Reviewed Date: 12/15/2022
The city should require strict accountability for the use and care of all capital assets. Physical inventory counts should be conducted to verify the existence of these assets. Inventory counts or observations should be performed at various times:
A physical inventory count of the city’s capital assets should be performed annually. This inventory should be performed at or as closely as possible to the city’s fiscal year end. The property accounting officer should provide a current listing from, in numerical order, all equipment allocated to each department. This list should provide space for checking each item is present and should note exceptions and certification. Any items that are not listed should be noted and a detailed description should be provided to the property accounting officer for consideration.
To ensure that the system is functioning as intended, the city should initially take a complete inventory of capital assets every three or four months. The inventory should agree with the records maintained in the in the accounting software. After determining that the system is operating properly, an annual physical inventory (coinciding with the end of the city’s fiscal year) should be sufficient.
In the interest of internal control, the property accounting officer should check inventories randomly and unannounced. Make an investigation of any shortages or overages in cooperation with the department involved.
Frequently such discrepancies are due to the lag in recording acquisitions, transfers, and dispositions. Report any unexplained shortage to the head administrative or chief fiscal officer. Make adequate written explanation of all items accounted for and be available for any administrative or legislative inquiry regarding discrepancies.