Proper Maintenance of Capital Asset Records: Make It a Year-round Activity

Accounting for capital assets generally is not on a school district’s radar for day-to-day accounting. Usually, capital asset workpapers are completed at the end of the audit. Because they are presented only at a district-wide level, they are frequently overlooked. However, these assets are often one of the largest amounts on the financial statements. Proper accounting for capital assets is important to ensure that this balance is accurate and represents actual assets held by the school district.

Managing the capital asset listings

Capital asset listings are generally very large and may contain items from the formation of the school district. Additions during the year are identified through items coded to a capital outlay object code (6000). These transactions should be reviewed to determine which of them exceeds the school district’s capitalization policy and should be added to the listing to begin depreciation. The Michigan Public School Accounting Manual (Bulletin 1022) provides major class codes for land, building and additions, site improvements, equipment and furniture, vehicles other than buses, school buses, educational media and textbooks, construction in process, and other capital assets.

Capital asset disposal

While additions are straightforward to identify, disposals are not as simple. Many times, the disposal of a capital asset does not result in the school district receiving proceeds; therefore, items may be removed, and the business office will not know about the transaction. Capital asset policies should be established to define proper disposal procedures. The business office must communicate the policies throughout the school district to ensure that all information is properly reported.

A physical inventory of assets purchased in whole or in part under a federal award must undergo a physical inventory a least once every two years. The school district may want to consider performing a full capital asset inventory at this time. Procedures usually include the tagging of equipment with barcodes and updating asset valuations to ensure the listing is as accurate as possible.

Capture as much identifying information as possible

What type of information should be on the listing? As much identifying information as possible! To help combat the disposal issue noted above, assets should be easily distinguishable. The description should include the location, serial number, date added, original invoice information, etc.

If the equipment was purchased with federal funds, the school district is required to include the following in the property records:

• a description of the property
• a serial number or other identification number
• the source of funding for the property (including the FAIN)
• who holds the title
• the acquisition date
• cost of the property
• percentage of federal participation in the project costs for the federal award under which the property was acquired
• the location, use, and condition of the property
• any ultimate disposition data including the date of disposal and sale price of the property (2 CFR 200.313(d)(1))

Clear, enforced policies are vital

Clear policies should be established and enforced by the school district to ensure that the balance is accurate. Review throughout the year can help eliminate any year-end headaches and make updating the records much less of an administrative burden. Yeo & Yeo has several solutions to assist in the proper maintenance of the capital asset listing and we would be happy to help.