Overview
SDE did not conduct an annual physical inventory for its generally accepted accounting principles (GAAP) and non-GAAP assets during the audit period; the agency does not know when the last inventory was completed. SDE’s management provided inventory lists, which were kept by several departments. Some lists were dated 2014; others were dated 2017. The SDE Fiscal Department did not have a complete list of all SDE assets. Without performing and documenting an annual physical inventory, SDE cannot ensure that its assets are properly safeguarded against loss, theft, and misuse.
Authoritative Guidance
The Asset Management section of SDE’s ICP states, “The Fiscal department will conduct an inventory of assets annually.” In addition, the OSC Fixed Assets—Accounting and Management Policy, issued on July 1, 2004 and revised November 1, 2006, states,
There shall be a reconciliation of the fixed asset inventory against the books and records maintained by the Department, either on the Fixed Asset Subsystem or other documented methods. This reconciliation is to be done, at a minimum, on an annual basis.
Reasons for Inadequate Controls
SDE officials told us that SDE’s prior management had not taken responsibility for SDE’s inventory to ensure compliance with policy requirements and SDE’s ICP requirements for an annual physical inventory.
Recommendations
- SDE’s management should ensure that its inventory staff is trained on fixed-asset policies and procedures.
- SDE should conduct an annual physical inventory of all assets and complete reconciliations of the annual physical inventory results to its asset records.
- SDE’s Fiscal Department should maintain a complete record of all SDE assets on file.
Auditee's Response
Since this audit, SDE has updated and created an all-inclusive and whole-department inventory of assets. Additionally, SDE intends to link asset inventory to the aforementioned CRM software suite. The result will be total transparency into the entire life-cycle of an asset, including tagging, value, description, locating, and surplus or destruction date. Any additions, deletions or location changes will be recorded as they occur. A comprehensive fixed asset inventory audit will occur annually.
Auditor's Reply
Based on its response, SDE is taking measures to maintain a complete record of all its assets on file and conduct an annual physical inventory, but it should also ensure that its inventory staff is trained on fixed-asset policies and procedures.
| Date published: | August 27, 2018 |
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