Property Accounting: Is it capitalization or control?

December 4, 2013       The NonProfit Times      

Nonprofits are well aware of the need for good accounting for their money, but they often overlook the importance of good accounting of assets other than cash.

During the 2013 Risk Summit, Mark T. Hessel of HCA Asset Management LLC discussed the importance of property records.

Hessel said ensuring effective property accounting practices means having clearly defined goals and objectives, and he recommended the following as way to bring that about:

  • Know the requirements. Whether this pertains to the government or the Financial Accounting Standards Board (FASB), be aware of them.
  • Identify timelines and deadlines. The obvious first question is: When is the fiscal year end (FYE)? When do auditors typically start each year? If auditors will have a role (other than review) how much involvement will there be?
  • Identify all potential stakeholders. The key accounting question is: Who will be responsible for the overall maintenance of records? Is there obvious overlap in risk management and insurance? Are purchasing decisions centralized or decentralized? * Can the data be used for forecasting replacement, capital projections or other growth and planning functions?
  • Develop and clearly state a realistic scope. Balance is key between capitalization and control decision. Is one of the goals theft deterrence?
  • Explore all viable options.  Does the organization have the tools to support and perpetuate what is created? There is an integrated (module) system, a stand-alone system, a simple Excel/Access database, outsourcing.