Summary of best practices for controlling fixed assets

Fixed asset management in relation to internal control is critical to the fiscal health of all operations. Frequent and effective fixed asset management processes could potentially save your organization hundreds of thousands of dollars a year.

The PCAOB, and independent auditors, have already started the process of reviewing internal controls on fixed assets. The best property record system in the world does not represent true internal control. The only way to assure that the property record is correct, and that the record truly reflects actual conditions, is to take a physical inventory of PP&E and then reconcile the results.

If you are looking to justify the implementation of a fixed asset management system, take some time to detail the deficiencies in your current processes. Then set up a working schedule, a timeline, with specific tasks assigned to individuals. This will involve all the participants discussed above, plus IT management to assure that all new software is fully compatible with existing company systems.

The best practices we recommend can be handled as follows:

Determine the current condition of you property record system, including both the capabilities of existing software and the underlying accuracy of the information contained in today’s system.

Make sure your existing software has full flexibility and capability to handle the wide variety of uses to which a good property record system can be put.

Review capitalization policy to avoid putting small dollar items into the system.

Start entering new acquisitions into the updated property record system using a barcode tag on each asset.

To the extent resources are available start to clean up the existing file representing past acquisitions by identifying ghost assets, and reconciling what we refer to as zombie assets.

Review insurable values, which can be input into a new system.

Review property tax assessments against current financial information.

Optimize tax depreciation by taking maximum advantage of Federal Tax requirements.