Overview
In our prior audit (No. 2016-0201-3E), we found that Northern Essex Community College (NECC) did not properly record required information on its fixed asset inventory list, conduct a complete annual inventory or any inventory testing of its fixed assets, or designate an inventory coordinator.
During our current audit period, NECC’s fixed asset inventory list was inaccurate, and not all assets had been added to the list. Additionally, NECC could not substantiate that it had conducted annual inventories, or inventory testing, for fiscal years 2019 and 2020. Finally, NECC had not designated an inventory coordinator to oversee and coordinate annual inventories.
As a result of these issues, NECC cannot be certain that all its fixed assets are adequately safeguarded against misuse or that it can effectively detect lost, missing, or stolen items.
We randomly selected and tested 80 fixed assets (40 from the fixed asset inventory list and 40 from NECC’s Lawrence, downtown Haverhill, and main Haverhill campuses) and noted that 40 (50%) of them were in locations different from the locations on the list. Further, we noted that 3 (4%) of these 80 fixed assets located on the campuses were not on the fixed asset inventory list.
Authoritative Guidance
Institutions of higher education in Massachusetts are required to follow fixed asset guidance issued by the Office of the Comptroller of the Commonwealth (CTR).
CTR’s “Accounting and Management” policy states,
There shall be an annual inventory taken of fixed assets owned by every Department. This inventory shall include, at a minimum, a verification of the existence and location of fixed assets owned by a Department. . . .
There shall be a reconciliation of the fixed asset inventory against the books and records maintained by the Department. . . . This reconciliation is to be done, at a minimum, on an annual basis.
In addition, NECC’s “Inventory Control / Fixed Assets” policy states that the college must designate an individual to oversee and coordinate annual inventories.
Reasons for Issues
NECC personnel stated that the locations on the fixed asset inventory list were not always updated when assets were moved to new locations. Regarding annual inventories and inventory testing, NECC personnel stated that staffing to conduct annual inventories or inventory testing had been an issue since the loss of a dedicated position in fiscal year 2018. They also stated that NECC administration could not designate an inventory coordinator because of funding constraints.
Recommendations
- NECC should review and edit its current fixed asset inventory list to include accurate locations for all assets on the list.
- NECC should enhance its “Inventory Control / Fixed Assets” policy to include detailed procedures for all phases of the fixed asset inventory process and provide guidance for the relocation of fixed assets.
- NECC should conduct annual inventory testing or physical inventories and designate an inventory coordinator to oversee and coordinate them.
Auditee’s Response
Overall, we agree with this finding.
We would like to add that the sampled tested assets procurements were all appropriately procured with the required internal approvals. [The 2019 coronavirus, or COVID-19, pandemic] impacted the timing of the [fiscal year 2020] physical inventory which started in August 2020 versus June 2020 due to the campus on-site [COVID-19] restrictions.
We agree with the above 3 recommendations. In conjunction with the [fiscal year 2021] physical inventory, the college has procured and installed WASP AssetCloud portal technology inventory control asset system which will both assist in the physical inventories processes and serve as the college’s database of record for all required track assets, effective July 1, 2021. This technology will provide an automated fixed asset tracking system and enable us to provide a streamlined annual physical inventory process and the ability to update the existing inventory data. Warehouse and [information technology] staff have completed the provided training and are developing an implementation plan, currently. Further, we are updating the college’s inventory control / fixed asset policies and procedures, including the relocation/moving of assets. The college’s comptroller’s position was vacant for a portion of [fiscal year 2020], and a new comptroller joined the college on July 29th, 2020. The comptroller [will] serve as the college’s inventory coordinator.
Auditor’s Reply
Based on its response, NECC is taking measures to address our concerns on this matter.
| Date published: | June 30, 2021 |
|---|