Date: February 14, 1996 Code: AD 96-04
To: Vice Presidents for Administration
From: Jon H. Regnier George A. Pardon Senior Director Accounting Director Physical Planning and Development Business and Finance
Subject: Coopers & Lybrand GAAP Audit--Capitalization Records
To date, ten campuses have had GAAP Audits performed. One area of the audits that has been problematic is the Fixed Asset category related to completed capital outlay projects that are older than five years. The main problem arises from the lack of detailed records supporting the ledger balances for pre-1990 construction activity.
The testwork performed by the auditors to assess the accuracy of the campus' records has predominately been a comparison of the capitalized cost per square foot carried on the campus books to the auditor's estimated cost. The auditors use the Engineering News Record (ENR) to arrive at an estimated cost per square foot. Significant differences between the auditor's cost and the campus' cost per square foot may result in the expenditure of substantial campus effort to research and resolve the variances. Attachment I contains an example that demonstrates the auditor's methodology.
Other methods of reviewing fixed assets to prepare for the audit are available to the campus. A comparison of the campus map to capital asset records should identify major structures that have been improperly included or excluded. Also, capital outlay expenditures identified in the Governor's Budget provide the campus with significant information.
In an effort to reduce the effort required of the campuses to successfully complete the capital assetphase of the audit, we have prepared a summary of capital expenditures. This summary is included as Attachment II and is based on expenditures reported in the Governor's Budget from fiscal years 1963/4 thru 1993/4.
Significant effort is being expended in the Chancellor's Office to update our construction work in progress records. We have noted that capitalization letters have not yet been issued for a number of completed projects funded by the Dormitory Construction Fund (576) or by Public Works Board leases. Capitalization letters for these projects will be issued by mid-April.
We recommend that your financial managers analyze your fixed asset records prior to your audit. Once auditable fixed asset records are established, this information can be used to build more accurate records based on capitalization letters issued upon completion and occupancy of facilities.GAP:WPM:js AD 96-04 C&L GAAP
Distribution: Presidents (w/o Attachments) Financial Managers (w/o Attachments) Accounting Officers (w/ Attachments) Mr. Richard P. West - Vice Chancellor, Business and Finance (w/ Attachments) Mr. Bill Musselman - Cash and Asset Manager (w/ Attachments)