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F I N A N C I A L I N F O R M A T I O N S Y S T E M S

Peralta Community College District

Business Blueprint Document

Fixed Asset Management Process

Project: PeopleSoft v8.9– Asset Management

Version: V.00

Date: July 25th, 2011

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Document Change Log

Date Author Description

7/25/2011 Prasad Mavuduri Initial draft

Document Review & Approval History

Name Department Signature Approval Date

Project Participants The following individuals have been designated to participate in the definition of requirements for the project

Name Designation Phone Email

Ron Gerhard Vice Chancellor, Finance and

Administration, Project Sponsor (510) 466-7275 rgerhard@peralta.edu

Sarah C Schrader Internal Auditor (510) 466-5363 sschrader@peralta.edu

Information Technology

Tony Tortirice

Kyu Lee Applications Software Analyst (510) 466-7328 klee@peralta.edu

EB5C

Bill Vorhies Project Director (818) 257-2035 wvorhies@earthlink.net

Prasad Mavuduri Project Manager (408) 828-9909 prasad@tekyogi.com

Functional Consultant

Technical Consultant

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User Sign-off Responsibility

“By providing user sign-off, this confirms that you have reviewed and agree with the Consolidations

Process Design contained within this document. It provides the “go ahead” to work with the technical

resources to develop and implement the Planning & Consolidations Process Design contained herein. If

it is necessary to change this design after the project has commenced, the time and cost of this initiative

may be impacted.”

Name Signature Company / Title Date

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Table of Contents Project Participants ..................................................................................................................... 2

1 Fixed Asset Management at Peralta Community College District .............................................. 5 2 Scope, Requirements / Expectations .......................................................................................... 5 3 Explanation of Terms of PeopleSoft Asset Management ........................................................... 7 4 Technical Solution Details .......................................................................................................... 8 5 Test data ..................................................................................................................................... 9 6 Special Process Considerations ................................................................................................. 9 7 Reporting .................................................................................................................................... 9 8 Security / Authorization ............................................................................................................... 9 Appendix A - Fixed Asset Management Policy ......................................................................................... 10

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1 Fixed Asset Management at Peralta Community College District

Generally Accepted Accounting Principles (GAAP) mandates and defines governmental fixed assets to include such items as Land, Improvements other than buildings, Buildings, Fixtures, Equipment (including Instructional, Non-Instructional and Vehicles), and Construction in Progress. Fixed assets are categorized in to two groups - Capitalized and non-Capitalized depending on the cost and life of the assets. Capitalized assets are depreciated over time according to the District’s policy and the non-Capitalized assets are “expensed” right away at the time of acquisition. Capitalized fixed assets are to be reported on the District’s Balance Sheet at their historical costs which not only includes the purchase price or cost of construction, but also any other charges incurred to place the asset in service. Control of non-Capitalized fixed assets resides at the department level and these assets are referred to as “Small Dollar Fixed Assets”. Fixed Asset Management policy is available in Appendix “A” for quick reference.

2 Scope, Requirements / Expectations

The District has been maintaining these assets, values, depreciations etc. in various forms of legacy systems. Now it is decided to incorporate fixed asset management into the financial systems residing in PeopleSoft system (version 8.9). The broad scope of the project is to maintain fixed assets in PeopleSoft system to calculate depreciations post the asset values into General Ledger, integrate asset management with Purchasing / Accounts Payable / Inventory Management.

The first phase of the project is to enumerate the assets which are both capitalized and non-capitalized from the physical inventory report (produced by the physical inventory verification agency), load them into PeopleSoft’s Asset Management module along with their barcodes / tag numbers, automate the calculation of depreciations in the system, post the depreciation amounts into GL, and facilitate the reporting of capitalized assets from PeopleSoft GL system.

The second phase of the project is to integrate asset management module with Purchasing and Accounts Payable modules in PeopleSoft system. It is also desired to see if the assets could be activated automatically once the goods are received in the inventory. Automatic tag generation for new assets will be attempted in this phase. This phase also should automate the retirement of assets once the fixed assets are depreciated to below the threshold value. This phase should also be able to retire the legacy methods to maintain the assets and depreciations completely.

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In future, there is a desire to slowly retire the barcode system and replace that with Radio Frequency IDs for fixed assets. This will ease physical verification of assets down the line enabling precise identification of assets. Provisions shall be made in the current phases of asset management module, early enough to accommodate RF ID implementation if desired.

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3 Explanation of Terms of PeopleSoft Asset Management

Locations: Location is used to store all the organization’s physical address used in Asset Management. Location definition and Location Detail pages are used to enter details like addresses, phones, and building details etc. Calendars: Calendars are created to maintain fiscal year periods which are used in calculating depreciation of assets accurately. These calendars are used in setting up depreciation allocations for Asset Management. ChartField Values: ChartField values provide the structure of accounts and related data that is used to post accounting entries from Asset Management module. ChartField typically includes Asset(GL) Account, Currency Code, Department, Fund Code, Alternate Account etc. Asset Books: Asset Books define financial information about an asset such as cost, depreciation rules, retirement information, Tax etc. Multiple Asset Books, with separate cost and depreciation rules, can be maintained to accommodate multiple reporting needs. Business Units: Business Units are required to logically group transactions for each legal entity for accounting purposes. These are used to define restrictions and default transactions entered in Asset Management module. It is possible to map many Asset Management Business Units point to the same General Ledger Business Unit. Asset Categories: Asset Categories classify assets by type for accounting entry and reporting purposes and are used to reflect how assets are reported on the balance sheet. The combination of Asset category and transaction type determines the account to be debited or credited when and asset transaction is entered. We can set the asset status to be depreciable or non-depreciable in the definition of Asset Category.

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Asset Class: Asset Classes are used to classify assets for reporting purposes. In combination with Asset Category, Asset Class will refine the asset classification. For example, within a broad category of Furniture & fixtures, an asset can be further classified as a desk. Asset Profiles: Asset Profile is a template that stores standard depreciation criteria for a type of asset and the corresponding asset books Asset Profile includes Asset Type, Asset Category, Asset Book, Depreciation Method, Child Asset Inheritance details etc. Accounting Entry Template: Accounting Entry template is the central table that system uses for creating accounting entries in the general ledger, for all financially impacting asset transactions. Accounting Entry Templates are created for each transaction type in combination with Asset Category, Cost Type, and Transaction Code. AET is a crucial component of the Asset Management module to process the asset transactions accurately. ABCD tables of Assets: In Asset Management module, ABCD table set up is crucial and mandatory. ABCD stand for Asset (basic Info), asset Book (definitions), asset Cost (Adjust & Transfer), and asset Depreciation tables. A-table holds physical non-financial information of the assets; B-table holds depreciation rules such as method, life, service date, salvage value etc.; C-table holds financial information of the assets such as cost, quantity, ChartFields, and category; D-table holds the results of depreciation, such as accumulated depreciation and depreciation adjustments. Any activity in A,B,C tables will result in open transactions and then running depreciation process (AM_DEPR_CALC) updates the D table.

4 Technical Solution Details

PeopleSoft (v. 8.9) delivers a predefined Excel to Component Interface (ExcelToCI.xls) spread sheet template to organize and upload asset data from a MS Excel spreadsheet into Asset Management module. Once the data is uploaded into AM module’s INTFC_FIN and INTFC_PHY_A tables, the data is available for Transaction Loader to process as financial Adds which invokes the same edits enforced when entered online. This method greatly reduces the efforts required for data entry. There are some CI interface sheets created previously which shall be reviewed to see if they could be salvaged for current implementation. The current solution includes defining the master and control data required for Asset Management module at PCCD. This exercise will include defining the organization structures, locations, financial control definitions, Asset related control data like classes and categories, and Journal templates etc. After the control data definitions, convert the asset data from the

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physical verification provider to suit the Component Interface format. Once ExcelToCI.xls is made ready, assets will be loaded into the system while scrubbing the data as necessary.

< Details to be filled here> Once the assets are loaded into the system, the depreciation run set up will be configured with validation reports as needed. User authorizations will be configured to post the depreciation entries into General Ledger.

< Details to be filled here> A report will be generated to choose and retire assets periodically. This report will be able to run either on demand or as a scheduled job.

< Details to be filled here>

5 Test data

6 Special Process Considerations

7 Reporting

8 Security / Authorization

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Appendix A - Fixed Asset Management Policy

1. Purpose

The purpose of this policy is to introduce fixed asset accounting concepts and to provide users with an

understanding of the policies in controlling the fixed assets of the District. This policy is designed to maintain the

fixed assets of the District including additions, changes, and dispositions. Generally Accepted Accounting

Principles (GAAP) defines governmental fixed assets to include such items as Land, Improvements other than

buildings, Buildings, Fixtures, Equipment (including Instructional, Non-Instructional and Vehicles), and

Construction in Progress. Fixed assets are to be reported at historical cost. Historical cost not only includes the

purchase price or cost of construction, but also any other charges incurred to place the asset in service. Not all fixed

assets are required to be reported on the District’s balance sheet. Specifically, fixed assets with extremely short

useful lives and or minor value are reported as “expensed” assets in the period they are acquired. Fixed assets that

are reported on the balance sheet are “capitalized”. GAAP reporting requires the District to maintain physical

accountability over the assets owned by the District. Control of noncapitalized fixed assets resides at the department

level and is referred to in this policy as “Small Dollar Fixed Assets”.

2. Definitions

Small Dollar Fixed Assets- These assets are items with an original cost of $500 (to $5,000), and may include items

that are sensitive, portable, or prone to theft items. The District Warehouse puts an inventory tag on all Fixed Assets

exceeding $500 in value and on some lesser-value sensitive items that have a higher likelihood to be stolen (i.e.,

computer monitors and audio visual equipment). These items are not capital assets but are tracked for control

purposes. - Many Fixed Assets consist of multiple components that make up the asset. This is particularly true for

personal computer systems. The District has decided to control all personal computers as a system. A system has

the following characteristics:

1. Consists of multiple property sub-units which function together as a single fixed asset.

2. Individual sub-unit costs are generally not significant in comparison to the total cost of the entire

system.

Capital Assets- A Capital Asset is defined as a fixed asset that meets all of the following criteria:

1. It is tangible in nature.

2. It has a useful life of greater than one year.

3. Its unit cost, including freight and installation, exceeds $5,000.

4. It must be tracked for state or regulatory purposes (regardless of its cost).

Capital Assets acquired by the District are recorded at cost. Cost is equal to either the fair market value of the asset

if it is being donated or the amount paid for the asset. In addition, ancillary costs associated with preparing the

property for its intended use should be capitalized. All Capital Assets over $500 are tagged with a PCCD Inventory

Tag.

Land Assets- Land assets include the following ancillary costs: land original contract cost, brokers commission,

legal fees for examining and recording ownership, cost of ownership guarantee insurance policies, cost of real estate

surveys, cost of razing old buildings, structures, or other improvements acquired with the property, cost incurred to

put property in condition for its intended use, including draining, clearing, landscaping, land filling, and grading

costs. Excluded are fees for ownership searches, expenditures in connection with disposal of refuse, costs of utility

easements, and repairs to other improvements.

Building Assets- Building assets include the following ancillary costs: building original purchase price , cost of

construction, expenses incurred in remodeling, reconditioning, or altering a purchased building to make it suitable

for the purpose for which it was acquired, cost of excavation, grading or filling of land as part of the construction of

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a specific building, expenses incurred for the preparation of plans, specifications, blueprints, etc., cost of building

permits, architects’ and engineers’ fees for design and supervision, other costs such as temporary buildings used

during the construction period that are not moveable or reusable and are razed at the end of construction. Excluded

are extraordinary costs that are merely incidental to the erection of the building (e.g., those due to strike, flood, fire,

or other casualty), and the cost of abandoned construction.

Machinery, Equipment, and Vehicles- Machinery, Equipment, and Vehicles include the following ancillary costs:

original machinery, equipment, and vehicle invoice cost, freight and storage charges, installation costs, and costs for

testing and preparation for use. All costs incurred after acquisition but prior to placing in service to make a fixed

asset ready for use should be capitalized as part of the cost of the asset. All Machinery, Equipment, and Vehicles

Assets over $500 are tagged with a PCCD Inventory Tag.

Adding auxiliary equipment to a vehicle such as installation and testing of radios, antennas and other

communications devices, installation and testing of electronic equipment, or painting and application of logos on a

vehicle are also be capitalized as part of the vehicle cost of the asset.

Capital Lease Assets- A Capital Lease Asset is a lease that transfers substantially all the benefits and risks of

ownership to the District. A lease must meet one or more of the following four criteria to qualify as a capital lease:

1. Ownership of the leased property is transferred to the District at the end of the lease term.

2. The lease contains a bargain purchase option.

3. The lease term is equal or greater than 75% of the estimated useful life of the property.

4. The present value of the future minimum lease payments is 90% or more of the fair market value of the

leased property.

Capital Lease Assets must be capitalized and depreciated over the useful life of the asset. Account for capital leases

with a net present value of the future minimum lease payments or fair value, whichever is less. All Capital Lease

Assets over $500 are tagged with a PCCD Inventory Tag.

Construction In Progress- A Capital Projects Fund is used to account for the construction of a Capital Asset. As

construction progresses, the cumulative expenditures are capitalized as Construction In Progress (CIP). Upon

completion of the capital asset, the balance in the CIP account is transferred to the appropriate account such as

Building or Equipment. Projects that have reached 100% completion are transferred. Projects that have not reached

100% completion will continue to be tracked as Construction in Progress. Interest cost incurred during the

construction period is subject to capitalization as part of the cost of construction when conditions identified by FAS-

34 (Capitalization of Interest Cost) exist.

Improvements, Betterments and Extraordinary Repairs- Improvements, Betterments and Extraordinary Repairs to

an asset that increase future benefits from an existing capital asset beyond its previously assessed standard of

performance must be capitalized. Capitalizable leasehold improvements are classified within the commodity class

major group “Building or Land Improvements”. Increased future benefits typically include:

1. An extension in the estimated useful life of the asset.

2. An increase in the capacity of an existing capital asset.

3. A substantial improvement in the quality of output or a reduction in previously assessed operating

costs.

The following Improvements, Betterment and Extraordinary Repairs that do not extend the useful life of the asset

are not capitalized and are instead expensed:

Replacements of roof coverings are not capitalized unless the replacement extends the useful life of the

building.

Replacement floor coverings and window coverings are not capitalized.

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Costs to remodel a building to a different use, where the remodeling does not extend the useful life of

the structure itself, are not capitalized.

Self Constructed Assets- When the District utilizes internal staff, resources, equipment, and/or materials to construct

a building or piece of machinery, fixture, furniture or equipment for its own use which meets the capitalization

thresholds, an acquisition cost will be established and the asset must be capitalized. All direct costs, including

materials and labor costs, are included in the total cost of the asset. Overhead (indirect) costs are not included unless

they were incrementally increased by the construction of the asset.

Donated Assets- Donated Assets of tangible personal property valued greater than $500 must be recorded at the

property’s fair market value. Donations over $50,000 must be approved by the Board of Trustees before they can be

placed into service. All Donated Assets over $500 are tagged with a PCCD Inventory Tag.

3. Value Determination

Purchased fixed assets are recorded at historical cost including all applicable taxes and all appropriate ancillary costs

less any trade discounts or rebates. In some instances, the cost of the property may not be available and the cost of

the asset may be estimated and used as the basis for capitalization.

4. Tagging and Logging Fixed Assets

All assets exceeding $500 in value and purchased via a Purchase Order and delivered to the District Warehouse will

be tagged with a PCCD Inventory Tag. Users receiving items that were delivered directly to the College (that did

not come through the District Warehouse) must notify the Warehouse staff of receipt of the item, so that the

Warehouse Staff can log a PCCD Inventory Tag for the item. Inventory tags will be sent to the user to affix to the

asset.

When notifying the Warehouse of receipt of an item, or when the Warehouse logs the receipt of the item, the

following information must be provided/captured:

PO Number (for the purchased item)

Tag Number (Warehouse Staff to provide)

Campus

Building Number/Name

Room Number

Requestor/User Name on the PO

Serial Number of the Item

Description of the Item

Manufacturer’s Name (or a Vendor Name)

Model

Cost of the Item (including all ancillary costs)

Date Received

5. Asset Classes, Capitalization Thresholds, and Economic Life

The usefulness of most assets, other than land, declines over time and must be depreciated over its Economic life.

The District Finance Department will depreciate an asset and keep track of its accumulated depreciation. This

information will be recorded in the Fixed Asset Module of the PROMT system and will be reported in the District’s

Annual Financial Statements. Depreciation will be calculated using the straight line method, which is the standard

practice in public sector accounting. The cost basis used in straight line depreciation is the acquisition cost. Annual

depreciation is calculated by dividing the basis by the Economic life. The total amount depreciated can never exceed

the acquired cost. The Depreciation Convention used by the District is the Half Year Convention. This means one

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half of the annual depreciation is taken in the year the asset is acquired, and one half of the annual depreciation is

taken at the end of the economic useful life.

The below table describes the asset class, capitalization threshold and economic life:

Asset Class Capitalization Threshold Economic Life

Land $1 Forever

Land Improvements $1 40 years

Equipment (Instructional and

Non-Instructional) $5,000 5 years

Building $1 40 years (or useful life)

Building Improvement $1 40 years (or useful life)

Construction In Progress $1 40 years (or useful life)

Machinery and Tools $5,000 5 years

Vehicle $5,000 5 years

Computers, Audio Visual

Equipment, and

Telecommunication Equipment

$5,000 5 years

Lab/Science/ Engineering

Equipment $5,000 5 years

Outdoor Equipment, Grounds and

Agricultural Equipment $5,000 5 years

Athletic Equipment $5,000 5 years

Furniture and Accessories $5,000 5 years

6. Acquisitions of Assets

All fixed assets must be purchased via the District’s Requisition and Purchase Order system. Fixed assets above the

District’s bid thresholds will be purchased via a formal bid, conducted by the Purchasing Department. No fixed

assets are to be purchased utilizing the District’s Blanket Order or Just-In-Time purchasing system. When

purchasing a fixed asset utilizing the District’s Requisition and Purchase Order system, the ordering department

must provide the following information within the requisition:

A. Description of the fixed asset.

B. Proper Fund Code (Object Code and Account Code) for the asset.

C. Final location of the asset including the Campus, Building, and Room Number where the asset will be

located.

D. If the asset is to be purchased with Categorical or Grant Funds, the name of the Categorical and or

Grant must be provided in the text of the requisition. If the Grant stipulates any special handling of the

Fixed Asset or requires a stipulation to get multiple quotes for the items being purchased, this

information must be noted in the requisition. If no notes are made, the District Purchasing will

purchase the items via its normal purchasing procedures.

7. Transfers of Assets Between Departments

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When an asset is transferred from one department to another, or to another building within the same

department/college, the sending department completes an EQUIPMENT ACTION REQUEST FORM and forwards

it to the District Warehouse with the following information filled in:

Requesters Name and Date.

Location of Existing Asset.

Action Requested (i.e., remove from inventory or relocate).

New building number/name, room number, and user name.

Information about the asset or description of the asset.

Itemizes each asset with the Quantity, Item, Serial Number, PCCD Number and estimated Dollar

Value of the asset.

Obtains approval of the Business Manager/ Department Head.

The District Warehouse Supervisor will note the new location of the fixed asset in the PROMT system.

8. Retirement/Disposal of Fixed Assets from Inventory

Upon determination by a department that a Fixed Asset is either no longer needed or not serviceable, an

EQUIPMENT ACTION REQUEST FORM is filled out by the department and forwarded to the District Warehouse.

The following information must be provided:

Requesters Name and Date.

Location of Existing Asset.

Action Requested (i.e., Surplus).

New building number/name, room number, and user name.

Information about the asset or description of the asset.

Itemizes each asset with the Quantity, Item, Serial Number, PCCD Number and estimated Dollar

Value of the asset.

Obtains approval of the Business Manager/ Department Head.

Once the District Warehouse receives the approved EQUIPMENT ACTION REQUEST FORM , the Warehouse

will pick up the asset and move the asset to a storage area to await disposition. The EQUIPMENT ACTION

REQUEST FORM will then be forwarded to the Purchasing Department for retirement of the asset in the PROMT

system. The Purchasing Department will consolidate the surplus items, and a couple of times a year will obtain

Board of Trustees approval for either the sale or disposal of the surplus items. All surplus disposals are conducted in

accordance with Education Code Section 81450-81460.

9. Lost or Stolen Fixed Assets

When suspected or a known loss of a fixed asset occurs, the affected department should conduct a search for the

missing property. The search should include transfers to other departments and possible declaration of surplus. If

the missing property is not found, the Department Head must be notified and a Police Report must be filed with the

PCCD Police Department.

The individual deemed to be primarily responsible for the asset, as well as that individual’s supervisor, must

complete and sign a statement detailing the events surrounding the disappearance of the asset, and must forward that

statement along with the EQUIPMENT ACTION REQUEST FORM to the District Warehouse. The Warehouse

staff will forward the EQUIPMENT ACTION REQUEST FORM and statement to the Purchasing Department for

review, and the Purchasing Department will forward it to the Finance Department for removal of the asset from the

PROMT system.

10. Physical Inventory

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A physical inventory of all fixed assets will be conducted every two (2) years. In addition, random periodic spot

checks may be made by the Purchasing/Warehouse Departments to confirm the location of selected fixed assets.

A list of qualifying assets in each building shall be printed out and carried into the building to determine if the assets

remain in place. The aide of a qualified and experienced person working in the building shall be required to

determine the status of the assets. Note: Any asset moved, lost or retired or upgraded must be noted. It should also

be checked at this time if there is any asset in the building which is not listed but seems obviously of a value that

would require it to be inventoried. All adjustments discovered shall be made to the inventory. The loss, destruction

or retirement of any inventoried items must be reported to the Board of Trustees.

End of Policy.