Fixed Assets Management and Control

download report

Transcript Fixed Assets Management and Control

Fixed Asset Management
& Control
Dec 2010
What is a fixed asset?
It is an asset, with a useful life of over one year, owned &
used by a project to achieve its stated objectives
Examples are:
 Computer
 Furniture
 Vehicle
 Concrete Mixer
 Photocopier
Why should fixed assets be managed?
They have a life of over 12 months & hence are carried forward to
the next accounting period
They are open to misuse, abuse, theft and fraud
They need to be retained in good working
They need replacement, that requires planning
& finance
They are usually of high value
They are bought using project funds & belong to the project
Fixed Assets need to be handed over to Government on project
What is a Fixed Assets Register (FAR)?
It is a manual or computerized record of fixed assets
It contains details of assets – make, model, specifications, quantity, rate,
value, supplier, receipts, issues, balance, location etc. It also has the date
of receipt of the asset & the payment voucher reference.
Each class of assets will have a separate page in the FAR
Entry in FAR should be made before payment is released to the supplier
Any alteration in the FAR must be duly authorized
It will reflect the book balance of a class of assets at any point of time
Book balance is the balance of the asset/ class of assets as per the FAR
What is the Fixed Assets Issue Register (FAIR)?
While the FAR is maintained according to class of assets, the FAIR is
maintained according to the staff member who holds the asset. There
will be one folio for each staff member who has custody of an asset
It will record the date of issue & return of each asset
It will bear the signatures of the employee when he receives the asset &
that of the storekeeper the asset is returned
The register has to be periodically reconciled with the FAR. All issues in
the FAR should be reflected in the FAIR
The register helps in locating assets at the time of physical inventory
What are standard fixed asset control
Tagging & labelling of assets – assets are labelled or tagged so that they
can be easily identified & their ownership established
Insurance of assets against theft, fire, flood etc.- in most countries, only
vehicles are insured. But it is a recommended practice to insure all project
assets. In some financing agreements, this is mandatory
Physical inventory of assets at regular intervals
Log books for vehicles, construction equipment, generators etc. The log
book records the details of use of the asset & is usually maintained by the
driver or operator. It helps in identifying personal use of project assets. It is
also used for calculating fuel consumption
Cross referencing of financial & fixed asset records – done to avoid
payment to supplier before assets are recorded in the FAR. For internal
control purposes it is vital to reconcile the financial accounting records
with fixed asset records
Note: In some countries, it is the Government Policy to only insure vehicles
Physical verification of fixed assets
► Conducted by an inter departmental team
► Should be undertaken under the supervision of external/ internal
auditors at least once a year
► Surprise checks during audit/supervision visits
► To verify existence, condition & custody of assets
► Physical balances compared with book balances
► Variances reported
► Variances have to be adjusted in financial records after due
Physical Asset Inventory Form (PAIF)
 This is the form used for recording the results of
physical asset verification
 PAIF records the asset code, book balance, physical balance,
condition, variance & possible reasons for variance
 Surplus & shortage are equally serious & need further
 Should be signed by all members of the verification team
 Preferably, it should be counter signed by the auditors
Thank You