Section 6. Property and Equipment Accounting

(1) This transmits revised IRM 1.35.6, Financial Accounting, Property and Equipment Accounting.

Material Changes

(1) IRM 1.35.6.1.1, (2), Background, added FASAB standards related to recording property and equipment.

(2) IRM 1.35.6.1.3.2, Changed Associate CFO for Financial Management and Deputy Associate CFO for Administrative Financial Management to Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting.

(3) IRM 1.35.6.1.3.5, Deputy Chief, FMSS, added deputy chief, FMSS, also assists the chief, FMSS, in directing the Division that provides nationwide facilities and security services for all IRS employees and manages approximately 23 million square feet of office space in approximately 519 buildings throughout the country. These services include real estate and project management, physical security or security, logistics services, and environmental and safety services.

(4) IRM 1.35.6.1.3.8, Program Manager, Information Technology UNS, Operations Service Support renamed subsection title from Program Manager, IT Service Asset and Configuration Management to Information Technology, UNS, Operations Service Support.

(5) IRM 1.35.6.1.3.8, Program Manager, Information Technology, UNS, Operations Service Support, deleted the following responsibilities:

• Providing oversight, coordination and guidance on the asset management of IT equipment Servicewide within KISAM.
• Performing analyses of the KISAM database and identifying anomalies.
• Maintaining business rules for asset management processes.
• Developing and improving asset management and control processes.
• Providing direction to asset owners and IT staff for property and equipment activities to strengthen asset management processes and controls.
• Ensuring accurate record-keeping in KISAM.

(6) IRM 1.35.6.3.12, (d), Criminal Investigation Management Information System Equipment Coordinator, replaced National Criminal Investigation Training Academy (NCITA) with Asset and Knowledge Management (AKM).

(7) IRM 1.35.6.1.6, Terms and Definitions, made the following revisions:

• Added Assisted Acquisitions
• Updated Capital Asset
• Deleted Capital Lease
• Deleted Deferred maintenance and repairs (DM&R)
• Added Intragovernmental Lease
• Added Lease
• Deleted Lease-purchase
• Deleted Operating Lease
• Added Probable
• Added Right-to-use Lease

(8) IRM 1.35.6.1.7, Acronyms, added the following acronyms:

• MGC, Material Group Code
• PE, Property and Equipment
• PCC, Product Category Code
• PPS, Procurement for Public Sector
• RTU, Right-to-use

(9) IRM 1.35.6.2.1, Shopping Cart Process, added reference to material group code (MGC).

(10) IRM 1.35.6.3,(a), Recording Property and Equipment Transactions, deleted Budgeting section reference.

(11) IRM 1.35.6.3,(c), Recording Property and Equipment Transactions, replaced capital leases with right-to-use leases.

(12) IRM 1.35.6.4, Property and Equipment Capitalization, updated to reflect SFFAS 54 requirements.

(13) IRM 1.35.6.4, Property and Equipment Capitalization, deleted Assets for capital lease from table.

(14) IRM 1.35.6.4, Property and Equipment Capitalization, added Right-to-use to table.

(15) IRM 1.35.6.4.1,(5), Information Technology Equipment deleted software capitalization criteria example.

(16) IRM 1.35.6.4.2,(1), Non-IT Equipment, replaced $5,000 with $10,000.

(17) IRM 1.35.6.4.4,(7), Internal Use Software, deleted sentence - Any IT or non-IT equipment purchased in conjunction with a capitalized IUS that is not an integral part of the IUS is treated separately; and replaced with Equipment purchased in conjunction with capitalized internally developed software as an integral part of the IUS is treated and depreciated, accordingly.

(18) IRM 1.35.6.4.4,(10),(a), Internal Use Software, deleted reference to estimated cumulative project costs over $50 million over the five-year period of performance.

(19) IRM 1.35.6.4.6,(5), Leasehold Improvements, added subsections 5, 5(a), and 5(b).

(20) IRM 1.35.6.4.7, Leases renamed subsection from “Assets under capital Leases” to “Leases”, and changed content to reflect SFFAS 54 updates.

(21) IRM 1.35.6.4.7.1, Lease Categories, added new subsection.

(22) IRM 1.35.6.4.7.2, Lease Asset and Liability added new subsection.

(23) IRM 1.35.6.4.9,(3), Vehicles, changed assets under capital lease to lease.

(24) Prior IRM 1.35.6.5.1, Inventory System, section deleted.

(25) IRM 1.35.6.8, Impairment, deleted paragraph, The IRS does not impair other general property and equipment per SFFAS No. 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use, as these assets are repaired, replaced, or disposed of when damaged or obsolete.

(26) IRM 1.35.6.5, Physical Security Protection, deleted reference to IRM 10.2.15 because IRM is obsolete.

(27) Prior 1.35.6.5.3, Physical Inventory, deleted section.

(28) IRM 1.35.6.6, Verification of IFS to KISAM, subsection title changed from “Reconciliation of IFS to KISAM”.

(29) IRM 1.35.6.9, Disposals, added reference to IRM 10.8.1, Information Technology (IT) Security, Policy and Guidance.

(30) Minor editorial changes were made throughout this document.

Effect on Other Documents

This IRM supersedes IRM 1.35.6, dated April 23, 2021. This IRM incorporates Interim Guidance Memorandum CFO-01-0923-0005, Interim Guidance for recognition of leases defined by SSFAS 54, dated November 20, 2023.

Audience

Effective Date

Teresa R. Hunter
Chief Financial Officer

Program Scope and Objectives

1. Purpose: To provide policy and guidance for recording property and equipment transactions, ensuring data integrity and accountability.
2. Audience: All business units
3. Policy Owner: CFO
4. Program Owner: Financial Reporting and Analysis office
5. Primary Stakeholders: CFO and the IRS business units
6. Program Goals: To maintain internal controls to ensure accurate and timely accounting treatment for property and equipment according to Federal Accounting Standards Advisory Board (FASAB) standards and Office of Management and Budget (OMB), Treasury, and IRS guidance.

Background

1. In October 1990, the Secretary of the Treasury, the Director, Office of Management and Budget, and the Comptroller General established the FASAB by a memorandum of understanding (MOU). The FASAB standards are recognized as generally accepted accounting principles (GAAP) for the federal government.
2. The IRS records property and equipment at full cost in accordance with FASAB, Statement of Federal Financial Accounting Standards (SFFAS) 5, 6, 10, 44, and 54 (see IRM 1.35.6.1.8, Related Resources).
3. The IRS checks the useful life categories periodically to verify reasonableness.

Authorities

1. The authorities for property and equipment policies are:

1. Chief Financial Officers Act of 1990, Pub. L. No. 101-576
2. 40 USC 524, Duties of Executive Agencies
3. Federal Managers' Financial Integrity Act of 1982 (FMFIA) Pub. L. No. 97-255
4. E-Government Act of 2002, Pub. L. No. 107-347
5. 31 USC 3512, Executive Agency Accounting and Other Financial Management Reports and Plans
6. 41 CFR, Public Contracts and Property Management, Chapters 101 and 102
7. 41 CFR Part 102-36, Disposition of Excess Personal Property

Responsibilities

1. This section assigns responsibilities for:

1. CFO and Deputy CFO
2. Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting
3. Director, Financial Reporting and Analysis Office
4. Chief, Facilities Management and Security Services (FMSS)
5. Deputy Chief, FMSS
6. Office of Chief Procurement Officer (OCPO)
7. Chief Information Officer (CIO)
8. Program manager, IT Service Asset and Configuration Management (SACM)
9. Chief, CI
10. CI director, Field Operations
11. CI field offices
12. CI Management Information System (CIMIS) equipment coordinator
13. Business units

CFO and Deputy CFO

1. The CFO and Deputy CFO are responsible for overseeing compliance with accounting policies for Servicewide property and equipment.

Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting

1. The Senior Associate CFO for Financial Management and Associate CFO for Corporate Accounting are responsible for providing Servicewide property and equipment guidance to the business units and offices, and ensuring the proper recording of property and equipment transactions on the financial statements.

Director, Financial Reporting and Analysis Office

1. The Financial Reporting and Analysis office is responsible for:

1. Overseeing accounting procedures and internal controls for administrative property and equipment accounting.
2. Ensuring property and equipment transactions are accurately posted to the Asset Accounting Module (AAM).

Chief, Facilities Management and Security Services (FMSS)

1. The chief, FMSS, is responsible for setting Servicewide policies, procedures, standards and guidelines for purchasing and using furniture and equipment by:

1. Providing central oversight and guidance for managing property and equipment.
2. Planning, negotiating, executing and managing property and equipment procurement activities.
3. Conducting internal control reviews of property and equipment.

Deputy Chief, FMSS

1. The Deputy Chief, FMSS, is responsible for receiving, evaluating and disposing of foreign gifts, decorations and unconditional (in-kind) gifts tendered to IRS employees consistent with the Foreign Gifts and Decorations Act of 1966, amended (5 USC 7342) and Delegation Order 1-24 (FMSS Property and Asset Management Desk Guide). The Deputy Chief, FMSS, also assists the Chief, FMSS, in directing the Division that provides nationwide facilities and security services for all IRS employees and manages office space within its buildings throughout the country. These services include real estate and project management, physical security or security, logistics services, and environmental and safety services.

Office of the Chief Procurement Officer

1. The OCPO is responsible for establishing, maintaining and ensuring purchases are in accordance with Federal Acquisition Regulations, Department of the Treasury procurement policy and regulations, Internal Revenue Service Acquisition Policy (IRSAP), and Procedures, Guidance, and Information (PGI) documents.

Chief Information Officer

1. The CIO is responsible for:

1. Managing all IRS IT resources.
2. Delivering and maintaining modernized information systems throughout the IRS, including information security policies, procedures and control techniques to address system security planning and all applicable needs.
3. Ensuring information systems maintain an approved security plan, are authorized to operate and have the ability for reporting of all security-related activities.
4. Coordinating all policy issues related to information systems security including: computer security, telecommunications security, operational security, certificate management, electronic authentication, disaster recovery (DR) and critical infrastructure protection related to cyber threats.

Program Manager, Information Technology User and Network Services (UNS), Operations Service Support

1. The program manager, IT UNS, Operations Service Support, is responsible for overseeing and managing IT assets enterprise-wide that meets the established criteria set forth in the annual established Inventory Certification Plan.

Chief, CI

1. The chief, CI, is responsible for:

1. Maintaining and coordinating the inventory, control and accountability of all CI investigative and non-investigative equipment.
2. Establishing uniform rules and guidelines for CI equipment assignment, use, application and loan to maintain proper security and to prolong service life.
3. Providing an electronic extract of Criminal Investigation Management Information System (CIMIS) data to requestors.
4. Allocating CI equipment to field offices.
5. Fulfilling all roles of a property manager including records accountability.
6. Coordinating CI procurement requirements with the Procurement office.
7. Ensuring accurate asset record-keeping in CIMIS.

CI Director, Field Operations

1. The CI director, Field Operations, is responsible for:

1. Maintaining an accurate record of all investigative equipment, investigative accessories and investigative supplies assigned to the director, Field Operations.
2. Designating an area CIMIS equipment coordinator responsible for training new operators and providing aide to the field office equipment coordinators within their area.

CI Field Offices

1. The CI Field Offices are responsible for maintaining an accurate record of all investigative equipment.

Criminal Investigation Management Information System Equipment Coordinator

1. The CIMIS equipment coordinator is responsible for:

1. Ensuring information for access to CIMIS is provided by new users to the CIMIS user administrator.
2. Ensuring all users are aware of security procedures.
3. Offering all excess equipment to all other field offices before disposal.
4. Ensuring physical inventory of investigative equipment is completed, documented and reported to the Asset Knowledge Management (AKM) within the prescribed time frame in the fourth quarter of each fiscal year.

Business Units

1. The business units are responsible for complying with policies and procedures to requisition, purchase and safeguard property and equipment.

Program Management and Review

1. Program Reports - The IRS uses the Integrated Financial System (IFS) as its official financial system of record and reports the historical cost, depreciation and net book value of property and equipment in its annual financial statements according to FASAB, OMB, and Department of Treasury guidance.
2. Program Effectiveness - The effectiveness is measured by ensuring that all asset classifications are valid and recorded timely at the appropriate thresholds.

Program Controls

1. The Financial Reporting and Analysis office implements controls to ensure reasonable assurance that the property and equipment balances are accurate by:

1. Analyzing all property and equipment and certain expense transactions $50,000 and greater to verify they are classified correctly.
2. Reconciling property and equipment databases between AAM, KISAM and CIMIS.
3. Reconciling AAM to the general ledger.
4. Reviewing disposals.
5. Segregating duties and IFS access control.

Terms and Definitions

1. The following terms and definitions apply to this program.

1. Acquisition cost - The original cost of an asset to the government, which is the amount recorded in the financial and accounting records. This includes all costs incurred to bring the asset to a form and location suitable for its intended use.
2. Asset - Tangible or intangible items owned by the federal government that have probable economic benefits that can be obtained or controlled by a federal government entity.
3. Assisted acquisitions - The original cost of an asset to the government, which is the amount recorded in the financial and accounting records. This includes all costs incurred to bring the asset to a form and location suitable for its intended use.
4. Book value - The net amount at which an asset or a liability is carried on the books (also referred to as carrying value or amount). It equals the gross or nominal amount of an asset or liability minus any allowance or valuation amount.
5. Capital asset - Structures, equipment, vehicles and intellectual property, that are used by the federal government and that have an estimated useful life of two years or more.
6. Capitalize - To record a cost as an asset rather than an expense.
7. Commercial Off-The-Shelf (COTS) software - Software that is bought from a vendor and is ready to use with little or no changes.
8. Criminal Investigation Management Information System (CIMIS) - A database system used by Criminal Investigation (CI) to track asset management activities for the full life cycle of non-IT and sensitive law enforcement equipment from acquisition to disposal.
9. Depreciation - The systematic and rational allocation of the acquisition cost of an asset, less its estimated salvage or residual value, over its estimated useful life.
10. Direct costs - Costs assigned to activities by direct tracing of units of resources consumed by individual activities. A cost that is specifically identified with a single cost object.
11. Indirect costs - Costs that cannot be identified specifically or traced to a given cost object economically.
12. Impairment - A significant and permanent decline in the service utility of general property and equipment or expected service utility for construction work in process.
13. Internal use software (IUS) - Software that is bought from commercial vendors “off-the-shelf,” internally developed, or contractor-developed, solely to meet the entity's internal or operational needs.
14. Internally developed software - Software that employees are actively developing, including new software and existing or purchased software that is being modified with or without contractor’s assistance.
15. Intragovernmental lease - An intragovernmental lease is a contract or agreement occurring within a consolidation entity or between two or more consolidation entities whereby one entity (lessor) conveys the right to control the use of Property and Equipment (PE) (the underlying asset) to another entity (lessee) for a period of time as specified in the contract or agreement in exchange for consideration.
16. Knowledge, Incident/Problem, Service and Asset Management (KISAM) - An inventory system for all accountable IRS property and equipment, except for leasehold improvement, software, investigative equipment, and vehicles. Investigative equipment and vehicles are recorded in CIMIS. The KISAM Asset Manager module is used to track asset management activities for full life cycle of IT and non-IT hardware from acquisition to disposal.
17. Lease - A lease is defined as a contract or agreement whereby one entity (lessor) conveys the right to control the use of PE (the underlying asset) to another entity (lessee) for a period of time as specified in the contract or agreement in exchange for consideration.
18. Net book value - The net amount an asset or group of assets is carried on the books. It is based on the historical cost (gross amount) of the asset less any depreciation, amortization, or impairment costs against the asset.
19. Probable - The IRS follows the FASAB consideration of probable, to equate to more likely than not (>50% probability).
20. Product category code (PCC) ormaterial group code (MGC) - A data element used to group materials and services according to their characteristics. The PCC/MGC can be associated with one commitment item and more than one Federal Supply Codes (FSC).
21. Rehabilitation - The restoration or renovation of serviceable or operable articles to near-new condition or the repair of unserviceable or inoperable articles when the overall aim is to restore or renovate articles to a near-new condition.
22. Right-to-use (RTU) Lease - A lease that is a non-intragovernmental that does not transfer ownership and the term is longer than 24 months.
23. Shopping cart - The official Procurement Public Sector (PPS) requisition document submitted by an end user, a program office or a contracting officer's representative (COR), for acquiring property and equipment, supplies or services through an appointed procurement office via a warranted Contracting Officer.
24. Short-term lease - A lease with a term of 24 months or less.
25. Service utility - The expected usable capacity at acquisition.
26. Useful life - The expected operating life of an asset.

Acronyms

1. The following acronyms apply to this program.

Related Resources

1. OMB Circular No. A-11, Preparation, Submission, and Execution of the Budget
2. OMB Circular No. A-94, Guidelines and Discount Rates for Benefit-Cost Analysis of Federal Programs, Appendix C: Discount Rates for Cost-Effectiveness, Lease-Purchase, and Related Analyses for OMB Circular No. A-94
3. OMB Circular No. A-136, Financial Reporting Requirements
4. SFFAS No. 5, Accounting for Liabilities of the Federal Government
5. SFFAS No. 6, Accounting for Property, Plant, and Equipment
6. SFFAS No. 10, Accounting for Internal Use Software
7. SFFAS No. 44, Accounting for Impairment of General Property, Plant, and Equipment Remaining in Use
8. SFFAS No. 54, Leases
9. IRM 1.14.4, Personal Property Management
10. IRM 2.149.1, Asset Management Policy
11. IRM 2.149.2, Asset Management Process Description
12. IRM 2.149.3, Asset Management Hardware Procedures
13. IRM 2.149.4, Asset Management Software Procedures
14. IRM 9.10.1, Criminal Investigation Management Information System Equipment Inventory
15. IRM 9.11.3, Investigative Property
16. Procurement Policy Framework
17. Financial Management Codes Handbook

Acquisition of Goods and Services

1. This section provides guidance on procuring goods and services.

Shopping Cart Process

1. Requester electronically prepares and tracks shopping carts (requisitions) in the PPS module. The shopping cart must be complete and contain the proper approvals, technical documentation and funding information to be acceptable for processing. The requester, approver, and financial plan manager validate the accounting string and ensure the product category code (PCC) and material group code (MGC) complies with the Financial Management Codes Handbook.
2. See Procurement Knowledge Base for more information.

Procurement Process

1. Procurement is responsible for the centralized purchase of goods and services for their assigned business units.

1. Procurement staff use the PPS module to generate shopping cart documents for executing new orders, modifying existing orders and obligating funds.
2. See Procurement Policy Framework andIFS-PPS Resource Center for more information.