N9G “TOOLBOX”

1. N9G “TOOLBOX”

2. What is the N9G Tool Box? • The N9G tool box provides the field with helpful information on a wide range of subjects. • The tool box provides information to CNIC Regions & Installations; keeping them “audit-ready” at all times. • We have provided each of you with a tool box, just make sure as we provide you a tool monthly, you keep it in your tool box!

3. Topics that will be filling your Tool Box Monthly • Cost of Goods Sold developed by Inez HoltNovember • Cash & Cash Handling developed by Dierk Jaeger December • Managers Financial Review developed by Connie Milton January • NAF Personnel developed by Sandy New February • Contracts developedby Dierk Jaeger April • Reconciliation developed by Inez Holt July • Assets Inventory developed by Connie Milton August • Refreshment Policy October

4. Assets Inventory A Fixed Asset is defined in DOD 7000.14r and CNICINST 7000.3 as: “Non-expendable property which ordinarily retains its original identity during its period of use, is not fully consumed in normal use, has a unit acquisition value of $2,500 or more and has a life expectancy of more than two years.”

5. Assets Inventory • Examples include: • Furniture, fixtures and office equipment. • When purchases are made in bulk for like items (example: a set of chairs) and the total cost is $2,500 or more, regardless of the unit cost, the items may be capitalized and depreciated for MWR Operations only. • Non-expendable property will be recorded in the general ledger as fixed assets and capitalized. • Property and depreciation records will be maintained as subsidiary records to the general ledger controlling account. • At least annually, the total value recorded on the subsidiary records will be reconciled to the corresponding general ledger account balance. • Each non-expendable item will be given a unique identification number which shall be permanently affixed with a tag or by some other method, to identify activity property. • Assets in this group will be considered fixed assets for depreciation purposes.

6. Assets Inventory • Fixed assets are recorded at cost plus any expenditures necessary to place those assets into use as intended • e.g., installation, freight, testing, legal fees to establish title, and any other costs of putting the asset in the condition and location for use. • Labor costs are included only if the labor is contracted or a NAF employee was hired for the express purpose of performing work to create the fixed assets • Do not include the labor cost of NAF employees working on a fixed asset if the employees would have been on the payroll regardless of whether or not they worked on a fixed asset • Purchase discounts should be applied to reduce the costs; however, interest charges should not be capitalized • If the original cost is not known, an estimated value will be assigned. In determining the estimated value, reference should be made, where possible, to manufacturers, price lists, cost of similar items, and such other sources of information as may be available

7. Assets Inventory Fixed assets are recorded at cost plus any expenditures necessary to place those assets into use as intended e.g., installation, freight, testing, legal fees to establish title, and any other costs of putting the asset in the condition and location for use. • When the source of funds for the original procurement of property cannot be determined, it will be considered to have been purchased with appropriated funds. • Property on loan will be controlled through use of appropriate issue and signed receipt documents • A Certificate of Disposition (NAVCOMPTFORM 2212) must be approved by the CO or his designated representative before a fixed asset may be removed from the fixed asset listing

8. Assets Inventory The series of debit balance asset control accounts 170000-178000 are used to record the cost value of fixed assets of durable or costly nature that have been purchased with NAFs Asset Master Records will be maintained for each asset item in support of the value of these accounts Account 179 is used to accumulate the capitalized value of construction in progress until an item is financially complete. The value is then transferred to account 170 - 178 as appropriate

9. Asset Master Records - SAP Prior to making an acquisition, an asset master record shell needs to be created in the asset management module in SAP The asset shell contains only the minimum amount of information to actually save the record in the system. It contains only the asset description, depreciation settings (useful life) and location (cost center, responsible cost center, etc.). The asset shell is assigned an asset number by the system so that it is ready to receive postings into its sub-ledger. 2. Without postings the asset shell has no financial impact on the general ledger. It is simply an object waiting for an acquisition or transfer.

10. Asset Master Records - SAP Prior to making an acquisition, an asset master record shell needs to be created in the asset management module in SAP When purchasing an asset using a purchase order, the asset number must be assigned to the PO item using the account assignment. This will enable the receiving agent to post acquisition value to the asset sub-ledger through the goods receipt transaction. When the goods receipt is entered, the asset master record will also be updated with certain information such as quantity and supplier. 5. At this moment the asset shell can be considered a complete asset master record. Also, at time of goods receipt both the asset sub-ledger and the general ledger are updated with the acquisition value.

11. Asset Master Records - SAP SAP

12. Asset Master Records - SAP There are various classifications of fixed assets AIMS/SAP categorizes fixed assets using the following asset classes: • Computers and Related Equipment (Desktops, Laptops/Notebooks, Servers, Routers, Switches, POS Machines, etc.) • Vehicles (Cars, Trucks, Vans) • Centrally Funded Vehicles • Furniture, Fixtures and Equipment (Work desks, Refrigerators, Freezers, Bar Equipment, Tractors, Utility Vehicles, Mowers, Golf Carts, etc.) • Buildings (Pools, Field houses, Fitness Centers, Golf Maintenance Sheds, etc.) • Centrally Funded Buildings • Building & Facility Improvements (Renovations, Golf Course Improvements, etc.) • Centrally Funded Building & Facility Improvements • Prepaid Minor Property UFM, Computer Equipment UFM, Fixed Asset Other UFM • Minor Property • Appropriated Funds Acquired Assets (APF) • OTHER (Assets acquired at no cost from other Navy/government sources

13. Asset Master Records - SAP Each of these asset classes has a specific numeric code. The specific numeric code forms the basis of the asset numbers of the assets assigned to that asset class. The asset class determines the general ledger account assignment for the assets throughout their lifecycle. These general ledger (g/l) accounts include the balance sheet accounts for acquisition costs and accumulated depreciation, as well as the g/l account for depreciation expense and gains/losses on disposal. The asset class will determine the suggested useful life default values for assets created under that particular asset class.

14. Property Accountability and Control All persons entrusted with government property will be responsible for the proper financial recording, use, care, custody and safekeeping. Government property will not be used for anyone's personal use. Property constructed or purchased using non-appropriated funds will not be diverted to a use other than in direct support of the FFR purpose for which it was acquired without the prior concurrence of the commanding officer and region FFR manager.

15. Property Accountability and Control Fixed Assets (Purchased with NAF to be offset with APF) As of October 2004, APFs may be used to offset authorized NAF fixed asset costs. In those instances when property is purchased with non-appropriated funds to be subsequently offset with appropriated funds, such property will be recorded on the NAF books at zero cost for inventory purposes only. Fixed assets acquired with MWR USA or UFM resources shall be expensed at the time of purchase and recorded in the NAFI fixed asset records for inventory and control purposes at zero acquisition value. These fixed assets are NAFI assets; proceeds from the disposition of these assets revert to the NAFI

16. Surplus Property Surplus/excess items are deemed to be those items which have been screened in accordance with current disposal regulations. Items acquired through surplus/excess programs remain APF property and will be accounted for and controlled as such in accordance with current regulations and as directed by the program manager. When no longer needed, these items will be turned in to the nearest Defense Reutilization Marketing Office (DRMO) with a statement that they were previously obtained from appropriated funded surplus/excess sources and that no part of any proceeds from sale or other disposition are due the returning activity. Likewise, when the DRMO sells NAF property the proceeds are returned to the activity disposing of the property.

17. Depreciation Depreciationis a non-cash expense that reduces the value of an asset over time. When it's stated that depreciation is "non-cash," it means that depreciation is taken as an accounting entry, and that the amount of cash held by the business is not affected. Business assets that can be depreciated include equipment, machinery, technology and computers, office furniture, buildings and improvements to buildings, and business vehicles. Depreciation is taken on business assets to recognize the change in value of these assets as they age.

18. Depreciation Depreciation is the allocation of asset acquisition value or cost to present and future operations on the basis of some equitable and rational mathematical system. Although the purchase or acquisition of an asset occurs at one time, the benefits derived from an asset’s use are received in future periods. Therefore, an asset’s value or cost must be allocated to the periods that receive beneficial use. Depreciation begins the month after fixed-asset acquisition

19. Depreciation • In the case of large projects, however, use the construction in progress (CIP) account until the project is either: • Generating revenue • Fully utilized • or final payment has been made • As soon as one of the above three criteria is met, reclassify the CIP amount to the proper fixed-asset account(s) and begin depreciation over the prescribed lifespans. • For projects generating revenue or fully utilized wherein final payment has not been made nor is final cost known, estimate expected total cost of the project and record the amount to CIP with the offset entry to accounts payable. • Then transfer the entire actual and estimated amount recorded in CIP to the proper fixed-asset account(s) and commence depreciation according to prescribed lifespans. • After final payment is made, adjust fixed-asset and depreciation accounts accordingly.

20. Computing &Recording Depreciation • Within the DON, all fixed assets will be depreciated by the straight-line method • Under this method, an equal portion of the cost of the asset is allocated to each accounting period of use; consequently, this is most appropriate when usage of an asset is fairly uniform from year to year. • The possibility of a salvage value is ignored and the annual depreciation charge is computed merely by dividing the total cost of the assets by the number of years of estimated useful life. • At the end of each accounting period, the following entries will be required to record depreciation: • Debit - Depreciation Expense • Credit – Accumulated Depreciation

21. Computing & Recording Depreciation • Depreciation is not recorded as a decrease to the fixed asset account but as an increase to a contra-asset account, accumulated depreciation. • The fixed asset account will always show the acquisition cost of the fixed assets • The accumulated depreciation account will show the estimated decrease in value of the fixed assets • The difference between the two accounts is book value • Accumulated depreciation is shown on the asset side of the balance sheet as a reverse of normal amount • All fixed assets are to be depreciated at the activity or general fund level G&A within the region

22. Trade In When one asset is traded in for another, the acquisition cost of the new asset will be calculated as: the cost of the new asset + the net book value of the old asset - the trade allowance The total cannot exceed the purchase value before trade-in allowance of the new asset.

23. Disposition of Property and Records in lieu of Base Closure Upon the disestablishment of an activity the property and records thereof will be disposed of in the following manner unless otherwise prescribed by the program manager: Merchandise may be sold to other activities or returned to vendors for credit, if possible. Transfer merchandise and property to other activities as prescribed by the FFR manager. Receiving activities will be responsible for payment of all expenses incident to packing, crating, and movements of merchandise of property. All records and related correspondence remaining after the terminal audit will be forwarded to the appropriate Navy Region Accounting Office for subsequent forwarding to the nearest Federal Records Center.

24. Final Disposition of Residual Assets Upon final dissolution, all residual assets which remain after the transfer of monies cited above, including proceeds from sale of property and merchandise will be forwarded as directed by the applicable program manager. Residual assets will be accompanied by a certified copy of the terminal audit of funds and, if appropriate, by notation of corrective actions taken hereon. Fixed asset disposal entries are normally based on the book values existing at the close of the last month of business NAFs existence as a fiscal entity, i.e., a fixed asset is not depreciated over the final accounting periods required for liquidation and closing if normal business operations have ceased and the fixed asset is no longer being used or providing service

25. Retirement of an Asset When a request to dispose of an asset is received, assets that are in usable condition must be screened to determine if they can be used by another area. If the asset cannot be used by another area, the asset will be retired/disposed as follows: • Trade-ins • Sale (Garage Sale or Sealed Bid) • Donations • Scrap • Lost/stolen **Follow the rules in CNICINST 1710.3** Once an item has been retired, the information about the retirement will be captured, including the type, date and related proceeds or trade-in value if applicable. Both groups of assets or portions of single assets may need to be disposed. The system has the capability of performing partial and mass disposition of assets. Disposed assets can be returned to service. A Certificate of Disposition (NAVCOMPTFORM 2212) must be approved by the CO or his designated representative before a fixed asset may be removed from the fixed asset listing

26. Unserviceable Property • Property procured with non-appropriated funds, which has become unserviceable or excess to the needs of the activity will be disposed of as follows: • Used as a trade-in on a similar item • (b) Sold to or transferred to another FFR activity • (c) If not desired by another FFR activity within reasonable shipping distance or if it is deemed unfit for redistribution by the FFR Manager, it will be disposed of in accordance with current Navy and base disposal regulations. • In order to ensure that the NAF receives fair compensation for disposal items the following methods of selling the assets are authorized • Garage sale • Auction • Sealed bid

27. Recyclable Material FFR activities are authorized to use the installation FFR contracting service to sell non-appropriated recyclable scrap such as aluminum cans, bottles and newspapers directly to local recycling firms or continue to use the Defense Reutilization Marketing Office (DRMO). However, prior to selling locally, get assurance from the servicing DRMO that no long-term collection or surplus sales contracts are in effect for the installation for the specific types of recyclables If a DRMO contract exists for this type of property, the contract takes precedence until expiration unless exception is granted by the servicing DRMO All appropriated recyclable materials shall continue to be processed through the DRMO.

28. Inventory Frequency Inventory frequency will be prescribed by appropriate program managers As a minimum requirement, non-resale merchandise, consumable supplies, fixed assets, and property on loan require an annual physical inventory Cash, prepaid supplies and resale merchandise requires an inventory at the close of each accounting period. (don’t forget the surprise cash counts!) The results of the inventory will be reconciled with property records and the general ledger controlling accounts Upon the relief of the responsible person, as determined by the program manager, inventories as set forth above will be accomplished. Annually, resale inventories, prepaid inventories, consumable supplies & fixed asset inventories must be verified by a dis-interested party. (3rd party verification; look for this requirement in the next update to the CNICINST 7000.3)

29. Most Common Findings • Assets are not recorded in SAP • Assets are not tagged with fixed asset numbers as required • Completed projects are not capitalized • Assets have installation property tags but do not correlate to any numbers in SAP • Certificate of Dispositions are not prepared or approved by the CO or his/her designee • Fixed assets that have been disposed have not been removed from the SAP asset listing • No disinterested party inventory verification - (The Regional Internal Review Officers can be utilized as a disinterested party when available)