Fleet Funding

Municipalities with larger or more complex fleets may consider operating fleet services as an internal service fund or using another cost-allocation method that accurately reflects the cost of fleet ownership. Regardless of the accounting structure used, every municipality should establish a city-wide fleet replacement fund to support the planned replacement of vehicles and equipment.

The replacement fund should operate on a business-like basis. An initially capitalized fund should be replenished through annual replacement charges based on the expected service life and replacement cost of each vehicle or piece of equipment. Fleet services would manage the fund, while user departments would recover these costs through internal lease rates, rental rates, or other approved cost-allocation methods. In many municipalities, the fleet manager and finance director work together to administer the replacement fund and develop long-term replacement plans.

When fleet services maintain equipment other than vehicles (including generators, pumps, mowers, trailers, and similar assets) all operating, maintenance, and replacement costs should be assigned to the appropriate asset or cost center to ensure accurate accounting and informed management decisions.