Government GPS

The Latest Rules and Regulations That Impact Your Government Entity

Do You Reconcile Your Governmental Capital Assets?

It can be hard to remember, but it is a requirement of most all federal grants in which capital assets are purchased, that a governmental entity performs a physical inventory of all capital assets at least once every other year. In the case of Arizona school districts, they must inventory their capital assets, or property control lists, once every three years. We recommend to our clients to use the capital asset listing to reconcile back to the physical asset every year, by using a unique identifying number, such as a tag number, on each asset to ensure that they are still with the organization and they are not impaired. A simple definition of an impaired asset is one in which you may still physically have the asset on hand, but it either does not work properly without action to restore its service utility, you don’t use it anymore because some other asset was purchased to replace its usefulness or a law was enacted that changed its service utility.

Every governmental organization, using governmental funds, should reconcile their capital expenditures made during the year, or capital outlay expenditures, to the additions they record in their general fixed assets account group (GFAAG), usually a memo fund is used to keep track of the balances each year going forward. When your government performs this reconciliation of capital additions to capital expenditures during the year, it would be a great idea to go ahead and send each department a list of the capital assets your general fixed assets account grouping shows as still active and being depreciated, and have those departments physically observe each asset in their department and report back to finance regarding the status of their assets. This should all be well documented and maintained for federal grant purposes and in cases where your State requires it.

By Brian Hemmerle, CPA, CFE