720-913-5000 auditor@denvergov.org

Audit Report

Capital Assets: Building and Equipment

The objective of the audit was to determine the operating effectiveness of internal controls over capital assets, and to assess the accuracy, existence, and completeness of capital asset data in the system of record.

 

Watch the Audit Committee presentation here.

Unclear and inaccurate capital asset records throughout city agencies are resulting in missing and misidentified equipment and other physical and intangible assets. This audit tried to track down and account for a sample of the city’s audits and found missing and misidentified items across several agencies. Based on the audit teams’ sampling method, 670 to 1,590 of the city’s assets – including buildings and fixtures – could be missing or improperly classified. In total, the city’s capital assets are disclosed at a value of $7.1 billion. This audit matters because it’s important for every agency to keep track of the items paid for with billions of tax payer dollars.

Our audit of the City’s capital assets revealed that there are several inaccuracies in the capital asset list. Inaccuracies can be addressed and prevented with improvements to the capital asset policies and procedures, monitoring of inventory counts, and access to capital asset training.

Errors found in our detail testing indicate that City agencies may not be giving due process and care to the annual capital asset inventory process, during which personnel are responsible for ensuring that their listed capital assets can be found and that any inaccuracies found are noted and corrected. We tested a statistical sample of 124 assets across the City, and 15 items could not be located. Other issues noted in our testing include:

– Incorrect asset locations
– Inaccurate or insufficient asset descriptions
– Blank or incorrect identification numbers
– Incorrect classification
– Incorrect historical cost
– Missing records
– Lack of timeliness in adding new assets and deleting old ones

Our audit work also identified areas where the Controller’s Office can improve its monitoring of the agencies’ capital asset inventory process and enhance the guidance given to agencies through capital asset policies and procedures. Additionally, inventory training should be updated accordingly and made available to all personnel responsible for tracking their agencies’ assets.

1.1 Establish and Assign Locations – The Departments of Safety, Parks and Recreation, Public Works, General Services, Denver Arts and Venues, and the Wastewater Management Division should work with the Controller’s Office to establish new Workday locations as necessary, document a review of the agency’s asset list to identify assets that need a more precise location, and assign assets a more precise location in Workday.

Department of Safety Response: Agree – June 30, 2018

Department of Parks and Recreation Response: Agree – September 30, 2018

Department of Public Works Response: Agree – June 30, 2018

Department of General Services Response: Agree – June 1, 2018

Denver Arts and Venues Response: Agree – September 30, 2018

Wastewater Management Division Response: Agree – June 30, 2018

Detailed agency narratives are included in the Agency Response letter beginning on page 31.

1.2 Correct Errors Found During Testing – The Departments of Safety, Parks and Recreation, Public Works, General Services, Denver Arts and Venues, and the Wastewater Management Division should correct the errors and data inconsistencies identified in the audit’s detailed testing, as found in Appendix B of the report.

Department of Safety: Agree – June 30, 2018

Department of Parks and Recreation Response: Agree – September 30, 2018

Department of Public Works Response: Agree – June 30, 2018

Department of General Services Response: Agree – June 15, 2018

Denver Arts and Venues Response: Agree – June 30, 2018

Wastewater Management Division Response: Agree – June 30, 2018

Detailed agency narratives are included in the Agency Response letter beginning on page 31.

 

1.3 Clean Up Old Data Issues – The Departments of Safety, Parks and Recreation, Public Works, General Services, Denver Arts and Venues, and the Wastewater Management Division should develop and document a plan of action for the 2018 asset inventory count that will instruct personnel to detect and correct the types of errors identified in this audit, including blank identification numbers, wrong locations, and inaccurate or insufficient asset descriptions.

Department of Safety: Agree – June 30, 2018

Department of Parks and Recreation Response: Agree – September 30, 2018

Department of Public Works Response: Agree – June 30, 2018

Department of General Services Response: Agree – July 6, 2018

Denver Arts and Venues Response: Agree – June 30, 2018

Wastewater Management Division Response: Agree – June 30, 2018

Detailed agency narratives are included in the Agency Response letter beginning on page 31.

 

1.4 Develop Internal Capital Asset Policies and Procedures – In consultation with the Controller’s Office, the Departments of Safety, Parks and Recreation, Public Works, General Services, Denver Arts and Venues, and the Wastewater Management Division should develop internal capital asset policies and procedures. Policies and procedures should specify a strategy for conducting an efficient and effective inventory of their capital assets, such as selecting an inventory count approach, utilizing subsidiary inventory systems, utilizing of secondary reviews or spot checks, verifying of the accuracy of information in the capital asset list, developing internal training, and using performance metrics and goals for individuals involved in the annual inventory process.

Department of Safety: Agree – June 30, 2018

Department of Parks and Recreation Response: Agree – September 30, 2018

Department of Public Works Response: Agree – June 30, 2018

Department of General Services Response: Agree – July 15, 2018

Denver Arts and Venues Response: Agree – September 30, 2018

Wastewater Management Division Response: Agree – June 30, 2018

Detailed agency narratives are included in the Agency Response letter beginning on page 31.

 

1.5 Develop Plan to Monitor Internal Controls – The Controller’s Office should develop a plan to monitor internal controls to ensure that agencies are giving due process to the asset inventory counts, such as:

-Having a Controller’s Office representative sign the annual Asset Certification Form to indicate internal review;

-Performing spot checks of assets, potentially using GPS-tagged photos for existence verification.

Agency Response: Agree – July 31, 2018

Auditee Narrative: The Controller’s Office currently uses a spreadsheet to track agencies’ submission, notes from our review and follow-up on their inventory ‘packet’, which includes the Annual Asset Certification form. We will analyze this spreadsheet to see how we can more clearly indicate that the form was reviewed. The Controller’s Office will also look for ways to ensure the physical inventory was completed and this will include performing spot checks.

1.6 Update Fiscal Accountability Rules and Procedures – The Controller’s Office should continue to update relevant Fiscal Accountability Rules and associated procedures to address the following:

-Making changes due to the Workday conversion, including updating procedures and step-by-step guidance;

Requiring agencies, in consultation with the Controller’s Office, to determine whether they need supplemental asset procedures, which could include a step- by-step guide for conducting efficient and effective capital inventory counts. Policies and procedures should incorporate GAO’s best practices of inventory, such as selecting an approach, strategy, and frequency for different types of assets; utilizing subsidiary inventory systems and photos to verify existence during the annual count; performing spot checks of asset data in Workday; incorporating “floor-to-book” and “book-to-floor” tests; utilizing performance metrics; and developing agency-specific training; and

Mandating training requirements for all agency personnel involved in annual capital asset inventory counts.

Agency Response: Agree – July 31, 2018

Auditee Narrative: The Controller’s Office will update the Fiscal Accountability Rules so that the policy and procedures are current. We will work with agencies to develop internal procedures where necessary and ensure asset custodians have the knowledge and tools necessary to perform and manage the inventory process for their agency.

1.7 Develop Training Regarding Capital Assets – Once the FARs are updated, the Controller’s Office should develop asset training and make it available to all City personnel on City U. Topics for training should include, but are not limited to, allowable costs for capitalization, how to book partially donated assets, manual entry of assets (outside of the Workday procure-to-pay process), assigning costs of improvements to pre-existing assets, and how to split costs over multiple capital projects/assets.

Agency Response: Agree – July 31, 2018

Auditee Narrative: The Controller’s Office will develop training to ensure agencies have the knowledge and tools necessary to record and manage assets for their agency.

1.8 Update Agency-Specific Asset List and Asset Certification Form – The Controller’s Office should update the Asset Certification Form to require that agencies indicate which assets they spot-checked. 

Agency Response: Agree – July 31, 2018

Auditee Narrative: The Controller’s Office agrees that more controls need to be put in place to ensure the physical inventory was completed by the agency. For some agencies, this may include a spot check by the asset custodian as a part of their internal procedures. We will evaluate this specific suggestion along with other potential internal controls and make updates to the rule and agency internal procedures accordingly.

 

 

Follow-up report

A follow-up report is forthcoming.

Other related reports

None at this time.

Audit Team: Dawn Wiseman, Cody Schulte, Anna Hansen, Marc Hoffman, Ivy Anderson, and Brandon Stolba