Financial Management Practice Manual
Chapter 7
Asset Management
Guidance Template
Office of Health Statutory Agencies – Queensland Health
Financial Management Practice Manual - Guidance Template
Chapter 7 – Asset Management
153
Document control sheet
Contact for enquiries and proposed changes
If you have any questions regarding this document or if you have a suggestion for
improvements, please contact:
Office of Health Statutory Agencies
Email:
statutoryagencies@health.qld.gov.au
Telephone:
3234 1228
Version history
Version no.
Date
Changed by
Nature of amendment
1.0
July 12
Jesse Lee
Final draft
1.1
October 12
James Ronan
Financial Policy Review
1.2
October 12
Deborah
McLaughlin
Final
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Contents
7
Asset Management .................................................................................. 157
7.1
Introduction ................................................................................................ 157
7.2
Control Objectives...................................................................................... 158
7.3
Definition and Recognition of Assets ......................................................... 158
7.4
Funds and Bank Accounts ......................................................................... 159
7.4.1
7.4.2
7.4.3
Banking Arrangement and Authorisations ........................................................................... 160
Bank Overdraft .................................................................................................................... 161
Bank Reconciliations ........................................................................................................... 161
7.5
Cash and Accountable Advances .............................................................. 162
7.5.1
7.5.2
Imprest Accounts (including Petty Cash) ............................................................................ 162
Other Floats.......................................................................................................................... 164
7.6
Accounts Receivable / Debtors .................................................................. 164
7.6.1
7.6.2
7.6.3
7.6.4
7.6.5
7.6.6
7.6.7
7.6.8
7.6.9
Impairment Test for Accounts Receivable........................................................................... 165
Recording of Accounts Receivable/Debtors ........................................................................ 165
Credit Balances .................................................................................................................... 166
Adjustment to Accounts (Credit Notes) ............................................................................... 166
Overdue Receivables and Bad debts .................................................................................... 167
Letter of Demand and use of Debt Collection Agencies...................................................... 167
Legal Recovery of Overdue Receivables ............................................................................. 168
Debt Write Off Level ........................................................................................................... 168
Written Off Unpaid Receivables .......................................................................................... 168
7.7
Inventory .................................................................................................... 169
7.7.1
7.7.2
7.7.3
7.7.4
7.7.5
Valuation of Inventory ......................................................................................................... 170
Storage of Inventory and Control ........................................................................................ 171
Inventory Stock-take ............................................................................................................ 171
Obsolete Inventory ............................................................................................................... 172
Write Off Approvals for Obselete Inventory ....................................................................... 172
7.8
Portable and Attractive Items ..................................................................... 173
7.9
Non-Current Physical Assets ..................................................................... 173
7.9.1
7.9.2
7.9.3
7.9.4
Classification of Assets ........................................................................................................ 174
Acquisition ........................................................................................................................... 174
Procurement Process ............................................................................................................ 175
Valuation of Assets (Non-Current Physical Assets) ............................................................ 176
7.10
Intangible Assets........................................................................................ 177
7.10.1
7.10.2
7.10.3
7.10.4
7.10.5
7.10.6
Recognition Criteria ............................................................................................................. 177
Software Assets.................................................................................................................... 178
Research and Development.................................................................................................. 179
Useful Lives and Amortisation ............................................................................................ 179
Disposal of Intangable Assets .............................................................................................. 180
Disclosure Requirements ..................................................................................................... 180
7.11
Works in progress ...................................................................................... 181
7.11.1
Completion of Capital Works .............................................................................................. 181
7.12
Non-Current Assets - Compliance, Control and Administration ................. 182
7.12.1
7.12.2
7.12.3
7.12.4
7.12.5
Identification ........................................................................................................................ 183
Usage of Non-Current Assets .............................................................................................. 183
Non-Current Asset Stock-takes............................................................................................ 184
Impairment of Assets ........................................................................................................... 185
Revaluation of Assets .......................................................................................................... 186
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7.13
Depreciation and Amortisation ................................................................... 187
7.13.1
Depreciation Policy.............................................................................................................. 188
7.14
Disposal of Assets ..................................................................................... 189
7.14.1
7.14.2
7.14.3
Valuation of Assets identified as ‘Held for Sale’ ................................................................ 191
Gains/Losses on Disposal of Assets .................................................................................... 192
Disposal Method .................................................................................................................. 192
7.15
Loans and Advances ................................................................................. 193
7.15.1
7.15.2
Loans Receivable ................................................................................................................. 193
Advances .............................................................................................................................. 194
7.16
Other Assets (Prepaid Expenses) .............................................................. 194
7.17
Planning and Control of Capital Commitments .......................................... 195
7.17.1
7.17.2
Capital Commitments .......................................................................................................... 195
Asset Leases and Hire .......................................................................................................... 196
7.18
Contingency Management ......................................................................... 197
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7 Asset Management
7.1 Introduction
Legislation requires foundations to have an asset management system in place to efficiently,
effectively and economically manage the assets of the Foundation.
This system must provide for identifying, acquiring, managing, disposing of, valuing, recording and
writing off assets. In addition, evaluations and reviews must be undertaken on any acquisitions,
maintenance and improvements to the Foundation’s significant assets. See sections 15 & 23 of the
Financial and Performance Management Standard 2009.
Foundations must also comply with the Non-Current Asset Policies for the Queensland Public Sector
document produced by Queensland Treasury.
In addition, section 59 of the Financial Accountability Act 2009 requires a Foundation to adhere to
relevant Australian Accounting Standards, titled “prescribed accounting standards”, issued by the
Australian Accounting Standards Board. To assist, the Accounting Policy Guidelines are used to clarify
which standards and interpretations are applicable to the current reporting period. These guidelines
are produced as part of the Financial Reporting Requirements for Queensland Government agencies.
When undertaking evaluations of assets, Foundations must comply with the requirements set out in
Queensland’s Project Assurance framework and Queensland’s Value for money framework.
Foundations must comply with the Financial Accountability Handbook (see Volume 3, Information
Sheet 3.9 – Asset Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset
management, Information Sheet 2.3 - Internal Controls Accountability Framework and Information
Sheet 4.1 - Monitoring/Assessment of Internal Controls).
–
Provide an outline of the asset management practices of the Foundation.
–
What is the purpose of asset management for the Foundation? How does asset
management benefit the Foundation?
–
What are the objectives and principles of the Foundation’s asset management system?
–
How is asset management for the Foundation achieved? Who is responsible? How is it
undertaken?
–
Describe how the asset management practices of the Foundation meet the legislated
requirements.
–
Describe how the business internal controls (refer to Chapter 2) of the Foundation
support proper and effective asset management.
–
Describe how the Foundation’s asset management system complies with the State
Procurement Policy?
–
Describe the core activities related to asset management, i.e. identifying, acquiring,
managing, disposing of, valuing, recording, maintaining and writing off assets etc. Who is
responsible for these activities? How are they undertaken?
–
How are the asset management systems and practices of the Foundation reviewed? Who
is responsible for this? When is it undertaken?
–
How does asset management assist the Foundation in achieving the objectives and goals
in its Strategic Plan and deliverables in its Operational Plan?
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7.2 Control Objectives
Control objectives form part of the mandatory internal control structure as outlined in section 8 of the
Financial and Performance Management Standard 2009.
For more information on internal controls refer to Financial Accountability Handbook - Volume 2,
Information Sheet 2.3 - Internal Controls and the Financial Management Tools - Information Sheet 4.1
- Monitoring/Assessment of Internal Controls.
–
What are the control objectives for asset management? For example:
o
Assets, are identified, claimed, acknowledged, held and registered in the
name of the Foundation, and are used for official business purposes
o
Acquisition, receipt, disposal, issue or distribution of assets are properly
approved in accordance with, and recorded in, the Foundation’s Financial
Delegations. Also see Financial Delegations Register (see Chapter 2)
o
Acquisition, receipt, disposal, issue or distribution of assets are promptly and
accurately recorded by authorised staff in accordance with prescribed
requirements and practices including the State Procurement Policy
o
Proper application of statutory and administrative requirements and policies
determined by State Cabinet, the Treasurer or other responsible authority,
occurs with regard to the acquisition, holding and disposal of assets
o
Transactions are recorded accurately and completely, supported by readily
accessible records and documentation with clearly maintained audit trails
o
Assets are adequately protected from theft, loss, damage and misuse
o
Existence of the assets is verified at least annually and a reconciliation of
relevant balances is carried out at appropriate times
o
Relevant and reliable information is obtained to enable all internal and
external reporting
o
Economy, efficiency, timeliness and effectiveness is achieved in the
acquisition, use and disposal of assets
o
Losses or damages are detected and recorded promptly and accurately and
appropriate action taken
o
Adequate separation of duties exists for approval of acquisition, accounting
for, and custody of assets.
–
What are these controls objectives used for? What do they aim to provide for the
Foundation?
–
Describe how the control objectives support the Foundation to efficiently, effectively and
economically manage its assets,
–
Who is responsible for these controls? How/when are they reviewed?
7.3 Definition and Recognition of Assets
TIP:
Include additional definitions considered appropriate and remove those not applicable.
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An asset is defined in the Australian Accounting Standards Board (AASB) publication
Framework for the Preparation and Presentation of Financial Statements as “a resource
controlled by the entity as a result of past events and from which future economic benefits
are expected to flow to the entity”.
An asset therefore has the characteristics of future economic benefits embodied in it, with the
potential to contribute, directly or indirectly, to meeting the Foundation’s strategic goals and
operational objectives.
Refer to Queensland Treasury’s Non-Current Asset Policies for Queensland Public Sector for
specific accounting treatment of non-current assets in the public sector.
The AASB pronouncement AASB 116 Property, Plant and Equipment states that an asset
must be recognised only if:


It is probable that future economic benefits associated with the items will flow to the
entity
The cost or value of the item can be reliably measured.
It is sometimes the case that an asset will be acquired by a Foundation at no cost but must
still be recognised in the asset register at its market value. Assets may be owned, leased or
donated and may include:









Cash
Receivables
Loans and advances
Inventories
Investments
Prepayments
Land and buildings
Property, plant and equipment
Intangibles.
7.4 Funds and Bank Accounts
–
–
Describe the funds that are managed by the Foundation and what they are used for. For
example:
o
Operating Funds – used for general operations of the Foundation
o
General Trust Funds – used to hold moneys of the Foundation for a particular
purpose
o
Tied/untied Funds – used for the purpose those moneys were provided for
o
Term deposits and investments – used to generate capital for the Foundation.
Describe the bank accounts that are managed by the Foundation and what they are
used for. For example:
o
Controlled collections bank account – used to receive funds into the
Foundation
o
Controlled expenditure bank account – used to manage expenditure
o
Other specific purpose accounts.
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–
What are the policies, principles and procedures for the management of the Foundation’s
funds and bank accounts?
–
What are the procedures if the Foundation is made aware of activities in managing the
Foundation’s funds and bank accounts that contravene the policies, principles and
procedures?
–
Where are the details of the Foundation’s funds and bank account kept? Who has access
to these? What security and controls are in place to ensure they are not misused?
–
What segregation of duties is in place for management of funds and bank accounts?
–
How do the Foundation’s risk management policies apply to managing funds and bank
accounts?
–
How is a clear audit trail maintained for the management of the funds and bank
accounts?
–
How does the Foundation ensure funds and bank accounts are managed in accordance
with the legislated requirements, with proper documentation of transitions and a clear
audit trail maintained?
–
Who can approve the creation or closing of funds and bank accounts?
7.4.1 Banking Arrangement and Authorisations
TIP:
Some banking processes for the Foundation may be covered in Chapter 6.
–
What are the banking arrangements of the Foundation? What banking institution/s are
the Foundation’s funds and banks accounts with?
–
Are the funds and banks accounts named for the Foundation? Or are they named
differently? Who can approve the naming of a fund or account by the Foundation?
–
Is the Foundation required to comply with any conditions as part of the banking
institution/s’ service agreement? For example: only certain staff may be authorised to
undertake banking on behalf of the Foundation?
–
What are the requirements the Foundation considers appropriate for its banking
arrangements? For example:
o
Bank statements of transactions to be received at the end of each month for
all accounts
o
Certificates of balance of any account to be forwarded on request
o
Endorsement of cheques only by authorised staff
o
Recognition of authorised signatures only
o
Return of paid cheques and other banking related documents for audit needs
o
Collection of paid cheques only by authorised staff.
–
What is the process for opening a new fund or bank account for the Foundation?
–
How is a clear audit trail maintained through banking arrangements and authorisations?
–
What are the authorisations for the management of the Foundation’s funds and bank
accounts? Can these be delegated? If so, is this delegation of authority recorded in the
Financial Delegations Register (see Chapter 2)?
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–
Does the Foundation have an authorising officer for banking duties? If so, what are their
responsibilities?
–
Does the Foundation have a verifying officer for the Foundation’s banking? If so, what is
the process to appoint them and what are their duties?
7.4.2 Bank Overdraft
–
Does the Foundation have an overdraft facility on its bank accounts or funds? If so, what
is it used for?
–
What are the policies, principles and procedures for the management of the Foundation’s
overdraft facilities on its bank accounts?
–
How do the Foundation’s risk management policies apply to managing the overdraft
facilities?
–
How is a clear audit trail maintained for the management of the overdraft facilities?
7.4.3 Bank Reconciliations
Foundations should refer to the Financial Management Tools, in particular the Information Sheet 3.9
Asset management for further details.
TIP:
Some banking reconciliation processes for the Foundation may be covered in Chapter 6.
–
How does the Foundation manage banking reconciliations? Who is responsible for the
bank reconciliations?
–
What are the principles, processes and policies for banking reconciliations?
–
How often is the Foundation required to undertake banking reconciliations? For example,
daily, or every 30/60/90 days?
–
Who can approve the banking reconciliations? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
Does the Foundation compare banking reconciliations with the General Ledger figures? If
so, what is the process to undertake this? Are there any issues required to be taken into
account when doing this? For example:
o
Receipts processed but not yet acknowledged by the bank
o
Cheques drawn but not yet processed
o
Transactions (bank fees, interest, electronic funds transfers, manual cheques
presented) not yet recorded in the General Ledger.
–
If discrepancies are found during banking reconciliations, how are they managed? Who is
responsible? Where is this information stored?
–
Is there any specific information required for banking reconciliation working papers? For
example:
o
Copy of the general ledger bank account transaction listing
o
General ledger bank account reconciliation statement
o
Supporting documentation for the reconciliation (bank statements, general
ledger balance reports, error list reports, list of cancelled/replaced cheques)
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o
Records of reconciled items and how these have been cleared
o
Reconciled items working papers and supporting documentation.
–
How does the Foundation report on its banking reconciliations? Who is responsible? How
is this linked to the Foundation’s reporting requirements in Chapter 4?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for banking reconciliations?
7.5 Cash and Accountable Advances
Foundations have a legislated requirement to have systems in place for promptly identifying,
collecting, paying and investing cash, as well as recording transactions involving cash. These systems
can work together to support the mandatory internal control structure. See sections 8, 15 & 24 of the
Financial and Performance Management Standard 2009.
Foundations must also comply with the relevant Australian Accounting Standards Board
pronouncements.
Accountable advances, for example petty cash or floats, are “advances” of a fixed amount that are
required for frequent and relatively minor expenditure for official purposes.
TIP:
Certain cash management practices are covered in other chapters.
–
How does the Foundation manage cash and accountable advances? Who is responsible
for this?
–
What are the principles, processes and policies for managing cash and accountable
advances?
–
Who has access to using and/or receiving cash and accountable advances?
–
How do the Foundation’s security and specific controls apply for the management of cash
and accountable advances? See Chapter 2.
–
How does the Foundation ensure cash on premises is kept to a minimum?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for cash and accountable advances?
7.5.1 Imprest Accounts (including Petty Cash)
Refer to the Financial Accountability Handbook (see Volume 3, Information Sheet 3.9 – Asset
Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset management) for
further information.
TIP:
An imprest account is also referred to as petty cash or float. This is a permanent “advance”
of a fixed amount that is required to frequently fund relatively minor amounts of expenditure
for official purposes. Imprest accounts are also periodically reimbursed.
–
How does the Foundation manage its imprest accounts? Who is responsible for this?
–
What are the principles, processes and policies for the imprest accounts?
–
How often are imprest accounts reviewed for operational validity?
–
What are the security considerations for the management of the imprest accounts?
–
What is the process if discrepancies are identified in imprest account records?
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–
How are imprest accounts accessed? Who determines staff access?
–
What is the imprest account used for? For example:
o
Reimbursement for purchases which are unanticipated, of low value, and
which have been previously funded from an officer's personal finances for
expediency
o
Advancing cash to officers, reducing the need for them to initially meet, from
their personal finances, costs incurred for official departmental purposes.
–
What is the monetary value of the imprest account? For example, a $50 float. Is there a
particular make-up of the float in certain monetary denominations?
–
Are imprest accounts required to be reconciled similarly to other banking accounts? If
not, how do they differ?
–
What are the responsibilities for staff handling the imprest account (petty cash)? Consider
segregation of duties. For example:
–
o
Fully accountable for the petty cash and associated transactions
o
Provided with adequate security for the petty cash
o
Responsible for the safe custody of the petty cash.
What processes are in place when petty cash is used for a purchase? For example:
o
Staff sign appropriate documentation indicating the amount of cash received
o
Produce all receipts, and a properly authorised petty cash voucher, for the
total amount spent
o
Return all unspent moneys
o
Process signed off by authorised staff.
–
Are imprest account funds considered non-recurrent expenditure?
–
What are the specific requirements when managing petty cash? For example:
o
Funds must be maintained on an imprest basis
o
Records are kept up to date
o
Custodianship is assigned to one person whose duties do not include cash
receiving, disbursing or accounts receivable functions
o
Hand over procedures must be conducted when custodianship transfers to
another
o
Funds must not be mixed with cash from other sources
o
Vouchers must be signed by the claimant, with supporting receipts
o
Vouchers must be countersigned by staff approving the expenditure
o
Claim voucher should be countersigned by the custodian when the funds are
disbursed
o
Petty cash must be counted and reconciled at least monthly
o
No private loans will be made or private cheques cashed from petty cash
funds
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o
Funds must be securely stored to avoid theft
o
Cash floats and imprest funds must be replenished before the end of the
financial year.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for imprest accounts?
7.5.2 Other Floats
Refer to the Financial Accountability Handbook (see Volume 3, Information Sheet 3.9 – Asset
Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset management) for
further information
–
Does the Foundation manage float accounts (other than petty cash)? If so, what are
these accounts? For example cash register floats.
–
What are the principles, processes and policies for managing these float accounts?
–
What are the security considerations for the management of float accounts?
–
What is the process if discrepancies are identified in the Foundation’s float accounts?
–
How often are float accounts reviewed? Who is responsible for this?
–
How are float accounts recognised on the general ledger?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for float accounts?
7.6 Accounts Receivable / Debtors
Refer to the Financial Accountability Handbook (see Volume 3, Information Sheet 3.9 – Asset
Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset management) for
further information.
TIP:
There may be many links between the Foundation’s internal business controls (Chapter 2),
revenue management (Chapter 5) and asset management systems. It is important to
identify and document these links.
–
Provide an outline of the Foundation’s accounts receivable/debtor management
practices.
–
What is the purpose of accounts receivable/debtor management? How does this benefit
the Foundation?
–
What are the objectives and principles of the accounts receivable/debtor management?
–
How is accounts receivable/debtor management for the Foundation achieved? Who is
responsible? How is it undertaken?
–
Describe how the accounts receivable/debtor management practices of the Foundation
meet the legislated requirements.
–
Describe how the business internal controls (refer to Chapter 2) of the Foundation
support proper and effective accounts receivable/debtor management.
–
Describe the link between the Foundation’s accounts receivable/debtor management and
revenue management practices (refer to Chapter 5)?
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–
Provide examples of the accounts receivable/debtors managed by the Foundation. Is
there a register/record of these?
–
How are the accounts receivable/debtor management systems and practices of the
Foundation reviewed? Who is responsible for this? When is it undertaken?
–
How does accounts receivable/debtor management assist the Foundation in achieving
the objectives and goals in its Strategic Plan and deliverables in its Operational Plan?
–
How is the accounts receivable/debtor management system used to assist and report on
the Foundation’s financial position throughout the year?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for accounts receivable/debtors?
7.6.1 Impairment Test for Accounts Receivable
Foundations are required to assess at the end of each reporting period (as a minimum) whether there
is any objective evidence that a financial asset or group of financial assets is impaired. This is
according to pronouncements by the Australian Accounting Standards Board, in particular, AASB 139
– Financial Instruments: Recognition and Measurement (refer paragraphs 58 – 62). Foundations are
required to recognise impairment losses in their Statement of Comprehensive Income.
Current and non-current financial assets must be assessed for impairment. Where an impairment loss
has been incurred, the amount of the loss is measured as the difference between the asset’s carrying
amount and the present value of estimated future cash flows.
TIP:
Impairment tests may also be managed through Loss of Asset procedures identified in
Chapter 6.
Impairment reviews are inherently subjective. Because of this, they are usually the subject
of focused testing by financial statement auditors. It is imperative that management are able
to substantiate any financial judgements made in this area.
–
How does the Foundation manage the requirement to review accounts receivable for
impairment? Who is responsible for this? What are the types of ‘loss events’ which may
occur? (e.g. breach of loan terms, debt greater than 120 days overdue, financial
difficulties of the debtor, likely insolvency of the debtor).
–
What are the principles, processes and policies for managing the requirement to review
receivables for impairment?
–
How does the Foundation ensure its impairment test requirements support the
procedures for impairment loss management in Chapter 6?
–
How often are the Foundation’s receivables assessed for impairment?
–
How are impairment losses on receivables financially accounted for (e.g. through an
allowance account or written off directly)? Are they considered uncollectable and
therefore written-off?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for impairment reviews and associated activities? Is
the impairment methodology consistent, reasonable and documented?
7.6.2 Recording of Accounts Receivable/Debtors
TIP:
Some of the procedures for the recording of accounts receivable may be covered in Chapter
5.
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–
What are the procedures in place to ensure the timely charging of billable services?
Where are these procedures kept?
–
What information is required to be recorded for the management of the Foundation’s
accounts receivable/debtors?
–
How are the details of the Foundation’s accounts receivable/debtors stored? What are
the procedures if details are changed?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for recording of accounts receivable/debtors?
7.6.3 Credit Balances
–
How does the Foundation manage credit balances for accounts receivable? Who is
responsible for this?
–
What are the principles, processes and policies for the managing of credit balances for
accounts receivable?
–
How often must credit balances for accounts receivable be reviewed and investigated?
Monthly?
–
Does the Foundation use credit from a previous payment on an account receivable to
reduce the next invoice? Or does the Foundation return this to the payer?
–
How does the Foundation financially report on credit balances for accounts receivable?
–
How is a clear audit trail maintained for credit balances?
7.6.4 Adjustment to Accounts (Credit Notes)
TIP:
Adjustment note procedures may also be covered in Chapter 6.
–
How does the Foundation manage credit notes? Who is responsible for this?
–
What are the principles, processes and policies for managing credit notes?
–
How does the Foundation ensure its credit note requirements support the procedures for
expenditure management outlined in Chapter 6?
–
How are adjustment notes financially reported? Are they reported in the Foundation’s
Statement of Comprehensive Income?
–
Who can approve providing credit notes? Can this be delegated? If so, is this delegation
of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
What documentation is required to be recorded for the management of credit notes? For
example:
o
Debtor's name and address
o
Account number
o
Number of the invoice to which the credit relates
o
Line item description as shown on the invoice
o
Reason for the credit being raised
o
Credit note number, value, and date of issue
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o
Signatures of the officers preparing and approving the credit.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for credit notes?
7.6.5 Overdue Receivables and Bad debts
–
How does the Foundation manage overdue receivables and bad debts? Who is
responsible for this?
–
What are the principles, processes and policies for managing overdue receivables and
bad debts?
–
How are overdue receivables identified? Is there a specific timeframe where payment
required matures from being late, to overdue, to a bad debt? For example 30/60/90
days?
–
How are accounts receivable managed when payment is unlikely? For example, if an
account receivable becomes a bad debt? (Refer to chapter 5 and to ‘Impairment’ section
above).
–
What is the process for collecting a bad debt?
–
How are bad debts financially reported? For example, are they reported as Other
Expenses or Loss on the Foundation’s Statement of Comprehensive Income?
–
Does the Foundation engage revenue recovery companies to receive outstanding and
overdue receivables?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for overdue receivables and bad debts?
7.6.6 Letter of Demand and use of Debt Collection Agencies
–
Does the Foundation use Letters of Demand in the process of recovering debts? If so,
how are they managed and who is responsible for them? Who is the relevant authority
who signs off on the Letter of Demand?
–
What timeframe is used to determine when to send a letter of demand? For example
30/60/90 days?
–
Is a Letter of Demand required to expire prior to legal action being taken? Has legal
advice been sought?
–
What are the minimum details required to be contained within a Letter of Demand? For
example:
o
Circumstances of the debt arising
o
Date/s, number/s and amount/s of the invoice/s outstanding and the amount/s
of any receipts applied against the invoice/s
o
Statement that the debt remains outstanding
o
Clear demand for payment of the debt in full within a stipulated time frame
o
Statement that if the full amount is not received by the stipulated date, legal
proceedings will be commenced to recover both the debt and costs incurred.
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–
Does the Foundation use debt collecting agencies? If so, what are the controls for their
use?
–
What criteria are used to demine if a debt collecting agency should be used to recover a
debt? Who is responsible for determining these criteria?
–
Is a cost/benefit analysis undertaken prior to engaging a debt collecting agency?
7.6.7 Legal Recovery of Overdue Receivables
–
How does the Foundation manage legal advice for recovering overdue receivables? Who
is responsible for this?
–
How do the procedures for legal recovery of overdue receivables support procedures
relating to revenue recovery set out in Chapter 5?
–
Who is able to provide the Foundation with legal advice? Does the Foundation have a
legal officer? Does the Foundation engage a solicitor to provide legal advice?
–
Does the legal recovery of overdue receivables only apply to specific types of debt?
7.6.8 Debt Write Off Level
TIP:
Write off debt levels will relate closely to the materiality of the debt.
–
What does the Foundation consider a reasonable threshold for debts that are not viable
for recovery? Who is responsible for this? Who is the relevant authority from whom
approval is required?
–
Is the cost of recovery taken into consideration when deciding to undertake action to
recover a debt?
–
Where are these details kept? How are they reviewed?
7.6.9 Written Off Unpaid Receivables
Foundations are required to have a Loss Register. Written off unpaid receivables are to be recorded in
this Register. See Chapter 2.
–
How does the Foundation write off unpaid receivables? Who is responsible for this?
–
Is there a timeframe required to be met prior to writing off unpaid receivables? For
example, 120 days?
–
What are the steps required to be undertaken prior to writing off unpaid receivables? For
example:
o
Steps have been made to investigate the raising and non-recovery of the debt
o
Determination that legal prosecution is inappropriate, unlikely to be
successful, or is not cost effective
o
All reasonable steps have been made to recover the debt
o
Debt is reasonably considered to be non-recoverable
o
Circumstances surrounding the loss are fully examined
o
Summarised justification for the write-off recommendation is provided.
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–
Who can approve writing off unpaid receivables? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How are written off unpaid receivables financially reported? Are they reported in the
Foundation’s Statement of Comprehensive Income?
–
How does the Foundation analyse the reason for the unpaid receivables and put
processes in place to reduce occurrences in the future?
–
Are debts required to be written off as a single value?
–
What documentation is required for written off unpaid receivables? For example:
o
Originals or good copies of all documents relating to the written off debt
o
Records of telephone interviews
o
Relevant correspondence
o
Memorandum of approval to write off
o
Signed acknowledgement from the debtor evidencing the debt is retained.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for writing off unpaid receivables?
7.7 Inventory
Foundations are required to have systems and processes in place to manage their inventories.
For more information on the management of inventories and the internal controls to manage them,
refer to Financial Accountability Handbook, in particular Volume 3, Information Sheet 3.9 – Asset
Systems and Volume 2, Information Sheet 2.3 - Internal Controls
In addition, Foundations must refer to the Financial Management Tools, in particular Information Sheet
3.9 - Asset management and Information Sheet 4.1 - Monitoring/Assessment of Internal Controls for
further information.
Inventory is defined by the Australian Accounting Standards Board through the
pronouncement AASB 102 – Inventories.
Inventory is defined as assets that are any of the following:

Held for sale in the ordinary course of business

In the process of production for such sale

In the form of materials or supplies to be consumed in the production process or in
the rendering of services.
The AASB 102 – Inventories requires the segregation of inventories which are held for sale
and inventories which are not held for sale or for distribution, mainly for not-for-profit entities,
to be shown in the notes to financial statement. A not-for-profit entity is defined as “whose
principal objective is not the generation of profit”.
Examples of inventories held for distribution include, a Foundation may hold stores of
supplies which are given to a business or hospital, either free of charge or for a nominal
charge at a fraction of their cost.
Note that items held for sale but owned by a third party, e.g. items held on consignment, do
not meet the definition of an asset; and are thus not considered to form part of inventories.
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The policies and practices contained in Chapter 6 relating to the processing of expenditure
requisitions and/or purchase orders, through to the payment of invoices, apply to the
acquisition of inventories.
–
How does the Foundation manage inventory? Who is responsible for this?
–
What are the principles, processes and policies for managing inventory?
–
What types of inventory does the Foundation manage?
–
What information is required to be recorded when managing inventory for sale or for use?
For example:
o
Stock item code/catalogue number
o
Stock item description
o
Storage location
o
Unit of measure
o
Stock in and stock out:
-
o
Date, Reference, Quantity, Unit price and value
Balance:
-
Quantity, Unit price and Value.
–
What is the segregation of duties for the management and processing of the
Foundation’s inventory?
–
Are reconciliations required to be undertaken on the Foundation’s inventory? Who is
responsible for this? How often is it undertaken?
–
How are inventory reconciliations recorded on the Foundation’s general ledger?
–
What are the security controls on the access and storage of inventory items?
–
How is the Foundation’s inventory financially reported? Is inventory reported as an asset
in the Foundation’s financial statements?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing inventory?
7.7.1 Valuation of Inventory
Inventory is defined by the Australian Accounting Standards Board through the pronouncement AASB
102 – Inventories. Foundations should refer to this when undertaking valuations of inventory.
TIP:
The value of inventory at the end of a financial year is to be the value of inventory at the
beginning of the next financial year.
–
How does the Foundation manage the valuation of inventory? Who is responsible for
this? How often are valuations undertaken?
–
What are the principles, processes and policies for valuing inventory?
–
Who can approve the findings of inventory valuations? Can this be delegated? If so, is
this delegation of authority recorded in the Financial Delegations Register (see Chapter
2)?
–
What is the segregation of duties for valuing and management of inventory?
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–
How is the Foundation’s inventory valued? For example, is the value based on the lower
of cost or net realisable value?
–
Is inventory arising from minor supplies purchases (low value) for immediate use
exempted from being valued?
–
How are discounts for the original bulk purchase of inventory taken into consideration?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the valuation of inventory?
7.7.2 Storage of Inventory and Control
–
How does the Foundation manage the storage and control of inventory? Who is
responsible for this?
–
How do the Foundation’s security and specific controls apply to the storage and control of
inventory? (See Chapter 2).
–
What are the principles, processes and policies for managing the storage and control of
inventory?
–
What is the segregation of duties for the storage and control of inventory and the
purchasing of inventory?
–
Does the Foundation hold inventory belonging to third parties? If so, how is this inventory
stored and controlled?
–
Are there specific inventories that can only be accessed by certain staff?
–
How does the Foundation investigate incidents of breaches of the safeguards for the
storage and control of inventory?
–
How does the Foundation ensure losses of inventory are recorded as required by the
Loss of Asset procedures outlined in Chapter 6?
–
How often are theoretical stock records and actual stock records reconciled? For
example monthly? Quarterly?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the storage and control of inventory?
7.7.3 Inventory Stock-take
Inventory losses identified through stock-takes must be managed as Loss of Assets outlined in
Chapter 6.
TIP:
Stock-takes are valuable tools to use to determine any losses through inventory. Regulator
and robust stock-takes can assist the Foundation by minimising loss of assets.
–
What are the purpose and objectives of inventory stock-takes for the Foundation? How
does this benefit the Foundation?
–
How does the Foundation manage inventory stock-takes? Who is responsible for this?
How often are stock-takes undertaken?
–
What are the principles, processes and policies for managing inventory stock-takes?
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–
Who can approve the findings of inventory stock-takes? Can this be delegated? If so, is
this delegation of authority recorded in the Financial Delegations Register (see Chapter
2)?
–
How do the Foundation’s security and specific controls apply to the management of
inventory stock-takes? (See chapter 2).
–
What is the segregation of duties for the stock-take and the management of the
inventory?
–
How does the Foundation investigate discrepancies of stock numbers?
–
How does the Foundation ensure losses of assets identified through stock-takes are
recorded as required by the Loss of Asset procedures outlined in Chapter 6?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for inventory stock-takes?
7.7.4 Obsolete Inventory
TIP:
Obsolete inventories are considered a loss of asset for the Foundation and must be
managed and reported as such.
–
What does the Foundation consider obsolete inventory? How is inventory determined
obsolete? Who is responsible for this?
–
Is there a specific timeframe for certain inventory items that determine them obsolete?
For example: inventory items not used in 12 months or past the expiry date?
–
How does the Foundation manage obsolete inventory?
–
What are the principles, processes and policies for managing obsolete inventory?
–
Are there any special procedures required to be followed when managing obsolete
(perishable) inventory? For example:
o
Perishable commodities must be tagged and dated to avoid spoilage and loss
o
Appropriate stock levels established for perishable and other items
o
Standard levels monitored and adjusted to reflect seasonal fluctuations
o
Issues from storeroom must be authorised and documented
o
Merchandise must be issued on a "first in, first out" basis
o
Direct issues limited to items for immediate use or items for which adequate
storeroom facilities are not available.
7.7.5 Write Off Approvals for Obselete Inventory
Foundations are required to have a Loss Register. Written off obsolete inventory items are to be
recorded in this Register. See Chapter 2.
–
What is the approval process to write off obsolete inventory? Who is responsible for this?
–
Who can approve writing off obsolete inventory? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
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–
How are written off obsolete inventory items financially reported? Are they reported in the
Foundation’s Statement of Comprehensive Income?
–
How does the Foundation analyse the reason for the requirement to write off obsolete
inventory and put processes in place to reduce occurrences in the future?
–
Are written off obsolete inventory items included in the Loss Register?
–
How does the Foundation ensure the writing off of obsolete inventory supports the
procedures for managing loss of assets outlined in Chapter 6?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for writing off obsolete inventory?
7.8 Portable and Attractive Items
Foundations must comply with Section 1.9 of the Non-current asset policies for the Queensland Public
Sector document produced by Queensland Treasury. This section provides guidance for the
management of portable and attractive items.
Portable and attractive items are tangible items which are:


Below the Property, Plant and Equipment recognition threshold outlined in the Noncurrent asset policies for the Queensland Public Sector. For example Computer
related equipment valued over $500
By their nature, susceptible to theft and/or loss, due to their size, portability, utility and
marketability.
Regardless of the treatment of these types of assets for financial reporting purposes, such
items must be registered for physical control purposes.
–
How does the Foundation manage portable and attractive items? Who is responsible for
this?
–
How do the Foundation’s security and specific controls apply to the storage and control of
portable and attractive items? (See Chapter 2).
–
What are the principles, processes and policies for portable and attractive items?
–
Are there specific portable and attractive items for which access is restricted to certain
staff?
–
How does the Foundation investigate incidents of breaches of safeguards for the storage
and control of portable and attractive items?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing and storing portable and attractive
items?
7.9 Non-Current Physical Assets
Foundations must comply with the Non-Current Asset Policies for the Queensland Public Sector
document produced by Queensland Treasury and the relevant Australian Accounting Standards Board
pronouncements, in particular AASB 116 – Property, Plant and Equipment.
A fixed asset register should be established and maintained to record all acquisitions, disposals and
transfers of non-current physical assets to assist the Foundation meet the reporting requirements
outlined in sections 15 & 23 of the Financial Accountability Act 2009
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TIP:
As costs related to assets are considered significant, non-current physical assets must be
properly recorded and classified, and the physical assets must be safeguarded against loss.
AASB 116 - Property, Plant and Equipment defines an asset as “a resource controlled by the
entity as a result of past events and from which future economic benefits are expected to
flow to the entity.” In addition, an asset must only be recognised if:

It is probable that future economic benefits will flow to the entity

The cost of the item can be measured reliably.
Paragraph 67 of AASB 101 – Presentation of Financial Statements also prescribes the use of
the term ‘non-current’ to include tangible, or physical, and intangible of a long term nature.
Key features to qualify for recognition as a non-current physical asset are:

Control: The Foundation must have the power to obtain the future economic benefits
from the asset and restrict the access of others to those benefits

Future economic benefits: The asset has the potential to contribute to the provision
of goods and services in accordance with the Foundation’s objectives

Past transaction or event: The past transaction will generally be the purchase or
donation of an asset. Transactions or events expected to occur in the future do not
give rise to assets.
The item must have an expected useful life of more than 12 months and must meet or
exceed the value threshold outlined in the Non-current asset policies for the Queensland
Public Sector.
7.9.1 Classification of Assets
For classification of assets, refer to the classification tables outlined in the Non-current asset
policies for the Queensland Public Sector, and the Financial Accountability Handbook, in
particular Volume 3, Information Sheet 3.9 – Asset Systems.
7.9.2 Acquisition
–
How does the Foundation manage acquisitions of non-current physical assets? Who is
responsible for this?
–
What are the principles, processes and policies for the management of acquisitions of
non-current physical assets?
–
What are the different methods of acquisition of non-current physical assets that the
Foundation manages? For example:
–
o
Purchase (see subsection 7.9.3 – Procurement Process)
o
Trade-in
o
Construction
o
Donation.
Who can approve the different types of acquisition of non-current physical assets? (Refer
to legislation and policy guidelines). Can this be delegated? If so, is this delegation of
authority recorded in the Financial Delegations Register (see Chapter 2)?
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–
How does the Foundation determine the Commissioning Date of non-current physical
assets? For example, see the table below.
Acquisition
Commission Date
Purchase of an asset ready for
immediate use
The date the asset is received and obligation to pay arises
Purchase of an asset requiring
installation
The date the asset is installed and ready for use
Construction of a building
The effective date of the certificate of practical completion
–
How does the Foundation manage non-current physical assets that require installation or
construction? For example, are they treated as ‘work-in-progress’ until the time the asset
is commissioned and depreciation commences?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for acquisitions of non-current physical assets?
7.9.3 Procurement Process
Foundations are required to undertake an evaluation prior to the procurement of an asset considered
a ‘significant asset’. See section 23 of the Financial and Performance Management Standard 2009.
When undertaking evaluations of assets, Foundations must comply with requirements set out in
Queensland’s Project Assurance framework and Queensland’s Value for money framework.
Foundations must have regard to the Statutory Body Guide, in particular Guide Sheet 4 – Evaluating
and reviewing significant physical assets.
–
How does the Foundation manage the procurement of non-current physical assets? Who
is responsible for this?
–
What are the principles, processes and policies for the procuring of non-current physical
assets?
–
How do the procedures for the procurement of non-current physical assets align with the
procedures within the expense management system outlined in Chapter 6 relating to:
o
Processing of expenditure requisitions
o
Purchase orders
o
Payment of invoices
o
Recording and reporting.
–
Describe how the Foundation’s internal business controls (refer to Chapter 2) support
proper and effective management of the procurement of non-current physical assets?
–
Who can approve the procurement of non-current physical assets? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
Describe how the Foundation’s systems for the procurement of non-current physical
assets comply with the State Procurement Policy.
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–
What segregation of duties is in place for the procurement of non-current physical
assets?
–
How does the Foundation manage its requirement to conduct an evaluation process for
the procurement of ‘significant assets’? Who is responsible for this?
–
What are the principles, processes and policies for the evaluation of ‘significant assets’?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the procurement of non-current physical assets?
7.9.4 Valuation of Assets (Non-Current Physical Assets)
Legislation requires an asset management system to be capable of valuing a Foundation’s assets.
See section 23 of the Financial and Performance Management Standard 2009.
Foundations must comply with the Non-Current Asset Policies for the Queensland Public Sector
document produced by Queensland Treasury, in particular NCAP 3 – Valuation of Assets.
In addition, Foundations must comply with the relevant Australian Accounting Standards Board
pronouncements, notably AASB 116 – Property, Plant and Equipment and AASB 136 – Impairment of
Assets.
TIP:
Having an effective system to value a Foundation’s assets is a key component of an asset
management system. This provides benefits to not only the financial reporting of asset
worth, but also assists in the determination of materiality of asset-based activities
(maintenance, upgrade, repairs etc).
–
How does the Foundation manage the valuation of non-current physical assets? Who is
responsible for this?
–
What are the principles, processes and policies for the valuation of non-current physical
assets?
–
What mechanisms are in place to assist the Foundation identify non-current physical
assets? Who is responsible for these?
–
How does the Foundation take impairment into consideration when valuing non-current
physical assets?
–
What is the model used for initial and subsequent valuations of non-current physical
assets? For example the Cost Model or the Revaluation Model? See AASB 116 –
Property, Plant and Equipment.
–
What does the Foundation consider asset improvement? For example:
o
Increase in the service potential provided
o
Increasing the useful life of the asset
o
Improvement in the quality of the asset’s services
o
Reduction in future operating costs.
–
Describe the process when an asset is valued and determined to be a ‘significant asset’?
How are significant non-current physical assets managed differently to other assets?
–
Who can approve the findings of a valuation of non-current physical assets? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
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–
How does the Foundation ensure non-current physical assets acquired at no cost (or
nominal cost) are valued at fair value as at the date of acquisition? Fair value is defined
in AASB 116 – Property, Plant and Equipment.
–
What is the segregation of duties for valuing and management of non-current physical
assets?
–
How does the Foundation manage any non-current physical assets exchanged or
replaced under warranty?
–
How does the effective valuation of non-current physical assets assist the Foundation in
meeting its financial reporting obligations set out in Chapter 4?
–
Are losses on non-current physical assets recorded in the Losses Register as outlined in
Chapter 2?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the valuation of non-current physical assets?
7.10 Intangible Assets
For the effective management of intangible assets, Foundations must comply with the Non-Current
Asset Policies for the Queensland Public Sector document produced by Queensland Treasury and the
relevant Australian Accounting Standards Board pronouncements, in particular AASB 138 – Intangible
Assets.
–
What are intangible assets? How does the Foundation manage intangible assets? Who is
responsible for this?
–
What are the principles, processes and policies for the management of intangible assets?
–
What mechanisms are in place to assist the Foundation identify intangible assets? Who
is responsible for these?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing intangible assets?
7.10.1
Recognition Criteria
The recognition thresholds for intangible assets can be found in NCAP 1 of the Non-Current Asset
Policies for the Queensland Public Sector.
TIP:
Foundations must refer to AASB 138 – Intangible Assets for further information relating to
the criteria for recognition of intangible assets.
AASB 138 – Intangible Assets outlines the criteria for recognising intangible assets, including
the following:

Being separable, that is, capable of being separated or divided from the entity and
sold, transferred, licensed, rented or exchanged, either individually or together with a
related contract, asset or liability

Arising from contractual or other legal rights, regardless of whether those rights are
transferable or separable from the entity or from other rights and obligations.
In order for an intangible asset to be capitalised, it must be identifiable, and meet the
following criteria:
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
It is probable that the expected future economic benefits that are attributable to the
asset will flow to the entity

Cost of the asset can be measured reliably

Asset is not held for resale in the normal course of business.
Valuation for Recognition
In accordance with the Queensland Treasury’s Non-Current Asset Policies for the
Queensland Public Sector, an intangible asset must be measured initially at cost. After initial
recognition, where there is an active market, an intangible asset is to be measured at fair
value.
–
How does the Foundation undertake valuations of intangible assets? Who is responsible
for this?
–
What are the principles, processes and policies for the valuation of intangible assets? Is it
similar to the valuation process for non-current physical assets? See section 7.9.4
Valuation of Assets (Non-Current Physical Assets).
–
How does the Foundation take impairment into consideration when valuing intangible
assets?
–
How does the Foundation undertake initial and subsequent valuations of intangible
assets? In particular, a valuation after an asset has been improved either by upgrade or
significant repair?
–
What does the Foundation consider asset improvement for intangible assets? For
example:
o
Increase in the service potential provided
o
Increasing the useful life of the asset
o
Improvement in the quality of the asset’s services
o
Reduction in future operating costs.
–
What is the segregation of duties for valuing and management of intangible assets?
–
How does the Foundation manage any intangible assets exchanged or replaced under
warranty?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for valuing intangible assets?
7.10.2
–
–
Software Assets
How does the Foundation classify software assets? What categories does the
Foundation use to classify software assets? For example:
o
Purchased Software – Where software has been purchased outright, and will
be used as is, without modification.
o
Developed Software – Software that has been developed to meet the
specific needs of the Foundation.
Who is responsible for demining the categories to classify software assets?
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–
What are the Foundation’s policies when deciding what software to purchase? Is an
evaluation undertaken, if so, what is considered? Who is responsible for this?
–
How does the Foundation manage software licenses and associated fees? Who is
responsible for this?
–
How does the Foundation ensure it only utilises legitimate software assets? This includes
registering of software licenses and associated costs.
–
What are the procedures if the Foundation is made aware of software assets that are not
legitimate, or not licensed?
–
Does the Foundation have software support? If so, who provides this support?
–
If further costs of software assets are incurred, are these considered an improvement (as
may be the case with certain non-current physical assets)?
7.10.3
TIP:
Research and Development
See AASB 138 – Intangible Assets for further information on research and development.
–
Does the Foundation manage any research and development activities? If so, what are
they?
–
How does the Foundation manage its research and development? Who is responsible for
this?
–
What are the principles, processes and policies for the management of research and
development?
–
How does the Foundation ensure activities classified as research and development
comply with those set out in AASB 138 – Intangible Assets? For example:
–
o
Research - Original and planned investigation undertaken with the prospect
of gaining new scientific or technical knowledge and understanding
o
Development - Application of research findings or other knowledge to a plan
or design for the production of new or substantially improved materials,
devices, products, processes, systems or services before the start of
commercial production or use.
How does the Foundation financially report on research and development?
7.10.4
TIP:
Useful Lives and Amortisation
See AASB 138 – Intangible Assets for further information on useful lives and amortisation.
–
How does the Foundation manage the effects of a limited useful life and amortisation of
intangible assets? Who is responsible for this?
–
What are the principles, processes and policies for managing the useful life and
amortisation of intangible assets?
–
How is intangible asset amortisation financially recorded and reported? For example:
intangible assets are written-down as an expense through periodic amortisation over their
useful lives as physical assets are written down as depreciated. Refer to section 7.13
Depreciation and Amortisation.
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–
Are losses on intangible assets recorded in the Losses Register as outlined in Chapter2?
7.10.5
Disposal of Intangable Assets
Foundations must comply with the accounting requirements for intangible assets outlined in the NonCurrent Asset Policies for the Queensland Public Sector.
Further information relating to the disposal of the Foundation’s assets can be found in section 7.14
Disposal of Assets.
–
How does the Foundation manage the disposal of intangible assets? Who is responsible
for this?
–
What are the principles, processes and policies for the disposal of intangible assets?
–
What is the segregation of duties for management and disposal of intangible assets?
–
Who can approve the disposal of intangible assets? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
Does the Foundation have specific criteria to determine when an intangible asset is to be
de-recognised? For example: an intangible asset “is to be derecognised on disposal, or
when no future economic benefits are expected from its use or disposal”.
–
How does the Foundation ensure that any loss or gain arising from de-recognising and
disposal of intangible assets are identified in the Statement of Comprehensive Income?
–
How does the effective management of the disposal of intangible assets assist the
Foundation in meeting its financial reporting obligations set out in Chapter 4?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the disposal of intangible assets?
7.10.6
TIP:
Disclosure Requirements
Foundations must refer to the Non-Current Asset Policies for the Queensland Public Sector
and AASB 138 – Intangible Assets for further information regarding requirements for
disclosure of the management of intangible assets.
–
How does the Foundation manage its disclosure obligations for intangible assets? Who is
responsible for this?
–
How does the Foundation ensure it complies with the disclosure requirements set out in
both the Non-Current Asset Policies for the Queensland Public Sector and AASB 138 –
Intangible Assets.
–
How does effective management of the disclosure requirements for intangible assets
assist the Foundation in meeting its financial reporting obligations set out in Chapter 4?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing the disclosure requirements for
intangible assets?
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7.11 Works in progress
TIP:
Works in Progress is a term generally used to describe assets under
construction/repair/upgrade/improvement. The costs attributable to the construction,
upgrade or enhancement of an asset are to be accumulated until the works are completed
and can be commissioned.
–
How does the Foundation manage works in progress? Who is responsible for this?
–
What are the principles, processes and policies for managing works in progress?
–
What costs does the Foundation consider to be covered by works in progress? For
example costs incurred when:
o
Designing
o
Constructing
o
Developing
o
Producing
o
Testing new assets
o
(or significant improvements to existing assets).
–
How does the Foundation ensure payments for works in progress comply with
procedures for expenditure approval and processing set out in Chapter 5? This includes
any prepayments.
–
What is the segregation of duties for the management of the works in progress and the
processing of payments?
–
How is the value of works in progress recorded in the Foundation’s general ledger?
–
How are works in progress financially reported? Are they reported as an asset in the
Foundation’s financial statements, or is the remaining money owed considered a liability?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for works in progress?
7.11.1
–
Completion of Capital Works
When does the Foundation consider capital works to be complete? Is this related to the
date of commission of capital works? For example:
o
Plant and equipment are commissioned when the asset is installed, ready for
use in the manner and capacity for which it was intended
o
Buildings are commissioned at practical completion.
–
At what stage of completion do the capital works of the Foundation get recorded on the
asset register? For example, capital works are recorded in the asset register upon
practical completion?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for completion of capital works?
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7.12 Non-Current Assets - Compliance, Control and
Administration
For more information on compliance, control and administration of non-current assets, refer to
Financial Accountability Handbook, in particular Volume 3, Information Sheet 3.9 – Asset Systems and
Volume 2, Information Sheet 2.3 - Internal Controls.
In addition, Foundations must refer to the Financial Management Tools, in particular Information Sheet
3.9 - Asset management and Information Sheet 4.1 - Monitoring/Assessment of Internal Controls for
further information.
Foundations must comply with the Australian Accounting Standards, in particular AASB 117 - Leases
of the Australian Accounting Standards Board when determining what type of leases it is engaged in.
In addition, Foundations must also comply with the Leasing in Queensland Public Sector Policy
Guidelines and the Non-current asset policies for the Queensland Public Sector.
Leasing policies may also be covered in Chapter 6 and Section 7.9.2 - Acquisition.
–
How does the Foundation manage the compliance, control and administration of noncurrent assets? Who is responsible for this?
–
What are the principles, processes and policies for managing the compliance, control and
administration of non-current assets? How often are these reviewed?
–
What is the segregation of duties for the management of the compliance, control and
administration of non-current assets? This includes the maintenance of any asset
registers.
–
Who can approve activities carried out in the process of managing the compliance,
control and administration of non-current assets? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How does the Foundation manage and maintain its non-current asset register? Who is
responsible for this? Are there specific requirements for this register? For example:
o
The register must provide adequate information based on which management
can make informed decisions to maximise effective use of Foundation
resources
o
Recorded information must be supported by legitimate and authorised
documentation.
–
How does the Foundation ensure that all additions, disposals and movements of physical
assets are recorded promptly and accurately in the asset register?
–
How are leased assets managed and financially accounted for? How does this comply
with policies and procedures outlined in Chapter 6?
–
How are fully depreciated assets removed from the asset register? Who can approve the
removal of these assets? Can this be delegated? If so, is this delegation of authority
recorded in the Financial Delegations Register (see Chapter 2)? Refer to Section 7.14 Disposal of Assets.
–
How does the Foundation manage the maintenance requirements for property, plant and
equipment? What if the value is below the recognisable threshold outlined in the Noncurrent asset policies for the Queensland Public Sector? Is this recorded in the
Foundation’s maintenance register?
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–
What is the requirement to reconcile the Foundation’s ‘asset related’ registers? How often
is this undertaken? What are the processes to manage this?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the management of the compliance, control and
administration of non-current assets?
7.12.1
Identification
Legislation requires Foundations to have an asset management system to efficiently, effectively and
economically identify the assets of the Foundation. See sections 15 & 23 of the Financial and
Performance Management Standard 2009.
Foundations must comply with the Non-Current Asset Policies for the Queensland Public Sector
document produced by Queensland Treasury when identifying physical assets.
Foundations must comply with the Financial Accountability Handbook (see Volume 3, Information
Sheet 3.9 – Asset Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset
management, Information Sheet 2.3 - Internal Controls Accountability Framework and Information
Sheet 4.1 - Monitoring/Assessment of Internal Controls).
–
How does the Foundation manage the identification of physical assets? Who is
responsible for this?
–
What are the principles, processes and policies for identifying physical assets? How often
are these reviewed?
–
What is the segregation of duties for the identification and management of the
Foundation’s physical assets? This includes the maintenance of any asset registers.
–
How does the Foundation individually identify its physical assets? For example: each
asset is given (labelled) an individual asset number. Is this asset number recorded
against the physical asset in the Foundation’s asset register?
–
How does the Foundation determine if a physical asset requires individual identification?
What is the value threshold?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the identification of physical assets?
7.12.2
Usage of Non-Current Assets
–
How does the Foundation manage the usage of its non-current assets?
–
What are the principles, processes and policies for the usage of non-current assets? How
often are these reviewed?
–
How does the Foundation determine if the usage of its non-current assets is considered
appropriate? For example, the asset is being used:
–
o
In accordance to its original intent when purchased
o
Used effectively and efficiently
o
Usage does not significantly reduce its expected useful lifespan.
Who is responsible for assessing the usage of the Foundation’s non-current assets?
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–
What are the procedures if usage of a non-current asset is considered inefficient and or
ineffective? Is the asset repaired, improved, disposed or replaced? What are the
procedures for each of these?
–
Does the Foundation require a cost/benefit analysis prior to requesting a non-current
asset be repaired, improved, disposed or replaced?
–
How does the Foundation’s ensure its non-current assets are only used for official
purposes? Are there exemptions to this? For example, in emergency situations and for
limited personal usage.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the usage of physical assets?
7.12.3
Non-Current Asset Stock-takes
Foundations are required to physically verify the existence of their property, plant and equipment
assets.
Stock-take frequencies are to be determined by the Foundation in consideration of the risk profile and
materiality of assets. However, they must be undertaken no less then every three years. Refer to the
Non-Current Asset Policies for the Queensland Public Sector produced by Queensland Treasury.
Foundations must comply with the Financial Accountability Handbook (see Volume 3, Information
Sheet 3.9 – Asset Systems) and the Financial Management Tools (see Information Sheet 3.9 Asset
management, Information Sheet 2.3 - Internal Controls Accountability Framework and Information
Sheet 4.1 - Monitoring/Assessment of Internal Controls).
–
How does the Foundation manage the stocktaking of its non-current assets? Who is
responsible for this? How often are these undertaken?
–
What are the principles, processes and policies for non-current asset stocktaking? For
example:
o
Identifying, counting and listing non-current physical assets in various
locations
o
Checking the results against Asset Registers to determine accuracy records
o
Investigating and resolving any resulting discrepancies.
–
What is the segregation of duties for the management and stocktaking of non-current
assets?
–
Who can approve the findings of non-current asset stocktaking? Can this be delegated?
If so, is this delegation of authority recorded in the Financial Delegations Register (see
Chapter 2)?
–
What is the purpose of non-current asset stocktaking? For example:
–
o
Inventory valuation
o
Asset usage monitoring
o
Security and specific control analysis (see Chapter 2)
o
Internal and external non-current asset audits.
What are the controls in place when a stock-take is undertaken? For example:
o
stocktakes are to be performed by two officers
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–
–
o
Records must be signed to indicate where assets have been sighted
o
After sighting, assets are determined to still be in use
o
Idle assets are to be written off the asset register
o
Assets beyond repair or obsolete are disposed of – Refer to section 7.14 Disposal.
How are the results of stock-takes recorded and financially reported? For example:
o
Depreciation, amortisation, writing off and disposal are recorded as losses in
the Foundation’s loss register
o
Adjustments are made to the Foundation’s asset register
o
Losses are reported in the Foundation’s Statement of Comprehensive Income
o
Results are made available for internal auditing purposes.
What does the stock-take report contain? What information is required to be addressed in
this report? For example:
o
Date of the stock-take and the locations/categories included
o
Total value of assets on hand at that date
o
Weaknesses (if any) discovered in practices, procedures or security in relation
to the care, control and safe custody of assets
o
The outcomes of the stock-take including:
-
Discrepancies identified (including details of any surplus items)
-
Reasons for such discrepancies
-
Action intended in relation to any write-offs. Refer to section 6.18
Specific Categories – Non-Current Physical Assets.
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the stock-take of physical assets?
7.12.4
Impairment of Assets
Foundations are required to comply with relevant pronouncements by the Australian Accounting
Standards Board, in particular the AASB 136 – Impairment of Assets. Foundations are required to
provide recognition of impairment losses in the Statement of Comprehensive Income.
Current and non-current assets must be tested for impairment to ensure assets are carried at amounts
that are not in excess of their recoverable amounts. An impairment loss is defined as “the amount by
which the carrying amount of an asset or a cash generating unit exceeds its recoverable amount”.
TIP:
Impairment tests may also be managed through Loss of Asset procedures identified in
Chapter 6.
–
How does the Foundation manage the impairment of its non-current assets? Who is
responsible for this?
–
What are the principles, processes and policies for managing the impairment of noncurrent assets? How often are these reviewed?
–
What are the segregation of duties for the management and assessment of impairment of
non-current assets?
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–
Who can approve the findings of impairment assessments of non-current assets? Can
this be delegated? If so, is this delegation of authority recorded in the Financial
Delegations Register (see Chapter 2)?
–
How does the Foundation ensure its impairment test requirements support the
requirements set out for impairment loss management in Chapter 6?
–
How often are impairment tests undertaken on the Foundation’s non-current assets?
–
How are impairment losses on non-current assets financially accounted for? How does
the Foundation ensure all impairment losses are reported in the Statement of
Comprehensive Income?
–
What indicators are used to determine impairment (and level thereof) of the Foundation’s
non-current assets? For example:
o
Demand for the service has ceased – asset now surplus
o
Service utility reduced due to change in technology
o
Service potential reduced due to change in policy
o
Physical damage, unable to provide same level of service
o
Expected useful life now shorter than originally estimated
o
Major change in manner asset is being used
o
Construction stopped before asset is complete
o
Evidence shows service performance worse than expected.
–
How does the Foundation assess the impairment of its building assets? Who is
responsible for this?
–
How does the Foundation assess the impairment of its plant, equipment and intangible
assets? Who is responsible for this?
–
How do the Foundation’s risk management policies apply?
–
How does the Foundation maintain a clear audit trail for managing the impairment of its
non-current assets?
7.12.5
Revaluation of Assets
Foundations are required to undertake revaluation of their assets every five years. See NCAP 4 of the
Non-Current Asset Policies for the Queensland Public Sector. These revaluations must ensure assets
are carried at fair value.
–
How does the Foundation manage the revaluation of non-current assets? Who is
responsible for this?
–
What are the principles, processes and policies for managing the revaluation of noncurrent assets? How often are these reviewed?
–
What is the segregation of duties for the management and revaluation of non-current
assets?
–
Who can approve the findings of the revaluation of non-current assets? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
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–
How does the Foundation ensure losses and/or gains determined by the revaluation of
assets are recorded in compliance with the procedures set out in Chapter 5 for income
management and Chapter 6 for expense management?
–
How does the Foundation determine fair value for its assets when undertaking
revaluations?
–
Describe how the volatility of certain markets affects the frequency of the Foundation
undertaking revaluation of its assets. For example:
o
Volatile land and property market requires increased occurrence of
revaluation (for buildings and land)
o
Technology evolution determines types of computers redundant (for ICT
assets).
–
How does the Foundation financially account for revaluation adjustments? How does the
Foundation ensure all adjustments are outlined in the Statement of Comprehensive
Income?
–
How does the Foundation undertaken revaluations of its building assets? Who is
responsible for this?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for revelations undertaken of its non-current assets?
7.13 Depreciation and Amortisation
Foundations are required to record the depreciation of assets in accordance with relevant Australian
Accounting Standards issued by the Australian Accounting Standards Board. In particular, when
determining and financially accounting for depreciation, Foundations must comply with AASB 116 –
Property, Plant and Equipment, AASB 136 – Impairment of Assets and AASB 138 – Intangible Assets.
Foundations are also required to comply with the relevant sections of the Non-Current Asset Policies
for the Queensland Public Sector produced by Queensland Treasury.
The following are definitions used throughout this section:

Accumulated Depreciation/Amortisation accounts are contra asset accounts which
are offset against the related asset accounts. Such accounts represent the total
depreciation/amortisation that has been allocated over the assets already expired

Amortisation is the regular allocation of the value of intangible assets, finance lease
assets etc. across the reporting periods over which they are expected to be used, or
the benefits of the assets are expected to be derived. Amortisation is essentially the
same as depreciation (also a non-cash transaction), and serves the same purpose

A Depreciable Asset is a non-current physical asset with a limited useful life

Depreciation represents the regular allocation of the gross value of non-current
physical assets over their useful lives, it is a non-cash transaction

The Net Book Value (NBV) or Carrying Amount of an asset is the gross value less
accumulated depreciation

Useful Life is the estimated period for which an asset is expected to be able to be
used, or the benefits from the asset are expected to be able to be derived.
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–
How does the Foundation manage the depreciation and amortisation of its assets? Who
is responsible for this?
–
What are the principles, processes and policies for managing the depreciation and
amortisation of assets? How often are these reviewed?
–
How does the Foundation determine the useful life of its assets when assessing for
depreciation and amortisation? What factors are considered? For example:
o
Wear and tear
o
Technical obsolescence
o
Commercial obsolescence.
–
How often is the useful life reviewed? What types of events could indicate a change in
useful life?
–
How does the Foundation determine what assets are depreciable assets?
–
How does the Foundation determine what level of depreciation and amortisation affects
its depreciable assets?
–
How does the Foundation determine the useful life of its depreciable assets? Who is
responsible for this? How often are these determinations undertaken?
–
Who can approve the revised valuations of the Foundation’s assets after depreciation
and amortisation has been considered? Can this be delegated? If so, is this delegation of
authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How does the Foundation financially account for depreciation and amortisation of its
assets? How does it ensure depreciation and amortisation are considered when
developing the Statement of Comprehensive Income?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing the depreciation and amortisation of its
assets?
7.13.1
Depreciation Policy
Foundations are required to ensure assets remain on the asset register until actually disposed of,
written-off or traded-in. Refer to section 7.14 - Disposal of Assets, AASB 116 Property, Plant and
Equipment, and the Non-Current Asset Policies for the Queensland Public Sector produced by
Queensland Treasury.
–
Provide an outline of the Foundation’s depreciation policies. Who is responsible for
them?
–
How often are the Foundation’s depreciation policies reviewed? Who is responsible for
this?
–
Does the Foundation require depreciation and amortisation to be charged against noncurrent assets? Are there exceptions to this? For example:
o
Land, which has an indefinite useful life
o
Work in Progress assets
o
Some Heritage and Cultural Assets whose service potential is not expected to
diminish over time
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o
Buildings which are “investment properties” in terms of Australian Accounting
Standard AASB 116 - Property, Plant and Equipment.
–
How does the Foundation calculate depreciation of its assets? For example, depreciation
is determined using the “straight-line” method on a monthly basis?
–
How is depreciation applied to revalued assets? Is the depreciation based off the new
value?
–
When does depreciation start to be charged against an asset? At commission? At
commencement of service?
–
Can depreciation be applied to works in progress?
–
How does the Foundation determine the residual value of a depreciating asset?
–
Does the Foundation work on a principle of “an asset’s residual value is zero”? (This is
based on the principal of utilising an asset until there is no longer any economic benefit).
–
Does the Foundation have a chart to provide depreciation guidelines for various asset
categories? For example:
Useful Life
Depreciation /Amortisation
Rate Straight Line
Land
Unlimited
N/A
Buildings
30 years
3.3%
Furniture and Fittings
20 years
5%
Lease term of 5 to 15 years
20% to 6.7%
Office Equipment
10 years
10%
Computer Hardware
5 years
20%
Computer Software
5 years
20%
Vehicles
5 years
20%
Asset Type
- Leasehold Improvements
–
How does the Foundation calculate amortisation of equipment acquired under a finance
lease? For example, amortisation is determined using the “straight-line” method on a
monthly basis. Foundations must refer to AASB 117 - Leases, and should refer to their
own procedures in Chapter 6 – Hire and leasing.
–
How do the Foundation’s risk management policies apply?
7.14 Disposal of Assets
Disposing of assets plays an important role if the management of assets. When disposing of assets,
Foundations are to comply with the requirements set out in AASB 116 - Property, Plant and
Equipment, AASB 5 – Non-current Assets Held for Sale and Discontinued Operations and relevant
sections of the Non-Current Asset Policies for the Queensland Public Sector produced by Queensland
Treasury.
When financially accounting for the disposal of assets, Foundations must also consider the
requirements outlined in AASB 118 – Revenue.
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When determining internal controls for the disposal of assets, Foundations should ensure they comply
with the Financial Management Tools (see Information Sheet 2.3 - Internal Controls Accountability
Framework and Information Sheet 4.1 - Monitoring/Assessment of Internal Controls).
–
How does the Foundation manage the disposal of its assets? Who is responsible for this?
–
What are the principles, processes and policies for managing the disposal of assets?
How often are these reviewed?
–
Does the Foundation require that excess physical assets be made available to other
entities in the public/charity sector prior to dumping or scrapping?
–
Is there a preferential cascading of options for disposing of assets? See 7.14.3 - Disposal
Method. For example:
o
Transfer within health charity or charity sector
o
Transfer within public sector
o
Recycling of components
o
Sale
o
Donation
o
Scrapping.
–
How does the Foundation ensure the disposal of property, plant and equipment is
undertaken ethically, honestly and fairly?
–
What does the Foundation consider appropriate reasons to make assets available for
disposal? For example:
o
No longer required due to changed procedures, functions or usage patterns
o
No longer complying with occupational health and safety standards
o
Occupying storage space and will not be needed in the foreseeable future
o
Reaching their optimum selling time to maximise returns
o
Found to contain hazardous materials
o
Beyond repair but able to be sold for scrap.
–
How does the Foundation manage the de-recognising of its assets? Who is responsible
for this?
–
When can the de-recognising of Foundation assets occur? For example:
o
Upon disposal
o
When no future economic benefits are expected from its use or disposal.
–
How does the Foundation ensure all disposed assets are de-recognised in the
Foundation’s financial statements?
–
What are the principles, processes and policies for managing the de-recognising of its
assets? How often are these reviewed?
–
How does the Foundation financially account for the disposal of its assets? For example:
o
Is it considered a financial loss?
o
Is the money received from the sale considered revenue or a financial gain?
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o
–
If a leased asset is returned, is it considered a reduction in the liability
payments of the Foundation?
When does the Foundation’s responsibility and liability for a disposed asset cease? For
example:
o
Time of delivery to the new asset owner
o
Time that the asset is dumped in a responsible manner.
–
When does the Foundation record and report on the disposal of its assets? Are they
considered a loss? If they are sold, how is the money received from the sale managed?
–
Who can approve the disposal of the Foundations assets? Can this be delegated? If so,
is this delegation of authority recorded in the Financial Delegations Register (see Chapter
2)?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for disposal of Foundation assets?
7.14.1
Valuation of Assets identified as ‘Held for Sale’
Foundations are required to ensure they undertake an evaluation of assets prior to disposal, at the
point at which the asset is identified as being ‘held for sale’. This assists in a number of requirements
as outlined in AASB 116 – Property, Plant and Equipment, AASB 5 – Non-current Assets Held for Sale
and Discontinued Operations and relevant sections of the Non-Current Asset Policies for the
Queensland Public Sector produced by Queensland Treasury.
When undertaken valuations of assets, Foundations must comply with requirements set out in
Queensland’s Project Assurance framework and Queensland’s Value for money framework.
When financially accounting for the disposal of assets, Foundations must also consider the
requirements outlined in AASB 118 – Revenue.
–
What documentation is available to verify the date at which an asset becomes classified
as ‘held for sale’ (e.g. minutes of Board Meeting, asset management plan)? How does
the Foundation ensure the relevant criteria for classification as ‘held for sale’ per AASB 5
has been met?
–
How does the Foundation manage the valuation of its assets identified as held for sale
(i.e. ensure the asset is measured at the lower of carrying amount and fair value less
costs to sell)? Who is responsible for this? How does this support the valuation
procedures outlined for both tangible and intangible assets?
–
How does the Foundation manage the transition of assets to the ‘held for sale’ asset
class? Note: assets are not depreciated when they become held for sale. How does the
Foundation manage this?
–
How does the Foundation ensure that the disclosure requirements of AASB 5 (including
disclosure of the held for sale asset class as current assets on the Statement of Financial
Position) are adhered to?
–
What are the principles, processes and policies for managing the valuation of its assets
when they are identified as held for sale? How often are these reviewed?
–
How does the Foundation undertake valuations on property, plant and equipment when
they are identified as held for sale?
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–
Who can undertake the valuation of assets? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How do the Foundation’s risk management policies apply?
–
How are clear audit trails maintained for the valuation of the Foundation’s assets?
7.14.2
Gains/Losses on Disposal of Assets
–
How does the Foundation manage the gains or losses from the disposal of its assets?
Who is responsible for this?
–
What are the principles, processes and policies for managing the gains or losses from the
disposal of assets? How often are these reviewed?
–
How are the proceeds from the disposal of assets receipted? Are the proceeds required
to be deposited into a specific account?
–
How does the Foundation ensure any gain or loss from the disposal of assets is
recognised in the Statement of Comprehensive Income?
7.14.3
TIP:
Disposal Method
The Queensland Government Marketplace, Government Disposals provides a range of
guidance that may be of assistance to Foundations regarding the disposal methods of
assets.
–
How does the Foundation determine the best disposal methods for its assets?
–
What considerations does the Foundation have regard to when determining the method
of disposal for its assets? For example:
–
o
Preferred cascading of disposal methods (see 7.14 - Disposal of Assets)
o
Corporate objectives of the Foundation with reference to asset strategic
planning
o
Costs involved in the selected disposal process
o
Maximum possible benefit from disposal.
Describe the Foundation’s policies and procedures for the following methods of asset
disposal:
o
o
o
Transfer, including:
-
Property
-
Plant and Equipment
Sale, including:
-
Public Auction
-
Tender
-
Public Offer
-
Trade-in
Scrapping, including:
-
Recycling of components
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-
Donation
-
Writing-off.
–
How do the Foundation’s risk management policies apply?
–
How are clear audit trails maintained for the disposal methods of the Foundation’s
assets?
7.15 Loans and Advances
Loans and advances are considered a category of asset and may play a considerable role in a
Foundation’s asset management system as outlined in the Financial Accountability Handbook (see
Volume 3, Information Sheet 3.9 – Asset Systems) for further information.
TIP:
For financial statements, loans and advances receivable are to be classified as current or
non-current receivables and impairment noted where relevant.
–
Does the Foundation provide loans or advances to either individuals or entities? If so,
how is this managed? Who is responsible for this?
–
What are the principles, processes and policies for managing loans and advances? How
often are these reviewed?
–
How does the Foundation differentiate between a loan and an advance?
–
How does the Foundation financially record and report on the loans and advances it
manages? Are they considered an asset and/or revenue?
–
Are loans and advances recorded in a register? If so, what register are they recorded
into? (See Chapter 2).
–
Who can approve loans and advances? What is the approval process? Can this be
delegated? If so, is this delegation of authority recorded in the Financial Delegations
Register (see Chapter 2)?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for loans and advances?
7.15.1
Loans Receivable
–
How does the Foundation manage loans receivable? Who is responsible for this?
–
What approvals are required prior to entering into a loan agreement? (Refer to relevant
legislation e.g. Statutory Bodies Financial Arrangements Act 1982 and Statutory Bodies
Financial Arrangements Regulation 2007.)
–
What are the principles, processes and policies for managing loans receivable? How
often are these reviewed?
–
How are loans receivable financially accounted for? For example, loan transactions are
recognised in a subsidiary ledger that is reconciled with the general ledger control
account monthly.
–
Does the Foundation require security to be taken when providing loans? How is the
security financially accounted for?
–
How does the Foundation manage defaults on loans receivable? How does this comply
with procedures set out in Chapters 5 – Revenue Recovery?
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–
Who can approve a loan to be written-off? What is the process to do this? How does the
Foundation ensure a written-off loan is recorded in the Foundation’s losses register?
(See Chapter 2).
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for loans receivable?
7.15.2
Advances
–
How does the Foundation manage advances? Who is responsible for this?
–
What are the principles, processes and policies for managing advances? How often are
these reviewed?
–
How are advances financially accounted for? For example, loan transactions are
recognised in a subsidiary ledger that is reconciled with the general ledger control
account monthly.
–
How does the Foundation manage advances considered less likely to be repaid? How
does this comply with procedures set out in Chapter 5 – Revenue Recovery?
–
Who can approve an advance to be written off? What is the process to do this? How
does the Foundation ensure a written-off advance is recorded in the Losses Register?
(See Chapter 2).
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for advances?
7.16 Other Assets (Prepaid Expenses)
For further details, refer to Chapter 6 – Prepayments.
TIP:
Prepayments occur when payments are made prior to goods/services being received, or for
reporting periods in the future. When a foundation provides a prepayment in advance of
receipt, that payment is considered an asset until goods/services are received.
–
How does the Foundation manage prepaid expenses? Who is responsible for this?
–
What are the principles, processes and policies for managing prepaid expenses? How
often are these reviewed?
–
When would the Foundation be required to manage prepaid expenses? For example:
o
Grant payments
o
Insurance premiums
o
Maintenance contracts
o
Property taxes
o
Dues and subscriptions
o
Permits and licenses
o
Portion of payroll paid relating to a future reporting period
o
Rent paid in advance.
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–
Who can approve prepayments by the Foundation? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for prepayments?
7.17 Planning and Control of Capital Commitments
Capital commitments form part of the Foundation’s asset strategic planning process.
Asset strategic planning is considered a function within the Foundation’s strategic planning. Although
this planning component is not explicitly mandatory, it is considered good practice. See sections 15 &
23 of the Financial and Performance Management Standard 2009.
Foundations must have regard to the Statutory Body Guide, in particular Guide Sheet 4 – Evaluating
and reviewing significant physical assets when developing a Strategic Asset Plan.
Link to the foundations asset strategic plan (if a separate document).
TIP:
Asset strategic planning is considered a key “enabling” planning process, as asset planning
can assist the Foundation achieve its objectives and strategic goals.
–
How does the Foundation manage the planning and control of capital commitments?
Who is responsible for this?
–
What are the principles, processes and policies for managing the planning and control of
capital commitments? How often are these reviewed?
–
Who can approve the planning and control of capital commitments? Who is involved in
this process?
–
Describe the link between the planning and control of capital commitments and the
Foundation’s asset planning and strategic planning processes.
–
If the Foundation has/could have a capital works program, describe the relationship
between it and the planning and control of capital commitments.
–
Who is responsible for the development and maintenance of the Foundation’s capital
works plan?
–
How is the capital works budget determined? Who is responsible for this?
–
How does the Foundation ensure payments are approved and processed according to
the requirements outlined in Chapter 6?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for the planning and control of capital commitments?
7.17.1
Capital Commitments
–
How does the Foundation manage its capital commitments? Who is responsible for this?
–
What are the principles, processes and policies for managing capital commitments? How
often are these reviewed?
–
Who can approve the Foundation’s capital commitments? Who is involved in this
process?
–
What does the Foundation use capital commitments for?
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–
How does the Foundation financially record and report on capital commitments? How
does the Foundation record commitments for future capital expenditure (to be incurred in
future reporting periods)?
–
How does the Foundation record details of capital commitments? What is the process to
do this? How does the Foundation ensure these details are recorded in the Foundation’s
Capital Commitments Register? (See Chapter 2).
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for capital commitments?
7.17.2
Asset Leases and Hire
Leasing and Hiring policies may also be covered in Chapter 6.
A Foundation may decide whether leasing or hiring goods or services best suits its needs at a
particular time. As a general principle:

Goods and services are hired when they are required for a short period and when it is not
practical/cost effective to purchase them outright.

Finance leases are often entered into as a means of financing or acquiring an asset which may or
may not be purchased at the end of the lease period.
Foundations must comply with the Australian Accounting Standards, in particular AASB 117 - Leases
of the Australian Accounting Standards Board when determining what type of leases it is engaged in.
In addition, Foundations must also comply with the Leasing in Queensland Public Sector Policy
Guidelines produced by Queensland Treasury.
There are different types of leases that can be utilised: These include:
Finance (capital) lease - These transfer to the lessee substantially all the risks and benefits
associated with owning the leased property, without transferring legal ownership. Finance leases are
usually non-cancellable and are often a means of eventually owning an asset. See Chapter 6.
Operating lease - This is a lease where the lessor effectively retains substantially all the risks and
benefits associated with owning the leased property. Examples include: motor vehicle leases and
certain leases of office equipment.
Each lease entered into by the Foundation must be classified in accordance with the criteria set out in
AASB 117 to determine the associated accounting treatment. See Chapter 6.
TIP:
Some procedures may be duplicated from Chapter 6. If so, Foundations can refer to chapter
6 when required. Alternatively, Foundations may simply document the duplication for ease
of use.
–
Are hiring or leasing arrangements utilised for various assets or land?
–
How does the Foundation manage its leases and hiring arrangements for assets? Who is
responsible for this?
–
What are the principles, processes and policies for managing leases and hiring
arrangements for assets? How often are these reviewed?
–
Who can approve hiring or leasing of assets? Can this be delegated? If so, is this
delegation of authority recorded in the Financial Delegations Register (see Chapter 2)?
–
How does the Foundation ensure that asset leases are subject to the same planning,
budgeting, and approval requirements as direct purchases of assets?
–
What criteria determine whether assets are hired or leased as opposed to purchased
outright?
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–
How do any lease arrangements entered into comply with the Foundation’s contract
performance guarantee system (See Chapter 6)?
–
How does the Foundation ensure details of any asset leases are recorded in the Lease
Register (See Chapter 2)?
–
How do the hiring and leasing arrangements for assets comply with the State
Procurement Policy?
–
What information is recorded in relation to asset leasing arrangements? Who is
responsible for recording and maintaining information relating to hiring and leasing
arrangements?
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing asset leases and hiring arrangements?
7.18 Contingency Management
Legislation requires Foundations to have systems in place to efficiently, effectively and economically
manage the contingencies of the Foundation. These systems must provide for identifying, monitoring
and recording contingencies and Foundations are required to report on their contingencies annually.
See sections 15 & 26 of the Financial and Performance Management Standard 2009.
Foundations must comply with the Financial Management Tools, in particular, Information Sheet 3.12
Commitments and Contingencies, Information Sheet 2.3 - Internal Controls Accountability Framework
and Information Sheet 4.1 - Monitoring/Assessment of Internal Controls.
–
What does the Foundation consider contingent assets and liabilites? For example:
o
Contingent assets exist where compensation may be received from a third
party
o
Contingent liabilities exit where compensation may be payable to a third party.
–
How does the Foundation manage its contingency arrangements? Who is responsible for
this?
–
What are the principles, processes and
arrangements? How often are these reviewed?
–
How does the Foundation financially report on contingencies? How are contingent assets
financially reported compared to contingent liabilities?
–
What are the record keeping requirements for the Foundation’s contingencies? What
information is required to be recorded regarding contingencies? For example:
policies
for
managing
contingency
o
Description
o
Name, address, and ABN of the other party
o
Value (actual amount or best estimate)
o
Type of obligation (e.g. legal matter, indemnity, guarantee)
o
Identified trigger/s for realisation of contingency
o
Estimated date of expiration
o
Action taken to manage the contingency (e.g. action taken to mitigate any
losses)
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o
Details surrounding the finalisation of the contingency (e.g. court decision).
–
How do the Foundation’s risk management policies apply?
–
How is a clear audit trail maintained for managing contingent assets and liabilites?
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