Erick Roeser Auditor.controller Jonathan Kadlec Treasurer-tax Collector Assistant Auditor.controller Treasurer.tax

Sonomo County Capital Assets Policy FA-7lailsto provide sufficient reporting for management to determine the extent to which normol maintenance ond repairs of buildings and other County lacilities are being deferred. Agree, however the purpose of Fiscal Policy FA-1, Accounting for Copitol Assets, is to present a uniform method of maintaining capital asset records and to apply a consistent method of accounting for capital assets. The focus of this policy is to ensure accurate, complete and timely physical and financial records needed for financial reporting in accordance with Generally Accepted Accounting Principles (GAAP). The policy addresses asset impairment, which is required for GAAP reporting, and to the extent deferred maintenance results in a financial impairment, it is covered in policy FA-1 (although there is no specific mention of impairment due to deferred maintenance in Fiscal Policy FA-1, and it could be made more clear that deferred maintenance could result in impairment). The policy is not intended to address areas outside of the authority/responsibility of the ACTTC, such as planning and budgeting for capital asset purchases and disposals, asset maintenance activities, the appropriate use of County-owned assets, etc. lf the County is lacking a policy specifically related to the tracking and reporting of required/deferred maintenance of County-owned assets, that policy should be created by the department(s) with oversight/authority of that activity (County Administrator, General Services, etc.)

Real asset records ore scattered over on excessive number of record keeping ond asset manogement systems. All physical/financial asset records are maintained in the EFS Asset Management (AM) module. EFS AM has been implemented county-wide. Some departments use other systems to maintain data not needed for financial reporting of assets, such as maintenance planning for buildings.

General Services, as well os other departments, have yet to take advantdge of integroting with the Enterprise Finoncial System's Asset Management module which provides asset tracking, acquisition, mointenonce, inventory, and cost-sharing. Disagree. This finding is based on inaccurate information about which modules included in the PeopleSoft Asset Lifecycle Management (ALM) solution were purchased and implemented by Sonoma County. The County purchased and implemented PeopleSoft Asset Management to provide a centralized accounting system to track capital assets for the purpose of financial accounting. Since its implementation in July 2074, EFS Asset Management is the centralized sole source and system of record for recording and reporting all asset acquisitions, transfers, cost adjustments, retirements and depreciation. PeopleSoft Asset Management is one of four applications available for controlling and managing assets throughout the asset lifecycle. The applications available within PeopleSoft's (ALM) solution are: a PeopleSoft Asset Management (AM): the foundation product of PeopleSoft ALM, PeopleSoft AM provides a common Asset Repository Manager (ARM), which stores all asset data. Once the PeopleSoft AM product is established, the asset repository is available to all PeopleSoft products that integrate with PeopleSoft AM. PeopleSoft AM includes features, such as asset maintenance, which enable integration with other applications and are dependent upon the purchase and implementation those applications. a PeopleSoft lT Asset Management (ITAM): represents an entire system of integrated management processes, strategies and technologies implemented to provide controlover lT assets throughout the asset life cycle. PeopleSoft AM integrates with PeopleSoft ITAM by sharing assets in the asset repository. Sonoma County did not purchase the ITAM module. a PeopleSoft Maintenance Management (MM): enables organizations to create work orders, schedule the resources to perform the tasks that are identified on the work orders, and track the costs that are associated with the maintenance and repair of these assets. Sonoma County did not purchase the MM module. . PeopleSoft Real Estate Management, renamed Lease Administration (LA): ensures that leases are managed according to terms; cost and space utilization are captured for performance managemenU and divisions comply with companywide financial processes and controls. Sonoma County did not purchase the LA module. Based on the above, the County has fully implemented the functionality available in the Asset Management module, and that functionality does not include the ability to manage the planned, actual or deferred maintenance of assets. lf the County wants to pursue additional functionality in PeopleSoft, it will need to compile the County's requirements, perform a fit-gap analysis of those requirements to functionality available in the other Asset Lifecycle Management solution modules, and analyze the cost and resource needs of implementing additional modules. 8,fu Respectfully, Erick Roeser Aud ito r-Co ntro I le r-Trea su re r-Tax Co I lecto r County of Sonoma Cc: Members, Sonoma County Board of Supervisors Dee Schweitzer, Foreperson, 2018-2019 Sonoma County Civil Grand Jury Sheryl Bratton, Sonoma County Administrator

Deferred maintenance costs ore continuing to accumulate to an ertent that they constitute a mojor redudion in osset volue not reported in the County's financial statements. Disagree, the ACTTC is not aware of any assets that qualify for impairment at this time. The Sonoma County Comprehensive Annual Financial Report (CAFR) is prepared in accordance with generally accepted accounting principles applicable to state and local governmental entities. As such, the County is required to comply with Governmental Accounting Standards Board (GASB) Statement No. 42, Accounting ond Finoncial Reporting for lmpoirment of Capitol Assets and for lnsuronce Recoveries. ln orderto record an impairment loss, GASB42 requiresthatthe impairment be significant, unexpected andpermanent,andalsoresultinadeclineinserviceutility. lfanimpairmentmeetsthesetests,the asset value must be accounted for at the lower of fair market value or carrying value (i.e. historical cost less accumulated depreciation/amortization). Following the provisions of GASB 42, an outdated/decrepit office building that is still used as an office is not impaired, because there has been no decline in service utility. Conversely an outdated/decrepit office building that cannot be used as an office without major repairs may be impaired if the fair market value is less than the carrying value of the asset, however very old buildings/improvements are likely to be at or near full depreciation already.