This provides an overview of property management systems functional requirements, explains certain property management system requirements, describes the types of property covered under this document, and outlines the components of a property management system.
Government Property Systems Background
The U.S. Government is the world’s largest and most complex enterprise. Currently, Federal agencies control hundreds of billions of dollars in property, plant, and equipment (PP&E). PP&E consists of tangible assets, including land, that have an estimated useful life of 2 years or more, are not intended for sale in the ordinary course of operations, and have been acquired or constructed with the intention of being used, or being available for use by the entity. PP&E includes, but is not limited to, office equipment, computer hardware-software; buildings, land, museum collections, and national defense PP&E. All of these items are controlled and accounted for in many different agency systems. This document is intended to establish basic capabilities that property management systems must have to support controlling and accounting for Federal property and to comply with applicable laws and regulations. It does not provide basic capabilities for all property management functions.
Issuance of Government property management systems functional requirements promotes a common understanding among private and public sector financial managers and property managers regarding property management systems capabilities. The functional requirements provide benchmarks for agency compliance under FFMIA and serve as a tool for oversight agencies to evaluate property management systems. The functional requirements help justify agency system improvements or replacements and help organize the private sector market by communicating mandatory capabilities that commercial software must be able to provide to Federal agencies, as well as identifying value-added features desired by Federal agencies.
Government property management systems, as components of the JFMIP Agency Systems Architecture (see Illustration 3), are relied upon to feed data to other financial management systems, including the Core Financial Systems which produce data needed for agency consolidated financial statements. Accordingly, Government property management systems must capture data to meet Federal statutes, regulations and standards governing property management and reporting property assets on agency financial statements. Federal Government property management systems must provide consistent, standardized information for program managers, financial managers, agency executives, and oversight organizations. All property management systems that are being designed and implemented or in current use must operate in accordance with laws, regulations, and judicial decisions.
This document identifies functional requirements for Federal agency property management systems. Although the document may be used when developing new property management systems or improving evaluating current systems, the document does not provide a specific model for such systems. Functional requirements not mandated by law, regulation, directive, or judicial decision should be incorporated in these systems if cost-effective and in the Government’s best interest.
Property management systems functions in this document are designated as mandatory or value-added. Definitions for these two categories of systems functions are:
Mandatory — Mandatory requirements describe what the system must do and consist of the minimum acceptable functionality necessary to establish a system, and are based on Federal laws, regulations, directives, or judicial decisions. Mandatory requirements are those against which agency heads evaluate their systems to determine substantial compliance with systems requirements under the FFMIA. These requirements apply to existing systems in operation and new systems planned or under development.
Value-added — Value-added requirements describe features or characteristics and may consist of any combination of the following: (1) using state-of-the-art technology, (2) employing the preferred or best business practices, or (3) meeting the special management needs of an individual agency. Value-added, optional, and other similar terminology may be used to describe this category of requirements. Agencies should consider value-added features when judging systems options. The need for these value-added features in agency systems is left to the discretion of each agency head. This document does not list all value-added requirements.
Within this document, mandatory property management systems requirements are indicated by the word “must”;
Value-added systems requirements are identified by use of the words “may” or “should”. Requirements are mandatory if they are necessary for compliance with statutes and regulations affecting property management, compliance with the FFMIA and 0MB Circular A-127, and proper stewardship of assets. However, not al l mandatory requirements in this document are germane to assessing compliance with 0MB Circular A-127 and the FFMIA. These requirements are identified by the parenthetical remarks “property management only.”
Federal agency property management systems are critical for establishing financial accounting and maintaining physical accountability over property. Such systems assist property managers in managing their property in accordance with missions and roles established by Congress. The property accountability requirements outlined in this document support management and administrative activities associated with property.
In a property management system, property is categorized as:
(1) Property Capitalized and Recorded in Property Management Systems. These are individual property items, items acquired separately but consolidated to represent one item, or items purchased in bulk, whose acquisition or fair market values meet agency-established capitalization thresholds. Such items are recorded and maintained in agency property management systems to maintain physical accountability over the property.
(2) Property Expensed and Recorded in Property Management Systems. These include heritage assets, stewardship land, and national defense PP&E that are expensed when acquired. This category also includes sensitive or controlled property that is expensed when acquired (the cost is below agency capitalization threshold) and that agencies choose to record and maintain in property management systems for accountability and management purposes. Agencies determine which sensitive or controlled items are appropriate for inclusion in their property management systems.
(3) Property Acquired at No Cost and Recorded in Property Management Systems. Accountable property such as heritage assets, stewardship land, and other property acquired at no cost to the Government either from donation or other means must be maintained in property management systems for accountability and or management purposes.
The document identifies managers as both users and beneficiaries of the system. Each agency will define the level of management involved in each area discussed to ensure adequate internal controls are implemented and maintained.
The property management system maintains information on property from the time the Government takes title to or possession of property through disposal and maintains a complete history of modifications and improvements to property. The systems requirements in this document are described in three sections. These sections categorize requirements as common requirements or requirements relating to specific functions. The sections associated with property management systems are:
General Requirements. These identify mandatory and value-added system functionality that are common for all property management functions. In addition, there are functional requirements that apply to specific categories of property.
Acquiring/Receiving Property. This function addresses initial physical control when property is delivered or real property is placed in service. Property is recognized as accountable when title passes to the entity obtaining the property or when goods are delivered. Property may be purchased, leased, loaned, granted, transferred, constructed, or donated. The property management system may obtain information from the acquisition system when property is ordered. The property management system records receipt of property and the results of an initial physical inspection regarding the condition of property, whether from vendor, donated, transferred, or gained through discovery.
Managing and Accounting for Property. The Managing Property function captures and provides data to assist property managers and officials in managing property. Examples of property management responsibilities and activities supported by property management systems include recording the results of inventories, and monitoring maintenance requirements, utilization, overhaul, retirement, transfer, or disposal of property.
The Accounting for Property function pertains to recording the acquisition cost of the property, or net book value fair market value for donated or transferred items. For capitalized property, the function records the acquisition cost, net book value or fair market value of donated or transferred assets, the property’s useful life, salvage value, and depreciation amortization method. In addition to the initial value, it also records all capitalizable improvements. Upon disposal, or when identified for disposal and no longer in use, the function identifies the property record as a disposal and no longer includes the value of the asset and its associated accumulated depreciation amortization in calculating the gross and net book value of property. This function calculates depreciation amortization on property, captures deferred maintenance, condition, and clean-up cost information and provides this information to the Core Financial System. I
Federal agencies may maintain the property management system in various integrated data system configurations, media, or formats. Accordingly, these requirements do not mandate a single property management system software application. The property management system(s) must be subsidiary to the general ledger. The property management system must be able to serve the needs of different communities of users. Finally, the property management system handles all property except the following (applicable JFMIP requirements document s indicated):
• Seized Property and Forfeited Assets (Seized Property and Forfeited Assets System Requirements)
• Work in Process (Managerial Cost Accounting System Requirements)
• Property Acquired as a Result of Credit Operations (Direct Loan System Requirements and Guaranteed
Loan System Requirements)
To facilitate the accounting and financial reporting requirements, property management systems should categorize property in classifications that facilitate Government-wide and agency-specific financial reporting and management reporting. At a minimum, property management systems should distinguish among categories of property established in SFFAS Nos. 6, 10, 11 and 16. These categories are general PP&E, heritage assets, stewardship land, and national defense PP&E. In addition to the SFFAS No. 6 categorization, the property management system should support agency-specific categorization and sub-categorization. For example, some agencies may have sub-categories for laboratory equipment, warehouses, and office buildings.2
When developing or modifying property management systems, agencies must recognize that a given type of property may be classified in more than one of the four SFFAS property categories. For example, land may, depending upon its primary use and how it was acquired, be categorized as general PP&E, stewardship land, or heritage assets.3
Introduction to Functional Requirements
Agency property management systems assist managers in collecting and maintaining information for financial reporting in accordance with generally accepted accounting principles (GAAP) and managing the various types of property. Additionally, they should assist managers in ensuring that assets are safeguarded against improper use or disposition.
The requirements that follow provide a description of the major information and processing capabilities for property management systems. The following basic requirements have been identified by General Requirements, Specific Categories, and property management functional area. These functional capabilities should be integrated with agency unique requirements in a manner that best supports the agency’s programs, operations, technical environment, and management philosophy.
The property management system must support the following common requirements for all property management
• Record beginning balances, acquisitions, withdrawals, and calculate ending balances expressed in values and physical units, except for heritage assets and stewardship land for which all end of period balances are expressed in physical units only.
• Capture the condition of the asset for heritage assets, stewardship land, national defense PP&E, and general PP&E for which a condition assessment survey was performed.
• Provide edits (controls) to prevent duplication and reduce the likelihood of creating erroneous property documents or records to ensure the integrity of data recorded in the system.
• Permit only authorized users to enter, modify, or otherwise alter property records.
• Provide an audit trail for entries to a property record, including the identification of the individual(s) entering or approving the information and or data.
• Identify the type of transaction affecting the property item, e.g., initial acquisition, change in location, and disposal.
• Incorporate adequate security features that prevent unauthorized access to the property system by unauthorized individuals.
• Enable the transfer of responsibility for property from one authorized manager to another authorized manager.
• Capture real property information for GSA’s Worldwide Inventory system as directed in Federal Property Management Regulation (FPMR) 102-84. (property management only).
• Produce reports in accordance with user defined criteria. Such reports may:
• Provide property information to allow appropriate users to conduct an inventory of current holdings or any subset of those holdings at any time.
• Allow a user to access both summary data and more detailed data.
• Capture the fact that an environmental or hazardous substance is located on or contained within a property item in accordance with 41 CFR 101-42.202.
• Distinguish between capitalized property and expensed property tracked in the property management system.
The property management system may:
• Capture and prioritize the estimated cost of repairs.
• Accumulate data from multiple appropriations.
• Provide for on-line search capability based on user-defined parameters.
• Provide the capability for agency property management systems to interface on-line or through Internet with other property management systems external to the agency to facilitate identification, location, or transfer of property Federal Government-wide.
Certain categories of property may require special treatment. This section addresses Information Technology, Government Property in the Custody of Others, and National Defense PP&E.
For purposes of this document, the term “information technology” includes computers, peripheral equipment, software (as defined in SFFAS 10, Accounting for Internal Use Software) and firmware. Because information technology assets are personal property, property management systems may already capture the data required to account for these assets. However, property management systems should also capture information essential to ensuring that software and software licenses are controlled and information driven by contractual licenses and agreements with software developers, vendors, or software licensers.
Government Property in the Custody of Others
The requirements in this document apply only to Government property management systems, and do not apply to contractor or grant recipient property systems. Agencies must adhere to the policy and procedures of FAR Part 45 and agency supplements for property in the hands of contractors and for grantees follow the standards set-forth in applicable OMB circulars. Non-Federal entities participating in a cooperative research and development agreement or an “other transaction” provide the agency sufficient information to enable the agency to satisfy its internal property accountability and financial reporting requirements as described in this document.
National Defense PP&E
National Defense PP&E assets have the same characteristics as general PP&E but, for reasons explained in the accounting literature, differ from general PP&E in accounting treatment. National Defense PP&E assets are expensed (versus capitalized) and are reported as stewardship property.
This function addresses assumption of initial physical control when property is delivered or real property is placed in service. Property is recognized as accountable when title passes to the entity obtaining the property or when goods are delivered. Property may be purchased, leased, loaned, granted, transferred, constructed, or donated. The property management system may obtain information from the acquisition system when property is ordered. The property management system records receipt of property and the results of an initial physical inspection regarding the condition of property, whether donated, transferred, or gained through discovery. Upon receipt of property, it captures confirmation information about physical receipt and forwards the information to the acquisition system and the Core Financial System.5
This section describes functional requirements for recording information relative to the acquisition and receipt of property.
The property management system must:
• Create a skeletal property record or other mechanism for capturing information on property in-trans it from the providing entity (e.g., vendor, donator, loaner, grantor, etc.). The skeletal property record or other mechanism is required only for property for which the Government has taken title. For example, the skeletal property record or other mechanism may identify the following on newly acquired property:
• Name and address of the shipper or vendor;
• Estimated date of delivery;
• Shipping address (“ship to” address);
• Item identification (e.g., nomenclature, quantity, description, year of manufacture, make –model – serial number, Federal stock classification or national stock number);
• Requisition information (e.g., contract – purchase order, or other requisition document number; name and address of requisitioning organization); and
• Order Date.
• Complete the skeletal property record, or create a property record for items with no skeletal property record, upon assuming possession of the item, placing the real property asset in service, or initiation of real estate instrument – grant.
• Capture the method of acquiring each property item or bulk property items (e.g., direct purchase, completed work-in-process, capital lease, donation, non-reciprocal transfer or reciprocal transfer), and the date of acquisition.
• Capture quantity, date of physical receipt or date real property is available for use or placed into service, and condition of item received when a condition assessment was made.
• Forward physical receipt information, including quantity and date of physical receipt, to the acquisition system and Core Financial System.6
The property management system may:
• Interface electronically with GSA’s Worldwide Inventory.
• Provide information on the status of upgrades and overhauls to property.
• Aggregate relatively homogenous assets into asset pools. All assets in the asset pools have the same estimated useful life and the acquisition cost of each item in the asset pool would be the average cost of all items in the pool. However, each item in the asset pool must have a separate property record and a separate agency-unique identification number.
• Capture warranty-guarantee information, including terms and period of coverage.
Managing and Accounting for Property:
This section addresses requirements for managing and accounting for property.
Requirements for managing property address capturing and providing data to assist property managers and officials in managing property. Examples of property management responsibilities and activities supported by property management systems include monitoring maintenance, utilization, overhaul, retirement, transfer, or disposal of property.
Requirements for accounting for property pertain to recording the acquisition cost of property, or net book value or fair market value for donated or transferred items. For capitalized property, the function records the acquisition cost or net book value or fair market value of donated or transferred assets, the property’s useful life, salvage value, and depreciation – amortization method. In addition to the initial value, it also records all capitalizable improvements. Upon disposal, or when identified for disposal and no longer in use, the function identifies the property record as a disposal and no longer includes the value of the asset, all associated capitalized improvements, and the associated accumulated depreciation – amortization in calculating the gross and net book value of property. The accounting for property function calculates depreciation – amortization for in-service property and captures deferred maintenance, condition, and cleanup cost information. Information on deferred maintenance, condition, and clean-up costs may be estimated or captured in other systems and subsequently provided to the Core Financial System.
Acquisition of Property; Changes in Asset Values
For capitalized property and stewardship assets:
• Classify PP&E by asset type (e.g., general, heritage, stewardship land, and national defense).
• Distinguish between heritage assets and multi-use heritage assets.
• Capture changes in quantities, including unit of measure, where applicable, for beginning balance adjustments, additions, and deletions, and compute ending balances by asset category.
• Provide an audit trail for all adjustments to quantities and units.
• Capture the acquisition cost of an asset and any changes in the valuation, where applicable for reporting purposes.
For capitalized property only:
• Capture the estimated value of donated assets.
• Provide an audit trail for all adjustments to property values.
• Classify PP&E according to the Standard General Ledger Accounts (e.g., buildings, land, equipment, assets under capital lease, software).
• Generate data for the journal entries necessary for recording changes in the valuation including any associated gains or losses.
Depreciation, Amortization, or Depletion of Capitalized Assets.
• Capture the estimated useful life, depreciation, amortization, and depletion method, and salvage, residual value for each asset or group of assets, when applicable.
• Calculate depreciation, amortization, depletion based on a management prescribed method (e.g., straight line, physical usage) and the net book value of capitalized assets.
• Accumulate amortization, depletion, and depreciation expense.
• Provide an audit trail for amortization, depletion, and depreciation expense.
• Allow authorized users system access to change the estimated useful life of an asset, the depreciation method, and estimated salvage value, and make adjustments to PP&E asset and contra-asset accounts on an exception basis.
Transfer, Disposal or Retirement of Assets
• Identify excess property or property held for disposal, retirement.
• Transfer property record data to the property disposal organization or receiving entity. Capture date of transfer, transferring entity, and recipient organization (disposal organization or recipient entity).
• Capture all essential information related to excess property and disposal as required by Federal Management
Regulation (FMR) 102-36 for applicable agencies.
• Capture type of disposal action (e.g., retirement, exchange, sale, donation, etc.), final disposition, and date of disposal.
• Capture property retirement or disposal status.
• Capture deletions.
• Calculate gain or loss at time of disposal or retirement, sale, exchange, donation.
• Transfer the asset’s acquisition cost, accumulated depreciation, amortization, and the amount of gain or loss to the Core Financial System at the time of asset transfer, disposal, or retirement.
• Maintain an audit trail of transfer, disposal, and retirement actions.
Deferred Maintenance and Condition
The requirement to capture deferred maintenance and condition information on appropriate assets does not affect management’s discretion with respect to: (1) establishing criteria for determining whether there is deferred maintenance and condition assessment, reporting, (2) the methodology used to determine the amount of deferred maintenance and assess condition8, or (3) the specific system(s) used to develop or track deferred maintenance and condition information.
• Capture management’s estimate of deferred maintenance. This may be accomplished through a process or system other than in a property system.
7 The property management system should be capable of interfacing with other financial and, or mixed systems.
However, interface requirements and systems architecture necessary to meet management and reporting requirements are determined by each agency. See the Interface Requirements section for more information.
8 In accordance with SFFAS No. 14, either life cycle costing, condition assessment or similar methods may serve as the basis for the estimates.
• Capture management’s assessment of property condition. This may be accomplished through a process or system other than in a property system.
• Capture the fact that an environmental or hazardous substance is located on or contained within a property item in accordance with 41 CFR 101-42.202.
The universe of clean-up costs is diverse and thus systems may differ. SFFAS No. 5, Accounting for Liabilities of the Federal Government, SFFAS No. 6, Accounting for Property, Plant, and Equipment, and Technical Release 2, Environmental Liabilities Guidance provide guidance on accounting for clean-up costs. In some cases, liabilities for clean-up costs may be associated with a specific item of PP&E and in other cases the liability may be estimated for a universe of PP&E. Management should determine the most appropriate method(s) given the circumstances within their organization.
• Capture the total estimated clean-up cost when the item is placed in service if the PP&E meets the criteria established in paragraph 88 of SFFAS No. 6. This may be accomplished through a process or system other than in a property system.
• Capture environmental liabilities associated with PP&E when an event has occurred and the liability is probable and estimable (see Technical Release 2). This may be accomplished through a process or system other than in a property system.
• For general PP&E, calculate the annual amortization of estimated material, clean-up costs, and the unamortized balance.
Property accountability is the physical control over fixed and moveable assets of the Federal Government. Physical control is a critical property management function exercised in concert with acquiring, maintaining, and disposing of property. Physical accountability begins when the property is received; real property is available for use or placed into service, or when ownership passes to the Government. The property management system must:
• Capture property identification number, which may be the item’s serial number.
• Capture location.
• Capture an item’s current ownership status (e.g., owned by the Government, leased to the Government under a capital lease, leased to the Government under an operating lease, and loaned to the Government).
• Capture the current user (e.g., the agency, contractor, grantee, etc.).
• Capture an item’s current use status whether in-use, in storage, in-transit, etc.
• Capture identity of property custodian and, or the accountable organization.
• Capture in-transit information to establish, maintain accountability and control over Government property. (e.g., name and address of the shipper, vendor, and estimated date of delivery, shipping address, item identification, and source information).
Property Record Maintenance
• Provide capability to electronically transfer property records between interfacing systems for the gaining and losing property custodians within the agency.
• Provide analytic tools to support analysis and evaluation of annual maintenance status, needs, and costs for effective program planning and budgeting.
• Capture property maintenance, upgrade, and overhaul schedules.
• Capture actual maintenance, upgrade, and overhaul data.
• Capture space utilization information.
• Support the use of bar code scanners.
• Record the stratification of critical and non-critical maintenance.
• Record detailed information regarding known flood hazard or flooding of real property.
Acquisition of Property; Changes in Asset Values
• Calculate and allocate interest expense for lease payments and apply the balance to reduce capital lease liability.
• Identify the type of cost recorded (e.g., acquisition cost, estimated fair market value, revaluation, present value).
• Capture the acquisition cost of individual items acquired through bulk purchase, when required by agency policy.
• Capture the cost of capitalizable improvements separate from the original cost, the estimated change in asset’s life as a result of the improvement, and the date of improvement.
Depreciation, Amortization, or Depletion of Capitalized Assets
• Calculate depreciation on asset pools.
• Separately calculate depreciation on capital improvements.
Deferred Maintenance and Condition
• Provide the capability to forecast or schedule maintenance requirements for future periods.
Transfer, Disposal, or Retirement of Assets
• Capture estimated cost to demolish property, or otherwise dispose of property.
This chapter provides information on input and output interfaces with the property management system. Interface requirements and systems architecture necessary to meet management and reporting requirements are determined by each agency. However, all systems, modules, or applications that capture, use, and pass on information should be linked. The property management system, to include subsystems that capture or generate property management information, should be capable of interfacing with other financial and mixed systems. The property management system should be able to process transactions from other systems and record and track such transactions and related information to provide the basis for central control. It is also probable that, where interfaces exist, there will be two-way interfaces associated between systems. If the property management system relies upon a subsystem for information or data, such as work-in-process, there should also exist a two-way interface, whereby the property management system could provide information to the subsystem involved.
Analysts, designers, etc. should consult the JFMIP Framework for Federal Financial Management Systems document for guidance on integration or interface issues, e.g., data stewardship, internal controls, and security. Illustration 4 shows what constitutes the property management system and its interfaces with other financial management and mixed systems.
System interfaces may be manual or automated. However, the goal of all system interfaces is to:
• Promote a single point of entry to populate the property management database and all databases with which the property management system interfaces at the same time.
• Ensure that audit trails of all system transactions are captured.
• Facilitate ease of reconciliation between systems to ensure data accuracy.
Source: JMIP – GAO