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Designation: E 2279 03

Standard Practice for

Establishing the Guiding Principles of Property
This standard is issued under the fixed designation E 2279; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (e) indicates an editorial change since the last revision or reapproval.

1. Scope 2.3 Federal Standards:

1.1 This practice covers the creation of a set of guiding GAO Manual for Guidance of Federal Agencies, Title 2,
principles to be applied to the practice of property manage- Accounting4
ment. Such principles will enunciate the objectives and intent Federal Property and Administrative Services Act of 1949 4
of the property community, stress simplified procedures, pro- Federal Property Management Regulations 4
mote less rather than more, judgment rather than by-the- Federal Management Regulations 4
book decisions, and encourage the adoption of best prac- The Budget and Accounting Procedures Act of 1950 4
tices. Federal Acquisition Regulations 4
1.2 The acceptance of guiding principles has the potential to Securities Exchange Act of 1934 (Title 15 Section 78m
foster a problem-solving mentality within the property man- (b)(2)(A)4
agement community, encourage the use of innovative and Securities and Exchange Commission Staff Accounting Bul-
cost-effective practices, create greater commonality between letin No.99, Materiality (1999)4
government and industry practices, and increase the ability of Federal Accounting Standards Advisory Board (FASAB)
organizations to respond to changing needs and business Statement of Federal Financial Accounting Standards
conditions. (SFFAS) No. 6, Accounting for Property, Plant, and
1.3 The potential economic and practical benefits of oper- Equipment4
ating in a manner consistent with a set of guidelines outweigh FAR Part Appendix Part 9900, Cost Accounting Standards4
concerns about the loss of predictability, uniformity, and 3. Terminology
3.1 Definitions of Terms Specific to This Standard:
2. Referenced Documents 3.1.1 acquisition cost, npurchase price paid for property
2.1 ASTM Standards: and any appropriate subsequent improvements to it. Includes
E 2131 Practice for Assessing, Loss Damage, or Destruc- cash paid or fair value received and material amounts of
tion of Property2 preparation cost such as inspection, testing, and installation.
E 2132 Practice for Physical Inventory of Durable, Move- 3.1.2 agency, ngovernment organization, regardless of
able Property2 level (federal, state, or local).
E 2135 Terminology for Property and Asset Management2 3.1.3 best value, nexpected outcome of an action, in the
E 2219 Practice for Valuation and Management of Move- entitys estimation, which provides the greatest overall benefit
able, Durable Property2 (adapted from FAR 2.1).
E 2220 Practice for Establishing the Full Valuation of the 3.1.4 care and handling, nincludes the costs of complet-
Loss/Overage Population Identified During the Inventory ing, repairing, converting, rehabilitating, operating, preparing,
of Movable, Durable Property2 preserving, protecting, insuring, packing, storing, conserving,
E 2221 Practice for the Administrative Control of Property2 and transporting of property, and, in the case of property that is
2.2 NPMA Standard: dangerous to public health, safety and security, destroying or
The NPMA Standard Property Book, Second Edition, Au- rendering such property useless for its original purpose.
gust 20013 3.1.5 company, nfor-profit organization.
3.1.6 entity, nan agency, institution or organization or any
component thereof.
This practice is under the jurisdiction of ASTM Committee E53 on Property 3.1.7 institution, nnot-for-profit, nongovernmental orga-
Management Systems and is the direct responsibility of Subcommittee E53.01 on nization.
Process Management.
Current edition approved May 10, 2003. Published May 2003.
Annual Book of ASTM Standards, Vol 04.12.
3 4
Available from the National Property Management Association, Inc., 1102 Available from U.S. Government Printing Office Superintendent of Documents,
Pinehurst Rd., Oaktree Center, Dunedin, FL 34698. 732 N. Capitol St., NW, Mail Stop: SDE, Washington, DC 20401.

Copyright ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959, United States.

E 2279 03
3.1.8 impairment or impairments, ncondition that exists 4.4 Property management practices must seek, when viewed
when the carrying amount of a long-lived asset (asset group) in totality, to be effective and efficient, to the point at which
exceeds its fair value. benefits exceed the costs of operation. DiscussionAn impairment loss shall be recog- 4.5 Often the key property management functions are based
nized only if the carrying amount of a long-lived asset (asset on compliance with quantitative measures and, as such, com-
group) is not recoverable and exceeds its fair value. An pliance with process has become more important than the
impairment loss shall be measured as the amount by which the goals that property management systems should seek to
carrying amount of a long-lived asset (asset group) exceeds it achieve.
fair value.
3.1.9 materiality, nmagnitude of an omission or misstate- 5. Management of Property
ment of accounting data that misleads financial statement 5.1 Entities shall establish policies and management sys-
readers or decision makers. Materiality is judged both by tems for the acquisition, use, and disposal of property.
relative amount and by the nature of the item. 5.2 Entities shall devise and maintain a system of internal DiscussionFor example, even a small theft by the management controls sufficient to provide reasonable assur-
president of a company is material. If an item is material, it ances that: transactions are executed in accordance with
should be disclosed in the body of the financial statements or managements general or specific authorization; transactions
footnotes. In determining whether items or amounts of cost are are recorded as necessary in conformity with generally ac-
material or immaterial, the following quantitative and qualita- cepted accounting principles; access is limited; and the re-
tive criteria should be considered where appropriate but no one corded accountability for property assets is compared with
criterion is necessarily determinative: (1) the absolute dollar existing assets at reasonable intervals and appropriate action is
amount involved, (2) the relationship between a cost item/ taken with respect to any differences.
occurrence and a cost objective, (3) the criticality of an item in 5.3 The maintenance of adequate property records is a
terms of importance or use, (4) the cumulative impact of fundamental responsibility of property asset managers.
individually immaterial items, and (5) the cost of administra- 5.4 Property management and accountability books and
tive processing. records shall be kept in reasonable detail that accurately and
3.1.10 reasonable detail and reasonable assurance, nthat fairly reflects the transactions and dispositions of the assets of
level of detail and assurance as would satisfy a prudent and the owner or owners agent.
knowledgeable asset manager. 5.5 Property management activities should strive for and
3.1.11 sensitive property, nSensitive personal property adopt best-in-class management practices and integrated man-
includes all items, regardless of value, that require special agement systems and withstand external audit of their manage-
control and accountability due to unusual rates of loss, theft or ment systems.
misuse, or due to national security or export control consider- 5.6 Property management systems will be designed to
ations. Items include, but are not limited to, classified property deliver on a timely basis the best value product to the
or records, information technology equipment and components organization and its customers, while preserving the confi-
with memory capability, cameras, and communications equip- dence of internal and external stakeholders.
ment or anything else that an entity determines to need special
5.7 The degree to which property is controlled and the costs
control or is subject to unusual rates of loss, theft, or misuse.
of control must be commensurate with the practical conse-
The above classifications do not preclude entities from devel-
quences of a shortage (non-availability of inventory) and the
oping additional personal property categories to effectively
criticality of an items loss, all in accordance with Practice
manage their programs.
E 2221.
3.1.12 surplus personal property, nany excess personal 5.8 Property management officials are to exercise personal
property not required for the needs and the discharge of initiative and sound business judgment in providing the best
responsibilities of any entity. value services to meet the organizations needs.
5.9 Property management officials may assume that if a
4. Significance and Use
specific strategy, practice, policy, or procedure is in the best
4.1 It is the intent of these principles to provide guidance for interest of the agency, company, institution, and stakeholders
an economical and efficient system for (1) the supply of and is not addressed in operating policies, a consensus standard
personal property, (2) the utilization of available property, and nor prohibited by law, Executive Order or other regulation, that
(3) the disposal of property. action, in accordance with the strategy, practice, policy, or
4.2 Historically, property management practices have often procedure, is an acceptable exercise of responsibility and
reflected organizational or management processes that did not authority.
reflect best practices. 5.10 For purposes of financial accounting, all property
4.3 One of the greatest challenges facing property managers acquired or listed in an inventory should be identified as a
is how to ensure that overly detailed and costly practices used capital expenditure, held in future inventory, or as an operating
or proposed for the oversight of property assets are not adopted expense.
as representing best practices or established as operating 5.11 The process of performing a physical inventory of
policy. controlled assets is a vital part of a property control system.

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5.12 Entities shall maintain adequate inventory records no longer needed for the purposes originally intended. The full
accountability systems for property under its control in accor- cost of reutilization should not exceed the value of the item to
dance with Practice E 2132. be reutilized.
5.13 Agencies, companies, and institutions should ensure 6.12 The costs of inventory control should be continuously
that inventory records control systems identify the economic assessed against inventory results and the system of inventory
and physical characteristics of all tangible assets that have a control should be adjusted as the incidents of lost, damaged,
service life in excess of two years and have a value consistent and destroyed property increase or decrease (see Practice
with the guidelines in Practice E 2220 or established by E 2221).
individual federal agencies. 7. Disposal of Property
5.14 Property asset management and control systems should
7.1 Surplus property should be disposed of consistently with
be based on specific desired outcomes or process-oriented
the objectives of the owner and as promptly as possible.
metrics that encourage improved performance and effective
7.2 The preferred method of disposal by agencies should be
donation to eligible recipients. A secondary method of disposal
5.15 Property asset management and control systems should should be the public sale of property assets by auction
be established with clear, direct lines of authority and organi- (including Internet-based models) or other means.
zational accountability for performance and custodial care. 7.3 A preferred method of disposal by companies and
5.16 Impairments to property assets under the responsibili- institutions should be public sale by auction (including
ties assigned or delegated to managers shall be recorded and Internet-based models) or other means that maximizes the
reported to the owner(s) of the assets as they occur. benefit to the entity.
7.4 All entities except as noted in 7.2 should attempt to
6. Utilization of Property prepare, handle, and market surplus property in a manner that
6.1 Property management and accounting shall be per- will result in the maximum benefit to the organization.
formed in accordance with existing applicable consensus 7.5 Agencies, companies, and institutions should allow for
standards. the proceeds received from the sale of property assets to be
6.2 Agencies, companies, and institutions shall have pro- applied to offset the costs of the preparation, handling, and
grams to seek the best value in the long term in the use and marketing of surplus property, the original cost objective that
maintenance of property assets. paid for the property or to depreciation expense.
6.3 Property management and accounting books and records 7.6 Abandonment, destruction, or donation may be an
shall be kept in reasonable detail that affords reasonable appropriate disposition action when the property asset has no
assurance that the system accurately reflects the transactions residual commercial value or when the estimated cost of
and dispositions of the assets of the owner. continued care and handling would exceed the anticipate
proceeds from sale.
6.4 All controlled property should be received, records
7.7 Sensitive items shall be disposed of in a manner
established and maintained and marked so as to denote level of
consistent with applicable laws and regulations and in a
control, ownership, and other information that fulfills organi-
manner that minimizes uncertainties and maximizes benefits.
zation objectives.
6.5 An entity shall periodically survey property under its 8. Summary
control to identify and report excess property. 8.1 This standard concerns the creation of those fundamen-
6.6 Administrative controls should be established based on tal property asset management guiding principles that are the
inventory results and the property subject to such controls essential elements in the success of many organizations,
should be reassessed based on economic values other than including:
acquisition costs, all as described in Practice E 2219. 8.1.1 Reducing the administrative costs of property systems
6.7 In establishing administrative controls, the materiality while continuing to support the adequate stewardship of assets;
of the property subject to such controls should be considered. 8.1.2 Facilitating the efforts in contractors and institutions to
6.8 Projecting the possibility and probability of loss, dam- offer competitive products and services in commercial markets
age, or destruction (LDD) as described in Practice E 2131 and and preserving special capabilities for agency work; and
minimizing such occurrences is a critical and economic factor 8.1.3 Establishing standard practices to augment the market
in measuring the success of a property management activity. strengths of companies and institutions.
8.2 The use of this practice will serve to minimize many of
6.9 Systems should be established for the care and handling
the artificial and costly distinctions between agency and
of excess property.
commercial/institutional property management practices which
6.10 Reutilization of property assets should be viewed as serve to raise the cost of work performed for the agencies.
the first source of supply.
6.11 Agencies, companies, and institutions shall have pro- 9. Keywords
grams to encourage the reutilization of property assets and to 9.1 acquisition cost; agency; best-value; care and handling;
facilitate the reassignment of property assets among organiza- company; impairment; institution; inventory; materiality; prop-
tional elements when such property assets are determined to be erty; reasonable detail; risk management

E 2279 03
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