Awards for Excellence: City of Bowling Green, KY

Safeguarding Equipment Assets with the Physical Inventory


About Bowling Green, Kentucky

In 2018, the City of Bowling Green, Kentucky was awarded for their Exceptionally Well Implemented GFOA Best Practice for capital asset inventory. The City of Bowling Green is a mid-sized city with a population of approximately 67,000 and employs about 750 full and part time employees.

In FY2008, the City reinstated a new workflow for conducting regular physical inventories. The City maintains over 1,000 equipment assets and 500+ land, building and improvement assets. Due to turnover in key Finance and Accounting staff, physical inventories were not conducted between FY2000 and FY2008. By FY2008, none of the staff involved in previous physical inventories were present to assist.

The City’s land, building and improvement assets are now inventoried centrally by the Finance Department approximately every five years. The infrequent inventory is a result of the immobile nature and longer useful life of the assets.

Below is a timeline describing how the current physical inventory was developed.

The Physical Inventory of Equipment Assets Program

The City of Bowling Green utilizes the Physical Inventory of Equipment Assets program on a biennial basis to locate and identify all equipment assets. The program began in this current form in FY2008, with improvements continually added, such as embedding the process into the City’s financial software to automatically upload minor changes directly to the capital asset file.

The physical inventory of equipment assets is detailed in the following steps:

  1. Assistant CFO (ACFO) kicks off the biennial program with refresher training. All documentation of the process is distributed to preselected departmental staff.
  2. Each departmental Point of Contact creates and maintains a physical asset inventory batch for their respective department in the City’s financial software.
  3. Departmental staff locate all listed assets in the inventory batch and note any changes to location, responsible department, responsible employee, and/or asset descriptions. If an asset is not found, staff complete a Missing Asset Form, which is reviewed and investigated by the ACFO.
  4. Departmental Points of Contact update software with the results from the inventory. The ACFO will process any changes to the active status or asset description.
  5. Departmental Senior Managers review, approve, and submit inventory changes to ACFO.
  6. The ACFO reviews all inventory batches and posts each after all changes have been validated and documented.
  7. Internal Auditor or the Chief Accountant verifies a random sample of approximately 5-10% of each department’s assets. If a large number of variances are reported during the verification, the Internal Auditor will schedule a follow-up verification of a larger sample or may call for a department-wide re-inventory.
  8. CFO receives summary memo of entire process and departmental Senior Managers receive results.
  9. Department equipment asset listings reviewed at end of each fiscal year.

Resources Required

This process was developed by the ACFO after researching best practices and relevant examples from other cities, universities, and the GFOA Capital Assets training held in December 2016. The entire process was reengineered and has continually improved since its reinstatement in 2008.

The physical inventory process is a collaborative effort relies on engaged stakeholders, including: ACFO to manage the process, departmental staff to complete the inventory, Senior Managers to review and approve, Internal Auditor and Chief Accountant to perform random verifications, Purchasing Manager to investigate prior year surplus and current year variances with ACFO, and City Manager and Chief Financial Officer to support the entire program.

To successfully implement a new physical inventory procedure, the City of Bowling Green had changed several other internal processes.

  • Responsibility for random verification of approximately 5-10% of each department's assets recently transferred from the ACFO to the Chief Accountant. This was implemented to mitigate any internal control issues that may arise since the ACFO manages the overall physical inventory process. Verifications are now performed by both the Internal Auditor and Chief Accountant, who meet with departmental personnel in the field to verify the randomly selected assets.
  • The fiscal year-end review of departmental equipment asset listings was implemented in FY2014 to reduce the number of changes recognized during the biennial inventory. The ACFO provides each department with an up-to-date asset listing as of early June each year. Each department reviews the listing for any known variances.


The City has primarily seen a reduction in the variances reported during the inventory, with a total of 66 transfers or prior year disposals reported in FY2010 versus an estimated total of 12 in FY2018.

This program has also indirectly improved the compliance with the Purchasing Division’s surplus program requirements. The surplus program relies upon accurate reporting from departments when equipment and/or supplies are requested to be removed from City service through an electronic workflow form. This workflow is dependent upon correct submission of asset number, description, and serial number. When an asset is subsequently sold at auction or scrapped, it can be easily removed from the capital asset listing.

Finally, the physical inventory process reengages departmental personnel in the asset program and reaffirms its importance not only to financial statement presentation, but also to the City’s overall mission to focus on fiscal responsibility (among others). Each year the inventory is conducted, departmental personnel see the value and have asked how they can improve their reporting and even conduct inventories on an ad-hoc basis outside of the biennial cycle.

Tools and Resources

GFOA Best Practice: Inventories of Tangible Capital Assets

GFOA recommends that every state and local government periodically inventory its tangible capital  assets so that all such assets are accounted for, at least on a test basis, no less often than once every  five years. While well-designed and properly maintained perpetual inventory systems can eliminate  the need for an annual inventory of a government’s tangible capital assets, no inventory system is so  reliable as to eliminate completely the need for a periodic physical inventory.