1. Department of Financial Training Knowledge Building for Property Management December 2005

2. Department of Financial Training Property Management Learning Objectives  Policy Overview  Definition of Property Asset  Property Management System  Roles in Managing Property Assets  Lifecycle of a Property Asset  Depreciation  Inventory Process  Access to Property System  Next Steps

3. Department of Financial Training Policy Overview  The University must maintain accurate records of tangible property whose value and useful life meet the criteria of a capital or property asset  Property assets are required to be tagged, monitored, and periodically inventoried  Schools & Centers have the responsibility for managing their property within all applicable regulations and policies

4. Department of Financial Training What is a Capital or Property Asset?  A property asset is any item for which all 3 criteria apply:  Item valued at $5,000 or more  Has a useful life of more than one year  The University retains title

5. Department of Financial Training Importance of Property Management  Proper stewardship of our assets will facilitate the accuracy of information which ultimately effects  Indirect cost proposal to Department of Health Human Services (DHHS) – The Office of Research Services uses asset data, i.e. depreciation expense, in the Facilities and Admin- istrative proposal, which is a key component in the Indirect Cost recovery negotiations with the Federal Government  Outside audits – PWC & A-133  University Financial Statements

6. Department of Financial Training Property Management System (PMS)  The Property Management System is used to track and maintain information about the University's depreciable assets from acquisition to disposal  Data maintained includes:  Manufacturer  Model  Serial number  Acquisition cost  Accumulated depreciation  Cost History  Item description  Acquisition date  Tag number  Status  Tagging contact  Custodian  Location

7. Department of Financial Training Roles in Managing Property Assets  There are five main roles in managing property:  Buyer  Property Management Group  Property Administrator  Custodian  Tagging Contact

8. Department of Financial Training Role: Buyer  The Buyer is the PO Manager who creates and/or approves the PO which acquires the property item  Though Buyers don’t have a role in the PMS, key information from the PO is used when creating a property item in the PMS  The Buyer must ensure property management information on the PO is complete and accurate. This information includes:  Description  Installation Location (Bldg, Floor, Room)  Category Code  Responsible ORG  Model #  Custodian  Tagging Contact  Govt. Retain Title?

9. Department of Financial Training Role: Property Management Group  The Property Management Group (PMG), within the Comptroller’s Office, oversees all University property  The PMG is responsible for  Ensuring compliance with all University & regulatory agency policies & procedures  Reviewing and adding financial assets greater than $5,000 to the asset management system

10. Department of Financial Training Role: Property Management Group (cont.)  Recording all financial transactions to the General Ledger involving the assets, i.e. dispositions, transfer of assets to other ORGs, cost adjustments, and depreciation  Sending tags to Tagging Contacts  Recording certain changes/edits in the Property Management system – Movement of item(s) from one building to another – Movement of item(s) from one CNAC or ORG to another – Changes in disposition, i.e. disposal, sale, etc.

11. Department of Financial Training Role: Property Administrator  A person designated by their School/Center as the liaison between their organization and the PMG on all property issues  Coordinates the property management activities of their assigned area(s)  Records certain changes/edits in the Property Management system  Maintains complete and accurate inventory of their areas equipment – Manages the disposal process, including disposal forms

12. Department of Financial Training Role: Custodian  Responsible for the physical custody of the property item  This is generally, but not necessarily, the person that is using the item  Name of person as specified on the Purchase Order by the Buyer – Must be a Penn employee

13. Department of Financial Training Role: Tagging Contact  Responsible for tagging the property item  Responsible for placing inventory tags supplied by the Property Management Group (PMG)  Sends notification to PMG and Property Administrator of item(s) tagged (item and tag #) when tagging completed  Name of person as specified on the Purchase Order by the Buyer – Must be a Penn employee

14. Department of Financial Training Lifecycle of Property Asset in PMS  Recording of Asset  Maintenance of Asset Data  Location  Custodian & Tagging Contact  Description, Serial Number  Condition  Depreciation  Disposal of Asset  Retirement  Sale  Lost, Missing, or Stolen Items

15. Department of Financial Training Flowchart for Recording Assets in Property Management System (PMS) Asset Purchased by Buyer Asset Object Codes Asset Invoiced Asset Paid PMG Adds Asset to PMS* & Sends Tags to Tagging Contact Tags Asset & Sends Info to PMG & Prop Admin PMG Updates PMS with Tagging Info *Acquisition date is generally last day of the month the item was paid and not the date it was delivered or placed in service. Asset Received

16. Department of Financial Training Recording of Assets: Acquisition Cost  The acquisition cost or property value of assets acquired via Purchase Orders or C-forms is the purchase price  Charges for transportation and/or labor for equipment installation and checkout shall be added to the value of equipment, when they can be determined

17. Department of Financial Training Recording of Assets: Government Ownership of Equipment  When completing a requisition, if the answer to the question ‘Govt. Retain Title?’ is  Yes – PMG will not add this item to the PM System* – Property Administrator must maintain records at the department for this property separately  No – PMG will add the item to the PM System – Only University owned assets are added to PM system * Refer to specific terms and conditions of grant/contract as property may convert to University ownership after completion of grant/contract.

18. Department of Financial Training Recording of Assets: Transfers-in of Equipment  The Property Administrator should notify the Property Management Group (PMG)  With the Department’s assistance, PMG will determine if the property was purchased by Penn AND whether the – Cost is over $5,000 – Item has a useful life of more than one year – University has title to the property  If yes to all, PMG will add item to PMS  If the University doesn’t retain title, the Property Administrator must maintain records at the department for this property separately

19. Department of Financial Training  Property Administrators are responsible for maintaining/updating the following in the Property Management System: Location Building/Floor/Room Custodian Name Tagging Contact Tagging Contact Phone Number Description Manufacturer Model # Serial # Condition In Use Surplus Mark for Retirement Retirement Reason Maintenance of Asset Data: Property Administrators Update PMS

20. Department of Financial Training Maintenance of Asset Data: Movement of Equipment  Change in location within the same building and ORG code  Property Administrator can update in system  Change in location to different building or change in ORG or CNAC codes  Complete Equipment Change Form and send to PMG  Home use  Complete a Home Use Statement Form – Send to PMG with appropriate signatures

21. Department of Financial Training Disposal of Assets: ‘Retirement’ of Equipment  Departments may ‘retire’ or discard obsolete or unusable equipment by completing the Notification of Disposition of Equipment Form which includes:  Reason for Disposal  ID # or Tag #  Description, Manufacturer, Model, Serial  Acquisition Date and Cost, Accumulated Depreciation and Sale Price (if applicable)  Obtain appropriate approval signatures prior to disposal  Remove and discard University ‘tag’ at time of disposal

22. Department of Financial Training Disposal of Assets: Sale of Equipment  Departments may sell surplus equipment by completing the Notification of Disposition of Equipment Form  Obtain appropriate approval signatures prior to disposal  Remove and discard University ‘tag’ at time of disposal  Include all information previously noted and a copy of BEN Deposit slip must be attached to form  Deposit of sale proceeds should be recorded as follows: xx0-xxxx-x-xxxxxx-5602-xxxx-xxxx (Sale amount) xx0-xxxx-x-xxxxxx-2111-xxxx-xxxx (Sales Tax 7%) – Sales to tax-exempt entities require a copy of that entity’s tax-exempt certificate

23. Department of Financial Training Disposal of Assets: Lost, Missing, or Stolen Property  Property Administrators should notify the PMG immediately if property is lost, missing, or stolen  Notify University Police first of stolen property  Statements required  Lost or Missing: The custodian must write and sign a statement of how the loss occurred  Stolen: Obtain a copy of the police report  Attach the statement/police report to the Notification of Disposition of Equipment Form

24. Department of Financial Training Depreciation: What is Depreciation?  Depreciation is a non-cash expense that reduces the value of an asset because of wear, age or obsolescence  Most assets lose their value over time, i.e. they depreciate  Depreciation expense information is necessary for  University financial statements  Indirect cost proposal

25. Department of Financial Training Depreciation: What is Depreciation?  From University Financial Policy 1106.02  All plant assets will be depreciated using the straight line method  One-half of one year’s depreciation will be recorded in both the year of acquisition and the last year of useful life or the year of disposition whichever comes first  The Category Code, entered when creating a Purchase Order, determines the number of years the item will be depreciated, i.e. the useful life of the asset

26. Department of Financial Training Depreciation: Example of Depreciation Schedule  Equipment purchased for $10,000 with a five(5) year of useful life.  1 st year depreciation = $1,000  2 nd year depreciation = $2,000  3 rd year depreciation = $2,000  4 th year depreciation = $2,000  5 th year depreciation = $2,000  6 th year depreciation = $1,000

27. Department of Financial Training Depreciation: Use of in Calculation of Book Value Book Value = Acquisition Cost – Accumulated Depreciation  Using the prior example, what is the Book Value of the asset in year five (5)?  1 st year depreciation = $1,000  2 nd year depreciation = $2,000  3 rd year depreciation = $2,000  4 th year depreciation = $2,000  5 th year depreciation = $1,000 – The last year of depreciation is 50% of one year straight line value (i.e. 50% of 2,000) regardless if disposition is June 30 or July 1  Accumulated Depreciation is $8,000  Book Value is $2,000

28. Department of Financial Training Property Inventory Verification  Quarterly review of asset additions, transfers, & disposals by Hirons & Associates, Inc.  Hirons quarterly review site visits started in October 2005  Verify asset additions – category code, location, description, custodian, tagging contact  Tagging of untagged assets  Inquiry on asset transfers and asset disposals

29. Department of Financial Training Inventory of Assets  Federal regulations require bi-annual inventory of all University owned assets  Inventory by Hirons & Associates  For FY06, the bi-annual inventory will begin in April 2006  Beginning in FY07, quarterly cycle counts will replace the biannual inventory – One-eighth (1/8) of Penn’s property will be counted each quarter – All assets counted over a two year period

30. Department of Financial Training Access Request Forms/System Availability  In order to obtain access, users must  Attend training  Complete ‘Request for Administrative Mainframe Logon ID…’ Form – Need to identify ORG(s) OR CNAC – Need Access Administrators Signature  System available from  8:00 a.m. – 6:00 p.m.

31. Department of Financial Training Best Practices  Periodic ‘self’ inventory to ensure data is properly reflected in PMS  Manage proactively as events happen – ask…  Where the equipment is located (Bldg/Floor/Room)?  Who is the tagging contact?  Who is the custodian?  What equipment is used for research?  Establish operating procedures for your area for maintaining property effectively  May require coordination with the following – Building/Business Administrator – Grants Manager/Administrator – Principle Investigator (PI) – Custodian/Tagging Contact

32. Department of Financial Training End-User Support Model Property Administrator PMG property@pobox Custodian Tagging Contact

33. Department of Financial Training Reminder: Events that Trigger Need to Review/Manage Equipment Update  Initial Recording of Property  Add Serial or Manufacturer Numbers  Confirm Category Code, Location, Custodian, and Tagging Contact, Tag Number, etc.  On-going Maintenance  Movement of Property (Building/Floor/Room)  Change of Custodian or Tagging Contact  Change of Status (Condition, Surplus, In Use)  Change in Government Ownership of Equipment  Transfer of Property from one ORG to another ORG  Disposal of Property  Transfer Property to another Organization  Retirement or Sale of Property  Missing, Loss or Stolen Property  Transfer In of Property

34. Department of Financial Training Your Next Steps  Complete ‘Quiz’ at end of this presentation  Register for Property Management Hands-on Training  (http://knowledgelink.upenn.edu/)  Print, complete, obtain authorizing signatures, and bring to hands-on training class the Request for Administrative Mainframe LOGON ID form.  http://www.finance.upenn.edu/comptroller/forms/  Meet with your School/Center Senior BA to review your role