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Why Investing in Annual Fixed Asset Audits is a Must for Public Schools

Summary

Public schools are typically the largest expenditure center in any city budget, and rightly so. However, with such significant budgets, it is imperative that public school districts make sound investments in their assets, which includes annual fixed asset audits. Annual audits help reduce total expenses, reduce liability, boost efficiency, and ensure equity in the use of district-owned items.

To learn more about how your district can benefit from an annual fixed asset audit, read on!

What is a Fixed Asset?

Fixed assets are those assets of a long-term nature intended to be held or used by the school district for more than one year and which are not consumable in nature. This includes things like equipment, furniture, technology, land, buildings, improvements other than buildings, construction in progress and leased property under capital leases.

Fixed assets are divided into two categories, Capitalized (the expense is depreciated across a fixed time period, often 7-15 years) and Non-Capitalized (the expense is recorded in the year it was purchased). Definitions for Capitalized and Non-Capitalized assets are typically:

  1. Capitalized assets are non-consumable fixed assets with a useful life of at least one year and a unit cost of $5,000 or more.
  2. Non-Capitalized assets are non-consumable fixed assets with a useful life of at least one year and a unit cost of $1,000 – $4,999, or have a unit cost of under $1,000 but are easily pilferable. Easily pilferable items generally consist of technology, such as:
  • – Computers
  • – Laptops 
  • – Chromebooks 
  • – iPads/Tablets
  • – Cell Phones
  • – Document Cameras

Fixed assets are those assets of a long-term nature intended to be held or used by the school district for more than one year and which are not consumable in nature.

Why Are Annual Fixed Asset Audits Important for Public Schools?

The amount of money public school districts need to spend on their assets can be staggering. In fact, public schools are one of the largest spending sectors in any city. However, these expenditures are often hard to track without annual fixed asset audits.

An audit can help identify potential problems before they become larger issues. It can also provide the insight necessary to make sound investments that will benefit your district for years to come.

And of course, yearly or bi-annual audits are required to stay in compliance with federal regulations GASB34 and 2 C.F.R. Part 200.313 (d)(2) which are crucially important to comply with to ensure that your district is eligible to receive Federal Funds.

State and local government expenditure by category

What Benefits Can a District Expect from an Annual Audit?

One of the biggest benefits you can expect from an annual audit is increased efficiency. Results from your audit will ensure that your assets are being used appropriately and in a way that will help them last longer. This means having the correct number of items in the correct place and using them in the right manner for their intended purpose. 

“An audit can help identify potential problems before they become larger issues. It can also provide the insight necessary to make sound investments that will benefit your district for years to come.”

Audits can also help identify opportunities for cost savings that may not have been previously realized. If you’re purchasing new items each year without checking whether they’re still necessary or fully functional then these expenditures could be unnecessary. By conducting an audit on an annual basis, then you’ll know how much of these items are really needed or functioning at their fullest potential before making any new purchases this year!

Picture those large closets filled with computers and laptops: how many of them are still useful, how many should be disposed? Without an annual audit, those items will typically go untouched for years, while new items are purchased to replace them rather than bringing existing items back into use.

Additionally, by auditing your district’s assets annually, you’ll be able to reduce the liability your organization could face should something happen to one of these assets. For example, if you have a district-owned truck and it gets in an accident, then you might need to pay for the damages incurred because it was not properly insured or maintained. By auditing your equipment annually, you can ensure that this equipment is insured and up-to-date with its maintenance schedule so that there won’t be any surprises when something goes wrong.

Finally, your annual audit report and up-to-date fixed asset master list are also two of the most important documents to have available in case of needed insurance claims. If a flood, fire, tornado, or other disaster wreaks havoc on your school, having a recent (within the previous two years) inventory of all your fixed assets is the best way to ensure the maximum insurance reimbursement amount. Insurance companies aren’t in the business of needlessly giving out money, the more assets you can prove, the more they will be required to reimburse.

Insurance claim form

Conclusion

In order to be efficient and stay compliant, public schools need to perform annual fixed asset audits. Not only do these audits protect your district from penalties and fines, but they can also help your district save money on spending, reduce insurance premiums and increase claims reimbursement, increase efficiency in the use of assets, and aid in budget planning for the upcoming fiscal year.

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