1. Capital Equipment Inventories, Allocations and Optimizing F&A Recoveries in the University Environment A Presentation by: Greg Sheahan Hirons & Associates, Inc. July 25 th, 2011 Welcome NPMA Members to

2. DISCUSSION TOPICS Issues Solutions & Opportunities for Property Management Departments: F&A reimbursement explained and its importance to your University? Brief History on Government Cost Reimbursement (indirect cost) F&A. Equipment accountability - reasons for an accurate inventory? Equipment depreciation allocation - optimizing F&A recoveries. Tracking equipment - why is it so difficult? Tracking Ideas - solutions on a budget. Equipment life accounting categories - impact on F&A rate calculations Will management be interested in accurate inventory- ROI?

3. Sometimes tracking equipment is a lot like finding Waldo???

4. Reasons to have an accurate inventory: -GASB 34 & A-21 requires complete inventory every 2 years. -Proven to be an area of vulnerability for auditors A-133 etc. -Maximizes overhead recovery and equipment use. -Remove equipment that no longer exists (Ghost items). -Provide consistent equipment accounting classifications lives. -Increased accountability & additional reporting requirements. -Provides quantifiable (ROI) return on investment. -Very complex to track without sufficient resources. EQUIPMENT ACCOUNTABILITY

5. Optimizing F&A recoveries: B oth A-21 (F2) and the DHHS Long Form Review Guide (page 37) provide that the depreciation for moveable equipment is to be allocated upon the space (i.e., rooms) in which such are located. Different types of equipment allocations -Moveable Equipment allocated to the % of research by room. -Moveable Equipment allocated to the % of research by department. -Moveable Equipment allocated to the % of research by building. Additional Considerations -Match equipment location to official space file for F&A calculations. -Assign room numbers to equipment in halls consistently. EQUIPMENT DEPRECIATION ALLOCATIONS

6. EQUIPMENT TRACKING Why is it so difficult: Lack of resources provided to asset/property departments – man power for comprehensive inventory or system upgrades. Departments unwilling to follow Asset Management policy and procedures regarding disposals, tagging, serial # changes etc. Lack of accountability and importance placed on equipment inventories – policy and procedures by departments. Location, disposal, transfer changes not being submitted from departments to the Property Management for system updates. No central distribution office for assets create a disconnect between department equipment list and property equipment lists. Antiquated fixed asset systems with limited access to automate - import/export information for reporting capabilities.

7. EQUIPMENT Moves at the speed of sound:

8. Solutions on a budget: -Review financial accounting classifications (consistency). -Spot check inventory - a statistical sampling of assets. -Estimate new (found) equipment costs where necessary. -Provide management ROI analysis - results of spot check(s). -Increase threshold on equipment - more manageable. -Review current policy on tagging - capital vs. control items. -Provide bar codes (RFID) tags for tracking if not already present. -Door portals on exit doors and sensitive rooms (server etc.) for security -Keep going “up the management ladder” find someone willing to listen TRACKING IDEAS

9. Impact on F&A rate calculations: -Condense or add accounting categories based on analysis. -Review policies on inventory of sensitive items thumb drives etc. -Assists with consistency when assigning accounting categories. -Perform life analysis after “ghost items” are removed. -Life analysis should reflect consumption at your University. -Considered a “change in accounting estimate” per GAAP-FASB. Chapter 9 section 9.07 “A change in estimate arises from new events or occurs from additional information or experience. A change in estimate is accounted for only over current and future years. Prior years are not adjusted.” -Provides insight into which departments are reliable or not? -Quantifiable cost benefit ROI to share with management. EQUIPMENT LIFE ACCOUNTING CATEGORIES

10. ROI - will management be interested: Compliance with GASB 34 A-110 & A-21requirements Ability to provide asset life study of equipment by classification A “snap shot” in time on equipment location Location information provides increased use of equipment Provides assistance in space & room function review/consistency Removal of “ghost items” Positive impact on financial overhead rate calculations/recoveries ROI – provides increased speed & accuracy Audit confidence A-133 audits etc. SUMMARY

11. Thank you Greg Sheahan gsheahan@hironsassociates.com (941) 747-6330 or (941) 544-2369 www.HironsAssociates.com