Finding Text
Financial Statement and Federal Awards Finding Finding # 2022-001 ? Fixed Asset Accounting Criteria: Fixed asset accounting is required by generally accepted accounting principles because it provides control over safeguarding a significantly valuable investment and reporting accurate data on financial reports. Accountability is required for fixed assets acquired with federal grant awards. Condition: There were multiple instances where fixed asset acquisition or construction were not recorded into the financial records by using the appropriate capital outlay expenditure and object codes per the Montana School Accounting Manual. There were also instances where expenditures were coded into capital outlay objects when those expenditures did not meet the capitalization policy of $5,000. Adjustments were made to the audited financial statements to correct the recording of fixed assets. Effect: GAAP requires that purchases of fixed assets be recorded as capital outlay expenditures in the governmental funds and recorded as fixed assets in the Statement of Net Position. Equipment and property management requirements for grant funds include additional requirements to inventory and monitor assets purchased with grant awards. Federal guidance is that assets are capitalized when the per unit cost exceeds $5,000. Not using the expenditure and object codes defined in the MT School Accounting Manual presents significant risk that fixed assets purchased or constructed during the period might not be appropriately reported and included in fixed asset records or inventoried and monitored in accordance with grant requirements. Cause: Multiple expenditures for the acquisition or construction of District assets were not coded appropriately in the financial records. Recommendation: Expenditures that meet the district?s capitalization policy should be recorded in the appropriate expenditure code and object per the Montana School Accounting Manual. Expenditures below the capitalization policy should not be recorded as capital outlay. Fixed assets purchased with grant funds should be appropriately recorded, inventoried and monitored per grant requirements.