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A robust Fixed Asset Register is in place to record all assets of the


FIG continues to uses the Fixed Asset module of the Microsoft Dynamics GP 2010 system to
record fixed asset transactions and accounting treatments. The system has the functionality to
classify assets, record Useful Economic Lives and calculate depreciation rates. A range of
reporting functionality is also available within the system, though a significant amount of
workings are carried out via exports to Excel. Access to the Fixed Asset Register (FAR) is
restricted to Treasury staff, and the system is protected and backed up in an appropriate manner.

Detailed accounting policies are in place to control asset classification,
capitalization, depreciation and disposal.

Accounting policies are in place to govern the classification of assets, thresholds for
capitalization and depreciation. All are reviewed on an annual basis and were found to be
reasonable, and in accordance with accepted practices. Following a recommendation in the
previous audit, guidance for managers on the disposal of assets has now been incorporated into
Financial Instructions.

Controls are in place to identify new assets and record them accurately in the
Fixed Asset Register.

Effective controls were found to be in place to ensure that Treasury identifies new assets to be
capitalized during the year and record them in the Fixed Asset Register. As an additional control
all departmental registers are reviewed on an annual basis to ensure any further movements not
previously identified by the Treasury are added to the FAR appropriately. Asset categorization
was reviewed and all were found to have been correctly treated. As noted in the last audit, the
department has considered capitalizing assets on a monthly basis, but this would be problematic.
For ongoing projects the costs would be capitalised as individual assets each month, which can
lead to multiple entries for one major project.
Also, due to the way the system operates assets recorded on the Dynamics FAR prior to the
previous year being closed could not be distinguished from earlier assets, which would lead to
inaccurate reporting. The department has therefore decided that whilst asset information will be
collated on a monthly basis to reduce the amount of work at year-end, entries will not be made
onto the FAR. Given that this issue has been identified and discussed within the department it is
not necessary to make a recommendation.

Assets are disposed of in accordance with agreed policies, and accounting
records are adjusted accordingly.
A sample of asset disposals was reviewed and all were found to have been correctly treated.
Proceeds from asset sales were recorded and coded correctly, and the necessary adjustments to
asset value and accumulated depreciation were made in all cases.

Depreciation is calculated in accordance with agreed policies, and applied

Depreciation calculations for a number of assets were reviewed to ensure correct and
appropriate. In two instances the depreciation charged by the system did not equal the expected
rate given the identified Useful Economic Life. Further investigation by the department
identified a further 4 assets where depreciation charged is not as expected. A recommendation
has been raised to address this issue.

In 2009, the Citys fixed asset internal controls were inefficient and ineffective resulting
various misstatements. Many of the errors, such as recording assets in the incorrect
improperly classifying fixed assets and/or recording assets not owned by the City, could have
been corrected if the Bureau of Accounting had performed a thorough and timely review
fixed asset transactions.

The lack of certain controls did not have a material impact on the Citys financial statements,
but improvement in the controls mentioned would reduce the opportunity for asset
misappropriation and financial statement inaccuracies. The lack of other controls did affect the
Citys financial statements. For example, auditors noted the City recorded duplicate
resulting in an overstatement of $224,215. Auditors also noted assets recorded in the incorrect
period resulting in an overstatement of $66,073.

Fixed assets comprised approximately 80% of the Citys 2009 total assets; therefore, it
important that controls be in place and operating effectively. A detailed fixed asset
would improve the controls over recording, reporting, monitoring and disposing of assets. Such
a policy would help standardize and improve the fixed asset internal controls process
throughout the City. The policy should require that the City:
monthly reconciliations;
assets with meaningful descriptions;
physical inventories;
the physical inventories to the accounting records;
impairment tests;
supporting documentation before removing disposed assets; and
CIP timely.

The Office of Inspector General will conduct a followup review to determine the status of
findings stated in this report.