Fixed Asset Management Fixed Asset Management & Control& Control

April 2012

What is a fixed asset?What is a fixed asset?What is a fixed asset?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:

Photocopier

Computer

Furniture

Vehicle

Concrete Mixer

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Why should fixed assets be managed?Why should fixed assets be managed?Why should fixed assets be managed?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 bought using project funds & belong to the project

Fixed Assets need to be handed over to Government on project close

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They are usually of high value

What is a Fixed Assets Register (FAR)?What is a Fixed Assets Register (FAR)?What is a Fixed Assets Register (FAR)?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

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Fixed Assets Register

What is the Fixed Assets Issue Register (FAIR)?What is the Fixed Assets Issue Register (FAIR)?What is the Fixed Assets Issue Register (FAIR)?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

taking

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Fixed Assets Issue Register

What are standard fixed asset control procedures?What are standard fixed asset control procedures?What are standard fixed asset control procedures?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 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

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Physical verification of fixed assetsPhysical verification of fixed assetsPhysical verification of fixed assetsPhysical 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 authorisation

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Physical Asset Inventory Form (PAIF)Physical Asset Inventory Form (PAIF)Physical Asset Inventory Form (PAIF)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

investigation

Should be signed by all members of the verification team

Preferably, it should be counter signed by the auditors

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PAIF Form