SESSION ID: ACT20
FIXED ASSET ACCOUNTING OVERVIEW
The views and opinions expressed in this presentation are those of the authors and do notnecessarily reflect those of CASBO.
Fixed Asset Accounting / What do We Need?
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What we think the requirements are
What we currently do What we really need to do
Why are fixed asset inventories done?GASB-34 RequirementsFull accrual accounting including depreciation & statements
Education Code 35168LEAs must maintain inventory of equipment > $500
Uniform Guidance (UG) or 2 CFR 200LEAs must maintain proper records of equipment acquired with
federal funds
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Why are fixed asset inventories done?Determine / Establish Value
Address uncertainty
Collect / Verify Information
Protect Your Position or Asset
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Benefits of a Fixed Asset InventoryIncreased accountability and control
Record special notes and pre-existing tag numbers
Identify active/inactive assets
Identify unrecorded additions, disposals and transfers
Serial number and model number tracking
Account for lost and misplaced equipment
Automates future inventories (more efficient and accurate!)
Customized reports and data files
Maintain asset cost records
Upload data to existing systems
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California Education Code 35168The governing board of each school district, shall establish and maintain a historical inventory, or an audit trace inventory system, or any other inventory system authorized by the State Board of Education, which shall contain the description, name, identification numbers, and original cost of all items of equipment acquired by it whose current market value exceeds five hundred dollars ($500) per item, the date of acquisition, the location of use, and the time and mode of disposal. A reasonable estimate of the original cost may be used if the actual original cost is unknown.
Solutions:Physical inventory Asset data collection Asset location Site/building/room
ReconciliationMatches Found Report Deletions Report Additions Report
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Financial Reporting RequirementsGovernmental Accounting Standards Board Statement 34/35 (GASB
34/35)Generally Accepted Accounting Practices (GAAP)Governmental Accounting, Auditing and Financial Reporting
Requirements (GAAFR)
Solutions:Physical inspectionOriginal cost determination of assetsBarcode taggingDepreciation reportsStraight-line methodFirst-of-the-month (full month) convention
Reconcile to fixed asset ledgerUseful life development
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Understanding Fixed Assets – Property IncludedBuildings
Infrastructure
Computer equipment
Computer software
Furniture and fixtures
Machinery
Intangible assets
Land
Leasehold improvements
vehicles
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Operational Accounting for Assets
Tangible & intangible assets acquired for use in operations that will benefit more than a single fiscal period
Capitalization threshold usually $5,000…could be more not less (GASB34)
Many variables…depends on situation…funding
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Operational Accounting for AssetsCapital Asset Types
Land – 6100
Improvements to land – 6170
Buildings & improvements – 6200
Equipment, vehicles, machinery, & equipment – 6400
Equipment Replacement – 6500
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Operational Accounting for AssetsLand - 6100
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All expenditures to acquire land & to ready it for its intended use
Professional fees: title searches, architect, legal, engineering, appraisal, surveying, environmental assessments, etc
Inexhaustible life…thus not depreciable
Dirt work
Operational Accounting for AssetsLand Improvement – 6170
Attachments to the land that have limited lives
Recorded separately & are depreciable
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Operational Accounting for AssetsLand Improvement – examples
Fencing & gates
Parking lots & driveways
Recreation areas, athletic fields & bleachers
Swimming pools & tennis courts
Retaining walls & lighting systems
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Operational Accounting for AssetsBuilding & Improvement – 6200
Structure…permanently attached to the land
Has a roof
Partially or completely enclosed by walls
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Operational Accounting for AssetsBuilding & Improvement – guidelines
Materially extends the useful life of building
Capitalized as a sub‐asset of the building
An additional value to the existing building
Improvement meets the capitalization threshold
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Operational Accounting for AssetsBuilding & Improvement – examples
Major projects that increases utility & useful life of the building
Adding new classroom/offices to existing building
Cost of converting an old storage room to a usable classroom/office
Installation of a new HVAC…not replacement
Installing data wiring
Technology upgrade (Chromebooks)…bond funds
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Operational Accounting for AssetsBuilding & Improvement – guidelines
Repair to original utility level is not capitalized
Roof replacement
Window covering
Painting a whole school/building
Replacement of siding
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Operational Accounting for AssetsEquipment – 6400
Vehicles & Equipment
Intangible assets…software purchase & implementation cost
Lease to own
Vehicle replacement – 6500
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EC Code 35168 vs. GASB Statement No. 34 – what’s the difference?
The Ed Code section 35168 requires maintenance of inventory for assets
Specific threshold for the assets ($500)
These are the assets that can ‘grow legs and walk away’
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EC Code 35168 vs. GASB Statement No. 34 – what’s the difference?
GASB Statement No. 34 is a ‘reporting requirement’
Generally, this requirement is addressed when the auditors are on their way
There isn’t always a person ‘dedicated’ to the ongoing maintenance of this task
A regular ‘updating’ of the capital assets system by an appraiser is not evident
Auditors are required to verify beginning balances for new clients
Districts should maintain the capital assets system, not the auditors
Always reconcile your capital asset balance to the audit report
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EC Code 35168 vs. GASB Statement No. 34 – what’s the difference?
Failure to include capital assets (from debt proceeds) can effect your ‘net position’
The District issues a General Obligation Bond for $100 million
Land purchased for $30 million
School site constructed for $65 million
Furniture and equipment purchased for $5 million (most of the items fall below the Districts capital assets threshold of $5,000)
Failure to capitalize the furniture and equipment results in capital assets of $95 million, debt of $100 million, and a deficit net position of $<5 million>
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Other issues that auditors find with Capital Assets
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From this report from the SACs GASB 34 software, we reconcile what your capital asset additions should be based on your activity
LandLand improvementsBuildingsFurniture and equipment
Other issues that auditors find with Capital AssetsWhat’s not included in the capital assets
Capital leases entered into during the year
Debit to equipment, credit to proceeds from the disposal of capital assets
Component unit activity
Financing activity such as community facility districts (CFD)
Donated assets
Market value
Erate
Where is the work in progress?
Make certain to maintain this by project
Are deferred maintenance projects considered capital assets?
Does it extend the useful life
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QUESTIONS?
Thank you for coming!
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