1. Updating Capital Asset Records
Michael M. Nielsen
Government Fixed Asset Services, Inc.
Long Beach, Indiana
(219)

2. Updating Capital Asset Records
Great Plains Government Finance Officers Association
2014 Fall Conference
Omaha, Nebraska
October 22, 2014

3. Preview of session discussion points
Annual additions and retirements of capital assets
Monitoring v. maintaining capital asset records
Timeline
Minor but sensitive items
Addition and retirement inclusions
Addition and retirement responsibility
Addition and retirement information sources
… for financial reporting only
Construction-in-progress

4. Annual additions Can be a challenge
Only assets at or above capitalization threshold (a separate and increased amount for building and general infrastructure improvements)
Assets must meet criteria of an improvement
Department must understand capital additions v. repairs and maintenance
No capitalization of groups of minor assets

5. Annual retirements Data may be difficult to establish centrally
Data may be incomplete and include only trade-ins but not items scrapped or disposed of at departmental level
Communication problems
Departments unable or unwilling to determine retirements
Often … simply report ’no retirements’ and over time this can lead to overstated balances

6. Annual retirements
Lack of understanding of importance of accounting for capital assets
Lack of understanding of process
Lack of interest or motivation
Departments too busy
Not their responsibility

7. Monitoring capital asset records
To do …
Plan to periodically check integrity of entire database for both property accounting and property control
An ‘iterative process’
Large assets (buildings, general infrastructure) may need to verify existence only

8. Monitoring capital asset records
To do …
Monitoring of land parcels, land improvements, buildings, and general infrastructure best done centrally
Monitoring moveable assets (machinery and equipment) verify existence and remove unreported retirements and record additions not previously recorded best done by departments

9. Monitoring capital asset records
Actually …
…a whole lot cheaper to monitor periodically than to start all over in three to five years

10. Maintaining capital asset records
Updating capital asset information annually
Update of information to subsequent fiscal year ends taking into account additions and retirements and adjusting information accordingly
Decision to be made is choosing the logical person to maintain the integrity at the database – both centrally (point person responsible for annual updates) and departmentally (person in charge of additions and retirements for both the property accounting information and the property control information)

11. Maintaining capital asset records
Updating capital asset information annually
Land parcels – best done centrally
Buildings – best done centrally
Improvements other than buildings – best done centrally
General infrastructure – best done departmentally (Engineer, Highway Director, Public Works Director, etc.)
Furnishings and equipment – best done departmentally
Vehicles – best done centrally with departmental input
Minor but sensitive items – best done departmentally

12. Maintaining capital asset records
Updating capital asset information annually
Centrally (comments)
Departmentally (comments)
Responsible person (comments)
‘Clout’ – reference large county that utilizes affidavit that must be signed by Elected Official or Department Head

13. Timeline for annual update of capital asset information
Not having a schedule can create problems
Assume fiscal year end
– gather information on additions
– separate capital and expense
– update report by department
– send updated information to departments for retirements
update list
prepare financial report

14. Property Control of minor but sensitive assets
Items can’t be controlled centrally
Departments should decide on items to control
Information requirements are open to interpretation
Inventory information probably exists and may only need reformatting
Keep it simple
Follow Recommended Practice

15. QUOTE
… LITTLE THINGS ARE BIG
-YOGI BERRA

16. Asset additions and retirements inclusions
Must be an annual reporting process
Capital assets only
Additions in year of acquisition
Retirements in year of disposal
Construction-in-progress capitalized only when asset is officially accepted by administration, used in operations, and providing service

17. Asset additions and retirements responsibility
Additions – centrally (Purchasing)
Retirements – send updated list to Departments showing existing assets and current year additions and ask only for indication of retirements – make easy

18. Annual additions – available information
Sources of cost information
Invoices, expenditure vouchers, purchase orders
Construction contracts, real estate closing documents
Recorded of deeds
Journal entries, work orders
Appropriations
Budget documents
Bond documents

19. Annual additions – establishing data elements for financial reporting
Very specific information
Focus only on financial reporting – keep things simple
Extemporaneous information to be recorded elsewhere
Insurance
Planning and forecasting
Property control of minor assets

20. Accounting and financial reporting – necessary data elements
Asset description
Department
Date of acquisition
Historical cost
Estimated useful life
Depreciation calculation

21. Capital asset record example
Local Roads

22. Construction-in-Progress
Building – starts at planning and continues on to include design, architectural fees, site preparation, construction costs, etc.
Bridge – starts at planning and continues on to include design, engineering, environmental, and construction costs, etc.

23. Construction-in-Progress
Building componentization
Keep simple and manageable
Perhaps – building shell, roof, and HVAC
Estimated useful lives will vary
50 – 100 years
Roof 15 years
15 – 20 years

24. Construction-in-Progress
Reporting construction-in-progress
Can be significant
Good discipline for future retirement of assets
Good discipline for future capitalization of assets
Applies to buildings and general infrastructure

25. QUOTE
… THE GAME ISN’T OVER UNTIL IT’S OVER
-YOGI BERRA

26. The end
Summary
Conclusion
Questions