Summary
Schools, colleges, and universities are always looking for ways to save time and money. But when it comes to fixed asset physical inventory audits, by not preparing properly they could be overlooking opportunities to make smarter decisions about their assets and equipment that will save time and budget in the long run. When having a physical inventory completed, you’re going to have to take the time out of your day and you’re going to have to cause some disruptions to students and teachers during school hours. This guide is going to walk you through some steps that will help you get prepared for your next fixed asset inventory audit so that you can save yourself from extra hassle, time, and disruption to the learning environment.
Preparing for the Inventory
The first step in preparing for a fixed asset physical inventory audit is to identify the people who will be conducting the audit and then determine if they have the correct qualifications. This may be an independent third party (see our list here on how to choose the right independent auditor) or an internal team of staff who have been trained in the procedures. The next step is to prepare your inventory list of all your district’s assets and equipment meeting the reporting requirement (see here for a guide on K-12 Asset Reporting Requirements). This list will typically be found in your asset management software, accounting software, school ERP software, or on an Excel/Google spreadsheet.
You should also prepare a list of what you have that needs repairs or has reached its life expectancy. You can use this information to help auditors plan their inventory survey and properly mark items that may be getting retired from your asset list.
Once you have completed these steps, you can review all of your information one last time before scheduling the auditor to come in and perform the audit.
Gather Your Documents
Before you can complete an inventory audit, there are a few documents that you’re going to need to gather.
– Your list of fixed assets from your last audit
– A map/diagram of the building that has all the potential equipment locations marked on it
– The list of qualifications for assets that are to be audited
– A list of all “unusual” items that an auditor might not expect to be looking for, such as small but expensive electronics, or expensive athletic equipment
– A list of contacts at each school or building that might be needed to help gain access to rooms, examples include: School Principal, School Bookkeeper, School Media Specialist, School IT Coordinator, School Band Director, District Facilities Manager, District IT Head
– A set of Master Keys so that all potential asset locations can be identified
Get Organized
The first step to saving yourself some time and headache for your physical inventory audit is to get organized. You can do this by creating a three-ring binder where you can keep the inventory list in one section, call sheets in another section, and any other forms or documents in a third section. This binder will make it easy for you to pull out information about an asset when you are talking with the auditor.
Another way you can save time is by utilizing spreadsheets. You can create a spreadsheet that groups every type of equipment together with its expected location or department listed as well. This makes it easy for auditors who might not be familiar with a certain piece of equipment because they are only used on campus periodically. If this is done, then they will know what needs to be checked out before they start their work!
What You Need to Know About Audits
You’ve already gathered your inventory list, you should have this ready ahead of time so that it can be provided to your auditor in advance of the audit, but along with the list, you’ll need to include an inventory file. This file will list all of your assets including the asset tag number, expected building and room number, manufacturer, model, serial number, acquisition price, PO number, and any other pertinent information that may be required for the audit.
The audit team will then inspect each item on your inventory list and confirm whether or not each item appears in the file and if the physical location matches the expected location. If any discrepancies are found between the two lists, they will be marked and updated on the new inventory last that is being created as a product of the audit.
If it is included as part of your audit, the auditors will also record data about each item on the list by looking at things like condition, age, remaining useful life (RUL), and maintenance needs. This data will then be recorded into a computer program that will create a report for you that includes detailed information about what’s been surveyed during their visit. You’ll also receive a summary report that provides a high-level overview of what was inspected along with recommendations for future action.
Getting the Most Out of an Audit
An audit is a process of verification or validation. In the context of your school district, it’s a process to ensure that every asset and piece of equipment that the district owns is accounted for and accurately represented on the books. The purpose of an inventory audit is to verify that what you have on paper matches what you actually have in your possession.
To get the most out of an audit, there are four main areas where you should focus:
1) Documenting Assets
Before the audit occurs, take as much time as possible to document all assets and pieces of equipment. You should create a list with as much detail as possible about each item so it’s easy to compare this list with those from your inventory records once they’re completed. You should also be accurately documenting location transfers and disposals of assets throughout the school year.
2) Inventory Records
The second area where you need to pay attention is inventory records. You should review these records and make sure all information reflects what your assets and equipment currently look like. It’s also important that any discrepancies be addressed before the audit takes place.
3) Missing Inventory
It’s also recommended to prepare a list of assets that were missing from the previous inventory so that auditors can specifically lookout for these items and “find” them whenever possible.
4) Reconciliation
This is one of the key phases of an audit and is where you match up the current audit findings with the previous audit findings to determine which assets have gone missing or have changed locations. This is used to produce your new master asset list file which will be used for your financial reporting and will also the basis for your next audit.
After the Audit
After the audit is completed, you’re going to have a master list of all of your fixed assets. This is where having an inventory management system can help you tremendously.
“The purpose of a physical inventory audit is to verify that what you have on paper matches what you actually have in your possession.”
It’s important to keep track of the information that the auditor collected during the audit process. These are things like what year the asset was purchased, who it was purchased from, and how much it cost. You’ll also want to make note of any maintenance costs for each asset as well as any diagnostic testing that has been done on them recently.
If your inventory management system is set up correctly, then this data should be automatically pushed into the system after a purchase order has been received. This will save time and work on your end by eliminating hours spent manually entering data into a spreadsheet or having to find old paperwork to review.
The goal here is to make sure that everyone in your organization knows how to access this information in case someone needs it quickly in the future when they take over a new position or if something comes up with an asset and they need more information about a possible purchase decision down the line.
Correcting Mistakes from the Past
Mistakes happen, but you don’t want to make those same mistakes again, which is why it’s important to look back and see what you can do better next time.
When it comes to fixed asset inventory audits, there are mistakes commonly made that will cost your school money in the long run if they’re not corrected. These mistakes include:
- Not completing regular audits
- Failing to keep records of any changes or repairs done on equipment
- Not keeping good records of purchases or depreciation schedules
- Not keeping records or disposed assets
- Spending budget to replace assets that were simply in storage
- Keeping asset records on the books even after the asset has been marked as missing for multiple years
These situations can be easily avoided by following these steps properly preparing for your next fixed asset audit.
Conclusion
A fixed asset physical inventory is the right move for any school and is generally required by most states. This type of audit can help your organization save time and money. It will also help you get the most out of your assets by providing you with vital information about location, usage, and maintenance status. Audits can be a daunting task, but with the right preparation and team they don’t need to be something to shy away from.
