The Fixed Asset Accounting and Control System (FAACS)

1
The Fixed Asset Accounting and Control System
(FAACS)

• System Overview
• Continuing Issues

2
Purpose of FAACS

• To provide auditable information for the required
  capital asset disclosures in the Comprehensive
  Annual Financial Report (CAFR).
• To help ensure that property, plant, and
  equipment are acquired, controlled, and disposed
  of in the best interests of the Commonwealth.

3
General Requirements

• Capitalizable Assets All fixed assets valued at
  5,000 or greater must be capitalized in FAACS.
• Controlled Assets Assets with a historical cost
  below 5,000 may be entered into FAACS at the
  agencys discretion.

4
FAACS Asset Types

• Land
• Buildings
• Infrastructure
• Equipment and,
• Construction in Progress (CIP)
• Not retained in the FAACS Masterfile

5

• How Often Should You Update FAACS?
• For all assets except CIP, create a new FAACS
  record within 30 days of the receipt of the asset
  or invoice.
• For CIP, update at least Quarterly.

6
COMMON FAACS PROBLEMS

• Timely data entry.
• Recording an incorrect acquisition date.
• Selecting an inappropriate nomenclature (which
  determines the useful life of the asset).
• Entering CIP balances timely. Land should not
  normally be recorded in FAACS as CIP.
• Failure to create a new asset Masterfile record
  and reduce CIP balances as projects are
  completed.

7
COMMON FAACS PROBLEMS continued

1. Maintaining both a CIP record and a FAACS
   Masterfile record for the same asset.
2. Failure to periodically review the useful life of
   an existing asset record in FAACS.
3. Not capitalizing internally developed software
   costs.
4. Failure to capitalize Energy Efficiency
   Contracts.

8
COMMON FAACS PROBLEMS continued

• Not entering asset disposals timely.
• Certifying the monthly CARS reconciliation
  without considering if FAACS has been
  appropriately updated. Agencies should show
  incorrect asset balances as reconciling items on
  the CARS reconciliation.

9

• Any Questions?

10
The Lease Accounting System (LAS)

• System Overview
• Continuing Issues

11
Purpose of LAS

• To provide auditable information for the required
  capital and operating lease disclosures in the
  Comprehensive Annual Financial Report (CAFR).
• Provides a real-time web-enabled lease accounting
  system for recording and tracking agency lease
  information.

12
Types of Leases

• A Capital lease effectively transfers ownership
  rights, risks, and rewards to the Lessee.
• An Operating lease does not transfer ownership
  rights and is simply a rental of the asset.

13
Lease Classification Rules

14
Lease Entry Form
15
Required LAS Elements

• Agency Number
• Lease Number
• Category
• Sublease
• CARS Fund
• CARS Program
• Lease Description
• Payment Timing

16
Required LAS Elements continued

• Beginning Payment Date
• Estimated Economic Life
• Remaining Economic Life
• Title Passes Option
• Bargain Purchase Option
• Bargain Renew Option

17
Required LAS Elements continued

• Failure to Renew Penalty
• Fair Market Value of Leased Asset
• Estimated Salvage Value
• Guaranteed Residual Value
• Unguaranteed Residual Value

18
Payment Entry Screen
19
Required LAS Elements Payment Stream Information

• Payment Frequency
• Payment Amount
• Executory Costs and
• Payment Type Original Lease or Extension

20
COMMON LAS PROBLEMS

• Timely data entry for each new or renewed lease.
• Selecting an incorrect CARS Fund.
• Selecting an incorrect CARS Program.
• Entering a Lease Description that does not
  differentiate one lease from another
• Entering an economic life or remaining economic
  life that is not appropriate

21
COMMON LAS PROBLEMS

• Not updating the Title Passes or Bargain Purchase
  fields.
• Recording an inappropriate Fair Market Value.
• Using Land/Building Lease Category
  inappropriately.
• Recording a Guaranteed Residual Value.

22
COMMON LAS PROBLEMS

• Entering an incorrect payment frequency.
• Entering an incorrect payment amount.
• Not entering scheduled lease increases or
  Consumer Price Index increases for the entire
  lease when the lease is originally entered.
• Not entering executory costs.
• Entering only one years payment information
  based upon a purchase order when the lease
  actually extends for several years.
• Not entering a renewal or extension for an
  expiring lease.

23

MOST SIGNIFICANT LAS PROBLEMS

• Not updating general lease information timely.
• Entering inappropriate fair market values.
• Entering incorrect payment frequencies, number of
  payments, payment amounts and executory costs.

24
Questions and Contacts

• Any Questions?
• Contacts
• Robert D. Eddleton Assistant Director
• bobby.eddleton_at_doa.virginia.gov
• 804-225-2257
• Andrew Short Financial Reporting Analyst
• andrew.short_at_doa.virginia.gov
• 804-225-2002