;
- Technical and other documentation, as well as other primary documents.
After the asset is accepted into operation, an inventory card for fixed assets must be completed. One copy of this card is filled out based on the Fixed Assets Commissioning Report, the Fixed Assets Acceptance Certificate, technical and other supporting documentation, as well as other primary documents.
At what cost should a building to be used as an FTCH be registered?
A fixed asset is valued at its initial cost, which is the purchase price if acquired for a fee (Clause 4, Section II of NP(S)BODS 121 (Fixed Assets)).
The initial cost of a fixed asset acquired for a fee consists of the following expenses (Clause 4, Section II of NP(S)BODS 121 (Fixed Assets)):
- Amounts paid for the purchase of a house to the seller (supplier);
- Registration fees, state duty and similar payments made in connection with the acquisition of rights to the fixed asset;
- Other expenses directly related to rendering fixed assets suitable for use for their intended purpose.
Depreciation
Depreciation occurs throughout the useful life (operation) of the asset and is suspended during its reconstruction, modernisation, extension, re-equipment and conservation (Clause 3.1, Section IV of NP(S)BODS 121 (Fixed Assets)).
The residual value is determined when the asset is put into service, and the useful life is set in the accounting policy.
Depreciation begins in the month following the month in which the building to be used as an FTCH became fit for service and was put into operation (Clause 6.3, Section IV of NP(S)BODS 121 (Fixed Assets)).
CONCLUSION:
- The council adds the building to be used as an FTCH to the housing stock.
- The FTCH building is recorded on the balance sheet of the council or its executive body or other balance sheet holder determined by the council’s decision.
- The ground for recording the FTCH building on the balance sheet is an extract from the State Register of Real Property Rights.
- When accepting the FTCH building, a Fixed Assets Acceptance Certificate and a Fixed Assets Commissioning Report (with the residual value specified) are drawn up.
- Upon commissioning, the FTCH building is recorded in subaccount 1013 “Buildings, structures and transmission devices”.
- The FTCH building is subject to depreciation as a fixed asset.
- The FTCH building is transferred for use (rent) to parental guardians in accordance with the procedure established for the use of service accommodation.
