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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 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 property@pobox 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