Accounting for capital assets is an area of difficulty for many governments. General purpose governments have been reporting infrastructure assets for more than a decade because of Governmental Accounting Standard’s Board (GASB) Statement No. 34. This pronouncement required the reporting of many more assets than had been previously reported, including some with their own unique challenges such as roads.
The challenges to accurate reporting include voluminous records, limited information about older assets, decentralized information affecting accounting, and limited resources. Capital assets are an important part of a government’s operations, budgeting and financial statements. Properly accounting for these assets, and the liabilities that finance them, is important to presenting an accurate picture of the government’s net position (equity) and financial condition.
To help governments with this challenging area, our Office recently updated guidance for capital assets in the Budgeting, Accounting and Reporting Systems (BARS) Manual for governments reporting in accordance with generally accepted accounting principles (GAAP). Capital asset guidance that was previously split into nine different sections (3.3.1 – 3.3.7 and 4.2.5 – 4.2.6) was consolidated into three sections. (3.3.9 – 3.3.11) While content has not fundamentally changed, most topics were updated and re-written to improve guidance and match the current environment and user needs. In particular, internal control guidance was expanded to help local governments with management of capital assets.
In addition, the State Auditor’s Office recently published a new checklist, which is available on our website. This checklist for managing capital assets provides information about best practices to ensure capital assets reported on the financial statements are complete, accurate, properly valued and correctly classified, and that the costs are allocated over the appropriate fiscal periods.
Local governments can use this example internal control checklist as a resource to develop policies and procedures that address the deficiencies most often noted by our audits.
Also coming soon is an eLearning resource on capital asset management that discusses why it is important, key aspects of capital assets records and accounting, and fraud schemes related to capital assets.
The State Auditor’s Office also is presenting an informative session about capital asset accounting September 14 at the Washington Finance Officers Association Conference in Kennewick. The training will focus on problem areas to consider, best practices and ideas on making capital asset accounting easier. We hope to see you there!
For specific questions about accounting for capital assets, governments may also submit questions to our Audit Help Desk for further guidance.