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Home My WebLink About0492.0941 > •••• -'~.''''-'. -,.'" -~-'--'~--------, .,-. Cit} of Palo A Ito ___ <=_~~rl\'la n:.lger'~_Report TO: HONORABLE CITY COUNCIL FROM: Cm'MANAGER OEPARTMEII'T: fiNANCE DATE: NOVEMBER 3. 1994 Cl\fR:492:94 SUBJECT: IMPLEMENTATION OF GENERAL FIXED ASSF:TS IllNENTORY REOlJEST Thi5 is an Lnfonnaticnal repol1 and flU (",Illn,:il acti,:lf, i:~ !cguirt,J I I:; In\ ~'n~l'r:\ d ,:l."nn;3~ thed asset.;; has been cornpkteJ hy the City"s; (l'r1i.r;l,;l~'r. I}dc'![i;..· L i'OU;,fk' r I )1 (.1' Oakland, CaHfomia, FimH1cia! infNma!:i:-,n (H-. th~',(' ,'.'-~('h '.~-ili k r2T'·':-'~t.'li 111 t.h,: Comprehensi ~'c-Annual Finai'1d:a I Report tl.~r n :;l'.~ i '. ,,-,:~l 'I Lj -11. I Q'_!J ~QJ.ICY:J)\J:PLICATIONS Maintenance of adequate records assrn:i:tted with 01;; Cit', 's ~CI~;;'T'Jl (!xcii 3s.seLi er.:-I.JI>':!> accou.ntabiliry and control of these ~lgniti.cant re~ow Ct.'-. til :JdU\licln. h~ indudlng gcn-:r<!l fixed a3set records in il'i an.r,uai tinaru.:ial repnrt. ~W1T an!icir'Jlc=, tb31 !hc Ci!.'" ,~dl ::.lli:,fy JIJ external reporting requirements J eliminating the quaiifi cation of It t: c ..... --1.t'mJ\ auditor' ':'-l'pin 'Ien on the Cit),·s fma.--.cial reports. EXECUTIVE SUr.tl\fARY &cgronDd The City has maintained capital asset records for the-ulillty eT!.te-rprise funds sro"l7(" 1986. All accura1e listing of the assets of the internal serviC"t: fund~ (vehicles and printing/molihng) and an inventory of City. owned real property als.o ~ maintain.:d. Howc\,er, no cnmpn:hensivt' inventory of the City's general fixed a.s:;eG ha" c.cer, pt"rfom',!!d. Sin..;.;.' tho::: eild of fl:;cal year 1985-1986, the City's external auditors hey!! been l!flabte'o alldil tilC general fixed as~ts and 10 verify thall.he financial statements fairly present the tina..1.cial ';ondition of the Cit)' in all material aspects:. As a consequence, the e:demal auditors have issued ~ qualified opinion of the annual financial reports since 1985" 1986. 1ne auditors ha\'e: also under~()red the importance of fixed assets records in m3in~ajning aC';0untability fOt lin: Cily":-; rrc1i','r1Y in their management lettt"f comments every )'t'il!. ---_____ .. _, .. l. ..... ~.<~ .... _, . ; " I , : .. Funding for the establishment of a flXed assets im-entory and accounting system, origina!!y approved by Council in 1991-19'12. was postponed until this iiscal year. due to budget limitations and a prior commitment of Finance Department staff resources to other projects, In MIlICh 1'194, Council approved a contract \\i!h Oeloine & Touche LLP (D&T) tocond"ct the general fixed asset, inventory and valuation. After a workplan was developed, Cit;' staff and the O&T team began work on the project in Apnl. All fixed assets with. co,t of at least SI,OOO and a useful service life of at least aU'ee ) ear:; were included in the general fixed assets invt'nlory liSTing. D&T inventory team member's and City staff worked together to determine the availability of docurnenwtion of fixed assets purchase_) and acquisitions. Pertinent documents in~luded purch,Lse order), invoices. ~.d canceled checks, An inventory ofCity~m\'ntd real property, c(1nducrca in November of 1992 for inSlll'3.nc.;; purposes, was made available lc D&T; a:ppraisal infl.iiffiathm was used by \h~ team to estimate rea! property costs and current value'S. A detailed ,vorkplan for the inspection and ntlua!ion of general fixed a;<;~'..'i~ '.-',',')5 developed by D&T in con(,~ert with the project manager. 111(" inYentory concentrated on fn e s}X.:ific groups of genCial fixed assets. building,~: and structures, land, significanl computer SYStCliIS. computers and related item.'), and other general fixed assets. Asset Inventory A significant portion of Cit)'~owned buildings and structures had been appraised in Novernhcr of 1992. A vaJuation consultant from D&T usen the appraisal to as:s.ign realistic I.':urrent replacement values to City·o\\Tlcd real estate which reflect actual changes in market conditions. Using the November i992 real estate inventory listing, L1!: valuation consultant also deveLoped a Jist (If multipliers to calculate approximate market values at the time of construction of each property and corresponding replacement values as of June 30, 1994. City staff rc~cherl historical documents to oelermlne the cost of City-oVl-nc-d tand a1 t..'1e time each parcel was acqulreJ. D&T statl reviewed the lis I to ensure that It Wil_';~ compiete. The land inventory was then incorporated in10 the general I1xed assets lis Ling. lnformation about significant computer systems r)\'I-ned by the City was compileJ. by D&T using pwchasing dccumentation provided by City per::onnel. Prior to the general fixed assel'i inventory) the City's Information Resources Department had conducted a recent in .... entory of computers and related equipment, detailing ownership b)' department This dceument was made available to the D&1' team, which updated the mformation to reflect the present inventory, 1 ,~ ! , .. , Woricing "ilh Ihe pf<lject manager and other City staff, D&T sUlff membm conUlcled dcpa:rtrnent lleads 10 determine where signifkant assett. \\'~e located. Siie vis-ito;;. by department liaiSQILS and mem""rs of the D&T 1= were conducted. and appropriale assets were identified and induded tn the general fixed asset, inventory. In addition, department pet"SOl\nei prepared a liSti .. lg of all assets approJ)riate for inclusion in the inventof)'J pnwiding • d<s<:ription of each asset and its physical location. Reported assets were classified according to type, and normal service lives were assigned by asset category. Depar.rnental staff determIned the condition of assets .1tld estimated historical costs fu1d acqulsit]on dates, jf this information wa'i unavaiiablc from other sowces. If availab1e, informatlon on vendor, manufacturer, makl.\ model., serialllumber, City account nt..LlilOers <md replace-merl: value was included in the fixed assets database. n.ed Asset Database Tne D&T team n:ceived cuntirmatitm from City stafr that the asset listing W'L' ('omplete. D&T prO\ lded t.~<;': City \Vi~jl the fma.l tixed <'1S5C!S Hstlng in an electronic format, whidl .,vas then imported into the CHy's computerized a"'counting system. A separate fixed assets module of the interactive Fur,d Accounting System (lFAS) currently jll use by the Cit)' will allow for updating and maintaining the database. Stall wilt be famiiLarizing themselves with the dat.ab~ and the IFAS module, and implementing modiftcations as necessary to ensure the integrity of the asset records. D&T suornitted a report to the City describing the procooures and methods employed during the im'entory and valuation, providing the finat res lJlt of the project, recommending implementatlon of policies, procedures, and internoll controls related to fixed assets, and offering other suggesti0ns for a successful capitalization process. Implementation and maintenance of the nev" database have been initiated in the Finance Department. The City's overall investment in general tixed assets can now be substantiated and correctly reported. II is anticipated thai the City should now be able to obtain an unqualified audit opinion on its annual financial reports. FISCAL IMPACT Funding for the ongoing ma.intenance of the tixed asset system is provided lor in the Finance Th..".,nment operating budget. Page 3 of 4 d I ., ,1 : I i ·~"IYIRQNMENT AL.MSESSMENT TI-.is project IS ::xcmpt from the et1virolL.'1lental impact assessment procedures as described in \be Pain Alto Enmoomentlll Prr.:<dares. PREPARED BY Carol F=tll. AcroWlting Manager DEPARTI-frNT HEAD APPROVAl~ .. ~.(};·dB...~ .. _ Emi!;. H;uris.on - Director of Fin;rnce ( •