Done right, capital asset management provides and sustains dependable and accurate cost and depreciation information used by management for external audit, financial and regulatory reporting, cost reimbursement, internal controls and asset management, acquisition accounting, and mitigating property insurance risk exposure.
Benchmarking Feedback Best Practices
Early feedback from Attain Partners’ benchmarking survey on the “Impacts of Covid-19 pandemic on fixed asset management and depreciation reporting” shows that institutions are having varying degrees of difficulty keeping current on their day-to-day responsibilities related to fixed assets.
External Auditor Findings: Due to Covid, many institutions are limiting external audits of equipment to smaller sampling of assets. This bare minimum audit approach may temporarily satisfy external auditors however, the risk of uncertainty is increasing as we enter the second fiscal year affected by the Covid pandemic. Higher scrutiny to certify the accuracy of the fixed asset system and depreciation reporting will resume as restrictions are eased in 2021. Some survey participants are indicating that restrictions to access buildings and laboratories is impacting their ability to tag assets and complete their fixed asset data capture to support future audits.
CAS / ONR / Agency Audits: Despite directives from OMB allowing institutions to defer equipment inventory verifications performed by external auditors and independent third-party equipment inventory verification surveys, cognizant agency audits related to indirect cost reimbursement continue unabated with any exceptions leading to challenges to proposed reimbursements.
Common Pitfalls Exacerbated by the Pandemic
In addition to dealing with the pandemic, accounting offices need to concentrate on common pitfalls impacting the accuracy of financial and GASB 34/35 asset depreciation reporting, namely:
- Staff reductions and turnover or lack of training and supervision that lessens asset accounting accuracy and consistency
- Inconsistent asset classification between building, fixed, and movable categories
- Inconsistent useful lives within asset categories
- Bloated records from unrecorded asset dispositions
- Inconsistent use of capitalization policy and procedures
- Impaired asset stewardship due to outdated inventory verification data that leads to unreliable support for external auditors, federal, state, and sponsored funding, including equipment on loan from other institutions
- Out-of-date inventory policy and practices and capitalization policy and guidelines
- Financial statement misrepresentation of property casualty risk of loss due to outdated property insurance coverage requirements. Insurance carriers look for independent appraisals to establish insurable replacement cost and documentation of the covered assets, like buildings and equipment that change over time as operations expand and change. Insurance carriers charge more for property insurance coverage when there is incomplete, inaccurate, and unsubstantiated information.
Attain Partners Solutions
We enhance the policy and procedures, internal competencies, and the consistency and quality of fixed asset depreciation reporting for FASB, GASB, regulatory, property insurance risk management, and other business management purposes. Attain Partners’ Asset Management and Valuation Services team in comprised of professionals with decades of experience who believe in delivering results that exceed our clients’ expectations on a wide array of issues. Our services focus on these critical areas:
- FASB and GASB 34/35 reporting of fixed asset depreciation
- Asset Capitalization Policy and Procedure Review
- Fixed Asset Software Conversion Planning and clean-up
- Asset Inventory Planning and Implementation
- Asset Inspection, Verification, Tagging, Tracking, and Reporting
- Implementing Barcode, RFID, and Custom Tracking
- Cognization Agency Audit Planning and Support
- Building Componentization Studies to Optimize Depreciation
- Property Insurance Appraisals for Coverage Renewals and Claims
To learn more about these and other services, contact us here.
About the Author
Andrew Campbell is a Senior Manager at Attain Partners. He has over 30 years of experience advising clients in fixed asset management and depreciation reporting, building componentization studies, useful life studies, equipment inventory and reconciliation, and asset valuation services.