Year-end capital asset rollforward

Capital assets are where small agencies most often carry forward last year's mistakes. The routine below starts from audited balances and works from the ledger outward, so the listing, the audit, and FTR forms 38 and 40 all agree.

What you need

• Last year's capital asset listing and depreciation schedule.
• Last year's audited financial statements and the auditor's adjusting entries.
• A general ledger extract of every capital outlay account (6000-6999 in the CACOA), every capital asset account (1200-1299), and every proceeds and sale account (8020-8499).
• The written capitalization policy (threshold and useful lives).

The routine

1. Start from audited balances. Tie the prior-year listing, not only the GL, to the audited capital asset note by class: land, buildings, improvements, infrastructure, equipment, construction in progress, and accumulated depreciation. Audit adjustments often reach the GL but never reach the listing.
2. Check what already posted. Before deciding what this year must record, search the ledger for last year's capital entries. Some corrections shown in the prior workpaper were never posted; some you would assume are unposted already are.
3. Sweep the whole population. List every capital outlay transaction for the year, not a sample. Classify each one: capitalize, expense (below threshold or repair), or construction in progress by project.
4. Handle financed purchases. When a vehicle or piece of equipment is bought on an installment or lease-purchase agreement, capital outlay often shows only the payments, some of which are principal. Record the full cost as the asset, the financing as an other financing source, and move principal payments to debt service.
5. Close finished projects. Move completed construction in progress to the right asset class and start depreciation. Stalled or abandoned projects are a conversation with the auditor, not a unilateral write-off.
6. Find the disposals. Every sale proceeds or surplus auction receipt means something left the listing. Identify the assets, remove cost and accumulated depreciation, and record the gain or loss where the fund type calls for it.
7. Depreciate. Calculate the year's depreciation by asset from the policy's useful lives.
8. Record it where it belongs. Proprietary funds record the assets, depreciation, and gains or losses in their own ledgers. For governmental activities, post the year's additions, disposals, and depreciation to the government-wide conversion ledger (CACOA fund 980) as journal entries, instead of carrying them only in a spreadsheet.
9. Tie out. Beginning balance plus additions minus disposals equals ending balance, by class, and the ending balance agrees with the ledger and with the draft capital asset note.
10. Carry forward. Save the rollforward as next year's starting point, with the audit adjustments applied.

What good looks like

• The listing agrees with the audited note at the start and with the ledger at the end.
• Every capital outlay transaction has a disposition.
• Financed purchases show full cost and the financing source.
• Governmental capital assets live in the ledger (fund 980), so FTR form 40 reads directly from it.

CACOA codes involved

Capital outlay (6000-6999), capital assets (1200-1299) and construction in progress (1260), accumulated depreciation (1250), purchase agreements and lease financing (7030, 7050, 8510), sale of capital assets (8030) in governmental funds, and gain or loss on disposal (3430, 5400) in proprietary funds.