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Knowledge Building for Property Management. December 2005. Property Management Learning Objectives . Policy Overview Definition of Property Asset Property Management System Roles in Managing Property Assets Lifecycle of a Property Asset Depreciation Inventory Process

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Knowledge Building for Property Management

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Knowledge BuildingforProperty Management

December 2005


Property Management Learning Objectives

  • Policy Overview

  • Definition of Property Asset

  • Property Management System

  • Roles in Managing Property Assets

  • Lifecycle of a Property Asset

  • Depreciation

  • Inventory Process

  • Access to Property System

  • Next Steps


Policy Overview

  • The University must maintain accurate records of tangible property whose value and useful life meet the criteria of a capital or property asset

  • Property assets are required to be tagged, monitored, and periodically inventoried

  • Schools & Centers have the responsibility for managing their property within all applicable regulations and policies


What is a Capital or Property Asset?

  • A property asset is any item for which all 3 criteria apply:

    • Item valued at $5,000 or more

    • Has a useful life of more than one year

    • The University retains title


Importance of Property Management

  • Proper stewardship of our assets will facilitate the accuracy of information which ultimately effects

    • Indirect cost proposal to Department of Health Human Services (DHHS)

      • The Office of Research Services uses asset data, i.e. depreciation expense, in the Facilities and Admin-istrative proposal, which is a key component in the Indirect Cost recovery negotiations with the Federal Government

    • Outside audits

      • PWC & A-133

    • University Financial Statements


Property Management System (PMS)

  • The Property Management System is used to track and maintain information about the University's depreciable assets from acquisition to disposal

    • Data maintained includes:

  • Item description

  • Acquisition date

  • Tag number

  • Status

  • Tagging contact

  • Custodian

  • Location

  • Manufacturer

  • Model

  • Serial number

  • Acquisition cost

  • Accumulated depreciation

  • Cost History


Roles in Managing Property Assets

  • There are five main roles in managing property:

    • Buyer

    • Property Management Group

    • Property Administrator

    • Custodian

    • Tagging Contact


Role: Buyer

  • The Buyer is the PO Manager who creates and/or approves the PO which acquires the property item

    • Though Buyers don’t have a role in the PMS, key information from the PO is used when creating a property item in the PMS

  • The Buyer must ensure property management information on the PO is complete and accurate. This information includes:

  • Description

  • Installation Location (Bldg, Floor, Room)

  • Category Code

  • Responsible ORG

  • Model #

  • Custodian

  • Tagging Contact

  • Govt. Retain Title?


Role: Property Management Group

  • The Property Management Group (PMG), within the Comptroller’s Office, oversees all University property

  • The PMG is responsible for

    • Ensuring compliance with all University & regulatory agency policies & procedures

    • Reviewing and adding financial assets greater than $5,000 to the asset management system


Role: Property Management Group (cont.)

  • Recording all financial transactions to the General Ledger involving the assets, i.e. dispositions, transfer of assets to other ORGs, cost adjustments, and depreciation

  • Sending tags to Tagging Contacts

  • Recording certain changes/edits in the Property Management system

    • Movement of item(s) from one building to another

    • Movement of item(s) from one CNAC or ORG to another

    • Changes in disposition, i.e. disposal, sale, etc.


Role: Property Administrator

  • A person designated by their School/Center as the liaison between their organization and the PMG on all property issues

    • Coordinates the property management activities of their assigned area(s)

    • Records certain changes/edits in the Property Management system

    • Maintains complete and accurate inventory of their areas equipment

      • Manages the disposal process, including disposal forms


Role: Custodian

  • Responsible for the physical custody of the property item

    • This is generally, but not necessarily, the person that is using the item

    • Name of person as specified on the Purchase Order by the Buyer

      • Must be a Penn employee


Role: Tagging Contact

  • Responsible for tagging the property item

    • Responsible for placing inventory tags supplied by the Property Management Group (PMG)

    • Sends notification to PMG and Property Administrator of item(s) tagged (item and tag #) when tagging completed

    • Name of person as specified on the Purchase Order by the Buyer

      • Must be a Penn employee


Lifecycle of Property Asset in PMS

  • Recording of Asset

  • Maintenance of Asset Data

    • Location

    • Custodian & Tagging Contact

    • Description, Serial Number

    • Condition

    • Depreciation

  • Disposal of Asset

    • Retirement

    • Sale

    • Lost, Missing, or Stolen Items


Flowchart for Recording Assets inProperty Management System (PMS)

Asset

Purchased

by Buyer

Asset Object Codes

Asset

Invoiced

Asset

Received

Asset

Paid

PMGAddsAsset

to PMS*

& Sends Tags to

Tagging Contact

Tagging Contact

Tags Asset

& Sends Info to

PMG & Prop Admin

PMG Updates

PMS with

Tagging Info

*Acquisition date is generally last day of the month the item was paid and not the date it was delivered or placed in service.


Recording of Assets:Acquisition Cost

  • The acquisition cost or property value of assets acquired via Purchase Orders or C-forms is the purchase price

    • Charges for transportation and/or labor for equipment installation and checkout shall be added to the value of equipment, when they can be determined


Recording of Assets:Government Ownership of Equipment

  • When completing a requisition, if the answer to the question ‘Govt. Retain Title?’ is

    • Yes

      • PMG will not add this item to the PM System*

      • Property Administrator must maintain records at the department for this property separately

    • No

      • PMG will add the item to the PM System

      • Only University owned assets are added to PM system

        * Refer to specific terms and conditions of grant/contract as property may convert to University ownership after completion of grant/contract.


Recording of Assets:Transfers-in of Equipment

  • The Property Administrator should notify the Property Management Group (PMG)

    • With the Department’s assistance, PMG will determine if the property was purchased by Penn AND whether the

      • Cost is over $5,000

      • Item has a useful life of more than one year

      • University has title to the property

    • If yes to all, PMG will add item to PMS

    • If the University doesn’t retain title, the Property Administrator must maintain records at the department for this property separately


Maintenance of Asset Data:Property Administrators Update PMS

  • Property Administrators are responsible for maintaining/updating the following in the Property Management System:

  • Location

    • Building/Floor/Room

  • Custodian Name

  • Tagging Contact

  • Tagging Contact Phone Number

  • Description

  • Manufacturer

  • Model #

  • Serial #

  • Condition

  • In Use

  • Surplus

  • Mark for Retirement

  • Retirement Reason


Maintenance of Asset Data:Movement of Equipment

  • Change in location within the same building and ORG code

    • Property Administrator can update in system

  • Change in location to different building or change in ORG or CNAC codes

    • Complete Equipment Change Form and send to PMG

  • Home use

    • Complete a Home Use Statement Form

      • Send to PMG with appropriate signatures


Disposal of Assets:‘Retirement’ of Equipment

  • Departments may ‘retire’ or discard obsolete or unusable equipment by completing the Notification of Disposition of Equipment Form which includes:

    • Reason for Disposal

    • ID # or Tag #

    • Description, Manufacturer, Model, Serial

    • Acquisition Date and Cost, Accumulated Depreciation and Sale Price (if applicable)

  • Obtain appropriate approval signatures prior to disposal

  • Remove and discard University ‘tag’ at time of disposal


Disposal of Assets:Sale of Equipment

  • Departments may sell surplus equipment by completing the Notification of Disposition of Equipment Form

    • Obtain appropriate approval signatures prior to disposal

    • Remove and discard University ‘tag’ at time of disposal

  • Include all information previously noted and a copy of BEN Deposit slip must be attached to form

    • Deposit of sale proceeds should be recorded as follows:

      xx0-xxxx-x-xxxxxx-5602-xxxx-xxxx (Sale amount)

      xx0-xxxx-x-xxxxxx-2111-xxxx-xxxx (Sales Tax 7%)

      • Sales to tax-exempt entities require a copy of that entity’s tax-exempt certificate


Disposal of Assets:Lost, Missing, or Stolen Property

  • Property Administrators should notify the PMG immediately if property is lost, missing, or stolen

    • Notify University Police first of stolen property

  • Statements required

    • Lost or Missing: The custodian must write and sign a statement of how the loss occurred

    • Stolen: Obtain a copy of the police report

    • Attach the statement/police report to the Notification of Disposition of Equipment Form


Depreciation: What is Depreciation?

  • Depreciation is a non-cash expense that reduces the value of an asset because of wear, age or obsolescence

    • Most assets lose their value over time, i.e. they depreciate

  • Depreciation expense information is necessary for

    • University financial statements

    • Indirect cost proposal


Depreciation: What is Depreciation?

  • From University Financial Policy 1106.02

    • All plant assets will be depreciated using the straight line method

    • One-half of one year’s depreciation will be recorded in both the year of acquisition and the last year of useful life or the year of disposition whichever comes first

  • The Category Code, entered when creating a Purchase Order, determines the number of years the item will be depreciated, i.e. the useful life of the asset


Depreciation:Example of Depreciation Schedule

  • Equipment purchased for $10,000 with a five(5) year of useful life.

    • 1st year depreciation = $1,000

    • 2nd year depreciation = $2,000

    • 3rd year depreciation = $2,000

    • 4th year depreciation = $2,000

    • 5th year depreciation = $2,000

    • 6th year depreciation = $1,000


Depreciation:Use of in Calculation of Book Value

Book Value = Acquisition Cost – Accumulated Depreciation

  • Using the prior example, what is the Book Value of the asset in year five (5)?

    • 1st year depreciation = $1,000

    • 2nd year depreciation = $2,000

    • 3rd year depreciation = $2,000

    • 4th year depreciation = $2,000

    • 5th year depreciation = $1,000

      • The last year of depreciation is 50% of one year straight line value (i.e. 50% of 2,000) regardless if disposition is June 30 or July 1

  • Accumulated Depreciation is $8,000

  • Book Value is $2,000


Property Inventory Verification

  • Quarterly review of asset additions, transfers, & disposals by Hirons & Associates, Inc.

  • Hirons quarterly review site visits started in October 2005

    • Verify asset additions

      • category code, location, description, custodian, tagging contact

    • Tagging of untagged assets

    • Inquiry on asset transfers and asset disposals


Inventory of Assets

  • Federal regulations require bi-annual inventory of all University owned assets

  • Inventory by Hirons & Associates

    • For FY06, the bi-annual inventory will begin in April 2006

    • Beginning in FY07, quarterly cycle counts will replace the biannual inventory

      • One-eighth (1/8) of Penn’s property will be counted each quarter

      • All assets counted over a two year period


Access Request Forms/System Availability

  • In order to obtain access, users must

    • Attend training

    • Complete ‘Request for Administrative Mainframe Logon ID…’ Form

      • Need to identify ORG(s) OR CNAC

      • Need Access Administrators Signature

  • System available from

    • 8:00 a.m. – 6:00 p.m.


Best Practices

  • Periodic ‘self’ inventory to ensure data is properly reflected in PMS

  • Manage proactively as events happen – ask…

    • Where the equipment is located (Bldg/Floor/Room)?

    • Who is the tagging contact?

    • Who is the custodian?

    • What equipment is used for research?

  • Establish operating procedures for your area for maintaining property effectively

    • May require coordination with the following

      • Building/Business Administrator

      • Grants Manager/Administrator

      • Principle Investigator (PI)

      • Custodian/Tagging Contact


End-User Support Model

PMG

[email protected]

Property

Administrator

Tagging

Contact

Custodian


Reminder: Events that Trigger Need to Review/Manage Equipment Update

  • Initial Recording of Property

    • Add Serial or Manufacturer Numbers

    • Confirm Category Code, Location, Custodian, and Tagging Contact, Tag Number, etc.

  • On-going Maintenance

    • Movement of Property (Building/Floor/Room)

    • Change of Custodian or Tagging Contact

    • Change of Status (Condition, Surplus, In Use)

    • Change in Government Ownership of Equipment

    • Transfer of Property from one ORG to another ORG

  • Disposal of Property

    • Transfer Property to another Organization

    • Retirement or Sale of Property

    • Missing, Loss or Stolen Property

  • Transfer In of Property


Your Next Steps

  • Complete ‘Quiz’ at end of this presentation

  • Register for Property Management Hands-on Training

    • (http://knowledgelink.upenn.edu/)

  • Print, complete, obtain authorizing signatures, and bring to hands-on training class the Request for Administrative Mainframe LOGON ID form.

    • http://www.finance.upenn.edu/comptroller/forms/

  • Meet with your School/Center Senior BA to review your role


Property Management Knowledge Building Quiz


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