Zombie assets are the opposite of ghost assets. These are fixed assets that your school district owns, and may be actively using, but do not appear in your fixed asset records. We’ll discuss how you end up with zombie assets, how to avoid them, and what you should do about the problem.
What is a zombie asset?
Zombie assets can be a big problem for schools districts. Zombie assets are fixed assets that your school district owns but do not appear in your fixed asset records. As a reminder, your fixed assets are everything your district owns that have a useful life of more than one year and are not consumable in nature. This typically includes things like equipment, furniture, technology, land, and buildings. Generally, these are divided into Capitalized Assets (purchase price over $5,000) and Non-capital assets (purchase price under $5,000).
What is so bad about zombie asset?
Financial Reporting
Zombie assets are not accounted for on the balance sheet, which means they’re not included in depreciation calculations leading to inaccurate yearly financial reporting. Along with simply being bad practice, poor financial reporting will lead to non-compliance of state and federal reporting practices and the risk of a failed audit. You will also risk losing your Federal Title I funding.
Insurance Claims
Your zombie assets are also not being covered by your insurance policy. Should your district be hit with a natural disaster or other occurrence leading to the loss of assets you won’t have any records that the zombie assets existed to back up insurance reimbursement claims. This poses a serious financial risk to your district at a time when you are worrying about many other things.
Budgeting
The problem with zombie assets is that you don’t notice them until it’s too late. This can cause schools to overspend on assets they already own simply because there was no easy record of existence. In today’s age of one-to-one devices and increasing classroom technology, there can be a huge amount of over-spending to replace items that were unknowingly stored in a closet or had been moved to a different classroom. This can be particularly costly with large expensive items that are not used frequently and may not be widely known that they already are available.
Why do we end up with zombie assets?
But how do these “zombies” get created? One common way is through the purchase of new replacement equipment, like computers or desks. The old equipment isn’t disposed of quickly enough, and eventually gets forgotten about and left behind somewhere on campus—a storage room, the boiler room, or even a classroom. Eventually, the staff finds it again when they need something from there. They may have been using it all along without realizing it wasn’t being recorded correctly in their asset database system!
Other common ways districts end up with zombie assets:
– Items were purchased at the school level and never entered into the Fixed Asset record at the administration level
– Items were donated to the school so no purchase order was created that would normally trigger a process of entering the item into the Fixed Asset record
– An asset was marked as missing during a less-than-thorough physical inventory and was subsequently removed from the Fixed Asset record, however, the item was actually in the district’s possession all along
– The asset was scheduled to be retired and was removed from the Fixed Asset records but was never physically disposed of
– You inherited the asset from another entity before you started using it
– The asset has been around since before the district created its Fixed Asset record and was never properly added at the outset
– The asset was paid for in multiple installments and thus evaded detection and addition to the fixed asset record through normal processes
How to find out if you have any zombie assets?
The right way to find out if you have any zombie assets is to complete a physical inventory of your entire district and reconcile the results against your fixed asset records. You should be performing physical inventories annually (they are required a minimum of every two years for all items purchased with Federal funds) whether you use your own staff or a third party to complete the task. While your staff members will have the best of intentions, they are not always well-versed in all the items in the district that should be included in the inventory, often causing them to miss items and leading to zombie assets. For this reason even for districts that handle their annual physical inventory internally, we recommend using a third party to complete a physical inventory every 2-3 years to catch all of your zombie and ghost assets.
What do we do with the zombies we find?
It’s important to use your inventories to identify zombie assets. If the assets aren’t listed as assets on paper, then from an accounting and insurance standpoint they don’t exist!
Regardless of how you end up with zombie assets, they should be accounted for properly. This means adding the asset into your Fixed Asset ledger, if you don’t know the original purchase price you should use the current fair market value. If you don’t, you’re likely overstating your expense and understating the value of your net assets. This could lead to problems with your financial reporting and audit compliance.
Conclusion
Knowing that zombies are lurking in your accounting should be enough to motivate you to do something about them. The sooner you can get rid of them, the better. But there are a few things you need to do first.
1. Know what a zombie asset is.
2. Know how to find any zombie assets you have.
3. Know how to get rid of the zombies you find.
4. Repeat the process on a regular basis to ensure that no zombies are ever lurking in your accounting again.
If you do a physical inventory and find that there are no zombies, then pat yourself on the back because congratulations! You’re doing a great job of managing your inventory and keeping track of everything.
