Accounting Policies & Procedures Mannual Chap 13

 

13  Procurement and Asset Management

Table of Contents

 

 

 

 

13.1             Introduction                                                                                                                                                          13.3

13.2             General Policies for Procurement                                                                                                                   13.4

13.2.1           Segregation of duties                                                                                                                                      13.4

13.2.2           Overseas procurement                                                                                                                                    13.4

13.2.3           Inter-entity procurement                                                                                                                                 13.4

13.2.4           Approval of procurement and commitment                                                                                                 13.4

13.3             Accounting for Stores                                                                                                                                        13.5

13.3.1           Stores                                                                                                                                                                 13.5

13.3.2           Stores accounts                                                                                                                                               13.5

13.3.3           Segregation of duties                                                                                                                                      13.5

13.3.4           Receipt of stores                                                                                                                                              13.5

13.3.5           Issue of stores                                                                                                                                                  13.6

13.3.6           Stocktaking                                                                                                                                                       13.6

13.4             Fixed Assets Management                                                                                                                                 13.8

13.4.1           Recording of fixed assets                                                                                                                               13.8

13.4.2           Responsibility for fixed assets recording                                                                                                     13.9

13.4.3           Donations/gifts of fixed assets                                                                                                                      13.9

13.4.4           Accounting for fixed assets                                                                                                                           13.9

13.4.5           Reporting of fixed assets                                                                                                                              13.10

13.5             General Policies for Disposal of Fixed Assets                                                                                            13.11

13.5.1           General principles                                                                                                                                          13.11

13.5.2           Disposal of assets to other government departments/entities                                                               13.11

13.5.3           Trade-ins and swaps                                                                                                                                     13.11

13.6             Accounting for Proceeds from Disposals                                                                                                     13.13

13.6.2           Accounting entries                                                                                                                                        13.13

 

13.1     Introduction

13.1.1.1   This chapter covers accounting policies and principles associated with the purchasing process and in relation to accounting for stores and fixed asset management.

13.1.1.2   This chapter does not deal with purchasing policies, rules and guidelines in relation to tendering, advertisement, ordering, receipt, quality certification and control of goods and services.  Such policies, rules and guidelines are available in the Manual Office Procedures (Purchase) issued by the Department of Supplies, Federal and Provisional Government, which acts as the centralized purchase agency on behalf of most of the civil departments of the Federal Government, or in Purchase Manuals of other entities such as Defence and Railways.

 

13.1.1.3   In the case of Provinces, such policies, rules, and guidelines are

contained in the Purchase Manuals of Industries Department, and

for specific items, such as medicines, in the Purchase Manuals of

the respective departments.

13.2     General Policies for Procurement

13.2.1  Segregation of duties

13.2.1.1   The PAO (or his/her delegated offices) of an entity should ensure that there is an appropriate segregation of duties between staff who approve purchase orders, those who place orders, and those who receive the goods or services.

13.2.1.2   For centralised accounting entities, all payments shall be certified and authorised by the DAO/AG/AGPR office as set out in the Chapter 4 “Expenditures” of this Manual.  For self-accounting entities, the PAO of that entity should ensure that there is an appropriate segregation of duties between staff who authorise and make payment.

13.2.1.3   The PAO (or his/her delegated offices) should also ensure that all officers responsible for the procurement of goods and services are aware of (by circulation of guidelines and notices to concerned officers) the procurement guidelines issued by the Government and also any guidance on purchasing practices which is issued from time to time by the Government.

13.2.2  Overseas procurement

13.2.2.1   For overseas procurement carried out through the Department of Industries, Supplies and Food, the policies and procedures as set by the Department of Industries, Supplies and Food should be followed.

13.2.2.2   Where a department/entity needs to use the facilities of an overseas office of the Department of Foreign Affairs for the procurement of certain supplies, the policies and procedures as set by the delegated authority  should be followed.

13.2.3  Inter-entity procurement

13.2.3.1   Accounting treatment of procurement relating to inter-department/entity, refer to chapter 12 "Transactions between Government Entities".

13.2.4  Approval of procurement and commitment

13.2.4.1   In relation to approval of procurement, including commitments entered for procurement, the policies as set out in sections 4.2.2. and 4.3.3. of chapter 4 of this Manual shall be followed.

13.3     Accounting for Stores

13.3.1  Stores

13.3.1.1   Stores are defined as consumable items or goods acquired not for resale, which are the property of, in the possession or under the control of the department/entity.

13.3.1.2   Expenditure on stores incurred in the departments shall be included under contingent expenditure (except where it is treated otherwise e.g. stores relating to works).

13.3.2  Stores accounts

13.3.2.1   These are subsidiary accounts kept by the department/entity for the purpose of recording and maintaining stores.

13.3.2.2   Each department/entity managing stores shall issue directions to cover detailed procedures for stores accounting and control.  

13.3.2.3   Stores accounts should be built up from properly authorised vouchers recording stores transactions.

13.3.2.4   In practice the amount of detail in stores accounts is likely to vary, and in devising systems, department/entity should pay regard to cost effectiveness.  Factors to be taken into account will include the nature of the items being held, their value and attractiveness.

13.3.2.5   Procedures issued by the department/entity should enable separate orders to be traced through each of the order, receipt and payment processes, and for the necessary cross checks to be carried out.

13.3.3  Segregation of duties

13.3.3.1   Control of stores records rests with a delegated officer(s) within the department/entity.

13.3.3.2   While other people may be allowed access to the records for operational reasons, any adjustment of the stores accounts should only be made by the delegated officer(s).

13.3.3.3   The tasks of ordering stores, checking deliveries and approving payments should be separated wherever possible.

13.3.4  Receipt of stores

13.3.4.1   All stores should be examined, by a delegated officer within the department/entity, on receipt of goods to ensure that there is a valid purchase order, that the correct quantities and qualities have been received, and that they are in good condition.

13.3.4.2   Appropriate action should be taken by the delegated officer within the department/entity if unsolicited goods are received or if quantities or qualities are wrong, or if the goods are not in good condition.

13.3.4.3   Where goods are received from within the department/entity (i.e. from another departmental store) or from another department/entity, the issuing store will prepare an issue voucher and send copies to the recipient, who should return a signed copy.  This signed copy of the issue voucher shall be kept by the issuing store for reconciling of goods.

13.3.4.4   The recipient should ensure that the goods are checked, that any discrepancies are resolved, and both the sender and the recipient will ensure that their records are updated.

13.3.5  Issue of stores

13.3.5.1   The PAO should ensure that within their department/entity, the departmental procedures lay down:

·        arrangements for demanding issue of goods from stores.  These arrangements should, inter alia, specify those entitled to acquisition stores, the circumstances in which stores may be demanded, and the procedure for making demands (including the signing of requisitions)

·        procedures for issuing stores.  These should cover, for example, instructions to store keepers on the conditions to be satisfied before stores may be released, and the arrangements for obtaining signed receipts

·        procedures for recording stores issues

·        arrangements for reconciling stores demands and stores issues

13.3.6  Stocktaking

13.3.6.1   The delegated officer(s) shall ensure that the balances recorded in stores accounts are regularly checked by stocktaking, at least once in a year.

13.3.6.2   The condition of goods should also be examined.

13.3.6.3   The immediate purpose of stocktaking is to deter and detect losses by theft and fraud, to verify the accuracy of stock records, and to identify any weaknesses in custody arrangements.

13.3.6.4   The PAO must ensure that the arrangements for stocktaking will provide management with an independent verification of the contents and the state of stores.  This is achieved by proper procedures for stocktaking issued by the PAO.

13.3.6.5   The stocktaking will be carried out under the overall supervision of Internal Audit Officer.  If stores accounts or store keeping staff are required to assist, the Internal Audit Officer should ensure that this will not prejudice the independence of stocktaking.

13.3.6.6   Discrepancies between stocktake and store accounts should be investigated by the delegated officer(s) and store accounts amended if necessary.

13.3.6.7   Any adjustments to store accounts shall be made only on the authority of an officer authorised by the department/entity.  Such adjustments shall be supported by reference to the relevant stocktaking reports and to the authority for the adjustments.

13.3.6.8   A copy of the stocktaking report shall be sent to the concerned DAO/AG/AGPR.

13.4     Fixed Assets Management

13.4.1  Recording of fixed assets

13.4.1.1   All departments/entities will maintain a "Fixed Assets Register" (form 13A)  for the  categories of assets, for which they are responsible.  The categories of assets shall include the following:

·        land & building

·        civil works

·        plant and machinery

·        vehicles

·        furniture & fitting

·        office equipment

·        computer equipment

13.4.1.2   The following information shall be kept on the Fixed Assets Register for each asset.

·        description

·        classification of asset

·        date of purchase or date of completion

·        original purchase cost in Rupees

·        cost in foreign currency (where applicable)

·        asset identification number

·        current location

·        ownership of/responsibility for asset

13.4.1.3   The above data is the minimum required for the proper management of fixed assets.

13.4.1.4   Every fixed asset purchased or improvement/extension made above Rs 100,000 shall be recorded in the Fixed Assets Register.  This threshold should be subsequently adjusted in the light of experience and better defined management information requirements.

13.4.1.5   The record of each item shall also include references to the relevant files, plans and deeds, source of acquisition, and give other relevant details such as rents payable or receivable, and restrictive covenants.

13.4.1.6   Every change affecting the ownership, occupation or change in location of the asset shall be the subject of an entry in the register.

13.4.2  Responsibility for fixed assets recording

13.4.2.1   The PAO shall ensure that the Fixed Assets Register kept in his/her department/entity is properly maintained and is up-to-date.

13.4.2.2   Departments/entities will regularly review their holdings of fixed assets (including land & building, plants, machinery, furniture & fittings, office equipment, computers etc.) in order to match with the fixed assets records and to identify surplus assets.

13.4.2.3   The Fixed Assets Register will be maintained by a delegated officer within the department/entity who should take appropriate precautions to safeguard the accuracy and integrity of the record.

13.4.2.4   Any entry in the register will only be made by an authorised officer who will sign it on every entry.

13.4.2.5   No item will be removed from the register except under proper authority.  When an item is removed the record should be noted to show the date and reasons for removal and the reference of the relevant written authority.

13.4.2.6   Where an asset is jointly owned by more than one department/entity, the Fixed Assets Register will be kept by the nominated controlling department/entity.

13.4.3  Donations/gifts of fixed assets

13.4.3.1   Donations or gifts of fixed assets may be received by a department/entity with the approval of the PAO.

13.4.3.2   The value of the assets donated or gifted shall be in accordance with guidelines set by the Government.

13.4.3.3   Donations or gifts of fixed assets by department/entity may be made only on the authority of the MoF.  Such assets shall be removed from the Fixed Assets Register on the date the fixed assets is donated or gifted.

13.4.4  Accounting for fixed assets

13.4.4.1   A memorandum account for fixed assets shall be kept by the DAO/AG/AGPR to record transactions relating to fixed assets.

13.4.4.2   Where claims are made in relation to expenditures for fixed assets, the claim voucher submitted to the DAO/AG/AGPR shall also include information on Fixed Assets Form (form 13B) .

13.4.4.3   When the delegated officer in the Account Section of the DAO/AG/AGPR records the expenditure, in accordance with section 4.4 of chapter 4 of this Manual, he/she shall, at the same time, also record the relevant information, as submitted with the claim voucher, in the fixed assets account (kept as a memorandum account by DDO-wise).

13.4.5  Reporting of fixed assets

13.4.5.1   All PAOs shall prepare a fixed assets report, by DDO-wise, from the Fixed Assets Register on a quarterly basis.  This quarterly report, in a prescribed form (see section 2.2.7 of FRM) , shall be sent to the concerned Accountant General.

13.4.5.2   All DAOs shall also prepare a fixed assets report, by DDO-wise, from the fixed assets account on a quarterly basis.  This quarterly report, in a prescribed form (see section 2.2.7 of FRM), shall be sent to the concerned Accountant General.

13.4.5.3   The Accountant General shall check the quarterly report send by the PAOs with the data in the fixed assets account and investigate any differences.

13.4.5.4   The Accountant General shall consolidate  the information for including into the Annual Accounts.

13.5     General Policies for Disposal of Fixed Assets

13.5.1  General principles

13.5.1.1   Surpluses should be sold as quickly as possible, subject to value for money considerations and guidelines set by the Government in relation to disposal of assets.

13.5.1.2   Surplus assets shall be sold on the open market by means of public auction or tender.

13.5.1.3   Where open market value is not available, department/entity should follow guidelines set by the Government in order to use their own valuers, the District Valuer or a suitably qualified private sector valuer.

13.5.1.4      Departments/entities shall ensure that appropriate systems of control are instituted over the disposals of assets.  In particular they should ensure that the staff concerned are properly supervised and that duties are adequately separated; for example that staff responsible for selling assets do not also value them.

13.5.1.5      Where a loss of asset has taken place, it shall be taken off the Fixed Assets Register and included in the Loss Register as set out in section 8.3.2 of chapter 8 of this Manual.

13.5.2  Disposal of assets to other government departments/entities

13.5.2.1   The transfer of assets by one department/entity to another will be treated as an arms length transaction i.e. the asset will be sold on cash basis instead of as a book entry going through some settlement/exchange account.

13.5.2.2   On transfer the asset shall be removed from the Fixed Assets Register by a delegated officer within the department/entity.  The delegated officer shall also inform the DAO/AG/AGPR of this transfer, who shall make the adjustment in the fixed assets account.

13.5.2.3   If the department/entity receiving the asset is under the jurisdiction of another DAO/AG/AGPR, that department/entity shall inform the concerned DAO/AG/AGPR of the assets transferred, on the Fixed Assets Form.

13.5.3  Trade-ins and swaps

13.5.3.1   Each trade-in arrangement will only to be approved by a delegated officer within a department/entity having the authority to incur expenditure representing the gross value of the purchase transaction, i.e. actual expenditure plus the value given by the supplier for the items traded-in.

13.5.3.2   Similarly, swap arrangements shall be approved in each case by a delegated officer empowered to incur expenditure equal to the estimated gross value of the items being acquired in the swap.

13.5.3.3   On trade-ins or swaps the asset traded-in or swapped shall be removed from the Fixed Assets Register and new asset shall be added to the Fixed Assets Register by a delegated officer within the department/entity.

13.5.3.4   The delegated officer shall also inform the DAO/AG/AGPR of this trade-in or swap, who shall make the adjustment in the fixed assets account.

13.6     Accounting for Proceeds from Disposals

13.6.1.1   Receipts from the sale of fixed assets shall be credited to the appropriate account head in the relevant Federal or Provincial Consolidated Fund.

13.6.1.2   Sale receipts shall be accounted for on a gross basis.  Sale expenses will not be netted off the sale proceeds but shall be separately accounted for as an expenditure item.

13.6.1.3   In relation to disposal of assets to other government department/entity, the value of the asset on transfer will be its original cost, as recorded in the books of transferee department.

13.6.2  Accounting entries

13.6.2.1   The double entry in relation to proceeds from disposal is as follows.

 

                                                  Dr                               Bank account

                                                            Cr                                Revenue head account

 

                                                  [to record proceeds from disposal of fixed asset]

 

                                                  Also

 

                                                            Cr                                Fixed assets account

 

                                                  [to record disposal of fixed asset in the memorandum account]

 

13.6.2.2   The double entry for trade-in is as follow.

 

                                                  Dr                               Expenditure head account

                                                            Cr                                Bank account

 

                                                  [to record the net expenditure incurred during trade-in of fixed asset]

 

                                                  Also

 

                                                  Dr                               Fixed assets account (new asset)

                                                            Cr                                Fixed assets account (old asset)

 

                                                  [to add the new asset and remove the old asset during a trade-in, from the memorandum account]

 

 

13.6.2.3   The double entry for swap is as follow.

 

                                                  Dr                               Fixed assets account (new asset)

                                                            Cr                                Fixed assets account (old asset)

 

                                                  [to add the new asset and remove the old asset during a swap, from the memorandum account]