Is asset tracking a thorn in your side? SAO’s resources can help ease the pain
May 25, 2022
Local governments track many assets with multiple objectives in mind. Whether your objective is accurate and complete financial reporting or safeguarding public assets, tracking all of your government's assets can quickly become a pain.
All governments, including cash-basis entities, should track capital assets and small and attractive assets, as described in the Budgeting, Accounting and Reporting System (BARS) Manual. If your government follows generally accepted accounting principles (GAAP) or spends federal funds to procure assets, you have additional requirements to follow, too.
Whether you have theft-sensitive assets or large assets like buildings and utility systems, SAO offers tools and resources to help you simplify asset tracking and comply with a variety of objectives and requirements.
Best practices for internal controls over small and attractive assets (for all governments)
Small and attractive assets are theft-sensitive assets like laptops, shop tools or public works power equipment. They are small dollar items below capitalization thresholds, some of which your government should track and monitor so people don't walk off with them without you noticing.
Many local governments struggle to implement a tracking program because it can be overwhelming—and not to mention taxing on resources—with so many small assets to consider. While this is a common area for audit recommendations, you should know that you don't have to track every single item. Rather, we recommend that you perform a risk assessment to determine which assets are most susceptible to theft, loss or misuse, and then use this information to develop a policy while considering your tolerance for risk and available resources. You can choose not to track certain categories of assets or set dollar limits on them. For example, Washington state doesn't track laptops or notebooks below $300.
SAO's guide will show you how to perform a risk assessment, and it offers some options for you to consider as you develop your policy.
Capital asset identification for GAAP governments
When it comes to capital assets, local governments often struggle to keep track of the hundreds of assets they possess. When you include roads and utility systems, that number might actually be in the thousands, depending on how you define an asset. The struggle only increases if you have to interpret older capital asset records (especially those recorded as a group of assets) that may not clearly identify what the assets were or where they were located.
Any asset reported in your financial statements needs to be identifiable and traceable to verify its existence. You also need to identify assets so accounting staff can adjust or remove them upon a partial or full replacement or retirement. However, many current tracking methods make this difficult.
We've noticed that our public utility districts seem to easily manage these capital asset challenges. We've incorporated this industry's best practices into our resource, as well as a few other best practices we've observed during audits. Overall, our guide details 10 best practices for tracking your capital assets.
Capital asset checklist for GAAP governments
If you are going to avoid financial statement errors, you need strong internal controls over your capital assets. SAO's recently updated capital asset checklist identifies steps you can take to ensure your government's assets are complete, accurate and properly valued. You can use this checklist at mid-year or year-end to see where you need to strengthen controls or improve accuracy. This comprehensive checklist includes items for those managing assets procured with federal funds and the modified approach for infrastructure assets.
Do you need technical assistance?
Remember, SAO can help you. If you have specific technical accounting questions about capital assets, submit them using our HelpDesk in the client portal.
We also have financial management specialists at SAO's Center for Government Innovation available to talk with you about best practices, resources or internal controls. For assistance, reach out to us at Center@sao.wa.gov.