Fixed Asset Management & Control

1. Fixed Asset Management & Control Dec 2010

2. 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

3. 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 condition • 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 Governmenton project close

4. What is a Fixed Assets Register (FAR)? • It is a manual or computerized recordof 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 assetswill have a separate page in the FAR • Entry in FAR should be made before payment is releasedto the supplier • Any alteration in the FAR must be duly authorized • It will reflect the book balance of a class of assetsat any point of time • Book balanceis the balance of the asset/ class of assets as per the FAR

5. 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 assetsat the time of physical inventory taking

6. What are standard fixed asset control procedures? • Tagging & labelling of assets – assets are labelled or tagged so that they can be easily identified & their ownership established • Insurance of assetsagainst 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 assetsat 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

7. Physical verification of fixed assets • Conducted by an inter departmental team • Should be undertaken under the supervision of external/ internal auditorsat least once a year • Surprise checksduring audit/supervision visits • To verify existence, condition & custodyof assets • Physical balances comparedwith book balances • Variancesreported • Variances have to be adjusted in financial recordsafter due authorisation

8. 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 & shortageare equally serious & need further investigation • Should be signed by all membersof the verification team • Preferably, it should be counter signed by the auditors

9. Thank You