Initial steps to be taken

To ensure accurate internal control, a detailed assessment of an organization’s current policies and procedures should be made, including review of current software adequacy.

Sample reconciliation should be reviewed to determine the nature of the problem. Just how accurate or inaccurate is the present fixed asset management system? A sample physical inventory will indicate the degree of accuracy.

Set minimum capitalization level as a policy decision. This should be set high enough so that inexpensive items are not set up in the system, thus reducing costs.

Start a new system with new acquisitions from today forward. Going back and fixing everything may appear unrealistic, but at a minimum an organization should start a new control system and use it from here forward.

Get current records in line with reality. This involves making sure current accounting records reflect actual assets on hand. Three approaches are possible:

1. Take existing printout and try and find the items.

2. Take a physical inventory and identify corresponding items on existing property ledger.

3. Use a professionally developed and supported asset tracking tool such as Track4000.

Review Property Tax issues. Eliminate ghost assets from records to reduce taxes. It is not always necessary to have the same value for property taxes as is used elsewhere in the system. For example, so-called ‘soft construction costs’ probably should be removed from asset values reported to local assessors.

Review Insurable values. Assets should be neither over-insured nor under-insured. A good property record system can be updated to current replacement cost using indexes.