Recently, the Performance Center provided several resources on accounting for capital assets to help local governments with financial reporting. Another group of assets, which fall below a government’s capitalization threshold, should also be considered when establishing and evaluating asset policies and other internal controls. In Washington, we frequently refer to these as “small and attractive assets,” but they these could be described using different terminology. For example, the Government Finance Officers Association refers to them as “controlled capital-type items” in its best practice guidance.
Examples of these assets include portable computer equipment, shop tools and video recorders. The term “small and attractive” implies several qualities about these assets – they have a smaller purchase price than many other assets, and might be more attractive to employees to convert for personal use or to sell. They might be bought using a purchasing card or by a small, less-noticeable transaction flowing through a procurement system without raising suspicion, and therefore might be more susceptible to loss, theft or misuse.
The Performance Center has developed best practice guidance for internal controls over small and attractive assets to help governments evaluate and improve internal controls and minimize the risk of loss. This guidance, which is available on the resource database, portal.sao.wa.gov/PerformanceCenter/#/address?mid=6&rid=18520, includes information on conducting a risk assessment as well as what might be included in a policy. It also includes best practices for tracking assets, maintaining inventory lists and conducting inventories.
Our Office frequently evaluates internal controls over small and attractive assets during accountability audits. We review policies and internal controls that ensure these assets are safeguarded and losses can be identified in a timely manner. We find frequent audit issues when performing this work. For example, recent statistics show that “safeguarding of assets and property” is the fourth most frequent category for recommendations in county audits.
Our audits have also identified instances when losses have occurred, and without adequate internal controls, these losses can become significant. For example, in a 2016 investigation, a government providing emergency management services had misappropriations including a skid steer trailer with attachments, tractor parts, a drone and four surplus generators. The report cited several control weakness, including a lack of adequate procedures to ensure purchases of theft-sensitive assets were monitored and safeguarded from loss. Governments can protect themselves by ensuring they have internal controls in place to identify concerns early before small discrepancies become large misappropriations.
For questions or feedback, please contact us at firstname.lastname@example.org. For specific technical questions about accounting for assets, governments may also submit questions to our Audit HelpDesk.