Property Accounting Policy
|POLICY TITLE:||Carnegie Mellon University Property Accounting Policy|
|DATE OF ISSUANCE:||This policy was originally issued to campus in October 1987 as Organization Announcement 291-B, the Manual of Property Management Policies and Procedures, and was updated in February 2007. This version was approved on November 12, 2020.|
|ACCOUNTABLE DEPARTMENT/UNIT:||Accountable Department/Unit: Controller’s Office. Specific questions regarding Policy content should be directed to the manager of Property Accounting Services.|
|ABSTRACT:||the purpose of this policy is to address the appropriate management and financial treatment of university capital assets with the companion document describing the applicable federal guidelines related to government-owned assets.|
This statement sets forth policies and procedures for Carnegie Mellon University with regard to:
- Property owned by CMU.
- Property acquired by CMU and funded under a sponsored research grant or contract.
- Property furnished by the U.S. government or other sponsors and being used as part of a research grant or contract with CMU.
- Property owned by other parties (e.g., vendors, faculty, staff, agencies, etc.) but being used in a facility owned or leased by CMU.
a. Asset tag
The 6‐character Carnegie Mellon tag number, usually affixed to a movable asset on a blue and white tag, which identifies the asset in the Property Accounting Services (PAS) records.
The recording of the acquisition cost of an item as benefiting two or more accounting years.
When an asset ceases to be part of the record of active assets in the PAS.
d. Excess Equipment
Equipment that the university still possesses after the contractual period, or property that is no longer needed by a department but may be needed by other departments at CMU
e. Fair Market Value
An exchange price that a buyer and seller would reach through negotiation under current market conditions.
f. Fixed Asset (real property)
The long-term tangible assets used in a business that are classified as property, plant and equipment.
g. Movable Asset
An article of nonexpendable tangible property (i.e., having physical existence) or an intangible property (i.e., having no physical existence, such as patents, inventions, copyrights, and software) which has a minimum original cost of $5,000.00 USD, and a useful life of two years or more.
h. Original Cost
The total net unit cost of the asset at the time the asset was acquired. This includes the purchase price less any applicable discounts, plus any delivery charges, and cost of original installation. The definition also includes (1) the fair market value if the item was found during a physical inventory, or (2) any donated value.
i. Property Accounting System (PAS)
A comprehensive database that accounts for all university movable equipment and fixed capital assets and complies with all current applicable government regulations. The PAS assists in the collection and maintenance of asset information from the point of acquisition through disposal; identifies pertinent asset information (e.g., model, manufacturer, fund code, serial number, location, use and condition codes); tracks financial information, including original cost (by Oracle string), transaction date and depreciation detail; and has display and data entry capabilities so that users can view, modify or create reports of assets.
3.0 Roles and Responsibilities
The following roles and responsibilities have been established to provide reasonable assurance of internal control over compliance requirements.
3.1 Property Accounting
CMU’s Property Accounting Services (PAS) department is responsible for CMU’s centralized property management, which includes:
Reviewing all related accounting data submitted in support of property acquisitions.
- Maintaining a record for each capitalized item in the PAS database. These records in aggregate support the net book value of property recorded in the General Ledger (GL).
- Conducting physical inventories at intervals of not less than once every 24 months to ensure the item’s existence and condition.
- Maintaining procedures for recycling or disposing of movable assets to ensure:
- Proper control over physical disposition is maintained.
- Adequate supporting records are kept to document a sale, trade-in or other disposition.
- Tagging assets with CMU asset tags when movable assets are received.
3.2 Department Property Officers
Each department is directly responsible for the control, use and security of capital movable and fixed assets in its possession. In accordance with this responsibility, each department must have a formally appointed property officer who works directly with PAS.
The department property officers (and others directly involved in equipment purchasing and inventories) are responsible for:
- Ensuring compliance within the department with the university policies and procedures.
- Assisting PAS in locating new equipment for tagging.
- Recording the movement and disposition of equipment and advising PAS of these changes.
- Assigning responsible department personnel to assist with physical inventories.
3.3 Sponsored Projects Accounting (SPA)
SPA is responsible for:
- Submitting all final property reports to the federal government.
- Requesting authorization to dispose of government property upon completion of a grant or contract from the Federal government.
- Notifying PAS of the final disposition of the property by written memo so that the items may be removed from the PAS database.
3.4 Insurance Services
Insurance Services is responsible for ensuring compliance with Uniform Guidance regulations regarding insurance coverage.
3.5 Procurement Services
Procurement Services is responsible for providing CMU's buying community with the information, processes and tools to make effective buying decisions and meet compliance obligations.
4.1.1 Movable Assets
- Individual items of furniture or equipment, with an original cost of $5,000.00 USD or more and a minimum useful life of two years are capitalized. Original cost includes the cost of the item, less any applicable discounts, plus any delivery charges and cost of installation. All of these costs are recorded as having been incurred on the asset's acquisition date. The cost also includes any modifications, attachments, accessories, or auxiliary apparatus (accessories), which are acquired with the item and are necessary to make the item usable for its acquired purpose. Such accessories acquired after the capitalized item and with costs less than $5,000.00 USD are not capitalized.
- The acquisition document for an accessory with an original cost of $5,000.00 USD or more, which is to be inserted into an existing movable asset, must state the CMU asset number or original purchase order number for the existing movable asset. If this information is not provided, the accessory will not be capitalized regardless of its value.
- Donated items, with a fair market value of $5,000.00 USD or more per item and a minimum useful life of two years are capitalized. The fair market value of each item is used as its original cost in the PAS database and recorded as a gift-in-kind.
- Repairs are not normally capitalized, however, repair costs of $5,000.00 USD or more may be capitalized if they extend the item's useful life two years or more beyond its original life. This fact, if applicable, must be stated on the purchase order by the ordering department.
- The following are also not included in capitalized costs:
- Demolishing or dismantling equipment.
- Rearrangement, transfer or moving of capitalized items from one university location to another, including costs incurred in dismantling, transporting, reassembling and reinstalling such items in a new location.
- Warranty costs or maintenance contracts.
4.1.2 Fixed Assets
- Land is capitalized but not depreciated; land improvements are capitalized and may be depreciated.
- Existing buildings and new construction are capitalized.
- Additions and renovations to buildings must be (a) greater than $5,000.00 USD for individual items, or (b) project costs of at least 20 percent of the total building cost or $100,000.00 USD, whichever is lower. Examples of renovations are as follows:
- Adding additional square footage to an existing building.
- Remodeling an existing building, including floor covering, etc.
- Installing a completely new heating, cooling or plumbing system.
- Extending wiring or plumbing to an area previously without such.
- Replacements or repairs that maintain or restore a building are not capitalized.
4.2 Depreciation Method
Depreciation is calculated by the straight-line method (i.e., an equal amount of the original cost per year over the life of the asset).
4.2.1 Movable Assets
For cost recovery purchases, depreciation is calculated from the day of acquisition to the day of disposal.
For financial statement purposes, depreciation is calculated using the half-year convention whereby a half year of depreciation is taken for the fiscal year of acquisition and a full year taken for each subsequent year except for the final year, when the final half year is taken.
4.2.2 Fixed Assets
For both cost recovery and financial statement purposes, depreciation is calculated using the half-year convention whereby a half year of depreciation is taken for the fiscal year of acquisition and a full year taken for each subsequent year except for the final year, when the final half year is taken.
4.3 Purchases for Sponsored Awards
CMU is responsible for the appropriate stewardship of all government-owned property, including property acquisition, control, use, care, maintenance, disposition, and reporting. The federal government requires the university to procure, use and control property in accordance with federal laws, executive orders, federal sponsoring agency instructions and specific grant or contract special instructions. It is government policy to rely upon the university's internal written procedures, subject to evaluation and approval. Documented procedures relating specifically to government assets can be found in the Government-Owned Property Guide [pdf].
4.4 Tagging of Movable Assets
All university movable assets must be tagged with a CMU asset tag, which corresponds to the asset number in the PAS database. In addition, any movable assets for which title is held by the government should also be tagged with a Property of U.S. Government tag.
4.5 Maintenance of Movable Assets and Fixed Assets
Maintenance of all government property is the responsibility of the principal investigator (PI). Maintenance of all other sponsor and CMU property is the responsibility of the departmental property officers and department personnel. This includes returning warranty cards as well as regular or periodic maintenance such as lubrication, cleaning or calibration. Maintenance should be performed in accordance with sound industrial practices and the terms of the grant or contract. Appropriate maintenance schedules may be determined by consulting equipment technical manuals. CMU’s maintenance program also includes the inspection of buildings by Facilities Management and Campus Services (FMCS) personnel at periodic intervals to assure detection of deterioration and the need for repairs.
Records of maintenance actions performed, and any deficiencies discovered as a result of inspections, are to be maintained by the persons responsible for maintenance. Maintenance costs are not capitalized.
4.6 Movable Assets Physical Inventory
A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years in compliance with Uniform Guidance.¹
4.7 Disposal or Re-Use of Movable Assets
Subject to the terms of the grant or contract, CMU may be liable when shortages of government property are disclosed or when government property is lost, damaged or destroyed, or when there is evidence of unreasonable use or consumption of government property as measured by the allowance provided by the terms of the grant or contract, the bill of materials or other appropriate criteria.
SPA reports all cases of loss, damage or destruction of government property in CMU’s possession or control to the government property administrator as soon as such facts become known or when requested by the property administrator. The report contains all factual data on the circumstances surrounding such loss, damage or destruction. For any CMU subcontractors with government property in their possession or control which is accountable under a grant or contract, CMU requires the subcontractors to report all instances of loss, damage or destruction of such government property to CMU’s principal investigator who advises SPA and PAS.
In order to comply with these and other CMU requirements, departments must notify PAS concerning any property which is idle, no longer usable, damaged beyond repair, or the department is disposing. For those movable assets being sold to parties outside of CMU the best possible price is to be obtained. Assets must be sold on an as-is, where-is basis.
An asset having been disposed has a disposal code and disposal date in the PAS database, and depreciation is calculated, if appropriate, through the day in which the asset is disposed.
4.8 Records Retention
The university’s Financial Records Retention Policy applies.
5.0 Related Information
- Property Accounting Forms
- Financial Records Retention Policy
- Manual of Property Management Policies and Procedures Glossary [pdf]
- Government-Owned Property Guide [pdf]