Financial Life Cycle of Assets (It’s a big deal.) Bob Mahaney, CPPS The University of Texas MD Anderson Cancer Center

Financial Life Cycle Why is it important to you? Defines resources available to acquire and manage assets. Management understands dollars, margins, and budget. Management may not appreciate the physical inventory process but they understand property loss.

Basic Financial Cycle Budgeting Acquisition Asset Creation Tracking Final disposition

Budgeting Capital assets, non-capital assets, new construction. Capital assets depreciate and impact margin over time. Non-capital assets are operating costs and impact margin when purchased. New construction –

Budgeting – AM Opportunity Asset awareness starts here. Budget guidelines for equipment. Capital or non-capital decision. Asset descriptions. AM gets in front of the financial cycle.

Budgeting – AM Opportunity New construction. How many square feet being added? How much new equipment will be acquired? What is the process for receiving equipment? Will existing AM staff be able to handle the increase?

Acquisition Acquisition method Requisition and PO Check Request Pro Card Donation and Gifts

Acquisition – AM Role Requisition and/or PO Review prior to issuance of PO. Is asset’s initial location clearly noted? Is the asset custodian disclosed? Is the information provided sufficient for correct receiving?

Acquisition – AM Role Check Request Review prior to payment. Asset description, location, and custodian? If reimbursement, is asset tagged? No tag, no reimbursement. Is the information provided sufficient for correct receiving?

Acquisition – AM Role Pro Card Discourage use for asset purchases. Asset description, location, and custodian can be difficult to determine. If you can’t eliminate asset purchases, require substantial documentation of purchase. Apply same standard to online and in store purchases.

Acquisition – AM Role Donations Work directly with your development office on Gift-In-Kind policy. Get on notification list for large equipment and art donations.

Asset Creation Critical step in the financial asset cycle. First time correct is key for capital assets. How good is the available information?

Asset Creation – Good Information Correct information starts with the budget process. Receiving data very important. Accounts Payable data quality heavily influenced by PO and receiving.

Asset Creation – Useful Life Consistent application of useful to similar assets! Follow your standard setting body. Develop policy for handling capital asset upgrades.

Asset Tracking It is our bread and butter, so to speak. Policy and responsibility for inventory. Missing property, any departmental penalties? Stolen property, any employee penalties?

Final Disposition Reutilization saves money, track it and report it. Trade-in asset review at requisition level. Surplus Sale – consistently follow your policies.

AM’s Actions Impact the Margin Correct identification of capital and non-capital assets. Consistent assignment of correct useful life at creation. Reducing missing assets by robust tracking and inventory processes. Getting the most value at final disposition.

Focus Management on AM’s Value Create a monthly reutilization report. Highlight cost avoidance or savings. Identify departments participating in reutilization. List top ten items available ranked by historical cost.

Focus Management on AM’s Value Use annual missing property report as a plus instead of a negative. Disclose dollar value of capital and non-capital reduction in missing assets. Identify top departments with highest success rate. Identify the top 5 most improved departments.

Focus Management on AM’s Value Create annual report highlighting the financial impact of new or revised AM policies. Key – must be able to quantify. Quantify using dollars to the extent possible.

Focus Management on AM’s Value Final Thought Get your NPMA certification. Management likes certifications. I’m a certified professional and bring “value through professional asset management”.

Questions?