CITY OF JALLocal Government

Condition: During the testing for construction in progress (CIP), it was noted that $2,140,374 was not included in the schedule of capital assets in fiscal year 2016 and was not capitalized. This resulted in a restatement in the FYE 2017. In fiscal years 2018 and 2019, the schedule of fixed assets were still not updated to include the corrected CIP balance. As a result, we could not follforward capital assets in fiscal years 2018 and 2019. Additionally, this resulted in inaccurate depreciation expenses as some of the CIP projects were completed and transferred during the year. Criteria: New Mexico Administrative Code 2.20.1.8 states that "Agencies should implement systematic and well-documented methods for accounting for their assets." To be compliant with GASB 34, capital assets must be presented net of accumulated depreciation expense, accumulated and current year depreciation must be identified by each major class of assets. Questioned Cost: Not Applicable. Cause: the City was unable to review the schedule of fixed assets that were prepared by a third party before these schedules were provided to the auditors. Effect: CIP balances are not updated accurately and depreciation expenses are not calculated correctly. Recommendation: The City shoudl re-evaluate the internal controls in place over construction in progress and capitalization of assets to ensure that assets are properly stated. Response: City staff has identified an Asset Manager who starting in 2020 will re-evaluate and reconcile in house asset reports to ensure reports are correct by the end of the fiscal year. Theis individual will receive appropiate training to ensure accurate recording of assets. They will also work with the third party who prepared capital assets schedule to update the fixed asset listing and reconcile the general ledger.