Five Minutes For Finance - Schedule of Fixed Assets
Maintaining a Schedule of Fixed Assets
Nonprofit organizations manage various resources to fulfill their missions, and fixed assets play a crucial role in sustaining their operations. Fixed assets include property, equipment, furniture, and vehicles that the organization owns and uses over an extended period. Maintaining a comprehensive and up-to-date fixed asset schedule is essential for financial accountability, compliance, and strategic decision-making.
A fixed asset schedule provides a detailed record of all tangible assets owned by a nonprofit. It is a vital tool for:
Financial Management: Helps in accurate financial reporting and budgeting.
Compliance: Ensures adherence to accounting standards and regulatory requirements.
Asset Tracking: Prevents asset loss or mismanagement by keeping records of location, condition, and usage.
Depreciation Accounting: Facilitates proper calculation of depreciation expenses, impacting financial statements.
Audit Preparation: Provides necessary documentation for external audits and internal reviews.
Key Components of a Fixed Asset Schedule
To maintain an effective schedule, nonprofits should include the following details for each asset:
Asset Description: A brief description of the item (e.g., "Office Laptop - Dell XPS 15").
Acquisition Date: The date the asset was purchased or donated.
Cost or Fair Market Value: The purchase price or estimated value if donated. This cost should also include any costs of delivery, installation, and customization.
Asset Tag or Identification Number: A unique tracking number assigned to each asset.
Location: Where the asset is physically located (e.g., "Main Office - Conference Room").
Depreciation Method: The method used to calculate depreciation (e.g., straight-line method).
Useful Life: The estimated number of years the asset will be in service.
Residual (Salvage) Value: The expected value of the asset at the end of its useful life.
Current Condition: The asset’s state (e.g., "Good," "Needs Repair").
Disposition Status: If the asset has been retired, sold, or donated, including the date and method of disposal.
Steps to Maintain an Effective Fixed Asset Schedule
Establish an Asset Policy: Develop and document a fixed asset policy outlining:
The minimum value for classifying an item as a fixed asset. This amount varies by organization and industry, but is typically between $2,500 and $5,000.
Depreciation methods and useful life estimations.
Procedures for asset acquisition, tagging, and disposal.
Use Asset Management Software: While spreadsheets can be used, investing in dedicated asset management software improves efficiency and accuracy. Many nonprofit accounting software solutions offer asset tracking features.
Conduct Regular Asset Audits: Perform periodic physical asset verifications to ensure all recorded assets exist and are in use. This helps identify misplaced, stolen, or obsolete assets.
Keep Records Updated: Ensure asset schedules are updated whenever assets are acquired, relocated, depreciated, or disposed of. Assign responsibility to a staff member or department for record maintenance.
Align with Financial Reporting: Reconcile the fixed asset schedule with the general ledger to ensure consistency in financial reporting. Work with accountants or financial advisors to adhere to nonprofit accounting standards (e.g., GAAP or IFRS).
Train Staff: Educate employees on the importance of asset tracking and the procedures involved to maintain an accurate schedule. Implement a clear process for reporting asset movements or changes.
Note on Tracking Lower-Value Items
Many organizations’ fixed asset thresholds are higher than the cost of personal computers or laptops. In many ways, this is an appropriate policy in that it recognizes the increasing pace of turnover/replacement of this type of equipment as well as it simplifies the accounting processes related to these purchases. However, despite their relatively low cost, these assets (and the information which they contain) are extremely valuable to the organization. Therefore, a best practice is to maintain a schedule of computers and other valuable “non-fixed” assets that is similar to the Schedule of Fixed Assets, less the depreciation and useful life data. This will enable the organization to keep track of these assets. Another benefit of this type of schedule is that it will facilitate planning for replacing or upgrading equipment as it becomes obsolete.
Conclusion
A well-maintained fixed asset schedule is fundamental for nonprofit organizations to achieve financial transparency, accountability, and efficient resource management. By implementing best practices such as regular audits, asset tagging, and utilizing asset management software, nonprofits can safeguard their assets and enhance operational effectiveness. Taking a proactive approach to fixed asset tracking ensures the organization remains compliant with financial regulations and supports sustainable growth.
About this Series
Subsequent articles in this series will cover other topics related to nonprofit financial management. Here is a list of, with links to, previous articles:
About the Author
For over 30 years, Robert Pascual has been a leader in nonprofit financial management as a CFO, consultant, conference speaker and educator. He holds an MBA from the Haas School of Business at the University of California and is the founder and principal of Robert Pascual, MBA LLC. He has worked with small, mid-size, and large nonprofit organizations spanning the fields of education, workforce development, housing, health, philanthropy, social services, media, fiscal sponsorship, nature, and the environment. Each of these organizations has faced both unique and common challenges, some of which are probably similar to ones that you wrestle with.