OPEN V2 Asset Management Handbook DRS 14112011 Dr Rovel Shackleford

Asset Management(incorporating Asset Accounting Policies and Guidelines)

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01. ASSET MANAGEMENTHURDLE STANDARDS

1.1 Introduction

1.1.1 What is asset management?

Asset management is to make the most of the service delivery potential of assets by managing therelated risks and costs over their entire life. It is the process of guided acquisition and optimal useof assets until their retirement usually by disposal.

Asset management is to enable the government to meet its service delivery objectives effectivelyand to provide a foundation for economic development and financial sustainability.

1.1.1.1 What is an asset?

An asset is something of value, something ‘worth having’.

Some assets have a relatively short life and are ‘consumed’, or used up, withintwelve months, or are readily turned into cash. These are known as currentassets. Examples are investments or an inventory of stock.

Other assets have a potential service life longer than one year, and are known asnon-current assets. These assets can vary in nature and can be physical, suchas land or buildings, or can be intangible, such as patents or intellectual propertylike some agency databases. These have important attributes like a cost at thetime of acquisition, tangibility, and exchangeability.

The procedures in this chapter only deal with non-current, physical assetscontrolled by agencies, recognising that ‘control’ does not necessarily imply legalownership. These non-current physical assets, such as land and buildings,operational vehicles and equipment, office equipment (personal computers,technical libraries, etc), and furniture and fittings.

Computer software and non-current non-physical (intangible) assets such asintellectual property and intellectual capability such as the talent and experienceof human resources are not covered.

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1.1.2 What is the asset management process – central and agency?

1.1.2.1 Stages in asset management.

Given in this chapter are operating procedures for asset management. Eachprocedure is presented as a set of sequential actions. Procedures are groupedinto sections according to the four phases of an asset’s life cycle - planning,acquisition, operation & maintenance and disposal as shown below.

Also given in this chapter are procedures for asset recording, valuing andreporting, costing and charging.

The procedures given apply to all agencies.

If an agency wants further procedures to cover aspects specific to an agency’sorganisation, administration and performance requirements, agencies shouldconsult with DEPT. and a procedure for agencies to do this is provided asProcedure 6.2: Identifying responsibilities for assets.

1.1.2.2 What is the link between national policy and agencyasset management

The procedures in this chapter provide the ‘how to’ for asset managementimplementation. The link between national policy and agency asset managementis not given in this chapter. It is outlined in a document that complements theseprocedures - the Asset Management Manual.

The manual provides the framework and principles for asset management and thehigh-level policies and practices that apply to public assets.

1.1.3 Roles and responsibilities

1.1.3.1 who does what in the asset management process?

Roles and responsibilities are given within the procedures as are applicable toassist agencies with their specific implementation of the standards in this chapter.Agencies will also need to identify higher-level roles and responsibilities for assetmanagement in addition to those required in these standards to deliver the fullrange of requirements as outlined in the Asset Management Manual.

planning acquisition

operation&

maintenancedisposal

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1.1.4 What is the difference between old and new?

The requirement to manage assets is not new. However management tools arenow available to make asset management more effective, accountable andtransparent. These tools are embodied in these standards and enable agencies tobe responsive to the changing demands of the more complex and dynamiceconomic and financial environment now facing the government.

The procedures presented in this chapter are designed to put into practice theasset management framework given in the Manual that applies to Thai agencies.

1.1.5 Minimum requirements for effective asset management – ie standards*.

The procedures given are not exhaustive in their coverage. They represent abenchmark for an agency to achieve incremental to substantial improvements inexisting practices.

The procedures, fully implemented, represent the minimum standards for assetmanagement requirements and present a ‘safety-net’ datum to be used forperformance management assessments.

As part of the ongoing maintenance of this chapter, additional material andrefinements to ensure its continuing relevance, to reflect operating experience andto support the ongoing management reforms of the Thai Government are planned.

Agencies that meet these standards can meet the asset management compliancerequirements. Agencies that seek to achieve performance beyond this level ofbasic compliance would need to consistently operate and perform above thesestandards and should refer to the further guidance given in the AssetManagement Manual. The manual is to equip chief executives and senior officerswith the big picture and the context for asset management essential to empowerthem to apply the leadership needed in their agencies to move them to the higherlevels in asset management performance.

1.1.6 Expectations about what agencies will achieve and the incentives for progress

It should be acknowledged that asset management requirements continue toconstantly change and evolve over time so agencies cannot become complacentand seek only to meet these standards. To do so would satisfy the minimumstatutory obligations today but agencies that aim to achieve such compliance mayfind that they fall well short of the government’s expectations in the future.

Agencies need to evolve their asset management capabilities of their humanresources in parallel with their implementation of these standards. To be able tomeet the implementation challenges requires commitment and drive from withinthe agencies.

1.1.7 Transitional arrangements for working towards the ideal standards

In implementing asset management there is no ‘transitional’ period. As assetmanagement is a process, its implementation relates to the journey that each

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agency must take and focuses on applying ways and means consistent with theprinciples to best achieve the asset management objectives. The principles andobjectives of asset management are cited in the Asset Management Manual.

The process to be applied must be one of constant improvement. As eachagency takes the asset management journey, the destinations to be reachedalong the way are expressed in the procedures given in this chapter. The ‘ideal’for each agency however will be different and specific to each individual agencyas the ‘ideal’ must be consistent and fully reflect the agency mission which, inturn, is unique for each agency. The identification of responsibilities within eachagency will also sometimes be complex due to size and diversity both in theassets held and in the services an agency supports. However complex they mustbe identified, documented and communicated effectively as the lack ofspecification of roles and responsibilities is the usual root cause of implementationfailure. Roles and responsibilities need to be clear not only for these proceduresbut for the higher-level requirements as expressed in the Asset ManagementManual.

The time expected to be taken to achieve these standards is to be negotiated withDEPT. by each agency and to be in accordance with an agreed implementationplan. A draft implementation plan is to be submitted by each agency by thespecified date. The agreed implementation plan will then be negotiated andratified by DEPT. and this plan will form the basis of a MOU between the parties.

It is a responsibility of each agency to initiate the asset managementimplementation plan and to put the required process into place. Agencies are totake the lead in working with DEPT.. DEPT. expect agencies to be active indisplaying their leadership and in setting up management arrangements that areconsistent with the heads of agencies and chief executive officers being fullyaccountable for assets that their agencies control.

1.1.7.1 Transition for each standard should be discussed

Details of general requirements are given as appropriate under each procedure toassist agencies to derive their implementation plans.

The detailed implementation plans prepared by each agency will refine and buildany further clarification that is specific to that agency.

All implementation actions to effect these model procedures must also follow thethemes and structure of the Asset Management Manual and must continue tokeep the focus on the nature of assets controlled, and build on the current statusof asset management in agencies.

* 1. 2 Standards for agency asset management

The following sections that are detailed below present the asset managementprocedures in this chapter:1. Implementing asset management2. Developing an asset management strategy

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3. Acquiring assets4. Operating and maintaining assets5. Disposing of assets6. Evaluation and review

Procedures – table of contents

1 Implementing asset management

1.1 Recognising assets1.1.1 Recognising portable and attractive items

1.2 Identifying responsibilities for assets

1.3 Recognising the Cost of using Assets

1.4 Internally controlling assets

Appendix A Recognising assetsAppendix B Asset management responsibilities

2 Developing an asset management strategy

2.1 Developing an asset strategy2.1.1 Managing output demands2.1.2 Identifying non-asset solutions

2.2 Preparing a capital investment plan2.2.1 Ranking asset acquisition proposals2.2.2 Conducting a feasibility study2.2.3 Undertaking life cycle costing2.2.4 Preparing a financing plan

2.3 Preparing an output submission

2.4 Preparing a risk management plan2.4.1 Meeting insurance requirements

3 Acquiring assets

3.1 Implementing an acquisition plan

3.2 Acquiring assets3.2.1 ‘Off the shelf’ assets3.2.2 Constructed assets3.2.3 Manufactured assets3.2.4 Leased property assets3.2.5 Donated and seized assets

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3.2.6 Heritage assets3.2.7 Reallocated assets

3.3 Developing and implementing a replacement strategy

3.4 Conducting a post-acquisition review

3.5 Recording new assets

3 Accounting treatment

Appendix A Tagging assetsAppendix B Requirements for an asset register

4 Operating and maintaining assets

4.1 Preparing an operational plan

4.2 Preparing an energy management plan

4.3 Developing a maintenance management strategy4.3.1 Implementing a maintenance plan

4.4 Assessing the performance of assets4.4.1 Assessing the performance of built assets4.4.2 Assessing the performance of other assets4.4.3 Assessing the performance of emergency vehicles

4.5 Administering property leases

4.6 Asset valuations and depreciation4.6.1 Valuing and revaluing assets4.6.2 Assessing the useful life of an asset4.6.3 Calculating depreciation

4.7 Recording asset expenditure

4.8 Maintaining data on existing assets4.8.1 Transferring assets between locations4.8.2 Stocktaking assets4.8.3 Undertaking general ledger reconciliations4.8.4 Deleting asset records

4.9 Developing and using performance measures

4.10 Reporting on assets

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Appendix A Securing assetsAppendix B Letter of instruction to a valuer

5 Disposing of assets

5.1 Implementing a disposal plan

5.2 Disposing of assets5.2.1 Disposing of land and buildings5.2.2 Disposing of other assets5.2.3 Evaluating disposal options

5.3 Terminating property leases


Attachment 1 - Agency responsibilities

Attachment 2 - Depreciation schedule

Forms

Suggestion forms

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1

Implementing asset management

Asset managers must be aware of their asset managementresponsibilities and be accountable for the performance of assetsunder their control. Responsibilities may include:

monitoring the performance of assets throughout their life cycle

acting to prevent loss or theft of assets, or damage to assets

recording and assessing actual expenditure against budget

developing operational and maintenance strategies, programsand budgets

and taking appropriate action to remedy any problems arising.

Knowing what costs are incurred in using assets is critical to theireffective management. Charging determines the extent to whichcosts will be charged when an asset is used to support the provisionof a service to others, either within the agency or externally.

Procedures

1.1 Recognising assets1.1.1 Recognising portable and attractive items

1.2 Identifying responsibilities for assets1.3 Recognising the Cost of Using Assets1.4 Internally controlling assets

Appendix A Recognising assetsAppendix B Asset management responsibilities

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The procedures presented in this chapter have been prepared based on the

following policy statements contained the Asset Management Manual, Thai

Government:

Heads of Ministries, agencies or enterprises are accountable forthe planning, management and performance of assets undertheir control.

Entities are to maintain asset registers in accordance with theComptroller General’s guidelines in order to facilitate theimplementation of appropriate asset management and riskmanagement strategies across the government sector.

Asset management decisions regarding acquisition &procurement; their operation, use, and maintenance; and theirretirement & ultimate disposal are to be made within anintegrated service and financial planning framework, and beplanned & budgeted in the context of the Thai government’soverall resource allocation policies and priorities.

1.1 (page 1)

Handbook, Chapter 6 Updated 14/07/11

Procedure 1.1 Recognising assets

Policy

all items purchased must be examined to identifywhether they conform with certain recognitioncriteria:

if an item conforms with all six tests (referAppendix A), it is recognised as an asset

if an item does not conform with all six tests, itwill not be treated as an asset

all relevant details of assets must be recorded in theasset register

for control purposes, portable and attractive itemsmust be recorded in the asset register.

Scope All items controlled by the agency and satisfying therecognition criteria as assets

Purpose Assets must be identified and recorded in the assetregister at the time of acquisition to enable decisions tobe made based on reliable and up-to-date information.The information in asset registers allows managementto:

evaluate asset performance

trace assets for security and control purposes

assess risk profiles

assess the contribution made by the assets toservice delivery objectives

better satisfy external reporting requirements.

Frequency Whenever an asset is received. Assets may bereceived by planned acquisition (purchase, custommanufacture or construction), by transfer from anotherentity or business unit, or by re-classification ordiscovery within the agency.

Responsibility Asset Officers

Recognising assets 1.1 (page 2)


Key words Control: the ability of the agency to enjoy the servicepotential of the asset, and deny it to others. It ispossible for an agency to control an asset withouthaving technical ownership of the asset.

Non-current asset: an asset having a potential servicelife longer than one year.

Recognition threshold: the value of an item belowwhich it does not have to be accounted for as an asset.The threshold level is 50,000 baht.

Service potential: the ability or capacity of the asset tosupport the operational needs of the controlling agency.

Business Unit: an organisational unit in an agency thatis administratively responsible for the asset.

Useful life:

the estimated period of time (in years) over whichthe asset is expected to be used, or the benefitsrepresented by the asset are expected to bederived; or

the estimated total service potential, expressed interms of production or similar units, that is expectedto be obtained from the asset.

Actions

1. Confirm that the item is an ‘asset’.

How to do it

Undertake the following tests:

Is the item tangible, with an economic lifegreater than one year?

Will the item generate service potential for theagency?

Does the agency control the service potential?

Has the transaction giving control to the agency



occurred?

Does the item (or group of items) exceed therecognition threshold?

Is there a probability of benefits for the agency?

Can the value of the benefits be reliablymeasured?

Ref: These tests are summarised in Figure 1.1below.

Further clarification of these tests is available inAppendix A at the end of this chapter.

If the answer to all the above questions is yes, thenthe item should be recorded as an asset.

Figure 1.1: Recognition of assets

Is the item tangible with an economic

life greater than one year?

Will the item generate service

Does the Business Unit control

the service potential?

Has the transaction giving the

Business Unit control occurred?

Will the service potential

eventuate?

Can the value be reliably

measured?

Does the value of the item or group

exceed the recognition threshold?

The item may be another type of

asset (eg current or intangible) which

is not dealt with in this manual

Not an asset of the Business Unit

Disclose in notes to the financial

statements

Record, if a portable and attractive

item

The item is a non current physical

asset to be recognised by the

Business Unit

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No

No

No

No

No

No

No

potential for the Business Unit?

Will the item generate service



2. Identify the fields required for the asset register anddevelop data standards to ensure consistency andaccuracy. Refer to Appendix B at the end of thischapter for further detail.

--------------------------------- End of Procedure 1.1 -------------------------------


Seven Hurdles Handbook, Chapter 6 Updated 14/07/11

Procedure 1.1.1 Recording portable and attractive items

Scope Items which are not recognised as assets, but whichare required to be traced for security and controlpurposes.

Purpose To keep records on, and maintain the security of, itemsthat are not recognised as ‘assets’ in terms of the testsdefined in Procedure 3.5: Recording new assets.

Frequency When new items are acquired or disposed of, or whenany transaction affecting the performance of a portableand attractive item takes place.


Key words Portable or attractive item: not an asset, butportable or attractive, and prone to loss or theft.Examples include tools and mobile telephones.

Recognition threshold: the value of an item belowwhich it does not have to be accounted for as anasset. The threshold level is 50,000 baht

References Asset Management Manual, Thai Government

Actions

Asset Officers 1. Consider whether the item should be classified as‘portable and attractive’. Do this by applying thefollowing tests:

the item does not pass the tests as an asset asdescribed in Procedure 1.1: Recognising assets;and

the item needs to be recorded for security, controland insurance purposes because it is prone toloss, theft or misuse, and is important to theoperations of the Business Unit, or the agency.

Generally, such items fail the tests of being an asset



because they fall below the recognition threshold.However, they may fail the tests for other reasonssuch as a short economic life, or because benefits cannot be reliably measured.

Examples

Examples of portable and attractive items includemobile phones, telephone answering machines,portable computers/computer equipment,cameras, binoculars, firearms, explosives, powertools, gardening equipment (lawn mowers) andelectric appliances (fan heaters, television sets,video cassette recorders (VCRs), electric powertools, chain saws).

Note: Each Responsible Manager* should identifywhich items are required to be traced for controlpurposes for their work place.

* - (See Appendix B – Business Units andOutputs)

2. If the item qualifies as ‘portable and attractive’, recordit on that part of the asset register (in a manual systemor in a computerised system - such as Oracle Assets)devoted to portable and attractive items (assetcategory ‘xx’). It should be entered in the same wayas any new asset except that financial data, other thanthe initial acquisition cost, need not be recorded.

Do not record revaluations or compute depreciation.The values of portable and attractive items are notreported in the financial statements.

3. Undertake regular stock takes of portable andattractive items, and record issues, receipts, transfersand responsibility for the item.

4. When the item is disposed of, remove the item fromthe asset database (manual or computerised system -such as Oracle Assets).

------------------------------- End of Procedure 1.1.1 ------------------------------

1.2 (page 1)


Procedure 1.2 Identifying responsibilities for assets

Policy Business Unit Managers within the agency areresponsible for the:

life cycle costs of using assets in program delivery

performance of assets in achieving programobjectives

safe-guarding of assets they control.

Scope All procedures in this chapter

Purpose To ensure that all asset management roles andresponsibilities are identified, allocated and advised toappropriate staff.

The output of this procedure is a listing of personneland their titles with responsibilities for assetmanagement actions for each procedure in thishandbook.

Frequency This procedure should be conducted before thehandbook is implemented in each Business Unit, andshould be reviewed annually to reflect organisationalrestructuring and changes in work practices.

Responsibility Business Unit Manager*

* - (See Appendix B – Business Units and Outputs)

Actions

Business UnitManager

1. Review the scope of the procedures to be undertakenin Sections 1 to 5 of this chapter.

2. Identify the appropriate model for assignment ofresponsibility for the custody and operation of assets.

Ref: Refer to Attachment 1 – Agency responsibilitiesfor Business Units and Outputs.

Identifying responsibilities for assets 1.2 (page 2)


Options include:

Central control: Assets are managed by a centralunit and made available to operational units. Thismodel recognises that asset management requiresspecialised skills.

User group control: User groups may directly controlthe assets that they use to deliver the outputs forwhich they are responsible. This model makes the fullcost of asset holdings visible to the user groupensuring that users take an interest in assetperformance.

Individual control: This model designates anindividual as responsible for particular assets and isused primarily for assets or portable and attractiveitems such as mobile telephones and portablecomputers.

3. Using the parties identified beside each action as aguide, allocate responsibilities to appropriate staffwithin your agency. Refer to Appendix B at the end ofSection 1 and Attachment 1 – Agency responsibilitiesfor further description of responsibilities.

4. Complete the space beside each action with the nameand/or title of the appropriate staff member.

5. Advise staff members of their asset managementresponsibilities and changes in responsibilities.

6. Review the allocated responsibilities annually to reflectorganisational restructuring.

7. Issue asset management responsibilities and fullyadvise staff of their responsibilities annually.

8. An outgoing business unit manager is to advise anincoming business unit manager of the rationale for thedelegations set in place.

--------------------------------- End of Procedure 1.2 -------------------------------

Charging for the use of assets 1.3 (page 3)


Procedure 1.3 Recognising the Cost of Using Assets

Scope Assets of all kinds, for which charges are made tousers

Purpose Effective asset management requires that the full costsof ownership and operation should be visible to assetusers.

The objectives of charging are to:

have the costs of the asset borne equitably bythose who benefit from its use

discourage frivolous or excessive use

allow benchmarking or alternative supply methodsto be evaluated.

This procedure explains how a realistic charge isdeveloped.

Frequency Calculate the user-charging basis whenever a newasset is acquired, and review annually.

Responsibility Business Unit Manager

Key words Capital Charge: the means used to measure the costof capital that agencies have invested in assets undertheir control.

Outputs: products and services produced anddelivered by a Business Unit for customers outside theUnit. (Inputs are the labour, materials and otherresources used to produce outputs.)

Output groups: groups of homogeneous outputswhich contribute to a common service and have thesame customers, and usually relate to a discrete policyobjective.

Performance measures: measures of quantity,quality, cost and timeliness used to assess theproduction or delivery of outputs.

Reference Output Costing chapter



Actions


1. Identify revenue and expenditure for each outputidentified in the agency’s output submission.

2. Develop a cost for each output considering thequantity and standard (quality) of the output to bedelivered.

(a) Define the assets or asset components whichcontribute to the output.

Example

As an example, the exercise could be carried outfor a sub-tenancy (ie a part of a single buildingwith a defined floor area, a complete building, or awhole site with a complex of buildings, such as agovernment services complex).

(b) Determine the unit of consumption on which the outputis to be costed.

Note: The unit of consumption selected shouldreflect the way in which the asset is used, andhence the unit on which charges will be based.For building occupancy, users are normallycharged on floor space used. Other assets maybe charged by units of consumption, such askilometres travelled for a truck, or the number ofcopies for a photocopier or printer.

(c) Calculate the full annual costs of owning and operatingthe asset, on an accrual basis.

How to do it

Both cash and non-cash must be included.

Typical costs will be:



the cost of capital, as represented by a CapitalCharge if one is to be applied or the interestrate

the rate of consumption of the asset,represented by depreciation

normal running costs such as fuelconsumption, cleaning, rates and taxes whereapplicable, licence fees, costs of managementand operating staff, and maintenance.

All types of cost that are directly attributable to theownership and use of the asset must be recorded.

(d) Calculate the cost per unit, using expected annualconsumption and total annual cost.

(e) Proportion the contribution of the cost to the assets toeach output.

This may be achieved by:

users committing in advance to paying a fixedproportion of the asset costs, based on theproportion of the asset capacity they intend to use,for example the lease of floor space in an officebuilding

users paying for asset capacity actually used,such as vehicle usage from a car pool

an arbitrary split based on observed usage.

(f) Determine the total cost of each output.

3. Establish a unit output cost for each output.

4. In conjunction with agency executives and users,determine whether costs are to be fully or partiallyrecovered from customers.

Alternatives include:

competitively neutral cost: this is the full cost,adjusted to eliminate advantages anddisadvantages that an agency experiences againsta private sector supplier of the same output.Competitive neutral costs may be needed forinternal cost recovery between business unitswithin an entity

marginal cost: this is lower than full cost, and isthe incremental cost of producing additional units



of output assuming that the overhead or indirectcosts remain fixed and are already covered

little or no cost recovery: occurs whenever anoutput is provided at less than full cost. Theremaining cost will need to be met from othersources, such as budget appropriation

market price: prices are set to match theprevailing market irrespective of cost. Somegovernment services or assets may not havecommercial equivalents, so this method is oflimited use. A possible application is the rental ofoffice space in a government-owned building by agovernment entity

actual full cost: this is the normal methodappropriate for most internal charging situations.It includes no profit, and care must be taken toensure that all costs are included (includingaccrued non-cash costs)

full cost, plus a factor: this can be done invarious ways and provides the equivalent of a‘profit’.

5. Agree the output costs and quantities to be deliveredin consultation with the Bureau of the Budget. Refer toProcedure 2.3: Preparing an output submission.

--------------------------------- End of Procedure 1.3 -------------------------------

1.4 (page 1)


Procedure 1.4 Internally controlling assets

Policy To control the recording, management and operationof, and accounting for non-current physical assets overtheir entire life, the agency is to use a system ofinternal controls to ensure the following:

adherence to Public Sector and assetmanagement policies and procedures

compliance with the Procurement ManagementAct

effectiveness and efficiency of all procedures

accuracy and reliability of systems, records andcontrols

safe-guarding of its assets.

Scope Policies, procedures, training and information systemsrelating to assets

Purpose A workable system of controls provides the frameworkwithin which to effect improvements to assetmanagement. Without it, there is limited scope forinformed decision making or implementingmanagement intentions.

Frequency Various, and all controls to be reviewed annually

Responsibility Responsibility Centre Manager

Actions

Responsibility CentreManager

1. Identify the necessary internal controls required for thisLocation.



The system of internal controls includes:

compliance at Responsibility Centre level

detailed policies and procedures addressingrequirements for effective governance of assets

an adequate training program in asset managementwhich addresses the needs of management andstaff and establishes whether staff are receivingtraining consistent with their responsibilities

an asset register which

contains reliable, relevant and timely data onacquisition, identification, accountability,performance, disposal and accounting

is integrated with the financial, accrualaccounting and budgetary systems (in thatasset data is to be held in one system and theother systems reference that master datasource. Asset data should also only beentered into one data location in that onesystem )

assists informed asset management decisions

an information system, based on the asset register,which provides all necessary financial and non-financial data needed to manage assets

adequate security and system controls to facilitateready access to asset information by staff who areaccountable for those assets and restricted accessby other staff who may be discharging functionswhich conflict with the asset management function.

Ref: Table 1.1 below provides further detail oninternal controls.



Table 1.1: Internal controls

Function Description

Internal controls Ensuring an adequate system of internalcontrols at this Location, and thatcontrols operate efficiently and effectively

Asset register Maintaining an asset register to providereliable and timely data enablinginformed asset management decisions

Regular verification Maintaining a regular asset verificationprogram at least once per year to certifythe existence of assets held at theResponsibility Centre on the assetregister

Computer security Notifying the Manager responsible forasset database administration or themanager responsible for financialmanagement of any changes in staffsecurity access levels to a manual orcomputerised system - such as OracleFinancials or any changes in location

Loss of assets Notifying the appropriate Business UnitDirector or Manager of any loss, theft ordamage to assets

Asset accounting Ensuring officers obtain authorisation forchanges to the asset register beforeapplying them

Updating the asset register accuratelyand in a timely manner

Ensuring that changes to the assetregister can be substantiated inelectronic or hardcopy form

Reconciling changes to the asset registeron a monthly basis

Conducting verification checks to ensurethat the asset register accurately reflectsthe physical assets at that Location

Recording any discrepancies betweenthe asset register and the physicalverification of assets

Systems functions Access to the manual or a computerisedsystem - such as Oracle Financialssystem must be adequately controlled

Levels of access are performed by the



manager responsible for financialreporting

Password authentication is performed bythe information technology databaseadministrator

2. Establish policies, procedures, training and/orinformation systems necessary to implement theinternal controls in this Location.

3. Annually assess the performance of the existinginternal controls and adjust policies, procedures,training and/or information systems if necessary.

--------------------------------- End of Procedure 1.4 -------------------------------

Recognising assets Appendix A (page 1)


Tests for recognising assets

Further clarification of the six tests (refer action 1 inProcedure 1.1: Recognising assets) is provided in thisappendix.

Service potential

Service potential is defined as the usefulness of an assetto the agency in achieving its objectives. Service potentialrepresents the benefit to the agency from utilising an asset.

The inability to sell or modify an asset does not remove itsability to yield service potential for the agency.

For example, an agency may not be able to sell a hospitalor use it for purposes other than the conduct of healthservices provision. This limitation does not eliminate thecontribution the hospital makes to the agency in achievingits objectives.

Control

Legal title

Legal title and physical possession are good indicatorsof control but they are not infallible.

A Finance Lease is one example where legalownership rests with the lessor, yet the benefits areenjoyed by the lessee.

The agency may be required to have legal title to someasset under legislation, but the asset is used byanother entity. That asset is controlled by the otherentity and should be recorded on their asset register(manual or computerised system - such as OracleAssets).

Control of an asset is evident, if the Agency has the:

ability to use the asset to achieve definedobjectives

ability to restrict or change access to the asset

ability to surrender the asset to another entity

ability to dispose of the asset

obligation to bear the risks associated with holdingthe asset.

Key to determining control

The key question for determining a control issue is:does the agency have the authority to decide if and



how the asset will be used? An ability to retain theproceeds of a sale is not a key determinant of controlin the public sector.

Control issues

Deciding control issues may be difficult, if a number ofBusiness Units are involved.

Such issues must be discussed with all Business Unitsconcerned. Agreements should ensure assets arereported in the financial statements of only oneBusiness Unit.

Transaction/past event

Before the agency can recognise an asset, a verifiablespecific event passing control of the asset to the agency orone of its Business Units must have taken place.

Clarification of past event

Transactions or processes leading to apparent controlmay have been implicit, recognised only unofficiallyand merely informally agreed over time. The agencymust establish that it has a clear right to the servicepotential of all its assets.

Evidence

A formal administrative arrangement is evidence of anevent giving the entity control over the asset. This willprotect the agency’s use of that asset.

For example, the agency may have a parcel ofgovernment owned land reserved for its use. Such areservation constitutes an event giving the agencycontrol over that land.

Non-evidence

The possibility of future control of an asset does notconstitute an event.

For example, the Government may propose extendinga public office complex by acquiring surrounding land.The agency has gained control over that land onlywhen the necessary transaction has been formallycompleted.

Probability of benefits

The service potential of an asset must actually flow to theagency. It must be certain or sufficiently probable andclearly shown that the agency will actually benefit from the



service potential of that asset.

Most items will contribute at least a degree of servicepotential and thus qualify as assets for recognition underthis criterion.

Reliable measurement

Assets must have a value that can be measured reliably.

Measurement reliability means that any qualified objectiveperson using the same valuation process will produceeither the same or an acceptably similar result. Auditorsmust be satisfied that the valuation is accurate andappropriate to the category to which the asset belongs.

In most cases you will be able to value assets with adegree of reliability sufficient for inclusion in financialstatements. Cases where this is not possible are rare.

An asset’s value can be made reliable by assigning aconservative value to the asset.

In some cases the value of an asset is measurable by thecost of replacing it. This method is usually sufficientlyreliable.

Unusual cases

If an apparent asset cannot be measured withsufficient reliability, it cannot be recognised in thefinancial statements. Disclose this in a note to thefinancial statements.

You should also provide details on the type of item,quantity, current use, restrictions, location and anyother performance related information of value to usersof financial information.

For example, the use of an asset may be subject tostrict caveats or other restrictions making valuationdifficult.

Recognition threshold

The agency has an asset recognition threshold of 50,000baht.

A recognition threshold of 50,000 baht means:

only assets with a value at or exceeding 50,000 bahtshould be recognised

items with a value below 50,000 baht should betreated as expenses and not recognised as assets.



Asset management responsibilities Appendix B (page 5)


Functions

These definitions are provided for guidance only. Business UnitManagers should review these to reflect their own organisationalstructures and needs.

Asset Manager: manages the implementation of the assetstrategy and associated plans, and guides the acquisition,operation and maintenance, and disposal of assets for theAgency

Asset Officers: undertake tasks associated with the day-to-dayoperation of assets

Business Unit Manager: responsible for the management of theBusiness Unit and ultimately responsible for asset management

Manager responsible for asset management or Capital WorksManager: develops, manages and controls the Agency’s CapitalWorks Program

Corporate Services: is responsible for financial reporting; policyand procedures relating to asset management including updates,system upgrades and modifications; and adequate training

Manager for Finance: prepares the Business Unit’s financialstatements and output submission; determines ResponsibilityCentre allocations and monitors expenditure; initiates the assetstocktake

Property or Technical Manager: manages and controls specificresources (eg property) to implement the Responsibility Centreoperations plan including maintenance, acquisition and disposal

Project Manager: manages the implementation of projects forthe Responsibility Centre

Responsibility Centre Manager: manages the day to dayoperation of assets and is responsible for maintaining thecondition of assets; efficient and economic operation of assets;efficient and effective utilisation; controlling and regulating the useof specific assets; identifying future asset needs, and surplusassets; recording asset costs for the centre in a timely andaccurate manner.

Who are RCMs will differ depending upon the approach taken bythe agency’s head on the level of delegation to be given tovarious parts in the organisation for the various classes of assets.For example, an agency head may select to provide widespreaddevolution and place the opportunity of managing the assets intothe hands of those that use the assets. Under this scenario thelocal management that use particular assets to deliver services



may be given the mandate to manage them. This may result inmay to large number of a relatively junior managers becomeauthorised as RCMs in the organisation. Provided the role andresponsibility of a RCM and made clear to these managers andthey understands the role and its requirements this could producea satisfactory result for the agency concerned. Alternatively, ahead of an agency may choose to restrict the RCM role to a verysmall number and gives the RCM role to a small number of themost senior officials. These arrangements any many other formsof arrangement may work successfully. The key is that the peoplethat become an RCM understand their role and exercise theirduty professionally and diligently.

Secretary: prepares the agency’s Corporate Plan in conjunctionwith senior managers and is the Agency’s Accountable Officer

Strategic Planner: develops the agency’s five-year assetstrategy based on the agency’s service delivery strategy



Responsibility for asset categories

Land andbuildings(includingfixtures, fittingsand fit-out)

Computerequipment

Personalcomputers

Communica-tions systems

Registeredvehicles

Plant andequipment(includingfurniture)

Library assets

Responsibility Managerresponsible forAssets?

Director IT RCM RCM RCM RCM Chief Librarian

Planning Need – RCM andBUCo-ordinated bymanagerresponsible forassets

BU in conjunctionwith Director IT

RCM inconjunction withBU

RCM RCM RCM Chief Librarian toliaise with ManagerHuman ResourceServices, FMO

Acquiring Co-ordinated bymanagerresponsible forassets andapproved by theMinister forFinance

Acquisitions andcapitalexpenditure -Director IT

RCM RCM RCM BU; RCM Chief Librarian

Operating andmaintaining

Day-to-dayoperation - RCM;communicate withManagerresponsible forassets on minorworks program

Maintain all ITnetworks and theirconfiguration -Director IT

RCM RCM BU; RCM Chief Librarian

Transfer Decision – RCMManagerresponsible forassets

Director IT RCM RCM RCM RCM Chief Librarian

Disposing Surplus – RCMCo-ordinated byManagerresponsible forassets andapproved by theMinister forFinance

Director IT RCM RCM RCM BU; RCM Chief Librarian

Recording RCM Director IT RCM RCM BU; RCM Chief Librarian



Note:

1. All computer equipment, and plant and equipment must be purchased under a Government negotiated contract and from approved suppliers, or acontract between a supplier and the agency.2. All personal computers must be IT approved equipment and are acquired by IT on receipt of authorised requisitions.3. Financial Management Operations record passenger and fleet vehicle lease payments.4. RCM = Responsibility Centre Manager; GM for assets = General Manager of the Assets Branch; IT = Director of the Information Technology Branch;BU = Business Unit Manager; FMO = Financial Management Operations

Business Units and Outputs

The identification of responsibilities within an agency issometimes complex due to its size and diversity. To assist you,an example of Output Groups, Business Units and the Outputthey are part of for the xx agency are listed below.

Output Group Output name

xxxx ??? Servicesxxxx ??? Servicesxxxx ??? Servicesxxxx ??? Servicesxxxx ??? Services

Corporate Overheads *

* costs associated with Corporate Overheads are apportioned over output groups

Responsibilities

A responsibilities table is to be prepared by the agency thatprovides a list of Business Units and Responsibility Centresfor the agency. Not all Business Units will need to have alevel of Responsibility Centre within the Unit.

xxxx ??? Services

Business Unit Director / Manager ResponsibilityCentre

Manager

Financial delegations

Responsible person - acquisitions

Financial delegations are authorisations to commitexpenditure. Only officers who have been delegated theappropriate authority by the relevant Minister may commitfunds.

Regulation xx of the Procurement Management Act XXX

requires that approvals for asset acquisitions are granted inaccordance with the appropriate Minister’s delegations.

A list of employees who have the authority to incur or meetexpenses and obligations against their budgets should bedetailed in a delegations manual and given on the FinanceHome Page on the agency Intranet site.

Responsible person - disposals

The authorised officer is responsible for approving thedisposal and method of disposal in accordance with policyxxx of the xxxxxxxx of the xxxx and Section xxx of theProcurement Management Act xxxx.

It is the responsibility of the Responsibility Centre Managerdisposing of the asset to ensure:

the physical removal of the asset, and

the adjustment of the asset register after authorisationby delegated officers or their nominees.

2Developing an asset management strategy

An asset strategy provides the basis for the acquisition, operation,maintenance, refurbishment, and disposal of assets enablesBusiness Units to provide the quantity, type and standard of assetsneeded to support its service delivery objectives.

Effective planning also assesses alternatives to the acquisition ofnew assets, including ‘non-asset solutions’ and the enhancedperformance or use of existing assets.

Procedures

2.1 Developing an asset strategy2.1.1 Managing output demands2.1.2 Identifying non-asset solutions

2.2 Preparing a capital investment plan2.2.1 Ranking asset acquisition proposals2.2.2 Conducting a feasibility study2.2.3 Undertaking life cycle costing2.2.4 Preparing a financing plan

2.3 Preparing an output submission2.4 Preparing a risk management plan

2.4.1 Meeting insurance requirements

The procedures presented in this section have been prepared based on the

following policy statements contained in the Asset Management Manual,

Thai Government:

Entities are to establish systems and processes to support thepreparation of five-year forward asset strategies coveringacquisition, maintenance, refurbishment, redeployment andretirement or disposal, together with the attendant capital andoperating costs.

Entities should prepare a risk management plan which describes therisk management strategies and actions to be implemented for theassets under their control. They are to be:

aimed at effective and timely outputs;

geared to meeting the quality standards of industry; and

determined in line with best practice.

2.1 (page 1)


Procedure 2.1 Developing an asset strategy

Guidelines Service delivery needs must drive asset decisions.

The objective of strategic planning is to achieve thebest possible match of assets with program deliverystrategies.

Asset planning and management must be integratedwith overall corporate plans, procedures andprocesses.

The outcomes of strategic asset management alsoinclude:

identifying assets that do not have the necessarycapacity or functionality to adequately addressoutput requirements

identifying assets that have capacity orfunctionality in excess of output requirements

identifying assets that do not support outputobjectives and should be disposed of.

When considering the need for additional assets,critically examine alternatives to the use of assets, ienon-asset solutions, extensions or refurbishment ofexisting resources should always be considered.

Where assets are identified as under-performing, orare no longer functionally suited to program deliveryneeds, consideration should be given to the possiblealternatives to disposal eg refurbishment or anupgrade of the asset may also be viable.

Scope All assets in the agency’s portfolio

Purpose The asset strategy prepared in this procedure uses ananalysis and comparison of asset demand and supplyto determine the agency’s long-term assetrequirements, based on its service delivery objectivesand Corporate Plan. The strategy is used to directexpenditure and management effort to assemble andmanage an asset portfolio that is the most efficient andeffective to meet the identified need.

Frequency An asset strategy should cover a rolling five-yearperiod, and be reviewed annually (refer action 12below). Reviews should be timed to coincide with thepreparation and review of the agency’s CorporatePlan, the budget planning process, output

2.1 (page 2)


submissions, and to meet the requirements of theBureau of the Budget.

Developing an asset strategy 2.1 (page 3)


Responsibility Strategic Planner

Key words Asset category: sub-groupings of an asset classused for management control and reporting purposes.

Asset strategy: the means by which the BusinessUnit proposes to manage its assets (across all phasesof their life cycle) to meet service delivery needs mostcost-effectively.

Demand management: a management techniqueused to identify and control demand for services.

Functionality: a term used to describe the ‘fitness forpurpose’ of an asset. It encompasses the size,location and environmental characteristics of an assetthat affect its ability to support the service for which itis used.

Planning period: the period covered by the assetstrategy.

Utilisation: a measure of how intensively an asset isbeing used to meet the Business Unit’s servicedelivery objectives.

Inputs The inputs to this procedure are the Business Unit’s:

Corporate Plan and any other material that definesthe agency’s service delivery objectives and plans

and existing five-year strategy and plans (procedurenumbers indicated in brackets):

asset strategy (2.1)

acquisition plan (3.1)

operational plan (4.1)

maintenance strategy and plan (4.3 and 4.3.1)

disposal plan (5.1).

Updated documents should be used to ensurechanges since the last review are considered, togetherwith any assessment of the effectiveness of theseplans. Financial and operational performance detailsof existing assets are available from the asset register,and from recent reviews and reports such as:

assessing the performance of assets (4.4)

reporting on assets (4.10).

Outputs The output of this procedure is a five-year asset



strategy, comprising listings of assets for potentialinclusion in:

acquisition and refurbishments

operations and maintenance

disposal.

Further review of assets in the acquisition andrefurbishment grouping (action 9 below) is undertakenin Procedures 2.2.2: Conducting a feasibility studyand 2.2.1: Ranking asset acquisition proposals

Assets which need to be included for operations andmaintenance should be considered in Procedures 4.1:Preparing an operational plan and 4.3: Developing amaintenance management strategy and 4.3.1:Implementing a maintenance plan.

Similarly assets for disposal need to be included in thedisposal plan, Procedure 5.1: Implementing a disposalplan.Costs associated with these activities need to beconsidered as part of an iterative process withProcedure 2.3: Preparing an output submission, untilthe budget is approved.



Actions

Figure 2.1: Demand and supply approach for use in the asset strategy

Assess service

demand

Prepare preliminary

statement of

asset demand

Review demand

for assets

Finalise consolidated

statement of

asset demand

Non-asset

solutions

Non-asset

solutions

Proc 2.1.2:

Identifying non-

asset solutions

Proc 2.1.1:

Managing service

demands

Assess supply

of assets

Prepare consolidated

statement of

asset supply

DEMAND SUPPLY

Compare & assess the

closeness of fit of the asset

demand & supply statements

Refer to Figure 2.2 for a detailed methodology fordeveloping a strategic asset plan.

Strategic Planner 1. Assess the service demand (output) over the planningperiod, based on the Agency’s Corporate Plan and anyother relevant material that defines the Business Unit’sservice delivery objectives and plans.



How to do it

(a) Review existing service delivery strategies tounderstand the scope, standard and level ofservice currently provided by the BusinessUnit.

(b) Review current and estimated future servicedelivery demands.

Ref: For detailed instructions refer to actions1 to 3, Procedure 2.1.1: Managing outputdemands.

(c) Consider methods of containing or modifyingdemand, using demand managementtechniques where applicable.

Ref: For detailed instructions refer to actions4 and 5, Procedure 2.1.1: Managing outputdemands.

(d) Reassess future output demand, using theresults of action 1(c).

(e) Review the service delivery strategy and seekdelivery options that reduce or eliminate theuse of assets.

Note: The analysis will generate a scheduleof asset requirements that should be theminimum required by the Business Unit todeliver the services.

Ref: A procedure for generating andassessing ‘non-asset solutions’ is given inProcedure 2.1.2: Identifying non-assetsolutions.

2. Prepare a preliminary statement of asset demand tomeet the output demand over the planning period.

The preliminary statement should include:

required functionality

performance specifications.

3. Review the demand for assets over the planningperiod.

How to do it

Investigate opportunities for asset requirements tobe met in ways that do not require Governmentownership. Options to be considered include:



extending the use of existing assets, by increasingutilisation, extended working hours, etc

leasing the asset

outsourcing the service, with the contractorproviding any assets required.

4. Finalise the consolidated statement of asset demandover the planning period.

The statement should include:

required functionality

performance specifications

locations and estimated costs (both capital andrecurrent).

5. Assess the supply of assets over the planning period,considering both existing assets and future assetcommitments.

How to do it

(a) List and evaluate the existing asset portfolio(including owned and leased assets),considering, for all classes of asset:

the categories, quantity, location andcapacity of the assets

the functionality (fitness for purpose)

utilisation (intensity of use)

the physical condition, and anyrequirements for refurbishment, majorreplacements or identified maintenancebacklog

the performance of the asset against theservice delivery requirement

projected operating costs (all types;including energy, cleaning, maintenance,management, security, and financecharges)

the expected useful life.

Ref: Procedures 2.2.3: Undertaking life cyclecosting, and 2.4: Preparing a riskmanagement plan.

(b) Identify the asset acquisitions which have



been committed to, or are planned to occurduring the planning period.

Ref: Planned acquisitions may be identifiedfrom the previous acquisition plan, and fromcurrent plant and equipment replacementprograms, Procedure 3.3: Developing andimplementing a replacement strategy.

6. Prepare a consolidated statement of asset supply overthe planning period.

The statement should include:

locations

operating costs

assessments of existing utilisation, functionalityand performance.

7. Compare the asset supply statement (action 6) withthe asset demand statement (action 4).

Assess the closeness of fit between the capacity andperformance of the existing and planned asset portfolio(supply) with the level necessary to support servicedelivery needs (demand). Classify the assets usingthe groupings in Table 2.1.

Table 2.1: Asset matching analysis

Grouping Asset

Assets necessary for the ongoing delivery ofGovernment services, or retained for publicinterest reasons

Core

Assets not required for the long-term serviceoutput ie not intended to be replaced if lost ordestroyed

Non-core

Services for which there is inadequate or noasset capacity

Acquire asset to meetrequirement



8. Group assets based on the evaluation conducted inaction 7, and develop a strategy for each group:

(a) Operate and maintain

An asset in this category is a core asset which fitsits purpose well, is intensively used, is in goodcondition and has satisfactory financialperformance (ie return on investment).

All assets in this group should be included inongoing operations and maintenance plans andbudgets for the planning period.

(b)Refurbish

An asset that falls into this category is a coreasset, fits its purpose, but either has inadequatecapacity, or is in poor condition and requirescapital investment if it is to adequately support theBusiness Unit’s service delivery objectives or toimprove its operating efficiency.

You will need to identify strategies which may beused to improve the performance of assets. Suchstrategies may include:

improving service and asset management practices

refurbishing or upgrading the asset through capitalinvestment

altering the use of the asset, perhaps throughcapital investment

replacing with a new asset.

(c) Acquire asset to meet requirement

Determine the best method of meeting theassessed asset shortfalls including:

sharing the use of assets with another operating unitin the agency, or elsewhere in Government

enhancing or extending existing assets

outsourcing all or part of the service to a serviceprovider that will include provision of the necessaryassets

acquiring additional assets that will provide thenecessary performance.

(d) Dispose

Assets which are non-core, and core assets thatperform inefficiently, should be considered for



disposal, unless the asset can be economicallyrefurbished.

Where refurbishment is not practical or economic,the asset should be disposed of, and the need forreplacement considered.

9. Include the assets in each group in the appropriateplan as follows:

(a) All assets to be retained must be included in futureoperation and maintenance plans (refer toProcedures 4.1: Preparing an operational plan,and 4.3.1: Implementing a maintenance plan).

(b) If the acquisition of a new asset is indicated or ifan asset is to be refurbished, add the proposedacquisition to the list of projects to be consideredin Procedure 2.2: Preparing a capital investmentplan.

(c) Include assets identified for disposal in thedisposal planning process (refer to Procedure 5.1:Implementing a disposal plan).

10. Compare the strategies in action 8 with those resultingfrom the existing/previous asset strategy and reviewany discrepancies. You will need to refer to existingacquisition, operation, maintenance, and disposalplans.

11. Finalise the acquisition, operations and maintenanceand disposal plans after completing Procedures 2.2:Preparing a capital investment plan and 2.3:Preparing an output submission and gain approval inaccordance with the appropriate level of conferral(delegation).

12. Review the effectiveness of the asset strategyannually, in terms of:

user satisfaction with assets meeting serviceobjectives

performance measures established for individualassets

changes in the value of the assets held relative tothe service delivery outputs

performance of the asset portfolio.



--------------------------------- End of Procedure 2.1 -------------------------------



Figure 2.2: Methodology for asset strategic planning

FUNDING PLAN

Analysis(Match - mismatch)

Inventory and conditionassessment

Capital works -programmed

acquisitions andcommitments

Non-assetsolutions

Non-capitalsolutions

(lease/outsource)

ASSET SUPPLY PROFILE

REFURBISH

CAPITAL WORKS and DISPOSALS PLAN

Non - core, Not functionalPoor condition

OPERATIONS AND MAINTENANCE PLAN

ASSET DEMAND PROFILE

Existing asset holdings

Asset needs to supportstrategy

Services delivery strategy

Core assetPoor condition

Core assetGood condition

New assetrequirement

DISPOSE OPERATE AND MAINTAIN CREATE OR ACQUIRE



Procedure 2.1.1 Managing output demands

Scope This procedure focuses on demand management withrespect to the use of assets, but the approach can bedirected to all resources used for output delivery.

Purpose Demand management is a technique used to modify thedemand for an output so that it can be:

delivered more efficiently

allocated more equitably

matched with the Business Unit’s capacity to deliverthe output.

Frequency A formal review of output demand forecasts should beconducted at least each five years. Reviews should betimed to coincide with the review of the Agency’s CorporatePlan.

Informal reviews should be conducted annually, and timedto coincide with the review of the Agency’s Business Planand budget planning process. Demand should bemonitored regularly to enable adjustments to be made tomatch changing business and community needs.

Responsibility Strategic Planner; Asset Manager

Key words Planning period: the period covered by the assetstrategy.

Actions

Strategic Planner 1. Estimate current and future service demands in termsof the nature, level, timing and quantity of outputrequired.

How to do it

The modelling technique chosen to assess outputdemand should be applicable to the factors which



have been identified as having a significantinfluence on the demand for outputs.

Influential factors may include:

population demographics and growth

community expectations, preferences andattitudes

technological changes

changes to Government policy

economic environment and employment levels

statutory and legislative requirements.

Asset Manager 2. Assess the Business Unit’s capacity to meet both thecurrent and future output demands estimated in action1, and provide this information to the StrategicPlanner.

This assessment should be based on the capacityof the Business Unit’s existing asset and non-asset portfolio to support the outputs, and theadditional capacity available from assetacquisitions planned during the next planningperiod.

Strategic Planner 3. Establish criteria to evaluate demand managementoptions which will be identified in the next action.

Criteria for evaluating options may include:

level of risk

feasibility and acceptability of application

potential to achieve desired outcomes

community acceptance

cost.

4. Identify methods of modifying the demand for outputs,and select appropriate options for furtherconsideration. Available methods include:

education, to make users more aware of thenature of the service and its appropriate use

identifying and treating the cause of the problemrequiring service. Improving road safety throughtraffic education for example



improving the service delivery process to reduceopportunities for ‘tea money’ and other corruption,waste or fraudulent use

more careful differentiation between products orservices, so that consumers will seek only thatservice that they require

introducing more realistic pricing policies, so thatthe price charged more closely reflects the cost ofdelivery

modifying eligibility. Access to services may bechanged to reduce excessive service provision, toimprove equity and target those most in need, orto provide the service to sectors of the communitythat are currently excluded.

Note: A workshop is a useful device for generatingand exploring approaches to demand managementand to create ownership of the methods selected.Typical participants would include the manager of thebusiness providing the service, customerrepresentatives, a strategic planner and the assetmanager.

5. Evaluate the demand management options identifiedin action 4 in terms of life cycle costs, impacts, andrisks.

How to do it

Evaluating the options will involve identifying andassessing human, physical, financial, social andpolitical implications over the asset life cycle.

Implications should be assessed in terms of costs,risks and benefits over the asset life cycle.

Risks to be considered include:

negative consumer reaction

unexpected and unintended consequences ofthe action taken

demand shifts greater or less than thoseanticipated

competition from other entities or privatesector providers

planned benefits not realised

undesirable impacts on other resources.



Ref: An approach to life cycle costing is set out inProcedure 2.2.3: Undertaking life cycle costing.Procedure 2.4: Preparing a risk management plan,provides guidance on assessing and implementing riskresponses.

6. Select the preferred method of demand managementby assessing the options developed against the criteriaestablished in action 3.

7. Select key performance measures and determinetargets for the assessment of future performance ofthe assets.

Selecting appropriate measures

Suitable measures include:

the level of community satisfaction with outputdelivered

changes in the unit cost of output delivered

the degree to which the outputs providedmatch forecast demand

changes in the utilisation of assets over time

extent to which demand is levelled out andcontrolled within the capacity of the currentasset portfolio.

Ref: For further information refer to Procedure4.9: Developing and using performancemeasures.

8. Identify and allocate roles and responsibilities for riskand performance management.

9. Establish a time frame for the implementation, andgain approval for the preferred method of demandmanagement.

10. Implement the preferred method of demandmanagement.

11. Review the impact of the method of demandmanagement and revise if necessary.



------------------------------- End of Procedure 2.1.1 ------------------------------



Procedure 2.1.2 Identifying non-asset solutions

Scope All assets, during the strategic planning process

Purpose Service delivery planning, or existing assets that are poorlyperforming, may generate the need to consider theacquisition of additional assets. Before such a decision ismade, the Business Unit should consider ways of meetingthe service requirement without acquiring additional assets- that is, to consider ‘non-asset solutions’. Non-assetsolutions will eliminate or reduce the need to acquire newassets, enabling funds to be applied to more pressingareas.

Frequency Annually and as required


Key words Non-asset solutions: ways of delivering a service, orincreasing the capacity of an existing service, without theBusiness Unit creating or acquiring additional assets.

Actions

Strategic Planner 1. Having determined the asset strategy and demandprofile, before making the decision to acquire a newasset or refurbish an existing asset, consider possible‘non-asset solutions’.

Possible non-asset solutions:

(i) redesigning the service to reduce the demandfor assets (eg telephone-based services,home-based detention)

(ii) increasing the utilisation of existing assets (egsharing resources between Business Units,increasing court sitting hours)

(iii) leasing or contracting-out the function to aservice provider (eg the use of private prison



contractors)

(iv) reducing demand for the service (egcommunity education, pricing policies)

(v) joint ventures with industry (eg sharingfacilities with industry)

(vi) leasing accommodation space.

2. Develop each applicable option in terms of life cyclecosts, impacts, and risks.

3. Incorporate the selected option into the strategicplanning process.

Ref: Procedure 2.1: Developing an asset strategy,action 1 (e)

------------------------------- End of Procedure 2.1.2 ------------------------------

2.2 (page 1)


Procedure 2.2 Preparing a capital investment plan

Scope Evaluating, prioritising and funding capital investmentprojects or acquisitions for delivery during the planningperiod

Purpose To direct resources towards projects that will bring agreater net benefit to the Thai economy thanalternative uses, and towards service prioritiesidentified by Government.

Frequency Prepare and update annually for projects oracquisitions proposed for inclusion in the budget forthe following year.

Actions

This procedure contains four sub-procedures:

Ranking asset acquisition proposals (2.2.1)

Conducting a feasibility study (2.2.2)

Undertaking life cycle costing (2.2.3)

Preparing a financing plan (2.2.4).

--------------------------------- End of Procedure 2.2 -------------------------------

Preparing a capital investment plan 2.2 (page 2)


Procedure 2.2.1 Ranking asset acquisition proposals

Scope Capital works projects or acquisitions proposed forinclusion in the acquisition and funding plans. Theprocedure is carried out at three levels:

at Responsibility Centre level to establishindividual priorities

at Business Unit level to co-ordinate and prioritise

at agency level to co-ordinate the projects andbudget.

Purpose Ranking is required to direct resources towardsprojects that will bring a greater net benefit to the Thaieconomy than alternative uses, and towards servicepriorities identified by Government. Ranking has twophases:

evaluating each project individually to confirm thatit meets the threshold criteria for consideration bythe Government

undertaking a comparative analysis to enable theproposals to be ranked in priority order.

Frequency Annually, for projects or acquisitions proposed forinclusion in the budget for the following year.

Responsibility Strategic Planner; Manager responsible for assets,General Manager responsible for assets

Key words ??????: Budget Expenditure Committee of Cabinet

Net Present Value (NPV): the value of an asset, inpresent-day monetary terms, to the Business Unit fromthe continuing use and subsequent disposal of theasset.

Threshold criteria: necessary criteria for theassessment of projects as advised from time to time bythe Bureau of the Budget

References Budget planning chapter



Actions

Strategic Planner 1. Prepare a list of proposed capital projects resulting fromthe asset management strategy. Refer to action 8 ofProcedure 2.1: Developing an asset strategy. Obtainall available relevant information on related outputdelivery needs from the asset demand statementprepared in action 4 of Procedure 2.1: Developing anasset strategy.

2. Identify the service needs to be addressed by each ofthe proposed investments. Assess how these align withBusiness Unit requirements, strategic directions andpriorities as well as with the agency’s approvedCorporate Plan and Government policies.

3. Prepare a short-list of projects for submission toGeneral Manager responsible for assets, includingdetails of proposed capital investments, priorities, timingand estimated costs.

Manager responsiblefor assets

4. In ?? (insert month), seek project submissions fromBusiness Units for inclusion in the next period’s CapitalInvestment Plan.

5. Develop ranking criteria based on the Government’sobjectives and priorities and the agency’s CorporatePlan.

6. Broadly consider, identify and if needed document theobjectives, outputs and outcomes for each projectsufficiently to make sure how each capital proposalclearly contributes to the asset strategy.

7. Consult with Strategic Planners from each of theBusiness Units if further information is required orprojects are to be substantially amended.

8. Rank the projects and identify any which do not meetthe criteria.

9. In ?? (insert month) identify candidate projects fromthe above ranking for further evaluation.

10. Develop a brief for each proposed asset acquisition.



Ref: Any material developed previously in Procedure2.1: Developing an asset strategy, and any internaldocumentation concerning the service objectives.

10. Conduct feasibility studies on selected projects in ??(insert month) each year.

Ref: For information on how to do this, see Procedure2.2.2: Conducting a feasibility study.

11. Re-prioritise the list of projects (from most to leastimportant) together with budgets, time frame,management structure and proposed financingarrangements. The combination of projects whichmaximises the total net present value for a limitedcapital budget should be selected for inclusion in thecapital investment plan.

12. Obtain appropriate approvals and sign-off for theproposals and their priority rankings, from the Head ofthe agency and Independent Reviewer.

13. Prepare supporting documentation for the preferredprojects, including:

project objectives

functional objectives

project plans, eg feasibility studies, specific timeframes, project budgets, delivery methods and riskmanagement plans.

These plans should be presented in accordance withEvaluation Guidelines in chapter ?? and Bureau of theBudget requirements issued from time to time. Notethat projects valued at over 100 million baht require afull economic evaluation of their costs and benefits,while projects less than 100 million baht require only asummary of cash flows.

14. Examine financing options for the selected projects, toinclude borrowings, leasing, Build Own OperateTransfer (BOOT) and BOO, user charging, instalmentpurchase, etc.

Ref: For further details, see Procedure 2.2.4:Preparing a financing plan.

15. In ?? (insert month), gain endorsement from Bureau ofthe Budget and Cabinet for the rolling five-year capital



investment plan.

16. Gain approval for the preferred program and budget aspart of the output submission in ?? (insert month).

17. Amend the five-year Capital Investment Plan andannual program.

18. Advise Business Units of endorsed projects.

19. Prepare management plans outlining the resources andactivities needed to manage the acquisition process.This will require the co-ordination of a number offunctions, including human resources, finance andinformation technology.

20. Once the annual budget allocation has been confirmed,review the program and the budget based on approvedfunds.

------------------------------- End of Procedure 2.2.1 ------------------------------



Procedure 2.2.2 Conducting a feasibility study

Scope A new asset acquisition, including modifications orrefurbishment of an existing asset

Purpose A feasibility study is necessary to assess:

whether the proposed project is viable

whether it should proceed now, or be deferred orcancelled

which solutions are feasible and which is the best,if a number of solutions are possible

what risks are attached to each option.

Frequency As required for each asset acquisition, beforepreparing the design brief and developing alternativesolutions.

Responsibility Manager responsible for assets

Key words Net Present Value (NPV): the value of an asset, inpresent-day monetary terms, to the Business Unit fromthe continuing use and subsequent disposal of theasset.

Threshold criteria: necessary criteria for theassessment of projects as advised from time to time bythe Bureau of the Budget.

References Handbook of Cost-Benefit Analysis (1991), Agency ofFinance, Commonwealth of Australia

Costing Chapter



Actions


1. Review the documentation for the investmentproposal.

2. Establish the base case and develop all feasibleoptions including the extended use of existing assets,non-asset solutions to the requirement, new assetalternatives, private sector options, and any scope fordemand management.

Where possible, a minimum of four options should beconsidered:

base case ie ‘do nothing’

redevelopment of an existing asset

a non-asset solution

an alternative form of new asset acquisition.

3. Record the targeted objectives, outputs and outcomesfor each investment option in measurable terms as faras possible.

Ensure that the objectives are defined in servicedelivery terms and examine targets for service deliveryquantity, quality, cost and risk.

4. Undertake a financial analysis of the options.Calculate the net present value (NPV) at a range ofdiscount rates as advised from time to time by theBureau of the Budget.

5. Assess risks and undertake sensitivity analyses todetermine the effect of identified risks on the NPV.

Ref: Handbook of Cost-Benefit Analysis (1991),Agency of Finance, Commonwealth of Australia,Chapter 6

6. Identify and weight socio-economic impacts, bothquantifiable and those that cannot be expressed inquantitative terms. Assess the impacts, using netpresent value (NPV) measures where possible, andthe qualitative aspects, taking into account risk anduncertainty as necessary.

Ref: Investment Evaluation procedure, Chapter ??



7. Integrate the financial and socio-economic impacts toobtain a comprehensive view of the relative merits ofeach option.

Note: To do this you will need to apply relativeweightings to financial and socio-economicimpacts.

8. Determine a preferred option for the project on thebasis of the relative merits.

9. Review the preferred option to determine whether itmeets the Government threshold criteria for furtherconsideration. Possible outcomes are:

the proposal does not meet the threshold criteria.Advise the stakeholder/client and abandon theproject.

the proposal does not meet current criteria butmay do so in future. Advise the stakeholder/clientto re-submit or consider implementation in stages.

the proposal requires modification beforeproceeding. Advise the stakeholder/client torevise the proposal and re-submit.

the preferred solution is selected for furtherconsideration. Proceed to the ranking process setout in Procedure 2.2.1: Ranking asset acquisitionproposals.

------------------------------- End of Procedure 2.2.2 ------------------------------



Procedure 2.2.3 Undertaking life cycle costing

Scope All assets

Purpose Life cycle costing provides a basis for evaluating optionsfor a new asset, and operational and maintenancestrategies for an existing asset. It should be used whenconsidering major decisions about a new or existing asset.

Frequency As required when carrying out Procedure 2.2.2:Conducting a feasibility study, action 4.


Key words Discount rate: a rate applied to a capital sum todetermine the equivalent value today of sums receivable orpayable in the future.

Expected useful life: the time period over which theasset is expected to provide service potential.

Capital Charge: the means used to measure the cost ofcapital that entities have invested in assets under theircontrol.

Life cycle costing (LCC): a process that determines thetotal cost of an asset throughout its life including planning,design, acquisition and support costs and any other costsdirectly attributable to owning or using the asset.

If an existing asset is being considered at a point during itslife, life cycle costing generally considers future costs only,and disregards historic costs (which are considered as‘sunk costs’).

References Handbook of Cost-Benefit Analysis (1991), Agency ofFinance, Commonwealth of Australia

Note The discount rate selected should be the cost of borrowing,alternatively guidance on the appropriate discount rate touse at any time can be obtained from the Bureau of theBudget and is likely to approximate the rate to be appliedfor capital charging.



Actions


1. Collect information on the up-front capital cost(including all directly associated costs, such as freight,fees, duties and installation or refurbishment) of theasset.

2. Refer to the operation and maintenance plan for theasset, or that for a similar asset, to determine:

details of the annual routine maintenance andoperating costs, including energy, cleaning,management and statutory charges such as ratesand taxes

the estimated timing and cost of major periodicmaintenance, replacements or refurbishments.

Ref: Procedures 4.1: Preparing an operational plan,and 4.3.1: Implementing a maintenance plan

3. Determine the time frame to be used in the life cyclecosting analysis.

In selecting the time frame, be aware that theapplication of a discount rate reduces thesignificance of costs falling well into the future, andthe reliability of the estimates also decreases.Costing exercises carried out over periods longerthan ten years can lose much of their relevancedue to the uncertainty associated with long rangeforward projections.

Note: If two assets are being compared, theanalysis should be undertaken using, as aminimum, the expected useful life of the asset withthe longer expected useful life.

The expected useful life of the asset may be thesame as its design life, or could be a perioddetermined by its usefulness to the Business Unit,ie its required useful life.

For an individual asset, the required useful lifeshould be chosen as the appropriate time frame.

Ref: Procedure 4.6.2: Assessing the useful life ofan asset, provides assistance in undertaking thisaction.



Manager responsiblefor finance

4. Determine an appropriate discount rate, or range ofdiscount rates. The discount rate adopted should benot less than the ‘risk free rate’, ie the earning rate oflong-term government securities.

Discount rate

The rationale for using a discount rate is that abaht now is worth more than a baht in the future(ie the value of money decreases as time passes).As a result, expenditure in the early years of aproject’s life is very significant, while the sameexpenditure in the future has less impact.

Example

To illustrate this, the discount factors for aninterest rate of 8% are shown in Table 2.2. Thediscount factor corresponds to the present value of1 baht in the future, hence 1baht at year 3 is worth0.79 baht today.

Note that the discount factor for a cost incurred inyear 9 falls to one-half of today’s value.

Table 2.2: Discount factors for a discount rate of8%

Year 0 1 2 3 4 5 6 7 8 9 10

Discountfactor

1.000 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.50 0.463

Ref: Handbook of Cost-Benefit Analysis (1991), Agency ofFinance, Commonwealth of Australia, Appendix VI providesdiscount factors for various discount rates.




5. Calculate the total outlays incurred by the asset foreach year in the selected time frame.

6. Multiply the outlays in each year by the discount factorapplicable to that year.

7. Add the discounted cash outlay for each year todetermine the asset’s life cycle cost.

8. For further information on the application of life cyclecosting, refer to the example at the end of thisprocedure.

------------------------------- End of Procedure 2.2.3 ------------------------------

Undertaking life-cycle costing 2.2.3 (Example page 1)


Example

Scenario

A Business Unit within an agency has ten offices throughoutCountry and requires an additional 1,000 square metres of floorarea to cater for a newly identified service requirement. As aresult of this requirement for additional floor space, the BusinessUnit is exploring the option of colocating its regional offices. Itwill require 14,000 square metres of floor area for this purpose.The service will be delivered for at least the next ten years.

During the planning phase, two Options (A and B) are identified.They both have 14,000 square metres of floor area but havedifferent capital, maintenance and operating cost characteristics.

Expenses Option

A B

Capital cost $19.6 m $15 m

Cleaning $5.7/sqm pa $11.90/sqm pa

Energy $14/sqm pa $22.10/sqm pa

Expected major periodicmaintenance

$1.5 m every 10years$2.5m in years 15,23, 35

$1.5 m every 10years$2.5 m in years 5,15, 25, 35

Other operating expenses $9.20/sqm pa $9.60/sqm pa

Routine maintenance $13.90/sqm pa $15.90/sqm pa

Statutory charges $18.8/sqm pa $22.70/sqm pa

Expected refurbishment $8 m every 15 years $8 m every 15 years

Option A is a purpose-built building. Option B is a refurbishedbuilding that was originally constructed in 1980. Both buildingsare located in the CBD.

The capital cost of Option B is the replacement cost of thebuilding in 1997 dollars.



Assumptions each option offers the same service potential and image discount rate of 8% forward projection for a period of ten years cash flows are incurred at the end of the year the major periodic maintenance does not increase the

service potential or extend the useful life of the property (ieit is an operating cost)

ignore inflation ignore residual values of buildings the lease/buy option has been investigated and resolved in

favour of buying.

Question

Calculate the life cycle costs for Options A and B.Which option should the Business Unit choose? Why?

Answer

Refer to the analysis presented below.

Life cycle costing analysis for Option A

Cost element Year

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Capital ($000) 19,600

Operatingexpenses:

- cleaning 79.8 79.8 79.8 79.8 79.8 79.8 79.8 79.8 79.8 79.8

- energy 196 196 196 196 196 196 196 196 196 196

- major periodicmaintenance

1,500

- other operatingexpenses

128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8 128.8

- routinemaintenance

194.6 194.6 194.6 194.6 194.6 194.6 194.6 194.6 194.6 194.6

- statutorycharges

263.2 263.2 263.2 263.2 263.2 263.2 263.2 263.2 263.2 263.2

Total outlays($000)

19,600 862.4 862.4 862.4 862.4 862.4 862.4 862.4 862.4 862.4 2,362.4

Discount rate 1.000 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463

Discounted cash($000)

19,600 798.5 739.4 684.6 633.9 586.9 543.5 503.2 465.9 431.4 1,094.3

Life cycle cost($000)

26,082

Life cycle costing analysis for Option B

Cost element Year

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

Capital ($) 15,000

Operatingexpenses:

- cleaning 166.6 166.6 166.6 166.6 166.6 166.6 166.6 166.6 166.6 166.6

- energy 309.4 309.4 309.4 309.4 309.4 309.4 309.4 309.4 309.4 309.4

- major periodicmaintenance

2,500 1,500

- other operatingexpenses

134.4 134.4 134.4 134.4 134.4 134.4 134.4 134.4 134.4 134.4

- routinemaintenance

222.6 222.6 222.6 222.6 222.6 222.6 222.6 222.6 222.6 222.6

- statutorycharges

317.8 317.8 317.8 317.8 317.8 317.8 317.8 317.8 317.8 317.8

Total outlays($000)

15,000 1,150.8

1,150.8

1,150.8

1,150.8

3,650.8

1,150.8

1,150.8

1,150.8

1,150.8

2,650.8

Discount rate 1.000 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463

Discounted cash($000)

15,000 1,065.6

986.6 913.5 845.9 2,484.7

725.2 671.5 621.7 575.7 1,227.8

Life cycle cost($000)

25,118



Conclusions

(a) Based on the analyses on the previous page, Option A hasa life cycle cost of $26.1 million and Option B has a lifecycle cost of $25.1 million. Option B is therefore thepreferred option.

(b) Life cycle costing does not calculate the precise amount ofmoney required for investment purposes. Rather, it canprovide comparative information that will enable aninformed choice to be made between alternative courses ofaction.

(c) A change in the discount rate will affect the difference in thelife cycle cost between Option A and Option B, and canchange the preferred option. For example:

Option LCC @ 2% LCC @ 6% LCC @ 8% LCC @ 12% LCC @ 15%

A $28.6m $26.8m $26.1m $25m $24.3m

B $28.8m $26.2m $25.1m $23.4m $22.4m

Preferredoption

A B B B B

(d) The investment period may also influence the results. Inthe example, a ten-year period was chosen because thefuture of the service requirement beyond this point isuncertain, and because the discount factor reduces theimportance of events well into the future. For example, achange in the investment period can result in a differentoutcome:

Option LCC @ 8%- 10 years

LCC @ 8%- 20 years

LCC @ 8%- 30 years

LCC @ 8%- 40 years

A $26.1m $32.4m $35m $35.8m

B $25.1m $32.3m $35.3m $36.3m

Preferredoption

B B A A

(e) Further evaluation, including impacts and risks associatedwith each option, would be required before the preferredoption is selected.





Procedure 2.2.4 Preparing a financing plan

Scope Funds required for each project on the approved capitalinvestment plan

Purpose Funding plans are required to support any application forfunds to acquire new assets to improve the capacity orservice delivery quality, or to extend the useful lives ofexisting assets. The plan will be used to secure adequatecapital funds for each project on the approved capitalinvestment plan.

Frequency Prepare a rolling five-year plan and review annually toincorporate proposed acquisitions and disposals. Timingof the preparation of the plan must be in accordance withthe Bureau of the Budget’s request for information.


Actions

Manager responsiblefor assets, andManager, Finance

1. Assess the capital funding requirements for eachproject to be undertaken during the planning period, asestablished in the Capital Investment Plan, and relateit to the capital funds available from existing resources.

2. If the capital project results from a new Governmentinitiative or expansion of existing services, considerwhether a case should be made to Government for acapital injection.

3. If the project results from the need to replace anexisting asset, assess the likely proceeds fromdisposal of the existing asset, and incorporate it intothe funding plan.



4. Review the feasibility study for each proposedacquisition and verify that the expected revenuestream (from user charges) or quantified socialbenefits can offset/support the proposed expenditure(ie can the revenues service the capital, irrespective ofthe source of finance?).

Ref: The feasibility study is developed in Procedure2.2.2: Conducting a feasibility study.

5. Assess the preferred funding sources for each project,considering:

accumulated agency funds (equivalent todepreciation expense)

proceeds of asset sales

capital injection from Government

other, such as

leasing (either finance lease or operatinglease)

private sector funding of the project (BuildOwn Operate Transfer - BOOT or BOO).

6. Develop a co-ordinated funding plan for each projectand review the plan with management.

7. Submit a funding plan for each project as part of theCabinet submission.

------------------------------- End of Procedure 2.2.4 ------------------------------

2.3 (page 1)


Procedure 2.3 Preparing a Funding Submission

Scope Funding for the operation and maintenance of assets(including leased assets and those identified in the assetstrategy and comprising the capital investment plan)

Purpose To help managers prepare output submissions, ie fundingthrough annual appropriations (payments for outputdelivery) but funding may be also achieved throughaccumulated funds, or other sources.

Frequency Prepare and update annually based on the five-yearoperations and maintenance plans. Timing of thepreparation of the program and budget, and submissionmust be in accordance with the Bureau of the Budget’sinformation requests issued annually.

Responsibility General Manager responsible for assets;Manager responsible for finance; Responsibility CentreManager

Key words xxxx: Budget Expenditure Review Committee

Corrective maintenance: actions performed as a result ofreported failure breakdown to restore an asset to anappropriate working condition.

Essential services: those services or elements of abuilding which require specific requirements in technicalregulations such as the Building Code of xxxx. Therequirement places a statutory requirement on the assetconcerned making the action to be taken madatory notdiscretionary. For example, the meeting of statutoryrequirements in the case of a new asset are enforced as acondition of the occupancy permit.

Preventative maintenance: actions performed on aregular or periodic basis to retain an asset in anappropriate working conidition. It is aimed at reducing thefrequency of failure and involves systematic inspection,monitoring, and servicing of maintainable elements.

References Output costing chapter

Preparing an output budget submission 2.3 (page 2)


Actions


1. Review the Business Unit’s asset operation andmaintenance plans from Procedure 2.1: Developingan asset strategy, to identify requirements for thecurrent planning period.

2. Advise the Responsibility Centre Managers of capitalinvestments approved to be undertaken in the nextplanning period.


3. Prepare forward projections of expenditure (includingessential services, preventative and correctivemaintenance, and programmed minor works) for thenext five years, separating recurrent expenditurerelating to the existing portfolio and plannedacquisitions and projects.

4. Submit to the Manager responsible for finance detailsof expenditure projections including priorities, timingand estimated costs.


5. Consult with individual Responsibility Centre Managersif further information is required or plans are to besubstantially amended.

6. Collate the Responsibility Centres’ expenditureprojections retaining the separation betweenexpenditure relating to the existing asset portfolio andnew acquisitions.

7. Develop the projections into detailed budgets for thefirst year.

Ref: Output Costing chapter


8. Complete Bureau of the Budget output budget formsas appropriate.

9. Forward copies of the completed forms to the financeand/or budget group.

Preparing an output budget submission 2.3 (page 3)



10. Collate the budget to prepare a consolidated draftbudget.

11. Consult with Business Units and amend the draftbudget accordingly.

12. Gain internal and external approval(s) for the budget.

13. When advice of the approved budget is received,advise Business Unit Managers of their respectivebudgets.

14. Include the approved output budgets in the agency’sBusiness Plan.

--------------------------------- End of Procedure 2.3 -------------------------------

2.4 (page 1)


Procedure 2.4 Preparing a risk management plan

Scope Initially the existing asset portfolio; it should then beextended to include service demand estimates; feasibilityanalyses; planning for capital investment; procurement,operations and maintenance of new assets; andsubsequent disposal and renewal processes for all assets.

The development and application of the risk managementplan should differ depending on the class and complexity ofthe assets and the risk events being considered, eg OH&S,regulatory and compliance.

Purpose Risk management helps to meet service delivery objectivesmore efficiently and reduce the likelihood of financial lossby:

systematically identifying risk events

determining the magnitude of those risk eventsthroughout the life cycle of an asset

developing ongoing measures to address those riskevents.

The risk management plan is the basis for the identificationand management of risks.

Frequency Regular reviews, concentrating on the implementation ofthe risk response strategies, should be conducted annuallyover the operational life of the asset.

Major reviews are required before the start of a significantstage or life cycle phase, for example the award of aconstruction or maintenance contract.

Responsibility Asset Manager

Key words Criticality: a measure of the importance of the function(service or product output) that an asset supports.

OH&S: Occupational Health and Safety

Preparing a risk management plan 2.4 (page 2)


References A risk assessment and management plan for land andbuildings within the Agency needs to be developed.

The risk management methodology developed features:

a methodology consistent with the standard used forrisk management For example, Australian StandardAS 4360

a three-level site inspection, using an electronic datacollection template to suit the range of building typesand hazards

an integrated works prioritisation process

a procedures manual (consistent with the style of thishandbook).

When fully operational, the agency will have an appropriaterisk management plan.

Actions

Asset Manager 1. Review the Business Unit’s risk management strategyto understand the Unit’s philosophy, and to identify thecriteria against which the level of risks should beevaluated.

2. Prepare and document the risk management plan,covering:

scope and objectives

guidelines for consistent actions in managing risks

evaluation criteria (from action 1)

identifiable activities and the responsible person orparty to complete the activities

expected and measurable outcomes

key performance measures (for information aboutperformance measures, see Procedure 4.9:Developing and using performance measures)

a schedule for risk response activities



a budget (if appropriate)

a risk review process (comprising regular andmajor reviews)

the timing of a risk management plan audit.

It will be necessary to undertake actions 3 to 8 tocomplete all aspects of the plan.

3. Review the existing asset portfolio, newly acquiredassets, or asset management process, to identifyknown and potential risk events by asking ‘what canhappen, and how and why can it happen?’

Possible risk events

Possible risk events to be considered includeinternal and external factors affecting the assetdirectly or through the service delivery processes.

Consider factors such as: Business Unit image(eg adverse publicity, complaints, communityconfidence); disabled access implications;environmental; financial; investment; liability;occupational health and safety; organisationalchange; operational; ownership cost; political;public liability; security; service performance;social environment; statutory infringement; andtechnical (availability, capability).

How to do it

Methods to identify risk events include:

Work Breakdown Structure (WBS) analysis,as used in the Australian building andconstruction sector

checklists to assist in the review of similarassets

Hazard and Operability (HAZOP) studies usedin the chemical and petroleum industries

risk audits (a comprehensive review ofoperating systems and managementprocedures).

Example

Table 2.3 presents some examples of risk eventsrelevant to built assets.

Table 2.3: Risk events for built assets



Type of risk Examples

Service availability Interruption or loss of quality to service

Security TheftFireDamage to facilities

Human resources Health and safetyConvenience and efficiencyCosts (level of amenities)Morale (level of amenities)

Excessive costs Over-provision or over-servicing of facilitiesOperating costs, eg energy

Organisationalbehaviour

LocationPresentation, eg corporate imageEnvironmental responsibility

Non-compliance risks OH&S legislationInsurance provisionsEnvironmental, eg discharge licences

4. Assess and analyse the risk events in terms oflikelihood of occurrence and consequence.

How to do it

This process requires specialist knowledge. It isrecommended that Business Units seek advicefrom an approved risk management expert.

The resources used in this assessment should beconsistent with the criticality of the asset orprocess being evaluated.

5. Calculate the level of risk based on the assessedlikelihood and consequence for each risk event.

Example

A simple quantitative approach that may be usedto quantify the likelihood and consequence isprovided in Table 2.4.

Table 2.4: Rating scale for likelihood and



consequence of risk events

Rating Likelihood Consequence

1 Unlikely to occur, or very lowprobability of occurrence

Little effect on the BusinessUnit or the public

2 Unlikely to occur in the nearfuture but potential for furtherdeterioration or loss ofservice likely

Reduction in level of service,cost of repairs or loss ofservice is significant

3 Imminent or likely in theforeseeable future, or veryhigh probability ofoccurrence

Identifiable loss of life orcatastrophic loss of service,with catastrophic damage toproperty, service delivery orenvironment

The level of risk is determined by calculating for eachrisk event:

Level of risk = likelihood x consequence

6. Assess the acceptability of the level of risk in terms ofthe established criteria (see action 1), and prepare alist of acceptable and unacceptable risk events.

Plotting the level of risk on a likelihood - consequencediagram may help to identify which risk events areunacceptable and require further treatment. Figure 2.4is an example of a likelihood - consequence diagram.

Figure 2.4: Likelihood - consequence diagram



Disastrous Severe Moderate Negligible

Almost certain

Unlikely

Rare

Risks thatmust betreated

Risks thatmay be

accepted

Likelihood

Consequences

Likely

Note: Events which fall outside the areas notated aseither accepted or requiring treatment are consideredto receive attention through existing business practiceseg regular condition monitoring and assessment.

7. For unacceptable risks, identify response measureswhich either:

remove the potential impact as much as possible;or

increase control of the risk.

How to do it

Four possible response measures are:

avoidance

avoiding exposure to the risk by not taking on thework or project, eg:

don’t produce the product or service

non-asset solutions

loss reduction/mitigation

reduce the likelihood, through:

condition monitoring

Quality Assurance

increased supervision

quality of components/elements

installation of protective measures suchas a security system or a fire sprinkler



system

preventative maintenance

reduce the consequences:

duplicate the asset, ie provide systemredundancy

find alternative supply sources

minimise time to restore

retention

retention must be planned, by:

monitoring occurrence

preparing for consequences

transfer

transfer through negotiation and inclusion incontractual clauses or commercial insurance, suchas:

insurance

outsourcing.

8. Identify parties responsible for carrying out theresponse measures and prepare a schedule of actionsrequired.

9. Implement the plan, including conducting staff trainingif required.

10. Ensure processes are put in place to undertake riskmanagement procedures for new asset acquisitionsand new processes.

11. Conduct appropriate regular and major reviews.

12. Monitor the effectiveness of the risk management plan:

the process

identification and assessment of risk events

risk response measures

resource performance.

Make any adjustments necessary.



--------------------------------- End of Procedure 2.4 -------------------------------



Procedure 2.4.1 Meeting insurance requirements

Scope All assets identified in Procedure 2.4: Preparing a riskmanagement plan, which require insurance in response toidentified risk events

Purpose This procedure identifies all actions necessary to fulfil therequirements for insurance purposes

Frequency Appropriate reports must be provided to the Riskmanagement expert at least once in each financial year.


Key words Asset category: sub-groupings of an asset class used formanagement control and reporting purposes.

Asset class: groupings of assets having a similar natureor function, such as land, buildings, plant and equipment.

References Further information and advice on this procedure isavailable from an approved risk management specialist.

Actions

Asset Manager 1. Review the Business Unit’s risk management strategy.

2. Establish an asset risk register for the existingportfolio, including the following details for significantindividual assets, or asset classes or categories:

construction material

fire protection systems

occupational health and safety

disability access

security provisions

quality controls in place

special hazards.



3. Identify those assets for which insurance has beenselected as the preferred risk response method.

Ref: Procedure 2.4: Preparing a risk managementplan, action 7

4. Forward to the risk management expert at least oncein each financial year:

a copy of the asset register (manual orcomputerised Infrastructure Management System)and risk management strategy

a report on the implementation of the riskmanagement strategy.

5. Prepare procedures for claims management, including:

definition of an incident

procedures for reporting and managing claims

sample claims reports and summaries

requirements for training and education in losshandling, accountability and responsibility.

6. Implement the claims management procedures if theneed arises.

7. Monitor the extent and nature of the claims, and takeaction if required.

------------------------------- End of Procedure 2.4.1 ------------------------------

3Acquiring assets

Before acquiring an asset you must:

determine that there is a demonstrated need for the asset tosupport service delivery, as developed in the asset strategy

evaluate the life cycle costs, impacts and risks of acquisitionoptions.

Procedures

3.1 Implementing an acquisition plan3.2 Acquiring assets

3.2.1 ‘Off the shelf’ assets3.2.2 Constructed assets3.2.3 Manufactured assets3.2.4 Leased property assets3.2.5 Donated and seized assets3.2.6 Heritage assets3.2.7 Reallocated assets

3.3 Developing and implementing a replacement strategy3.4 Conducting a post-acquisition review3.5 Recording new assets


Appendix A Tagging assetsAppendix B Requirements for an asset register



Thai Government:

Asset acquisition decisions are to be made within an integratedservice and financial planning framework.

All proposals to acquire new assets, enhance existing assets ordevelop increased private sector capacity to provide public servicesmust be evaluated in accordance with evaluation guidelines andmethodologies endorsed by the Bureau of the Budget, and mustidentify:

the full costs associated with the proposal;

all impacts on future budget supported by expenditure andreceipts;

the net impacts on service delivery capacity, range andefficiency; and

the arrangements and timetable proposed for implementation.

3.1 (page 1)


Procedure 3.1 Implementing an acquisition plan

Scope All assets to be acquired by the Business Unit, arisingfrom the asset strategy and approved acquisitionplan

Purpose An asset acquisition plan consists of:

the program, comprising

projected acquisitions over the planningperiod

method of procurement

timing

the budget.

The plan is used as a guide to prioritise the acquisitionof individual assets, and as a basis for determiningfuture capital requirements.

Acquisition plans are prepared as part of the assetstrategy (refer to Procedure 2.1: Developing an assetstrategy).

Frequency The acquisition plan should cover a rolling five-yearperiod and be reviewed annually. In some cases it isknown as the ‘capital works program’.



References Procurement Chapter

Actions

Strategic Planner 1. Each year, review the assets to be acquired over thenext five-year period, as set out in the approved plan(developed in Procedure 2.1: Developing an assetstrategy) and in any subsequent requests for assets.

Implementing an acquisition plan 3.1 (page 2)


2. Sort assets into categories according to whichResponsibility Centre will be responsible for theiracquisition.

3. Advise the appropriate Responsibility Centre Managerthat they will be responsible for managing and co-ordinating the acquisition process for their group ofassets.

4. Update the acquisition program at least annually (seeProcedure 3.2: Acquiring assets), and ensureconsistency with the approved budget for the nextperiod.

5. Monitor the process and outcomes of the acquisitionplan.

How to do it

This could include assessing:

actual expenditure against budget

any community reaction or comment on theasset acquired, or on the procurementprocess

client satisfaction with the asset acquired(refer to Procedure 3.4: Conducting a post-acquisition review)

the extent to which specified time, cost andquality requirements for acquisitions compliedwith xxxx???.

--------------------------------- End of Procedure 3.1 -------------------------------

3.2 (page 1)


Procedure 3.2 Acquiring assets

Policy The agency requires that acquisitions are:

conducted in a manner to provide open andeffective competition

undertaken by a process which is fair and ethical,conducted at arm’s length and resulting in valuefor money to the Agency

approved by an officer authorised underRegulation xx of the Procurement Act ????

in accordance with relevant government guidelinesas referenced in the following procedures.

Scope All assets, ‘off the shelf’, constructed, or manufactured,which are to be purchased or acquired in accordancewith the approved asset acquisition plan.

Purpose To ensure assets are acquired in accordance withapproved operational requirements, time frame andbudget. Procurement procedures differ according tothe class of asset, so this procedure has sections forthe main classes of assets eg buildings, plant andequipment.

Frequency According to the timing set out in the acquisition plan.

Acquiring assets 3.2 (page 2)


Actions

This procedure contains seven sub-procedures for:

‘Off the shelf’ assets (3.2.1)

Constructed assets (3.2.2)

Manufactured assets (3.2.3)

Leased property assets (3.2.4)

Donated and seized assets (3.2.5)

Heritage assets (3.2.6)

Reallocated assets (3.2.7).

--------------------------------- End of Procedure 3.2 -------------------------------



Procedure 3.2.1 ‘Off the shelf’ assets

Scope ‘Off the shelf’ purchases, such as office equipment,furnishings and personal computers, based on theapproved asset acquisition plan.

Purpose To ensure that conventionally purchased assets areacquired in accordance with approved operationalrequirements, time frame and budget. This proceduredoes not apply to leased assets, land, buildings, orcustom-built assets.

Responsibility Responsibility Centre Manager; Purchasing Officer;Asset Officers


IT: Information Technology Manager

References Xxxx, Bureau of the Budget



Actions

Note: Specialist advice on procurement methods isavailable from:

Procedures xxx to xxxx, Bureau of the Budget

Accredited Purchasing Units within agencies

Consultants, contractors and suppliers such asthose on the registers held by the PurchasingBoard


1. Identify the range of assets to be acquired over thenext financial year according to the acquisition plan.

2. Separate the assets into groups by asset category andby how they will be purchased.

3. Allot responsibility to the appropriate party for the co-ordination and management of the purchasing processfor each group of assets. In doing so, consider thedelegation and use of an accredited purchasing unitwhich has specified purchasing and contractingfunctions.

4. Select the appropriate purchasing method for eachasset or group of assets.

How to do it

Take the following factors into account:

any market conditions that may affect thetiming of the purchase or the achievement offair and open competition

whether the requirement can be met by anasset that is readily available in the market, orby modifying a readily available asset.Otherwise, a custom-built solution should beconsidered

the possibility of utilising an existing contract



with an appropriate supplier

whether the asset must be owned by theGovernment in order to meet the operationalrequirement (ie could it be leased or otherwisefinanced or acquired by the private sector?)

the possibility of including ongoingmaintenance and support of the asset as partof the initial acquisition process

whether potential contractors and suppliershave been endorsed

requirements and responsibilities for testing,delivery, inspection, installation andcommissioning

ownership of any intellectual propertydeveloped as part of the contract.

Ref: xxxx, Bureau of the Budget; Purchasing Policiesand Guidelines ????

5. Select the appropriate procedure for obtainingquotations or tenders.

Ref: Purchasing Policies and Guidelines, Agency

Note: If you need to purchase a new computer,please complete an IT Request form for each newasset.

All computer equipment, communications systems andplant and equipment is purchased under aGovernment contract from approved suppliers or by acontract between a supplier and the agency.

6. If appropriate, prepare tender documents andspecifications, including invitation to tender, tenderform, specification or brief, drawings, conditions oftender, conditions of contract, and any otherinformation.

Determine the closing date for tendering, date ofaward and period of contract.

Ref: Purchasing procedures, Procurement chapter

7. Develop the tender selection criteria and evaluationmethod.


8. If the estimated initial acquisition cost exceeds 25million baht or if the proposed acquisition is complex,



unusual, sensitive or strategic, or may provide anopportunity to foster local industry, consider theimpacts and risks associated with a pre-tender briefingfor interested parties.

9. If the estimated initial acquisition cost exceeds 250million baht, follow the procedure described by theBureau of the Budget.

10. Prepare the tender list from pre-qualified suppliers; aformal Invitation to Register Interest; or publicadvertisement.

11. Review the cost estimate against the budget and invitetenders.

12. Once tenders have been received and the tenderperiod closed, evaluate tenders according to thedefined selection criteria established in action 7 andmake recommendations.

Note: Complete the Tender Submissions Summaryform and forward to the Accredited Purchasing Unitwithin 10 working days of tender closing.

13. Conduct post-tender negotiations as required.


Purchasing Officer 14. Prepare the purchase order in Oracle Purchasing andgain approval in accordance with the appropriate levelof delegation.

It may be necessary to provide additional supportingdocumentation with the purchase order to gainapproval for the purchase.

Note: In initiating the purchase order, provide afull description of the item - do not use thesupplier’s stock numbers and equipment supplynumbers as the sole description of the purchaseorder.

15. Prepare and execute the contract documents (ifrequired), or issue the purchase order to the supplier.

16. Advise the unsuccessful tenderers in writing.

17. Manage and monitor the purchasing process.


18. When the asset is received, complete the followingchecking procedure:



check on the asset’s compliance withspecifications

check that the asset has been received in goodcondition

ensure all details are correct and match thepurchase order

ensure that all operations manuals and details ofall warranties for the asset are obtained inaccordance with the agreement.

Note: In cases of incorrect or short deliveries, theofficer receiving the goods will inform the PurchasingOfficer who will contact the supplier to establishreasons for any discrepancies and when the deliveryof all items can be expected (see Purchasingprocedures, Procurement chapter).

19. If the delivery is made to a different ResponsibilityCentre than the one which ordered the asset, provideproof of delivery and acceptance to the PurchasingOfficer who requested the items, and asset informationincluding description, serial number, order number,invoice number and location to the appropriate AssetOfficer.

How to do it

Forward an Email message, send a fax or post awritten notification by mail to the Purchasing/AssetOfficer at the Responsibility Centre which orderedthe asset.

20. Approve the invoice for payment by receipting goodsinto Oracle Purchasing.

Asset Officers 21. Attach a barcode or label to the asset.

Ref: Refer to Appendix A at the end of section 3 fordetails on asset tagging. All assets should be taggedor marked for asset verification purposes.

22. Ensure that all operations manuals and details of allwarranties for the asset are obtained in accordancewith the contract.

23. If the asset is a personal computer and the purchasehas not been previously approved by IT, arrange fortesting for correct operation before being recorded onthe asset register (manual or computerised System -



such as Oracle Assets).

24. Compile the asset data required and continue withProcedure 3.5: Recording new assets.

25. Advise the client that the asset has been received.

------------------------------- End of Procedure 3.2.1 ------------------------------



Procedure 3.2.2 Constructed assets

Scope New buildings, refurbishments and related assets suchas fit-outs

Purpose To acquire or construct assets in accordance withapproved operational requirements, time frame andbudget. This procedure applies to land, buildings andother assets directly associated with them such asextensions and fit-outs.

Responsibility Responsibility Centre Manager; Project Manager


References Purchasing procedures, Procurement chapter

Actions

All actions in this procedure must be carried out inaccordance with:

Code of Practice for the Building and ConstructionIndustry, ????

APCC National Code of Practice for the ConstructionIndustry, Australian Procurement and ConstructionCouncil and Agency of Labour Advisory Committee

Guide to Contractual Provisions for PublicConstruction, Ministerial Directions ?????, Office ????

Tendering Provisions for Public Construction ????,Bureau of the Budget


Bureau of the Budget



Accredited Purchasing Units within agencies andthe Government Purchasing Board ??

Consultants, contractors and suppliers such asthose on the registers held by the ThaiGovernment Purchasing Board.


1. Identify the range of constructed assets to be acquiredover the next five-year period according to theacquisition plan (based on the approved outputsubmission).

Ref: Refer to Procedure 2.3: Preparing an outputsubmission.

2. Separate the assets into groups by asset category andby how they will be acquired (such as land, newbuildings, fit-outs, etc).

3. Allot responsibilities for the co-ordination andmanagement of the purchasing process for each groupof assets.

4. Develop a design brief for each asset acquisition.

Ref: Any material developed previously in Procedure2.2.2: Conducting a feasibility study, or Procedure3.2.4: Leased property assets and any internaldocumentation setting out requirements.

5. Select the appropriate acquisition method for eachasset or group of assets.

How to do it

Consider the following:

the construction of purpose-built buildings ismore management-intensive, carries higherlevels of risk, and is more time-consumingthan purchasing an existing property

a building that is highly specialised, anddesigned to meet current needs, may bedifficult to adapt to changed circumstanceslater (such as new methods of servicedelivery)

current market conditions may affect thetiming of the purchase, or prejudice theachievement of fair and open competition



several methods of delivering a purpose-builtbuilding are possible:

design and construct contracts offer asingle point of responsibility, and reducethe need for detailed involvement by theclient

commissioning the design separatelycomplicates the management task butoffers more opportunity to becomeinvolved in the design process.

You should also take into account:

the possibility of extending an existingcontract


the possibility of including ongoingmaintenance and support of the asset as partof the initial purchase or construction process;eg build and operate/maintain contracts

requirements and responsibilities for testing,delivery, inspection, installation andcommissioning any fittings

the definition of ownership of any intellectualproperty developed as part of the contract.

Ref: Further detail is provided in InvestmentEvaluation procedures, Chapter ??? Bureau of theBudget

6. Appoint an internal Project Manager or team asappropriate. For any significant building project,effective project management is essential. If theseskills are not readily available, a contract ProjectManager or a secondment from another agency shouldbe considered.

Project Manager 7. Engage consultants when necessary and provide themwith a copy of the brief. Ministerial Directions ???requires:

one written tender or proposal for consultancyservices estimated to be less than xx,000 baht



consultancy services over xx,000 baht require apublic tender process or tenders called from pre-qualified contractors.

8. Prepare tender documents and specifications includinginvitation to tender, tender form, specification or brief,drawings, conditions of tender, conditions of contract,and any other information. Determine the tenderperiod.

Where non-standard contract documents are to beused, consult with the Government approved solicitoror other approved legal adviser.

9. Obtain planning and building permits at the appropriatestage, and any other permits necessary.

10. Obtain approval in accordance with the appropriatelevel of conferral (delegation) to call tenders.

11. Select the appropriate procedure for obtainingquotations or tenders. Ministerial Direction ???requires:

one written tender or proposal for building andconstruction works estimated to be less thanxx,000 baht

three written tenders to undertake building andconstruction works when the estimated purchaseprice is between xx,000 baht and xx,000 baht

building and construction works over xxx,000 baht

require a public tender process or tenders calledfrom pre-qualified contractors.

12. In consultation with the client/stakeholder, develop thetender selection criteria and evaluation method.

13. If the estimated initial acquisition cost exceeds xxmillion baht or if the proposed acquisition is complex,unusual, sensitive or strategic, or may provide anopportunity to foster local industry, consider theimpacts and risks associated with a pre-tender briefingfor interested parties.

14. If the estimated initial acquisition cost exceeds xxmillion baht, follow the procedure described in theProcurement chapter.

15. Prepare the tender list from pre-qualified contractors; a



formal Invitation to Register Interest; or publicadvertisement.

16. Review the cost estimate (prepared from the feasibilitystudy - see action 4) against the available budget.

17. Confirm in accordance with the appropriate level ofconferral (delegation) the availability of funding througha capital expenditure request.

18. Invite tenders.

19. Once tenders have been received and the tenderperiod closed, evaluate the tenders according to thedefined selection criteria established in action 12 andmake recommendations.

20. Obtain approval in accordance with the appropriatelevel of conferral (delegation) for the recommendedcontractor.

21. Prepare and execute the contract documents.

22. Advise the unsuccessful tenderers.

23. During the contract process administer the contract,including:

verifying and certifying payment claims andvariations

monitoring actual expenditure against budget

taking appropriate action.

24. Issue the form which requires asset data to becollected at building hand-over.

25. When the building reaches practical completion,undertake the following acceptance procedure:

check on its condition and compliance withspecifications

collate the details required for entry into thefinancial system

forward the final invoice to Accounts Payable forpayment

advise the client that practical completion hasbeen reached

collect the asset data required by your Business



Unit and enter it into the asset register (manual orcomputerised system - such as Oracle Assets andmanual or computerised InfrastructureManagement System).

Ref: Procedure 3.5: Recording new assets

26. Obtain operations manuals and details of all warrantiesfor any plant and equipment.

27. Ensure users receive full training in the use of thefacility if appropriate.

28. Discuss with the client and building users anyconcerns they may have.

29. Conduct a final inspection before the end of thedefects liability period, and advise the contractor of anyitems requiring attention.

30. Ensure that the final payment is made to the contractorfollowing the rectification of any defects.

------------------------------- End of Procedure 3.2.2 ------------------------------



Procedure 3.2.3 Manufactured assets

Scope Specialised plant, equipment and vehicles inaccordance with the approved asset acquisition plan

Purpose To ensure specialised assets are commissioned andmanufactured in accordance with approved operationalrequirements, time frame and budget.

Responsibility Responsibility Centre Manager; Project Manager;Asset Officers


References Procurement chapter

Actions


??? Branch, Bureau of the Budget

Accredited Purchasing Units within agencies andthe Government Purchasing Board

Consultants, contractors and suppliers such asthose on the registers held by the GovernmentPurchasing Board.


1. Identify the range of assets to be acquired ormanufactured over the next financial year, or five-yearperiod if more appropriate, according to the acquisitionplan.

2. Separate the assets into groups by asset category(such as specialised types of plant and equipment, etc)and by how they will be acquired.

3. Allot responsibilities for the co-ordination and



management of the purchasing process for each groupof assets. In doing so, consider the delegation anduse of an accredited purchasing unit which hasspecified purchasing and contracting functions,

Ref: Procurement chapter

4. Select the appropriate purchasing method for eachasset or group of assets.

How to do it

Consider the following:

the manufacture of a purpose-built asset ismanagement-intensive, carries higher levelsof risk, and is more time-consuming thanpurchasing an existing asset

an asset that is highly specialised, anddesigned to meet current needs, may bedifficult to adapt to changed circumstanceslater (such as new methods of servicedelivery)

current market conditions may affect thetiming of the purchase, or prejudice theachievement of fair and open competition

several methods of delivering a purpose-builtasset are possible:

design and manufacture contracts offer asingle point of responsibility and a highercertainty of outcome, and reduce theneed for detailed involvement by the client

commissioning the design separatelycomplicates the management task butoffers more opportunity to becomeinvolved in the design.

You should also take into account:

the possibility of extending an existingcontract


the possibility of including ongoingmaintenance and support of the asset as partof the initial purchase or manufacture process;



eg build and operate/maintain contracts

whether potential contractors and suppliershave been endorsed

requirements and responsibilities for testing,delivery, inspection, installation andcommissioning

the definition of the ownership of anyintellectual property developed as part of thecontract.


5. Develop a design brief for the project covering productrequirements, capacity standards, quality and timeframe. The brief should be based on Procedure 2.2.2:Conducting a feasibility study.

6. Appoint an internal Project Manager or team asappropriate. For any significant asset manufactureproject, effective project management is vital. If theseskills are not readily available, a contract ProjectManager should be considered.

Project Manager 7. Engage consultants when necessary and provide themwith a copy of the brief.


8. Select the appropriate procedure for obtainingquotations or tenders.

Note: All computer equipment, communicationssystems and plant and equipment is purchased undera Government contract negotiated either by thePurchasing Board and approved suppliers, or acontract between a supplier and the agency.


9. Prepare tender documents and specifications,including invitation to tender, tender form, specificationor brief, drawings, conditions of tender, conditions ofcontract, and any other information.

Determine the tender period, including closing date fortendering, date of award of contract, and period of thecontract.




Where non-standard contract documents are to beused consult with the Government approvedsolicitor or other approved legal adviser.

10. In consultation with the client, develop the tenderselection criteria and evaluation method.


11. If the estimated initial acquisition cost exceeds xxmillion baht or if the proposed acquisition is complex,unusual, sensitive or strategic, or may provide anopportunity to foster local industry, consider theimpacts and risks associated with a pre-tender briefingfor interested parties.

12. If the estimated initial acquisition cost exceeds xxmillion baht, follow the procedure described in theprocedures given in the procurement chapter.

13. Prepare the tender list from pre-qualified suppliers; aformal Invitation to Register Interest; or publicadvertisement.

14. Review the cost estimate against the budget and takeaction if appropriate.

15. Prepare the purchase order in Oracle Purchasing andgain approval in accordance with the appropriate levelof delegation.

It may be necessary to provide additional supportingdocumentation with the purchase order to gainapproval for the purchase.

16. Invite tenders, and once tenders have been receivedand the tender period closed, evaluate the tendersaccording to the defined selection criteria establishedin action 10 and make recommendations.

Note: Complete the Tender Submissions Summaryform and forward to the accredited purchasing unitwithin 10 working days of tender closing.

17. Conduct post-tender negotiations as required.

Ref: Procurement chapter18. Prepare and execute the contract documents (if

required).

19. Advise the unsuccessful tenderers in writing.

20. Complete the successful tenderer’s details in the



purchase order.

Note: In initiating the purchase order, provide afull description of the item - do not use thesupplier’s stock numbers and equipment supplynumbers as the sole description of the purchaseorder.

21. Manage and monitor the procurement or manufacture,including:

verifying and certifying payment claims andvariations

monitoring actual expenditure against budget

taking appropriate action.


Asset Officers 22. If necessary, issue the form which requires asset datato be provided by the person accepting delivery.

23. When the asset is received, complete the followingchecking procedure:

check on the asset’s compliance withspecifications

check that the asset has been received in goodcondition

ensure all details are correct and match thepurchase order.

Note: In cases of incorrect or short deliveries, theofficer receiving the goods will inform the PurchasingOfficer who will contact the supplier to establishreasons for any discrepancies and when the deliveryof all items can be expected (see Procurementchapter).

24. Approve the invoice for payment by receipting goodsinto Oracle Purchasing.

Ref: Refer to Figure 3.1: Flagging asset acquisitionsin action 24 of Procedure 3.2.1: ‘Off the shelf’ assets.

24. Attach a barcode or label to the asset.

Ref: Refer to Appendix A at the end of section 3 fordetails on asset tagging. All assets should be taggedor marked for asset verification purposes.



25. Advise the client that the asset has been received.

26. Compile the asset data required and continue withProcedure 3.5: Recording new assets.

Project Manager 27. Ensure that all operations manuals and details of allwarranties for the asset are obtained in accordancewith the contract.

28. Ensure users receive full training in the use of theasset.

---------------------------------- End of Procedure 3.2.3 ---------------------------



Procedure 3.2.4 Leased property assets

Scope Leased properties, based on the approved assetacquisition plan

Purpose To procure a lease and fit-out a property in accordancewith the approved operational requirements, timeframe and budget.

Frequency Whenever required by the approved acquisition plan

Responsibility Technical Manager or Property Manager

Key words Functional brief: a space planning documentprepared by an architect or facility planner whichspecifies the accommodation requirements of aparticular group. It:

defines a group’s agreed accommodation needs(total area, building facilities, services, storage,information technology, etc)

provides an assurance of a staff member’sentitlements and working conditions (work area,amenities, furniture, OH&S considerations, etc)

provides a cost estimate for the relocation orupgrading of accommodation

provides an analysis of the organisation’sfunctional relationships

is a descriptive link of the connection betweenthe group’s physical requirements and the lesstangible organisational features of corporategoals, objectives and service delivery targets.

OH&S: Occupational Health & Safety

References Victorian Government Office AccommodationGuidelines (1997), Victorian GovernmentAccommodation Group, Department of Treasury andFinance, Victoria, Australia



Actions

Read this procedure in conjunction with VictorianGovernment Office Accommodation Guidelines (1997),Victorian Government Accommodation Group,Department of Treasury and Finance, Victoria,Australia

Technical ManagerorProperty Manager

1. Identify the range of assets to be leased over the nextfive-year period according to the acquisition plan.

2. Allot responsibilities for the co-ordination andmanagement of the leasing process.

3. Develop a brief for each asset to be leased.

4. Advise the manager responsible for accommodationplanning of leased asset requirements.

The Business Unit responsible for accommodationplanning of leased assets is to manage theacquisition process, including negotiating thelease, and arranging for the fit-out and connectionof services.

5. The ongoing management of the lease will bemanaged by the Business Unit responsible foraccommodation planning of leased assets inaccordance with Procedure 4.5: Administeringproperty leases.

Generally payment of utilities will be the responsibilityof the occupant.

------------------------------- End of Procedure 3.2.4 ------------------------------



Procedure 3.2.5 Donated and seized assets

Scope All assets acquired free-of-charge in accordance withentity guidelines

Purpose To ensure that:

donated assets are recognised, and included inthe asset register, and appropriate operationalmaintenance programs

seized assets are recorded (not necessarily on theentity’s asset register unless legislation requires)for security and legal purposes.


Key words Functionality: a term used to describe the ‘fitness forpurpose’ of an asset. It encompasses the size,location and environmental characteristics of an assetthat affect its ability to support the service for which itis used.

Actions


1. When received, check that the asset is in goodcondition.

2. If the asset has been donated, provide anacknowledgment to the donor that the asset has beenreceived.

3. Attach a barcode or label to the asset. Refer toAppendix A at the end of this section for further detailson tagging assets.

4. Ascertain the current market value (or donor’s written-down book value) of the donated asset in its currentcondition.

Note: if an asset is acquired free of charge because



administrative functions within the agency have beenrestructured, use the value at which it was recognisedby the transferring entity immediately before therestructure. This is in compliance with (editorial note:identify the appropriate international accountingstandard consistent with AAS29).

5. Record the asset on the asset register from the date ofreceipt, ie the date ‘placed in service’.

Ref: Procedure 3.5: Recording new assets.

Note: The value of the asset should be identified asrevenue in the agency’s annual financial statements.

6. Maintain supporting paperwork detailing the basis ofvaluation for audit purposes.

7. If appropriate, refer to Procedure 4.1: Preparing anoperational plan and 4.3.1: Implementing amaintenance plan to incorporate the asset on theentity’s operational and maintenance plans.

------------------------------- End of Procedure 3.2.5 ------------------------------



Procedure 3.2.6 Heritage assets

Scope All buildings included as Heritage Buildings

Purpose To obtain a permit if necessary for alterations plannedto a heritage building

Frequency When changes or modifications are being consideredto heritage buildings


Actions

Asset Manager 1. Identify heritage buildings or heritage sites included onthe capital investment plan.

2. Allot responsibilities for the co-ordination andmanagement of the works programs.

3. Determine if a permission is required for the plannedwork.

Permission is not required for minor repairs or forreplacing new for old but are required for:

additions to the structure

subdivision

demolition

excavation at a registered heritage site.

Note: Contact Heritage expert on ph xxxxxxxxxx ifyou are unsure about the requirements.

4. Complete actions 4 to 30 in Procedure 3.2.2:Constructed assets.

In undertaking these actions consider:

the listing of heritage consultants held on theagency of consultant, contractor and supplier



register

application forms to apply for a permit for works toheritage buildings from ???????

application for financial assistance from ????????.Criteria for selection for financial assistance areurgency and the importance of the works.

------------------------------- End of Procedure 3.2.6 ------------------------------



Procedure 3.2.7 Reallocated assets

Scope Re-allocation of property rights between agencies orBusiness Units

Purpose To identify all responsibilities and liabilities associatedwith the assets

Frequency As required

Responsibility Business Unit Manager

Actions

Business UnitManager(TransferringLocation)

1. Identify assets being reallocated or transferred.

2. Identify and record all physical and financialinformation relevant to each asset.

Both revenue and expense streams should beidentified including:

legal costs

administrative costs

physical costs (such as cleaning-up ofcontaminated sites).

Business UnitManager (ReceivingLocation)

3. Confirm that the asset information provided is realisticand appropriate.

4. Assess the transfer conditions and prepare a businesscase seeking additional output funds in accordancewith Procedure 2.3: Preparing an output submission.

Business UnitManager(Transferring

5. As appropriate, undertake actions 2 to 7 of Procedure4.8.1: Transferring assets between locations.



Location)

Business UnitManager (ReceivingLocation)

6. If appropriate, refer to Procedure 4.1: Preparing anoperational plan and 4.3.1: Implementing amaintenance plan to incorporate the asset on theentity’s operational and maintenance plans.

------------------------------- End of Procedure 3.2.7 ------------------------------

3.3 (page 1)


Procedure 3.3 Developing and implementing areplacement strategy

Scope Plant and equipment which is essential to the BusinessUnit’s service delivery

Purpose A replacement strategy enables Business Units to planfor the future by setting aside funds to replaceessential assets and reducing disruption to servicedelivery.

Frequency Replacement strategies usually cover a rolling five-year period, depending on the complexity of and thelead-time for acquiring the asset. The strategy shouldbe reviewed following the first asset replacement (foreach category of asset) and before completion of theasset replacement program (for each category ofasset).

Responsibility Technical Manager or Responsibility Centre Manger



Actions

Technical Manageror ResponsibilityCentre Manager

1. From the asset register, identify the asset categorieswhich should be considered for inclusion on areplacement program.

For each asset category, take the following actions.

Developing and implementing a replacement strategy 3.3 (page 2)


2. Review the reasons for the need of each asset; iewhether changes may have occurred in the entity’sservice delivery requirements or approach.

3. Ascertain whether a non-asset solution is appropriate.

Ref: Procedure 2.1.2: Identifying non-asset solutions.

4. Determine whether the asset should be replaced withan identical asset or whether changes in technology orfunctionality considerations apply.

5. Identify any factors which will influence the timing of thereplacement of the asset; eg:

manufacturer’s recommended life

number of operations/cycles

cost of maintenance

major works requirements

assessment of current condition

ability to continue to satisfy service deliveryrequirements over time.

6. Using the above factors, calculate the replacementfrequency based on the asset’s expected life.

12. Determine the period for which the replacementprogram should operate.

How to do it

This will require a consideration of factorsidentified in action 4 and the quantity of assetsinvolved.

8. Prepare a replacement schedule based on thefrequency of asset replacement.

9. Prepare a budget for the asset replacement program.

10. Gain approval from an Accountable Officer (accordingto agency delegations) for all asset replacementprograms and budgets.

Ref: Procedure 2.2: Preparing a capital investmentplan.

11. Carry out the replacement in accordance withProcedure 3.2: Acquiring assets.

Developing and implementing a replacement strategy 3.3 (page 3)


12. Review the performance of the replacement program,including:

comparing actual expenditure against budget

assessing user satisfaction.

--------------------------------- End of Procedure 3.3 -------------------------------

3.4 (page 1)


Procedure 3.4 Conducting a post-acquisition review

Scope A selected sample of assets acquired in a nominatedperiod, including both ‘off the shelf’ and purpose-builtacquisitions

Purpose To determine whether the acquired assets are meetingtheir intended purpose.

Frequency To be determined by the Responsibility CentreManager, but not less than annually. Reviews shouldbe undertaken within six months (or within the defectsliability period) of the acquisition of the assets involved.


Key words Functionality: a term used to describe the ‘fitness forpurpose’ of an asset. It encompasses the size,location and environmental characteristics of an assetthat affect its ability to support the service for which itis used.

Actions


1. Select a random sample of assets acquired during theperiod. The sample should include representatives ofeach class of assets acquired.

2. Carry out the following actions for each of the assets inthe sample.

3. Review the specified operational requirement, budgetand preferred time frame for the acquisition of theasset, and the objectives of the asset acquisition, asdocumented in Procedure 3.2: Acquiring assets, or asdetermined by the user.

4. Carry out a physical inspection of the asset and recordany obvious defects or functionality problems.

Conducting a post-acquisition review 3.4 (page 2)


5. Review the operations and maintenancedocumentation supplied with the asset, and confirmthat it is consistent with the usage and maintenancehistory as contained in the asset register (manual orcomputerised Infrastructure Management System).

6. Examine the warranties, guarantees or defects liabilityobligations applicable to the asset.

7. Consult with the users of the asset to establish theirlevel of satisfaction with the acquisition.

Note: The asset should be tested against theoriginal requirement specified for it, even if theuser requirements have changed since the assetwas acquired.

8. Prepare a written assessment of the outcome of theacquisition process for the asset, in terms ofobjectives, budget and time limits.

9. Advise the following people of the results of the review:

the staff who undertook the acquisition process

the parties who specified and use the asset

the contractor or supplier, if contractedperformance of the asset is not being achieved.

--------------------------------- End of Procedure 3.4 -------------------------------

Recording new assets 3.5 (page 3)


Procedure 3.5 Recording new assets

Scope All assets at the time of acquisition, or if identified for thefirst time in a stock-take, which need to be traced forsecurity and control purposes

Purpose Assets must be recorded in the asset register at the timeof acquisition to enable decisions to be made based onreliable and up-to-date information.

Asset registers provide a readily accessible andconsistent source of information about assets forfinancial, control and technical purposes. Theinformation in asset registers allows management to:

evaluate asset performance

trace assets for security and control purposes

assess risk profiles

assess the contribution made by the assets toservice delivery objectives

satisfy external reporting requirements.

Frequency Whenever an asset is received. Assets may bereceived by planned acquisition (purchase, custommanufacture or construction), by transfer from anotherBusiness Unit, or by re-classification or discovery withinthe Business Unit.

Asset registers are updated when:

new assets are acquired and commissioned

whenever stocktaking takes place

when the responsibility for the control of assetschanges

when any transaction affecting the asset takes place(such as major periodic maintenance, or any otheraction incurring expenditure on the asset),

when an asset is retired from service, and

when the asset is finally disposed of (including write-offs).


Key words Control: the ability of the Business Unit to enjoy theservice potential of the asset, and deny it to others. It ispossible for a Business Unit to control an asset withouthaving technical ownership of the asset.



Manual or computerised Infrastructure ManagementSystem: an information system used by the agency tostore non-financial data about the agency’sinfrastructure assets such as utilisation, condition andfunctionality.

Non-current asset: an asset having a potential servicelife longer than one year.

Recognition threshold: the value of an item belowwhich it does not have to be accounted for as an asset.The threshold level is 50,000 baht.

Service potential: the ability or capacity of the asset tosupport the operational needs of the controllingBusiness Unit.

Useful life:


the estimated total service potential, expressed interms of production or similar units, that is expectedto be obtained from the asset.


Actions

Asset Officers 1. If the asset is a recently acquired asset, identify theappropriate class of asset.

Classes of asset

The class of asset is important for managementcontrol and financial reporting. The classes usedin the asset register should correspond with theterminology used in the agency’s Chart ofAccounts.

The classes (called categories in Oracle Assets)



used by the agency are:

land

buildings

fit-out

cultural and heritage assets

computer equipment and communicationssystems

motor vehicles

plant and equipment

infrastructure

(finance) leased assets

computer equipment and communicationssystems

motor vehicles

plant and equipment.

Asset categories

Classes may have to be further broken down intocategories for management control and reportingpurposes. Classes and categories useful for theagency (called categories and sub-categories in acomputerised system - such as Oracle Financials)include:

computers and communications systems

personal computers and accessories

radio/telephonic communicationequipment

VGRS - court reporting equipment

mainframe/network and datacommunication equipment

motor vehicles

passenger vehicles

commercial vehicles

plant and equipment

emergency rescue equipment

furniture

kitchen and laundry equipment



library assets

office machines

plant and machinery

scientific, laboratory and medicalequipment

security equipment

sporting and recreational equipment.

Note: In a computerised system - such as OracleFinancials, the useful life of all assets, and hence thedepreciation rate, within a category is the same bysystem default. Asset categories and sub-categoriesare generally denoted by a three character code, withthe first alpha character representing the category towhich the asset belongs. Additional categories andsub-categories should be added only by the BusinessUnit responsible for asset accounting or financialmanagement operations.

2. Consider whether the asset should be grouped,aggregated, disaggregated, or a parent-childrelationship established.

Explanation

Grouping: In some cases it may be moreappropriate to record a group of interrelatedassets (of which some or all of the componentsmay have a value below the recording threshold).Examples include a telephone PABX system, asuite of furniture, and a set of crockery. The assetregister should record the grouped asset, andidentify the individual components. Loss orremoval of one item would significantly diminishthe value of the group or collection by making itincomplete. This would apply even if the value ofthe particular item was relatively low.

Aggregate: A group of assets of similarcharacteristics which individually fall below therecognition threshold, but which in total aresignificant, may be recorded as a single asset inthe asset register, eg similar assets such as librarybooks or collections of scientific materials. In thiscase, loss or removal of one item may have anegligible effect on the total value of theaggregated assets. It is not acceptable to



aggregate assets which have fundamentallydifferent characteristics as this will result inincorrect assumptions about useful life anddepreciation.

Disaggregate: The principle underlyingdisaggregation is that assets should bedisaggregated to the point where assetmanagement techniques can be applied anddecisions can be made about renewal,replacement, use and remaining useful life.Assets should also be disaggregated to the pointwhere disposal of components can be treatedseparately in the asset register.

Parent-child relationship: A parent asset hasone or more subordinate (and possibly dissimilar)assets, and is:

the item with the longest life requiring the leastfrequent upgrades, or

the more valuable item.

It is used when a number of assets from differentcategories form a unique function, eg two-wayradio equipment in motor vehicles or rescue craft.This may be desirable for use in maintenancemanagement systems, or in cases where the childassets have expected useful lives that aresignificantly different from the life of the asset as awhole.

3. When the asset is delivered or handed over, confirmthat the asset is in working order and collect therequired information for entry into the asset register(manual or computerised System - such as OracleAssets).

Information to be collected

The information must include physical andidentification data, and financial information. Theactual information collected will depend on theclass and category of asset, and the BusinessUnit’s future reporting requirements for the asset.Refer to Table 3.1 below.

Note: The recorded value of the asset shouldinclude all acquisition costs (such as fees,transport costs, progress payments) andinstallation costs as well as the cost of the asset



itself.



Table 3.1 Information held in the asset register (manual or computerisedsystem - such as Oracle Assets)(Note that the information held for each recorded asset is dependenton the category and sub-category of asset selected in the manual or Oraclesystem.)

Acquisition DateSupplierReference numbers, eg invoice or purchaseorderAmount, ie the total acquisition cost

Identity DescriptionModelManufacturerSerial numberUnique asset number (assigned by Oracle)Tag number

Accountability Responsibility Centre or LocationBusiness UnitCustodianCaveats, covenants or restrictionsHeritage or cultural ‘identifiers’

Performance

(held as descriptivefields only)

CapacityConditionUseful lifeResidual valueWarranties or guaranteesMeasures

Disposal

(held as descriptivefields only)

CapacityConditionUseful lifeResidual valueReplacement value

Accounting Historic costDepreciation rateAccumulated depreciation

Further information may be required for theoperational management of assets that are large,complex, or operationally critical. Examples areincluded in Procedure 4.8: Maintaining data onexisting assets.

Ref: Refer to 3 – Accounting treatment for furtherdetails on posting details to the asset register (manualor computerised system).



Appendix B at the end of this section provides furtherinformation on the asset register.

4. Consider whether further information should berecorded for assets which are complex or of highvalue.

Assets of this kind are likely to require appraisal andreporting on:

functionality (fitness for purpose)

utilisation (intensity of use)

criticality (the importance of the function that theasset supports)

operating costs (maintenance, cleaning, energy,management as well as depreciation and financecharges)

maintenance history

life cycle cost analyses.

Where to record this information

The asset register (manual or computerisedsystem) holds information for financial reportingand control. The remaining information ismaintained on specialised systems (such as amanual or computerised InfrastructureManagement System). This information mayinclude:

any caveats, covenants or restrictions on use

any items of heritage or cultural significance

net present value of cash flows

life cycle expenditure (to date and forecast)

life cycle income (to date and forecast)

additional detail for each significant assetelement

current replacement cost

capacity

current condition, utilisation, functionality

date of last inspection

maintenance schedule



service and repair history

asset replacement date

reference to drawings and files.

5. At the end of the month, reconcile new assetacquisition details (purchase orders and invoices) withdetails of the assets held in the asset register (manualor computerised system).

Ref: Refer to 3 – Accounting treatment for detailsof accounting actions relating to recording newassets.

Figure 3.2 Clearing transactions from Mass Additions

Run the unposted MassAdditions report

For each asset identify therelevant invoice and

Purchase Order

Check invoice andPurchase Order details

Amend the details ifnecessary in unposted

Mass Additions

This process will identify itemswhich are the responsibility of each

Responsibility Centre Manager

Using the Prepare Mass Additionsform use the invoice number to

check the details of the asset on theOracle system

Asset Accounting

Enter the asset details inunposted Mass Additions

This will involve entering thebarcode label for the asset, together

with the location, sub-location,activity code, charge code and serial

number. Do not change thedepreciation code.

Save the recordCorporate Services Unit will post

transactions to the asset register ofOracle on a weekly basis

Run the depreciationschedule monthly

This will ensure that all journals areautomatically created and that the

General Ledger and the Assetsmodule will have the same dollar

amounts

--------------------------------- End of Procedure 3.5 -------------------------------



3 – Accounting treatment (page 1)


Recording assets for the first time

Unique asset numbers

Each asset should be recorded on the asset register(manual or a computerised system such as Oracle Assets)with a unique sequential asset number. Users who do notcurrently have access to a computerised system - such asOracle Financials should create a unique identifierthemselves and assign it to each asset.

Recording a value for the first time

When recording an asset, include the appropriate value:

the original acquisition cost, including installation andtransport costs, at the date of purchase

Capital Work in Progress at cost on the date ofcommissioning the works

if the acquisition cost is not known for a donated asset,the market value, or a reasonable estimate of, at thetime of receipt.

Asset hierarchy – parent-child relationship

Where a number of assets from different categoriestogether form a unique function (eg two-way radioequipment in motor vehicles), all related assets should belinked together using the parent-child relationship (refer toProcedure 3.5: Recording new assets.)

Assets acquired in previous accounting periods

If an asset was acquired in a previous accounting periodbut has not yet been accounted for or entered into theasset register (manual or a computerised system), thefollowing approach should be used:

immediately account for the acquisition at the originalacquisition price or requisition cost.

if there was no acquisition cost, value the asset atcurrent market value

record the asset in the asset register with all necessarydetails

set the depreciation as for other assets in its category

if the asset is already in service, use the originalpaperwork (eg purchase order, payment of invoice,delivery docket) to establish the date the asset was



placed in service

if the asset is not currently in service, it should berevalued, including any installation and transport costs,and depreciated over its estimated remaining usefullife.

Recording assets acquired ‘free of charge’

Record assets acquired free of charge (eg donations) inthe asset register from the date of receipt, ie the date‘placed in service’.

If an asset is acquired free of charge becauseadministrative functions within the agency have beenrestructured, use the value at which it was recognised bythe transferring Business Unit immediately before therestructure. This is in compliance with (internationalaccounting standard relating to scope in AAS 29).

Maintain supporting paperwork detailing the basis ofvaluation for audit purposes.

The asset will be depreciated according to its categoryusing the standard depreciation rates for its expectedremaining useful life (refer to Attachment 2 – Depreciationschedule).

Recording personal computers

Personal computers are to be recorded as an ‘asset set’consisting of a Central Processing Unit (CPU), monitor,keyboard and mouse.

If part of the personal computer is replaced with an itemcosting over 50,000 baht (eg a high-resolution monitor), itmay be recorded as an asset with a parent-childrelationship (refer to Procedure 3.5: Recording newassets).

If the item costs less than 50,000 baht it will be an expenseitem.

For the purpose of financial reporting, personal computersare included in the class of Plant and Equipment.

Recording plant and equipment spares

Plant and equipment spares are items which cost over50,000 baht and are to be treated as separate assets.

Recording shared assets

Where an asset is shared by more than one Responsibility



Centre, the asset should be recorded on the asset register(Computerised System - such as Oracle Assets) of theResponsibility Centre which utilises the majority of theasset, ie over 50% of the asset usage.

If it is difficult to determine the major asset user, the assetcan be incorporated into the asset register at Business Unitlevel, or a shared cost centre can be created.

Recording finance leases

A finance lease is one which effectively transfers from thelessor to the lessee substantially all risks and benefitsincidental to ownership of the leased property withouttransferring legal ownership.

At the beginning of the lease, accounts will show an assetentry and a matching liability entry. The value of the assetand the corresponding liability show the market value ofthe asset. The asset is then amortised over its useful life(rather than depreciated).

Each finance lease payment is apportioned betweeninterest and capital. The apportionment is calculatedbased on the outstanding balance of the lease liability.Once apportionment has occurred, interest is written-off tothe Operating Account as an expense, the payment ofcapital reduces the lease liability.

Leases for computer equipment are treated in the sameway. Whether ownership is transferred or not determinesthe nature of the lease, as is the case for equipment otherthan computers.

If an item is held under an operating lease agreement, thelease payments should be written-off to the OperatingAccount as an expense in the accounting period in whichthey are incurred. These items are not treated as assets.

Recording operating leases

An operating lease is one where the risks and benefitsincidental to ownership are not transferred to the lessee.

If an item is held under an Operating Lease agreement, thelease payments should be written-off to the OperatingAccount as an expense in the accounting period in whichthey are incurred. These items are not treated as assets.

Capital Work in Progress account

If an asset is under construction, Capital Work in Progress



should be used to record progress expenditure onmaterials, travel, installation, labour and overhead costs.

Once the asset has been commissioned for use, transferthese expenditures to the asset register (manual or acomputerised system).

This would mainly relate to land and therefore will be in theresponsibilities of the Manager responsible for assetmanagement

After transferring work in progress expenditures to theasset register, do the following:

notify the appropriate Asset Officer in writing, ie Emailor facsimile, to capitalise the work in progress

forward the following information to the appropriateAsset Officer:

breakdown of the completed works into its assetcomponents

appropriate parent-child structure.

Recording unused office space

If the Agency leases office space but cannot cancel thelease when that space is no longer required, the futurelease payments for that unused space are treated asfollows:

create a liability and an expense entry. The amountrecognised shall be the total expected outlay relatingto the surplus space, discounted by using the interestrate implicit in the lease or an estimate thereof.

if the leased space is sublet at a loss, the amount ofthe liability and the expense recognised shall be equalto that loss.

Tagging assets Appendix A (page 1)


Tags and barcodes

A barcode, or similar, should be attached to all non-currentphysical assets and attractive items when they arereceived at the Responsibility Centre.

Affix the barcode or similar to an area of the asset wherethey can be easily read or scanned with a barcodescanner. Do not affix barcode to the side, back orunderside of an asset where they are invisible or cannot beaccessed easily. Only one barcode is to be affixed to eachasset; remove excess labels.

Enter the barcode as the tag number on the asset register.Where identical assets have been delivered, take care toensure that the correct tag number has been entered onthe corresponding record of the asset register.

Method of asset identification

Barcodes are impractical on assets exposed to weather,damp, hot or wet conditions, etc. Examples include:

laundry assets, eg washing machines and dryers

kitchen assets, eg portable toasters

garden equipment, eg lawn mowers

farm machinery, eg tractors

some attractive assets, eg electric drills, chain saws

workshop machinery, eg lathes, etc used in prisonindustries

rescue equipment, eg outboard motors, breathingapparatus, etc

If barcode labelling is unsuitable, the Asset Officer shouldliaise with the Responsibility Centre Manager to determinea suitable method of asset identification. Alternativesinclude the engraving of the barcode label number on theasset and placing the barcode label on correspondingpurchasing or delivery documentation. Other methods aremetal tags, stencilling, metal stamping, etc.

Requirements for an asset register Appendix B (page 2)


Data requirements

Asset registers should include:

asset data which is:

updated as transactions and events occur (ie onan accrual basis)

readily available to officers requiring reports fromthe asset register

structured to distinguish between differentcategories of assets.

clear identification of the person, Business Unit orResponsibility Centre responsible for the asset

if the acquisition of an asset is funded by more thanone trust fund, that asset should be recorded in theasset register of the appropriate Responsibility Centreor Location, ie the Business Unit which controls theuse of that asset

non-financial data on acquisition, identity,accountability, performance and disposal in addition tofinancial data. This is:

necessary to discharge the statutory reportingobligations of the Agency

to ensure compliance with the ProcurementManagement Act ?????.

Responsibility

The Responsibility Centre Manager at each ResponsibilityCentre or Location is responsible for ensuring thatadequate asset registers are maintained.

Supplementary data

An adequate asset register is essential for effective assetmanagement. It is the basis for a comprehensive assetmanagement information system and will contain beyondthat required for financial reporting.

It is important that the asset register contains additionaldata for certain types of assets. For example, additionaldata may be required on planned and actual maintenanceexpenditure. This may include accounting data on aprovision for major maintenance or repairs.

It is the responsibility of Responsibility Centre Managers todecide whether the expenditure on extensive repairs

Requirements for an asset register Appendix B (page 3)


extends beyond normal repairs and maintenance, orsignificantly alters the estimated remaining useful life of theasset. Refer to Procedure 4.7: Recording assetexpenditure.

Repair and maintenance costs which do not add value tothe asset are treated as an operating expense (written offas an expense item in the Operating Statement).

4Operating and maintaining assets

So that a Business Unit’s assets can function in the manner requiredto support service delivery, they must be operated and maintained inan appropriate manner. Operational management and maintenanceare directed toward maximising the asset’s useful life, whilecontaining recurrent costs, and protecting the capital investment.

Asset recording, valuing and reporting provides comprehensive,accurate and up-to-date information on assets to:

discourage theft and to provide quick detection if it occurs

support decision-making about service delivery capacity

satisfy external reporting requirements

provide data for the financial statements

assess the comparative performance of assets

assist risk managers and insurers.

Procedures

4.1 Preparing an operational plan4.2 Preparing an energy management plan4.3 Developing a maintenance management strategy

4.3.1 Implementing a maintenance plan4.4 Assessing the performance of assets

4.4.1 Assessing the performance of built assets4.4.2 Assessing the performance of other assets4.4.3 Assessing the performance of vehicles

4.5 Administering property leases4.6 Asset valuations and depreciation

4.6.1 Valuing and revaluing assets4.6.2 Assessing the useful life of an asset4.6.3 Calculating depreciation

4.7 Recording asset expenditure4.8 Maintaining data on existing assets

4.8.1 Transferring assets between locations4.8.2 Stocktaking assets4.8.3 Undertaking general ledger reconciliations4.8.4 Deleting asset records

4.9 Developing and using performance measures4.10 Reporting on assets


Appendix A Securing assetsAppendix B Letter of instruction to a valuer



Thai Government

Entities are responsible for developing five-year asset managementstrategies for the assets under their control. The strategies are tocover maintenance, refurbishment and energy management andinclude all operating costs. They shall also detail the systems andprocesses to be established to monitor asset performance.

Entities shall establish and maintain management processes toregularly monitor and assess the assets under their control.

Assets that have been inadequately maintained may pose potentialsafety or health risks, disrupt essential services, or incur unforeseenexpenditures for the correction of defects.


The following figure shows the relationships of theprocedures in this section and with other sections ofthe chapter.

Figure 4.1: Relationship of procedures in Section4

Preparing an

operational

plan

Developing a

maintenance

management strategy

Implementing a

maintenance

plan

Preparing an

energy management

plan

Monitoring and assessing the performance of assets

Developing an asset strategy

Proc 2.2.4

Preparing

a financing

plan

4.1 (page 1)


Procedure 4.1 Preparing an operational plan

Scope All assets which need to be cleaned and maintained tooperate efficiently; eg buildings, plant and equipment

Purpose The cost of operating and maintaining an asset over itsuseful life is often greater than its acquisition cost. Anoperational plan is required to ensure that the assetsupports the Business Unit’s service delivery needs, isefficiently utilised and is provided at the lowestpossible long-term cost. A plan may cover one assetor an asset category.

Operations plans are prepared from the assetmanagement strategy (refer to Procedure 2.1:Developing an asset strategy).

Frequency The operations plan should cover a rolling five-yearperiod and be reviewed annually.

Responsibility Technical Manager or Responsibility Centre Manager


References Property Owners and Managers Guide to ContractCleaning (1988), BOMA (now Property Council ofAustralia)

(1994), BOMA (now Property Council of Australia)

Preparing an operational plan 4.1 (page 2)


Actions


1. Identify the assets listed in the operations andmaintenance plan (developed in Procedure 2.1:Developing an asset strategy).


2. Identify the controller of the asset (that is, theResponsibility Centre which receives the economicbenefit from the asset).

Controller

Where more than one Business Unit orResponsibility Centre receives a benefit, you willneed to identify which one will control the asset.

3. Establish arrangements for attributing the cost of theasset between the Business Unit or ResponsibilityCentres.

Example

For example, a large facility or complex may havea number of tenancies which are used for variousservice delivery purposes. The costs of ownershipsuch as operations, maintenance, cleaning, etcshould be identified and reported by the relevantBusiness Unit or Responsibility Centre.

Ref: Procedure 1.3: Charging for the use ofassets

4. Establish roles and responsibilities, business rules andprocedures for the management of the day-to-day useof the asset.

Example

For example, a building complex requiresintensive day-to-day management entailing:

allocating space/rooms to meet demand forvarious service requirements while levellingdemand by scheduling allocation to achievemaximum utilisation of each space/room

setting up and operating any specialisedrecording or projection equipment such asaudio, video and computer



reporting any breakdown maintenance needs.

5. Establish the requirements of, and responsibility for,access to and security of the asset.

Ref: Refer to Appendix A at the end of section 4 fordetails on securing assets.

6. Establish the performance standard required of theasset.

Examples

For example, a police building is critical to thedelivery of law and order services. An appropriatestandard of performance is required of thebuilding, particularly the interview and publicareas. As a result, the following performancestandard may be established:

appearance is a major consideration andsigns of deterioration may be unacceptable,particularly in public areas

all building elements and services shouldfunction as intended during the time of use.Any environmental controls important in thisbuilding may need to function at all times witha low probability of failure

public areas that used intensively can be areal public liability risk. Potential risk eventsmust be identified and all occupational heathand safety obligations must be complied with

the long-term performance of the facility is tobe achieved and costs minimised, withenergy, maintenance, cleaning and securitybeing planned in a strategic framework anddecisions made on a life cycle basis.

7. Develop energy, maintenance, cleaning and securitystrategies and plans for the asset.

Ref: Procedures 4.2: Preparing an energymanagement plan; 4.3: Developing a maintenancemanagement strategy; and 4.3.1: Implementing amaintenance plan.

Property Owners and Managers Guide to ContractCleaning (1988), BOMA (now Property Council ofAustralia).



8. Identify any specialised training required for staff in theuse of the asset, and include arrangements for thistraining in the human resources strategy andassociated training plans.

9. Develop operating budgets for individual assetsincluding costs for energy, maintenance, cleaning,security, specialised training and management.

Ref: Victorian Office Buildings Operating Costs 1994(1994), BOMA (now Property Council of Australia).

10. Monitor recurrent operating costs against the budgetand attribute costs to appropriate ResponsibilityCentres or Business Units.

--------------------------------- End of Procedure 4.1 -------------------------------

4.2 (page 1)


Procedure 4.2 Preparing an energy management plan

Scope Buildings and all energy-consuming plant andequipment accommodated in the Business Unit’sfacilities

Purpose An energy management plan aims to reduce aBusiness Unit’s energy bills to a minimum practicallevel, while offering improvements in comfort for usersand reducing environmental impacts. Managing theconsumption of energy can reduce the costs ofdelivering government services and minimise indirectcosts passed on to the community.

Two approaches are generally used:

conservation: avoiding the wasteful use ofenergy and reducing the demand for energy-related services through:

energy-conscious design of new infrastructure

education of designers, users and managersin the creation and operation of energyefficient infrastructure and related energyconsumption

efficiency: reducing energy consumption forcurrent operations by introducing more efficientprocesses and systems for facilities, plant andequipment.

Frequency The plan should be prepared for a five-year period.Energy management should be seen as a continuousprocess and will be more effective if the plan isreviewed annually and revised as necessary.

Responsibility Business Unit Manager; Energy Manager

Key words Energy Manager: prepares, manages and controlsthe energy management plan, analyses data andarranges training and energy audits.

References 1994 BOMA Energy Guidelines (1994), BOMA (nowProperty Council of Australia)

Preparing an energy management plan 4.2 (page 2)


Actions

Figure 4.2: Overview of this procedure

1. Corporate strategic approach2. Appoint Energy

Manager/s

3. Prepare energymanagement policy8. Annual review

and report

5. Staff awareness andtraining program

6. Conduct energyaudit/s

7. Prepare and undertake adetailed project

implementation plan

4. Set up monitoring andreporting system


1. Establish a corporate strategic approach to energymanagement by identifying clear accountability forenergy management.

How to do it

Set up a management structure which devolvesresponsibility for energy bills to those with theauthority to change the way energy is used.

2. Appoint a senior staff member as the Energy Manager.This person:

will be responsible for the overall co-ordinationof the program

will report directly to senior management

doesn’t require a technical background butshould be familiar with the Business Unit’sactivities.

Note: Energy Managers could convene regularmeetings with other government energy managersto discuss issues relevant to carrying out theduties of this role.

Energy Manager 3. Prepare an energy management policy.

An energy management policy statement includesgeneral aims and specific targets relating to:



energy consumption reduction (electricity, gas,petrol, oil, etc)

energy cost reduction (by lowering consumptionand negotiating lower unit rates)

time frames and budgetary limits

the methods to be employed

the organisation of management resources.

Example

An example of a target could be to reduceelectricity use for lighting in offices by 20% througha planned reduction of lighting elements, and theinstallation of controllers to automatically switch offlighting during unoccupied hours.

Note: A policy ensures that the success of theenergy management program does not depend onparticular individuals in the Business Unit. Theprogram must have a commitment from the wholeBusiness Unit to be successful. Formalising thepolicy in writing demonstrates this commitmentand will guide efforts to improve energy efficiency.

4. Establish an energy monitoring and reporting systemto collect, analyse and report the Business Unit’senergy costs and consumption. This system willprovide an overview of energy use and related costs.

How to do it

(i) Set up a database to record historical andongoing energy use and cost information frombilling data.

(ii) Produce a regular summary report of thisinformation.

(iii) From this information, analyse data trendsand review tariffs.

(iv) Record information and drawings of buildings,equipment and systems, and when theyoperate.



5. Implement a staff awareness and training program.

Need for awareness and training

A key ingredient in the success of any energymanagement program is a high level of awarenessamong staff. This can be achieved in a number ofways including formal training, newsletters,posters or publications, or you may want toincorporate energy management into an existingtraining program. Staff may need training fromspecialists to demonstrate energy saving practicesand the use of equipment.

6. Conduct an energy audit (walk-through survey andreview of energy-using systems) to determine howmuch energy is being used and to provide a baselinefrom which energy consumption can be compared overtime.

Who can conduct the audit

An audit can be conducted by an employee of theBusiness Unit who has the appropriate expertiseor by contracting an energy auditing firm. TheGovernment Purchasing Board may be best to setup a panel of approved energy auditors with astandard schedule of charges based on the site’stotal energy costs.

7. Following the audit, analyse current energy use anddevelop a number of options which provide for energyand cost savings. Options to be considered shouldinclude:

alternative sources of energy including renewablesources such as wind, solar and biomass

reducing the size of plant and equipment

purchasing thermally efficient facilities and energy-efficient plant, machinery and equipment

energy metering to facilitate ongoing management

reducing lighting levels, introducing broader bandtemperature controls, reducing transport frequency

more efficient fleet management and maintenancesystems



energy performance criteria in building leases

establishing or changing operational procedures tominimise energy use in the operation of plant andequipment

community and/or workplace education programsthat include skills enhancement in facility operation.

8. Prepare an energy audit report including an analysis ofthe costs and savings of each of the optionsconsidered. Provide recommendations and a priorityorder for implementation of the selected options.

For example, energy management projects may beintroduced in order of least cost to the Business Unitand maximum financial benefit.

9. Gain approval and commitment from seniormanagement for the recommendations of the energyaudit.

10. Prepare and undertake a detailed projectimplementation plan including a time frame and anyfunding or budgetary requirements.

11. Review the progress of individual projects to ensurethey stay within budget and achieve the energy targetwithin the specified time frame. Take action ifnecessary.

12. Review the energy management performanceannually. This will form the basis for developing animplementation plan for the following 12 months.

Importance of communication

It is important to communicate the program plans,and any case studies that demonstrate savings. Itis also important to report results and progress tomanagement and staff on a regular basis (at leastannually). This will increase awareness of energyefficiency issues among employees, and willencourage an ongoing commitment to theprogram.

--------------------------------- End of Procedure 4.2 -------------------------------



Developing a maintenance management strategy 4.3 (page 7)


Procedure 4.3 Developing a maintenance managementstrategy

Guidelines Good planning of maintenance needs ensures minimaldisruption to asset users and optimal use ofmaintenance resources. Routine inspections,servicing and preventative maintenance can all beplanned.

Certain assets require little or no maintenance, egfurniture and fittings. These may be excluded from aformal maintenance program but their good conditionshould be regularly ascertained by inspection, possiblyin conjunction with a stock-take.


Purpose The maintenance management strategy is a planningdocument which sets out the objectives for conductingmaintenance and the approach for achieving thoseobjectives. It is used to direct the development ofdetailed maintenance plans and to provide input to theAgency’s Business Plan.

The benefits of effective maintenance include:

a long-term reduction in life cycle costs

better asset performance and service

the optimisation of asset life

improved public perception of the asset’s serviceand safety standards.

Frequency The maintenance management strategy is to cover arolling five-year period and should be reviewedannually.

Responsibility Responsibility Centre Manager or Asset Manager;Technical Manager


Preventative maintenance: actions performed on aregular or periodic basis to retain an asset in anappropriate working condition. It is aimed at reducingthe frequency of failure and involves systematicinspection, monitoring, and servicing of maintainableelements.



References Assessing the Condition of Constructed Assets (1996),Asset and Building Policy, Office of Building, VictorianGovernment, Australia

Actions

Responsibility CentreManager or AssetManager

1. Review the Agency’s Corporate Plan and servicedelivery strategy to understand the Business Unit’sphilosophy regarding the use and maintenance ofassets.

2. Identify assets requiring maintenance from theoperations and maintenance plan (developed inProcedure 2.1: Developing an asset strategy).

3. Develop maintenance policies and objectives whichwill achieve the asset operation and maintenancephilosophy underlying the Corporate Plan and servicedelivery strategy. These will relate to issues such as:

supporting the function and use of facilities

customer satisfaction

compliance with statutory and legal requirements

minimising and managing internal resources

preservation of asset values.

Note: The audience for the strategy document willbe executive management. It should not be adetailed document.

4. Determine the maintenance organisation, skills and themost appropriate delivery method for the requiredmaintenance service. Available methods include:

use of in-house maintenance staff

use of contracted maintenance resources

outsourcing of the whole maintenance function toa single service provider.



How to do it

(a) Identify key service requirements such as:

the requirement for control over worksundertaken

availability of skills and expertise in-houseand externally, eg project management,industrial relations

extent of involvement and costsassociated with recruiting, training,purchasing

(b) Define the scope:

extent of works

location of works

grouping of works

performance standards

duration

contract value

opportunities for risk-sharing with serviceproviders

(c) Develop contract options, such asmanagement fee and costs; comprehensivelump sum; lump sum and hourly rate;incentive contract

(d) Identify costs, impacts and benefits of eachoption

(e) Compare net benefits, including non-costitems

(f) Undertake sensitivity analysis

(g) Evaluate and recommend best option.

Technical Manager 5. Review records in the asset register (manual orcomputerised Infrastructure Management System) toassess the class, category, quantity, location, valueand status of assets to be maintained and to identifymaintainable elements. Establish the service deliveryfunction which the asset supports, and the owner(occupant or user) of the asset.

6. Determine the ‘asset category level’ - a six-point scaleranging from 1 (superior) to 6 (low) that reflects the



function of the asset and its strategic importance to theState.

Note: This will have been undertaken as part ofthe asset strategy developed in Procedure 2.1:Developing an asset strategy.

Ref: For this and subsequent actions in thisprocedure, more information may be found inAssessing the Condition of Constructed Assets(1996), Asset and Building Policy, Office ofBuilding, Victorian Government, Australia.

7. In consultation with users, establish the ‘requiredcondition’ of the asset. This determination shouldreflect both the nature of the asset, and the use madeof it. Distinct parts of a single asset (such as differentareas of a building) may have different requirementsfor condition.

8. Assess the ‘actual condition’ relative to the requiredcondition defined in action 5. This may be done by acomprehensive physical inspection, by a samplesurvey, by reviewing existing preventative and cyclicinspection records, or by predictive methods that mayuse specialist technical advice.

9. Determine the ‘relative condition level’ - the differencebetween actual and required condition. This may beexpressed on a five-point scale ranging from -2 to +2,with 0 representing no difference, ie the actualcondition of the asset matches requirements.

10. Consult with users and assess the ‘condition impact’ -the effect of the condition surplus or deficiency onoutcomes such as economic performance, statutorycompliance, disruption to operations and visualappearance.

11. Use the condition impact information and relativecondition level information to determine the action tobe taken. This should include a schedule of requiredmaintenance works, with a preferred priority and timeframe.

How to do it

The maintenance effort to be applied to eachelement or asset must be consistent with the asset



category level, and required condition establishedin actions 5 and 6. It should include a preventativemaintenance program designed to retain thedesired condition level on a continuing basis, andto minimise the need for call-outs to deal withunexpected breakdowns or failures.

12. Identify the maintenance requirements of each assetor element in order to specify the required level ofmaintenance service. Maintenance servicerequirements should be defined in terms of:

‘reactive’ or breakdown maintenance, respondingto the failure or breakdown of building elements orservices. Response times to various categories offailure should be specified, as well as the periodsfor which the service is required.

Example

For example, in a prison it may be appropriateto provide a 24 hour, 7 day a week service.Breakdowns that affect prisoner security oraffect health and safety could require a 30-minute response time, and other breakdownsmay require a response by the next workingday.

a preventative maintenance service, designed toreduce costs and the incidence of failure inbuilding elements and services. This service isaimed at minimising disruption to users andreducing the number of call-outs that incur highercosts.

an ongoing program for the refurbishment orreplacement of major items such as plant andequipment, or building elements such as roofs,ceilings and windows.

13. Develop and negotiate maintenance serviceagreements between maintenance service providersand the clients (owners or users) of the facilities.These agreements will identify the performancerequired of each asset in supporting the client’s use ofthe asset, and should be defined in terms of the assetcategory and required condition.

14. Design and implement systems for the custody andupdating of asset records, the compilation ofmaintenance history, and the generation of progress



reports.

15. Calculate a budget for maintenance of the assetswhich reflects the maintenance service agreementsestablished in action 14. The budget should include:

all contract costs from service providers

all in-house costs incurred by maintenance staff,materials and spare parts

management costs, including the operation ofinformation systems and applicable overheads.

16. Gain approval for the maintenance service agreementsand budget as part of the output submission.

--------------------------------- End of Procedure 4.3 -------------------------------



Procedure 4.3.1 Implementing a maintenance plan


Purpose The maintenance plan is the basis for the conduct andmanagement of actual maintenance work conductedon the asset.

Maintenance plans are prepared from the assetstrategy (refer to Procedure 2.1: Developing an assetstrategy).

Frequency The maintenance plan should cover a rolling five-yearperiod and be reviewed annually.

Responsibility Technical Manager or Responsibility Centre Manager;Manager responsible for Finance


Corrective maintenance: actions performed as aresult of reported failure or breakdown to restore anasset to an appropriate working condition.

Major periodic maintenance: the replacement of, orsignificant repair work to, an asset or element. In thecase of buildings this includes lifts, roofs and surfacefinishes and air conditioning chillers, all of which areintegral parts of the building, but have a shorter lifethan the building. This is sometimes known as‘programmed maintenance’.

Preventative maintenance: actions performed on aregular or periodic basis to retain an asset in anappropriate working condition. It is aimed at reducingthe frequency of failure and involves systematicinspection, monitoring, and servicing of maintainableelements.



Actions

Property maintenance services will normally beprovided to an agency under a head contractorarrangement. In such situations, some of the actionsin this procedure will need to be undertaken inconjunction with the contractor..


1. Review available information to identify and assess:

records in the asset register (manual orcomputerised Infrastructure ManagementSystem): the class, category, quantity, locationand value of assets to be maintained

the service delivery function that the assetsupports

owner (occupant or user) of the asset

maintenance service agreements: review therequired condition for each asset and verify that itis still appropriate (see Procedure 4.3: Developinga maintenance management strategy).

2. Assess the current condition of assets, by assessingthe condition of their elements against the requiredcondition (refer to Procedure 4.3: Developing amaintenance management strategy).

If there is a deviation, identify the maintenance worknecessary to return the asset to the required standard.Prioritise and estimate the cost of that work.

3. Assess the adequacy of existing maintenanceprograms.

How to do it

The assessment should include a review ofcurrent performance, resources, support systems,contract arrangements, funding levels and plans,and should identify scope for further improvement.

Ref: Procedure 4.4: Assessing the performanceof assets.



4. If necessary, revise the existing maintenanceprograms so that the required condition can beachieved in a practical time frame. These will includeprograms for:

preventative (regular cyclical) maintenance

major periodic maintenance, long-termreplacement and renewal programs

and allowance for corrective (responsive) maintenancebased on historical requirements and on the levels ofpreventative and major periodic maintenance selected.

Note: Each maintenance program will identify thetype and frequency of maintenance based onstatutory requirements (eg specific legislation,Building Codes, International AccountingStandards), manufacturer’s recommendations andsite-specific requirements. The programs may bebased around set time intervals, operating cyclesor asset condition.

Judgement needs to be applied to the planning ofmaintenance works. For example, major worksare not appropriate for assets which will not beretained in the long term, or where the works costexceeds the acquisition cost of an identical newasset.

5. Review the projected cost of these programs and theavailable budget.

6. Develop forward budgets to fund maintenanceprograms.


7. As part of the output submission, gain approval for themaintenance programs and budgets prepared inactions 4, 5 and 6 and advise Responsibility Centreand Technical Managers of any changes.

Ref: Procedure 2.3: Preparing an output submission

Technical Manager 8. Revise the maintenance program based on theapproved annual budget.


9. Prepare an implementation program.

10. Monitor the performance of the maintenance programsin terms of both activities and outcomes.

Example



Performance measures may be used to monitorthe performance of the maintenance plans asfollows:

A performance measure for the maintenanceoutput may be ‘operational inefficiency due tobreakdowns’; eg the availability of the air-conditioning (ratio of total operational hours to totalrequired hours as a percentage).

A performance measure of preventativemaintenance activity may be ‘successfulcompletion of the program’; eg the maintenancecompletion rate (ratio of completed maintenancetasks to planned tasks as a percentage).

A performance measure of the preventativemaintenance inputs may be the ‘total cost ofpreventative maintenance’; eg the ratio of totalcost of preventative maintenance to the air-conditioned floor area of the building (baht/m2).

------------------------------- End of Procedure 4.3.1 ------------------------------

4.4 (page 1)


Procedure 4.4 Assessing the performance of assets

Guidelines Condition monitoring and performance assessmentneed to be undertaken regularly to provide feedbackon the operations and maintenance programs, and asan input to disposal decisions.


Purpose Monitoring the performance of assets providesinformation for decisions concerning:

maintenance and capital expenditure requirements

budget planning

asset acquisition, refurbishment, redeploymentand disposal.

Frequency Asset performance should be assessed and reportedon a regular basis consistent with managementreporting requirements for the asset.

Actions

This procedure is composed of three sub-procedures:

Assessing the performance of built assets (4.4.1)

Assessing the performance of other assets(4.4.2)

Assessing the performance of emergencyvehicles (4.4.3).

--------------------------------- End of Procedure 4.4 -------------------------------

Assessing the performance of assets 4.4 (page 2)


Procedure 4.4.1 Assessing the performance of built assets

Scope All buildings, and other high-value, long-life assetsrequiring regular maintenance

Responsibility Strategic Planner; Technical Officer; TechnicalManager or Responsibility Centre Manager

Key words Core assets: assets held by a Business Unit becausethey are considered to be necessary for the ongoingdelivery of Government services, or retained for publicinterest reasons (such as heritage or conservation).

Criticality: a measure of the importance of thefunction (service or product output) that an assetsupports.


Non-core assets: are assets not required for thelong-term service output of the Business Unit; or whichhave been identified as surplus and are awaitingdisposal or redeployment.

Performance: asset performance is assessed bymeasuring and analysing its key characteristics -criticality, utilisation, functionality and financialperformance and condition.

Technical Officer: assesses the condition of assets


References Assessing the Condition of Constructed Assets (1996),Asset and Building Policy, Office of Building, VictorianGovernment, Australia



Actions

A more detailed description of the procedure forassessing physical condition is given in: Assessing theCondition of Constructed Assets (1996), Asset andBuilding Policy, Office of Building, VictorianGovernment, Australia.

Strategic Planner 1. Establish rating scales for the asset performanceassessment:

(a) Establish a rating scale for criticality.

Criticality (or operational significance) reflectsthe extent to which the asset user dependsupon the asset in order to meet servicedelivery objectives.

A scale similar to the following could be adopted:

Table 4.1: Criticality rating scale

Rating scale Asset Description Examples

1Essential Core

Assets critical to theBusiness Unit’s ability todeliver services

Prison cells in acorrectionalinstitution

2Desirable Core

Assets that are required tomeet the Business Unit’sservice delivery objectives

Government officeaccommodation

3Not required Non-core

Assets which are surplus tothe Business Unit’s servicedelivery needs

Disused storageshed



(b) Establish a rating scale for utilisation.

Utilisation reflects how intensively the asset isused.


Table 4.2: Utilisation rating scale

Rating scale Description Examples

1Over utilised

Asset is used beyond itsintended capacity

Overcrowded cell blocksin a prison

2Continuous

Asset is in constant use 24 hour police stations,fire stations, airport

3High

Asset is used on a regular basisand for extended periods

Visitor reception area ofa hospital

4Normal

Standard level of usage Government officeaccommodation

5Under-utilised

Asset is not used to its full extent Facility not fully used orfully occupied duringtime available



(c) Establish a rating scale for functionality.

Functionality describes how well the assetsmatch the activities they support in terms ofspace, environment and location.


Table 4.3: Functionality rating scale

Rating scale Description Examples

1Ideally suited

Asset is purpose-designed for itsfunction

Cell block in acorrectional institution

2Very good fit

Asset supports the operations ofthe user very well

Bureau of BudgetBuilding

3Appropriate

Asset supports the operations ofthe user – the ‘default’ rating

Rented officeaccommodation

4Usable withdifficulty

The user may operate moreefficiently if the asset werechanged or improved

A poorly cooled officebuilding on a noisy roadin Bangkok

5Unsuitable

The user is unable to perform therequired function using this asset

Photocopier withinoperative paper feed

(d) Establish a rating scale for financial performance.

Financial performance may be measured bythe level of operating costs incurred, includingdepreciation and any capital charge that applyor the cost of borrowings where applicable.The level of operating costs may bebenchmarked against comparable facilitieselsewhere, or a new asset.

Where user charges are being made (such asrent), a rate of return may be calculated basedon the current valuation. Where possible,financial performance should be assessed ona life cycle basis using discounted cash flowtechniques.



At this stage financial performance should beranked on a relative scale using externalbenchmarks. If the internal rate of return can becalculated, one test that could be applied iswhether the rate of return is greater than thecapital charge or cost of borrowings. Assets thatshow a return less than a designated capitalcharge or cost of borrowings can be regarded ashaving poor financial performance.

Technical Officer 2. Assess the physical condition, using the ‘relativecondition level’ methodology described in Procedure4.3: Developing a maintenance managementstrategy, actions 7 and 8.

3. Assess the asset in terms of the rating scalesdeveloped in action 1.

The rating scale is used to analyse theperformance of the asset in relation to theoperational demands placed on it.


4. Establish an ‘asset action category’ for each asset,based on the outcome of action 3.

Asset action categories are determined from thecriticality, utilisation, condition and functionalityratings, and taking financial performance intoaccount.

Assets which do perform adequately should bereviewed to determine whether the performance ofthe asset can be improved (perhaps by capitalinvestment in it) or whether disposal orredeployment is indicated.

There are three possible ‘asset action categories’:

(i) Operate and maintain

An asset in this category has an importantpurpose, fits its purpose well, is intensivelyused, and is in good condition. If its financialperformance is satisfactory, it should beretained.

Such assets should be part of an ongoingoperations and maintenance program.

(ii) Refurbish

An asset that falls into this category fits itspurpose, but either has inadequate capacity,



or requires capital investment if it is toadequately support the Business Unit’sservice delivery objectives.

Such assets could be candidates for capitalinvestment to enhance or refurbish them.

(iii) Dispose

Assets that do not support the business of theBusiness Unit, or that do so inefficiently,should be considered for disposal.

5. Report on assets annually, in terms of the ratingscales, relative condition level and asset actioncategory, and retain this information for input into themaintenance management and asset strategy review.

------------------------------- End of Procedure 4.4.1 ------------------------------



Procedure 4.4.2 Assessing the performance of other assets

Scope Plant and equipment (typically high-volume, low-valueassets). Such assets are typically low maintenanceand have short lives, so the acquisition andreplacement planning of these assets assumes greaterimportance. Office equipment is an example.

Responsibility Technical Officer or Responsibility Centre Manager

Key words Technical Officer: assesses the condition of assets.

Actions

Technical Officer orResponsibility CentreManager

1. Carry out a physical inspection to determine the actualcondition of the asset. This may be linked to the stocktake process (refer to Procedure 4.8.2: Stocktakingassets) or as part of a regular inspection cycle.

2. Prepare an annual report on asset condition, and usethe resulting information in the strategic planningprocess (Procedure 2.1: Developing an assetstrategy).

------------------------------- End of Procedure 4.4.2 ------------------------------



Procedure 4.4.3 Assessing the performance of emergencyvehicles

Scope Emergency vehicles and appliances

Responsibility To be advised when this procedure is developed

Actions

This section will be added on further review of theprocesses used in monitoring the performance ofcritical vehicles and appliances.

------------------------------- End of Procedure 4.4.3 ------------------------------

4.5 (page 1)


Procedure 4.5 Administering property leases

Scope Established property leases

Purpose To address certain aspects of property leases requireperiodic review, re-negotiation or initiation of options

Frequency As required by the conditions of the lease, such asbefore the end of the term of the lease.

Responsibility Manager responsible for Property Management.

Actions

Manager responsiblefor PropertyManagement

1. Ongoing lease management will generally beconducted by a centralised property managementbranch.

2. Incorporate the aspects which are the Business Unit’sresponsibility into the operations and maintenanceplans and performance assessment (refer toProcedures 4.1: Preparing an operational plan; 4.3.1:Implementing a maintenance plan and 4.4: Assessingthe performance of assets).

--------------------------------- End of Procedure 4.5 -------------------------------

4.6 (page 1)


Procedure 4.6 Asset valuations and depreciation

Guidelines All assets are valued every five years, or morefrequently. There are various valuation bases and themethod applicable to a specific asset depends on itspurpose and nature.

The straight-line method of depreciation is used withinthe agency. Depreciation is charged monthly to theResponsibility Centre controlling the asset.

Scope All assets with values above the recognition threshold

Purpose Asset valuations are required for financial reporting, foruse in insurance assessments, for calculating thecharges to be made for the use of an asset, and forguiding investment and disposal decisions.

Depreciation is computed to allocate the cost of anasset over its useful life. Under accrual budgetingdepreciation has an effect on appropriations in theyear that it is costed. Depreciation not costed in theone financial year will draw upon future appropriations.

Frequency Valuations should be undertaken at the time ofacquisition, before disposal and at regular intervalswhich reflect the nature and category of the asset.

Depreciation is computed monthly use in the financialstatements.

Asset valuations and depreciation 4.6 (page 2)


Actions

This procedure is composed of three sub-procedures:

Valuing and revaluing assets (4.6.1)

Assessing the useful life of an asset (4.6.2)

Calculating depreciation (4.6.3).

--------------------------------- End of Procedure 4.6 -------------------------------



Procedure 4.6.1 Valuing and revaluing assets

Policy The agency requires that:

every recognised asset must be valued (referProcedure 1.1: Recognising assets)

the Fair Value method must be used to value anasset

no asset shall be revalued to greater than itsrealisable value

all non-current physical assets must be revaluedat least every five years

revaluation shall be in accordance with relevantguidelines as referenced in the followingprocedure.

Scope All assets with values above the recognition threshold

Purpose Asset valuations are required for financial andperformance reporting, to support repair andreplacement decisions, and in some cases for use ininsurance,. They are also needed to calculate the costof using an asset, and when charges are to be madeon users.

Frequency Valuations should be undertaken at the time ofacquisition, before disposal and at regular intervalswhich reflect the nature and category of the asset.

Responsibility Manager responsible for finance

Key words Asset category: is a sub-grouping of an asset classused for management control and reporting purposes.

Deprival Value method: a valuation method whichestablishes the cost to a Business Unit (if it weredeprived of an asset) of obtaining an equivalent oridentical asset.

Market value: the price that a willing seller wouldaccept from a willing buyer for an asset at currentprices (this does not include transaction costs).

Non-current asset: an asset having a potentialservice life longer than one year.

Recognition threshold: the value of an item belowwhich it does not have to be accounted for as an



asset. The threshold level is 50,000 baht. However,some lower-value items may be also recordedbecause, as a group, they represent a significant valueto the Business Unit.


(Refer here to the International accounting standard forvaluation) not to Australian Accounting Standard 10(AAS10): Accounting for the Revaluation of Non-Current Assets

Owners Guide to Briefing Valuers (1994), BOMA (nowProperty Council of Australia)

Recognition & Valuation of Non-Current PhysicalAssets, Department of Finance (1995) VictorianGovernment, Australia

Actions

This procedure should be carried out in accordance with(Refer here to the International accounting standard forvaluation) not to Australian Accounting Standard 10(AAS10): Accounting for the Revaluation of Non-Current Assets.


1. Determine the valuation or revaluation threshold thathas been set for assets controlled by the Agency.

Valuation threshold

The aim of this threshold is to avoid unnecessaryeffort being expended on assets of low-value items.It is normally set for various asset categories in theagency.

2. Determine the primary purpose and scope (range ofassets to be included) of the valuation. The purposemay be for:



financial reporting – information for statutoryreports, incorporation in financial statements andthe like

financial analysis - assessing asset performance,conducting life cycle cost analyses, calculating usercharges, etc

insurance - information for assessing riskexposure, and as a basis for insurance coverage

disposal or acquisition - to determine the likelyproceeds or cost, and as a basis for assessingoffers.

3. Determine whether the asset is ‘core’ or ‘non-core’.

core assets are held by a Business Unit becausethey are considered to be necessary for the ongoingdelivery of Government services, or retained forpublic interest reasons (such as heritage orconservation).

non-core assets are not intended to be replaced iflost or destroyed. This applies if the asset is notrequired for the long-term service output of theBusiness Unit; or has been identified as surplus andis awaiting disposal or redeployment.

4. Determine whether and when the asset should bevalued. An initial valuation is recorded at the time ofcommissioning, and generally corresponds with theacquisition cost. Subsequent revaluations should beundertaken periodically, at a frequency determined bythe asset category, and the operating environment.

Note: Where accurate records of asset holdings can beestablished, or where large numbers of similar types ofassets are involved (such as a library collection orcomputer hardware), sampling techniques may be usedto perform valuations when agreed with CGD.

Guidelines for revaluations

Full revaluations of non-current assets should beperformed at least every five years. Facilities whichare used for commercial purposes and wherevalues are likely to fluctuate according to the marketshould be valued more frequently.

Valuation reviews should be performed morefrequently, but need not result in a formalrestatement of asset values.



Adjustments based on indexation may be usedwhen the asset is operating in a stable environment,and is being operated and maintained in a mannerwhich is consistent with its expected useful life.Indexation should use an appropriate industry ortechnical index of price movements. Valuers, inconsultation with the Manager responsible forfinance can advise you which index should be used.(For example, in Australia, a useful index is theImplicit Price Deflator - Gross Fixed CapitalExpenditure, General Government, published by theAustralian Bureau of Statistics.

Full revaluations may be performed on a rollingbasis to even out the workload and demand forresources.

Figure 4.3: Revaluation process

Has the value of the asset changed

because of its condition or changes

in prices?

Has the asset been revalued in the

last five years?

Has there been a significant change

in the asset's value in the current

year?

Does the asset have a very long

useful life?Index the asset's value annually

Review and revalue the asset

No

Yes

Yes

No

Dispense with indexation and

revalue every five years

Yes

No

Yes

No

Ref: (Refer here to the International accountingstandard for valuation) not to AAS10 paragraph4.1(a), and Recognition & Valuation of Non-CurrentPhysical Assets, Agency of Finance, Victoria.



5. Consider whether the asset has heritage or culturalqualities.

Guidelines

The formal valuation of heritage assets should bebased on their functional performance and marketvalue, and exclude consideration of the heritagecharacteristics. However, the asset’s currentmarket value will probably not reflect the aestheticor social value of the asset.

The heritage worth of the asset, should appear inthe notes accompanying the financial statements.

Business Units should refer to the AccrualAccounting Manual from CGD for guidelines on howto value heritage or cultural assets. A note to theagency’s annual financial statements shoulddisclose that the asset’s true worth to the State isprobably only partly reflected in its reported value.

6. Using the Deprival Value method, select the appropriatevaluation base using the flow chart below.

Figure 4.4: Valuation base for assets



Is the asset a core asset?

Is the valuation required for

insurance purposes?

Does the asset produce a significant

Cash Flow?

Is a second hand value obtainable

for the asset?

Is the asset a heritage asset that

would be replaced by a replica?

Written-down replacement cost

Current market buying price

(second hand)

Net present value

Gross replacement cost

Net realisable value

No

Yes

Yes

No

Written-down reproduction cost

(record in notes)

Value at:

Yes

Yes

No

Yes

No

No

Ref: Further guidance is provided in Recognition &Valuation of Non-Current Physical Assets, Agency ofFinance, pp 4, 11-20.

7. Select a valuer to value the asset or assets.

Selection of valuer

Professional registered valuers, or consultants withexperience in the class of asset involved should bechosen.

Valuations for low-value, long-life assets (such asfurniture) may be developed by in-house staff, usingcurrent market prices as a guide. Other specialisedassets may be valued by in-house specialists suchas curators.

The professional registered valuers should be usedto value assets that are considered essential (seeprocedure 4.4.1, criticality)



8. Prepare written instructions for the valuer.

Ref: Owners Guide to Briefing Valuers (1994), BOMA (nowProperty Council of Australia)

9. Collate the data provided by the valuers, and considerany special conditions placed on the valuations.

10. Advise financial management operations of results ofasset valuations or revaluations for input into a manualor a computerised financial system.

Ref: Refer to 4 - Accounting treatment for details ofaccounting actions relating to updating asset valuationrecords.

11. Prepare disclosures for financial statements inaccordance with the requirements of (refer tointernational accounting standards not to AAS10paragraph 9).

------------------------------- End of Procedure 4.6.1 ------------------------------



Procedure 4.6.2 Assessing the useful life of an asset

Scope All assets except land

Purpose The useful life of an asset is used in life cycle costcalculations, depreciation calculations, and in planningfor asset repair or replacement.

Frequency The useful life of an asset should be determined whenthe asset is put into service, and when proposals forrefurbishment, modification or enhancement areconsidered. The estimated useful life should bereviewed annually.

Responsibility Manager responsible for finance; Technical Manager

Key words Useful life:


the estimated total service potential, expressed interms of production or similar units, that isexpected to be obtained from the asset.

Actions


1. Determine the useful life of the asset to the BusinessUnit, seeking advice from the Technical Manager asrequired and as set out in actions 2 to 4.

Technical Manager 2. Assess the potential technical life of the asset, that is,the period of time over which the asset can beexpected to remain efficient having regard to technicalobsolescence.

3. Assess the expected commercial life of the asset,corresponding to the utility of the product or output thatit generates (the possibility of alternative use of theasset needs to be kept in mind).

4. Assess the potential physical life of the asset, that is,



the period of time over which the asset can beexpected to remain in use from a physical point ofview, at its projected rate of usage and considering themaintenance plan appropriate to the asset.


5. Assess the legal life of the asset, that is, the period oftime during which the right or entitlement to use itexists.

6. Place a value on the useful life of the asset, based onthe shortest time (in years, production units or similar)of the alternatives calculated in actions 2 to 5.

Technical Manageror Managerresponsible forfinance

7. Annually review, and adjust if necessary, the usefullives of assets having regard to changes in factorssuch as:

wear and tear through physical use

length of time to technical obsolescence

length of time to commercial obsolescence

level of utilisation anticipated

net amount expected to be recovered on disposal.


8. Adjust the depreciation calculations for the asset toreflect the change in estimated useful life.

Ref: Procedure 4.6.3: Calculating depreciation

Note: The assessed useful life of a heritage asset islikely to be 100 years.

In a computerised system - such as Oracle Financials,the useful life of all assets within a category is thesame by system default. The useful lives of existingassets may differ from this default, as the remainingservice potential of these assets is reassessed onrevaluation.

------------------------------- End of Procedure 4.6.2 ------------------------------



Procedure 4.6.3 Calculating depreciation

Policy The Agency requires that:

depreciation is charged to the Cost Centrecontrolling the asset

depreciation charges are based on the straight-line method over the useful life of the asset

depreciation charge is calculated from the date ofacquisition or date placed in service and thesalvage value is assumed to be nil at the end ofthe asset’s estimated useful life (unless notedotherwise)

depreciation rates are reviewed annually to reflectthe most recent assessment of the useful lives

no depreciation is charged on land.

Scope All assets which exceed the recognition threshold

The only exceptions are land and antiques whichusually appreciate in value over time, although theymay be subject to market forces in the short-term.

Purpose Depreciation allows an asset’s full value to theBusiness Unit to be allocated over the asset’s usefullife. This value can be included in life cycle costing toidentify the full cost of using an asset in delivering aservice.

As depreciation is a major cost of operations for capitalintensive Business Units inaccurate estimates ofdepreciation will create the wrong information aboutthe cost of providing goods and services.

Frequency Depreciation must be reported in the financialstatements of the agency. Reports should be made tothe Responsibility Centre Manager controlling theasset.

Users and managers of assets should have the fullcosts of using the asset reported to them at an agreedfrequency. Full costs include operating costs such asenergy, cleaning and maintenance, and also non-cashcosts such as depreciation and the cost of capital (asexpressed in any capital charge or the cost ofborrowings).

Responsibility Manager responsible for finance



Key words Depreciation: the cost of using an asset, calculatedon a yearly basis by allocating the cost of an assetover its expected useful life to the Business Unit.

Capital charge: the means used to measure the costof capital that entities have invested in assets undertheir control.

Residual value: the estimated net proceeds to berecovered on the disposal of an asset at the end of itsuseful life. This may result in a positive or negativevalue.

References (Refer here to the International accounting standard forvaluation) not to Australian Accounting Standard 4(AAS4): Depreciation of Non-Current Assets

Actions

This procedure should be undertaken in accordancewith (Refer here to the International accountingstandard for valuation) not to Australian AccountingStandard 4 (AAS4): Depreciation of Non-CurrentAssets.

The Agency has adopted straight-line depreciationwhich should be applied consistently from reportingperiod to reporting period.

Ref: (Refer here to the International accountingstandard for valuation) not to AAS4 paragraph 4.4.7

The following flowchart sets out the process describedin this procedure.



Figure 4.5: Depreciation process

Is this asset land?

Determine the useful life

Estimate the residual value

Choose the depreciation method

Calculate depreciation

Is the result material?

Net realisable value

Yes

Yes

No

Dispense with depreciation for the

current period

No

Adjust asset value and review rate of

depreciation periodically in line with

the condition of the asset

Manager for finance 1. Determine the useful life of the asset.

Ref: Procedure 4.6.2: Assessing the useful life of anasset

2. Establish the acquisition cost (or current value) of the



asset, and the net amount expected to be recoveredon disposal of the asset at the end of its useful life(‘residual value’).

How to do it

In estimating the residual value of an assetconsider:

the existence of secondary markets

past experience of asset sales.

Residual values of items such as communicationsequipment are generally predetermined on thebasis of the age and condition of the equipment.

Where the residual value is insignificant incomparison to the acquisition cost of the asset, itis often ignored in calculating depreciation.

3. Determine the depreciation commencement date. Thedepreciation of an asset should commence when theeconomic benefits of the asset start to be used up, orotherwise decline (ie when the asset is first put to use,or held ready for use, whichever is the earlier).

Ref: (Refer here to the International accountingstandard for valuation) not to AAS4 paragraphs 4.2 to4.4

4. Using data entered in actions 1 to 3, the depreciationcharge is calculated and recorded in the asset register(manual or a computerised system - such as OracleAssets). This charge is calculated automatically by acomputerised system - such as Oracle Financials andrecorded in the appropriate ledgers.

How it is calculated

Depreciation is computed by deducting theresidual value from the original cost of the assetand dividing the result by the estimated useful life.For example:

Depreciation = Cost – Residual valueEstimated useful life

If depreciation is to be calculated for an assetwhich has been revalued, depreciation should bebased on the revalued amount.

Ref: (Refer here to the International accountingstandard for valuation) not to AAS4 paragraphs4.4.8 to 4.4.10



This method yields a constant depreciationexpense for each reporting period, unless theremaining life or residual value are reassessed.

Depreciation rates are commonly expressed as apercentage.

Note: Refer to Attachment 2 – Depreciationschedule for indicative asset category depreciationrates.

5. Annually review the depreciation rates to reflectchanges in useful life or residual value, for all assets.Make adjustments to the depreciation rates, ifnecessary.

6. Present, as a disclosure in the financial report for thereporting period, any increase or reduction in thedepreciation expense occurring due to:

the reassessment of useful lives of assets

changes in depreciable amounts as aconsequence of a revaluation

changes in depreciable amounts expected to berecovered on disposal.

------------------------------- End of Procedure 4.6.3 ------------------------------

4.7 (page 1)


Procedure 4.7 Recording asset expenditure

Scope All assets recorded in the asset register

Purpose To maintain accurate information on assets it isimportant to classify costs correctly. Expenditure oncapital improvements adds to the value of the asset,while repairs are treated as an expense and written offin the period in which they occur.

Frequency As required when expenditure is committed.

Responsibility Responsibility Centre Manager or Asset Officers



Recognition threshold: the value of an item belowwhich it does not have to be accounted for as anasset. The threshold level is 50,000 baht. However,some lower-value items may be also recordedbecause, as a group, they represent a significant valueto the Business Unit.

Refurbishment: extensive work intended to bring anasset up to a new standard or alter it for a new use.


Actions

Responsibility CentreManager or AssetOfficers

1. Determine whether the expenditure exceeds therecognition threshold established for the category ofasset being considered.

Recording asset expenditure 4.7 (page 2)


2. Determine whether the expenditure is directed towardan existing or new asset (refer to action 3 to ascertainwhether the expenditure is capital or maintenance).

If capital, the amount should be added to the value ofthe asset.

If maintenance, the amount should be recorded as anoperating expense. In this case, use a work order orsimilar to collect the costs and to record amaintenance history of the asset.

3. Assess whether an item of expenditure is a capitalimprovement or repair.

How to do it

(a) Capital improvement occurs when theexpenditure on an existing asset:

increases the asset’s service potential(through improvements to operatingcapacity, functionality or capability), or

increases its useful life.

Expenditure of this type includesenhancements such as extensions ormodifications to improve functionality.

(b) Normal maintenance and repairs maintainthe service potential and value of the assetover its planned useful life. Hence bothplanned and responsive maintenance shouldbe recorded as an expense. Similarly,consumables and expenditure on replacementparts, eg vehicle tyres, do not increase theoriginal service potential and should betreated as an expense.

(c) Refurbishment is carried out to restore anasset to an acceptable condition, to achievethe asset’s required useful life. In thesecases, refurbishment should be recorded asan expense. If the refurbishment results in anextension to the useful life, service potential orvalue of the asset, the costs must beapportioned between capital and recurrentexpenditure with only that portion of the coststhat result in the extension being capitalised.

Ref: Refer to 4 – Accounting treatment for detailsof accounting actions relating to recordingexpenditure on assets.

Recording asset expenditure 4.7 (page 3)


Example

Examples of the distinctions between capitalimprovements and repairs are shown in Table4.4.

Table 4.4: Examples of capital improvements andrepairs to buildings

Capital improvement Repair (recurrent expenditure)

Extension to the building Routine painting

Installation of a lift Lift maintenance

Landscaping Lawn mowing or gardening

Office upgrade Repair fire damage

Installation of a new securitydoor

Replace existing door

Installation of air-conditioning Maintenance contract includingservicing

General maintenance includingcleaning gutters and painting

--------------------------------- End of Procedure 4.7 -------------------------------

Maintaining data on existing assets 4.8 (page 1)


Procedure 4.8 Maintaining data on existing assets


Purpose The characteristics of assets change over their life. Alltransactions that affect the financial or operationalperformance of an asset must be recorded so thatperformance can be faithfully assessed and reported.Up-to-date information is needed for incorporation infinancial statements, and to assist with physical controland with repair and replacement decisions.

Frequency Transactions that affect assets should be recorded asthey occur.


Actions

Asset Officers 1. Identify any necessary changes to records in the assetregister (manual or a computerised financial systemand the manual or computerised InfrastructureManagement System), such as transfer, change instatus or disposal of assets. Specifically, the assetregister should be updated when (references toprocedures in this manual shown in brackets):

revaluations occur, the useful life of the assetchanges, or when depreciation is calculated (4.6)

expenditure is incurred on the asset (4.7)

transfers of responsibility for the asset take place(4.8.1)

stock takes take place (4.8.2)

the asset is disposed of, or written-off (5.2).



2. Complete an Adjustment Request form and obtain thenecessary approval in accordance with the appropriatelevel of delegation.

The Asset Adjustment Request form shouldcontain the following details:

responsibility

location

description of asset

tag number (if appropriate)

serial number

cost of adjustment.

3. Update information in the asset register (manual orcomputerised financial system and manual orcomputerised Infrastructure Management System) ifapplicable.

Ref: Procedure 3.5: Recording new assets, action 5

Refer to 4 – Accounting treatment for details ofaccounting actions relating to updating asset records.

--------------------------------- End of Procedure 4.8 -------------------------------



Procedure 4.8.1 Transferring assets between locations

Policy The agency requires that:

the Responsibility Centre or Location Managerauthorise the transfer of assets within the agency

the Responsibility Centre or Location Manager atthe receiving location to be advised of transferredassets

the forwarding Responsibility Centre is responsiblefor the security of the assets until they havereached their destination

the transfer can only be initiated and concludedbased on a correctly completed, and receiptedTransfer of Assets form.

Disposal of surplus assets to another Agency is nottreated as a transfer, instead the Agency must sell theasset to another agency.

Depreciation charges will accrue to the ‘owner’ of theasset as determined by details held in the assetregister (manual or computerised system - such asOracle Assets).

Scope All assets being moved physically between locationsincluding within Responsibility Centres

Purpose When an asset is identified as being surplus or when itis decommissioned to carry out repairs.

Frequency As identified in the disposal or operations andmaintenance plans.

Responsibility Responsibility Centre Manager; Transferring Officer

Actions

Responsibility Centre 1. Identify any assets to be transferred according to the



Manager disposal or operations and maintenance plans.

2. Determine the timing of the transfer in discussion withusers and arrange for decommissioning.

Transferring Officer 3. Determine the most appropriate transit arrangementsconsidering the nature of the asset and the distancebetween the locations.

Note: If you need to relocate a computer, pleasecomplete an IT Request form for each asset.

4. Advise the approved officer at the receivingResponsibility Centre of the transfer of assets by:

(a) If access to a personal computer and Email isavailable - initiate the transfer by sending an Emailmessage to the approved officer at the receivingResponsibility Centre. Include the followinginformation in the Email message:

forwarding and receiving Responsibility Centres(name and cost centre)

your name (Transferring Officer)

name of the Receiving Officer

name of the Responsibility Centre Managerauthorising the transfer and that of the manager atthe receiving location

reason for the transfer (eg repairs)

for each asset include the following details

asset number; asset tag, asset category;asset description

serial number; manufacturer (ifapplicable)

forwarding and receiving locations, sub-locations, activities

forwarding and receiving ResponsibilityCentre charge codes.

(b) If access to a personal computer and Email is notavailable - initiate the transfer by completing theappropriate details in the Transfer of Assets form,then mailing (keep the original and mail a copy) orfaxing it to the approved officer at the receivingResponsibility Centre. This form contains thesame information as that included in the Email



message above.

5. Obtain formal authorisation in accordance with theappropriate level of delegation from the ResponsibilityCentre Managers at both the forwarding and receivinglocations.

6. Implement the transfer arrangements when the formalapprovals are received.

7. Seek approval at the receiving location in accordancewith the appropriate level of delegation to acknowledgethe transfer.

8. The receiving Responsibility Centre has to haveaccess to a manual or a computerised financialsystem, to enter the details of the transfer into theasset register to conclude the transfer as soon as theacknowledgement is received.

Ref: Refer to 4 – Accounting treatment for details ofaccounting actions.

9. If the receiving Responsibility Centre cannot access acomputerised financial system, send or fax theTransfer of Assets form to the agency Accounting andFinance branch for them to enter the details of thetransfer into the asset register (manual orcomputerised financial system) to conclude thetransfer.

------------------------------- End of Procedure 4.8.1 ------------------------------



Procedure 4.8.2 Stocktaking assets

Scope All assets (except land and buildings), and portableand attractive items

Purpose The purpose of a stock take is to:

verify that the asset register is complete andaccurate

ensure that all assets recorded physically exist

ensure that all physical assets are recorded in theappropriate accounting period.

Frequency Annually. It is not necessary to undertake the fullstock take at one time, and a rolling program is often apractical approach.

Responsibility Manager responsible for finance; Stock takeSupervisor; Location Managers; Count Teams; DataEntry Personnel


Asset class: groupings of assets having a similarnature or function, such as land, buildings, plant andequipment.

Count Teams: team established to undertake thestock take survey at each location. Comprises twomembers; one familiar with the location and the otherindependent of the custody, movement and recordingof the assets. Reports to the stock take supervisor.

Data Entry Personnel: enters data into the assetregister, such as following a stock take.

Stocktake Supervisor: plans, organises and controlsthe stock take survey process and reports to theResponsibility Centre Manager.



Actions

As an alternative to this procedure, undertake anannual verification of assets at your ResponsibilityCentre, complete the Certificate of Asset Verificationform and file the form for audit purposes.


1. Appoint Stock take Supervisor.

The Supervisor should be an official, independentof the actual stocktaking procedures, available toanswer all queries in relation to the stock take andto maintain proper control over the progress of thecount.

Stocktake Supervisor 2. Prepare stock take instructions. The instructionsshould cover all aspects of the count, such as:

definition of items to be classified as assets

date and time of the count

requirements for the moving and issuing of assetsbefore and during the stock take

the stock take team members

locations to be covered by the count

use of barcodes or labelling of assets

use of scanners

contact officers and their telephone numbers forthe resolution of any difficulties likely to arise.

3. Advise all Location Managers of the count, includingextent, timing and the parties involved.

4. Organise Count Teams of at least two officers perteam.

Each Count Team is to include:

an officer familiar with the area being counted, andthe assets to be counted

an officer independent of the custody, movement,and recording of these assets.




5. Hold a pre-stock take meeting with officers involved inthe stock take to distribute and explain the instructionsprepared in action 2.

6. Assign identifiable area or areas to each Count Team.

A map or plan of each area could be provided toeach Count Team to help plan and control thecount.

Stock takeSupervisor

7. If the stock take is to be computerised, prepare datacollection forms or arrange for the necessary computerhardware and software to allow input of stock takeinformation directly.

Data collection forms should be numberedsequentially and contain information from theasset register or space for the collection of thefollowing information:

asset

class and category to which it belongs

serial number

location

condition

purchase order number, date and purchaseprice (if known).

8. Obtain sufficient barcodes or labels for use in the stocktake and keep them in a secure place.

Barcodes or labels should be pre-printed insequential order.

Ref: Refer to Appendix A at the end of section 3for further information on asset tagging.

9. Prepare a register indicating the issue of barcodes orlabels to Count Teams and for recording any that arelost or damaged.

Barcodes or labels should be issued and used insequential order.

10. Test the procedures and equipment by running a trialstock take on a representative area using equipmentand stationery that is to be used in the full count.



11. Re-appraise methods on the basis of the trial ifnecessary.

12. Issue sufficient barcodes to each Count Team beforethe count, recording the number block issued to eachteam.

Location Manager 13. Prepare areas to be covered by the count.

How to do it

Small and portable items should be arrangedin a manner convenient for counting (ieremoved from cupboards, etc).

Any portable assets removed temporarily fromthe premises, such as portable computers andmobile telephones, should be returned beforethe counting begins.

Arrangements should be made to countassets kept at off-site locations. Whereemployees have equipment owned by theBusiness Unit at their own homes, or in otheroffices, these assets may be counted by wayof written confirmation addressed to the Stocktake Supervisor.

Segregate from other assets any that aredamaged or identified for write-off or disposal,or ensure that they are clearly identified.

Count Teams 14. Conduct the count.

How to do it

(a) Officer 1 is to identify the asset and label it (ifnot already labelled)

(b) Officer 2 is to record details of the asset on adata collection form or input informationdirectly into the asset register (manual orcomputerised financial system).

Note: The Count Team should adopt a systematicapproach to locating assets to avoid the possibilityof missing or duplicating any items. Wherepracticable, each asset is to be physicallyinspected and identified. Where physicalinspection is not possible, written confirmation ofexistence must be established through alternativemeans.

(c) Officer 1 should assess the current working



condition of the asset and record it on theform or enter the data. Make enquires ofofficers with knowledge of the assets whereappropriate.

(d) Both officers should initial each data collectionform indicating their confirmation of the dataaccuracy.

15. Place barcodes or labels on all assets not previouslyrecorded or labelled. All barcodes or labels are to beplaced on assets in a readily visible (or appropriate)position. A consistent approach should be used inpositioning the labels on assets.

Note: Where it is not possible to affix a label thatwill remain intact during normal use (or wherelabels should not be affixed for security purposes),the asset should be recorded with its serialnumber as the asset number prefixed by a letterindicating the asset class. A ‘loose label register’should be used for these assets.

16. Inform the Location Manager if any personal issueassets have not been returned for the count.

17. At the end of each day during the count, batch thecompleted forms in sequential number order andreturn them in an envelope to the Stock takeSupervisor. Follow up any gaps once the forms havebeen placed in order.

Similarly, if an electronic system is being used, printout and sign the reports before returning them at theend of each day.

18. Advise the Location Manager of rooms, sections orlocations where you could not gain access. Re-schedule inspection where possible, otherwise advisethe Stock take Supervisor.

19. At the end of the count, return all completed forms andall unused labels and forms to the Stock takeSupervisor. If an electronic system is being used, afinal print-out should be returned together with anyequipment used.

Note: If any labels are damaged or lost, you mustinform the Stock take Supervisor so that theselabels can be recorded on the barcode register.




20. Arrange for off-site counts (including the issue orsubsequent receipt of barcodes) and arrange andreceive confirmation of assets held at officers’ homesor other locations. Record details of these off-siteassets on data collection forms.

21. Update the barcode register for labels which havebeen lost, damaged or returned.

22. Ensure that all labels not used by Count Teams arereturned and kept in a secure place.

23. As data collection sheets or print-outs are returned,ensure that data is checked for accuracy andconsistency before data entry or data down-load. Thecheck should include:

legibility

sequential numbering of forms

confirmation or matching with an issued purchaseorder

identification of incomplete forms and return toappropriate count team for completion.

Note: Take care to prevent loss or damage ofthese forms both pre- and post-data entry to thesystem. No paperwork is to be destroyed withoutconsent.

24. Review data collected at each location to ensure thatall assets have been labelled and counted.

25. Identify any assets acquired or disposed during thestock take process. Ensure that these assets arelabelled and that all details are recorded on a datacollection form.

Data Entry Personnel 26. Input the data to the system from the data collectionforms.

27. Advise the Stock take Supervisor of any mandatorydata fields left blank or any new codes.


28. Gain approval from the Manager responsible forfinance for new asset codes or for clarification ofwhether items are assets.



29. Randomly check data entered into the system againstthe data collection forms for accuracy andcompleteness.

30. Reconcile the results of the stock take with the assetregister (manual or computerised financial system).Discrepancies are to be dealt with as follows:

items on the asset register not located: checkrecords to see if the item has been disposed ortransferred. If so, amend the asset registeraccordingly. If not, refer to the ResponsibilityCentre Manager who will decide whether to initiatewrite-off action, or action to investigate theft orfraud.

items located in the stock take, not on theasset register: check records to see if purchaseor other acquisition information can be found. Ifso, enter the item on the asset register as a newasset. If not, refer to the Responsibility CentreManager for a decision.

31. Report the results of the stock take to ResponsibilityCentre Managers and the Manager responsible forfinance.

------------------------------- End of Procedure 4.8.2 ------------------------------



Procedure 4.8.3 Undertaking general ledger reconciliations

Scope All records in the asset register (manual orcomputerised financial system)

Purpose To maintain the accuracy of the asset registerBusiness Units are required to periodically reconcilethe general ledger control accounts for their own costcentres. For each class or category of assets, thereconciliation process should separately cover thethree main components:

cost/revalued amount

depreciation expense

accumulated depreciation.

Frequency As specified by CGD

Responsibility Asset Officers; Finance

Actions

Asset Officers 1. On an agreed basis, carry out reconciliations for eachof the cost centres to identify any differences andcorrect the relevant records. You must investigateany unreconciled or unsupported items on a timelybasis.

Make an appropriate manual General Ledger entry tocorrect the transaction record.

Identify any records in Computerised System -such as Oracle Assets requiring adjustment byreviewing the monthly control reports for:

asset purchases

asset disposals

erroneous records appearing in the assetregister.

Table 4.5 below provides guidance on preparingreconciliation reports from A computerised system



- such as Oracle Financials.



Table 4.5: Assets reconciliation procedures

Assets cost accountreconciliation

1. Prepare a Cost Summary Report inmanual systems or run a CSR if using acomputerised assets module (select bycost centre and the period ofreconciliation).

2. Prepare (in General Ledger if manualsystem) or run a Trial Balance SummaryReport in the General Ledger module(select by cost centre and the period ofreconciliation).

3. Select all Assets Cost Account EndingBalance from both the above reports andfill in (Assets) Cost Summary Reportcolumn, (GL) Trial Balance SummaryReport column and a Doc Ref. Column ifcomputerised.

4. If there is any variance, report it to theAssets Accounting Officer who is toinvestigate the problem.

Assets accumulateddepreciation(reserve) accountsreconciliation

1. Prepare (for manual systems) or run aReserve Summary Report in acomputerised assets module (select bycost centre and the period ofreconciliation).

2. Prepare in a manual in General Ledgeror run a Trial Balance Summary Report ina General Ledger module (select by costcentre and the period of reconciliation).

3. Select all Assets AccumulatedDepreciation (Reserve) Accounts EndingBalance from both the above reports andfill in (Assets) Reserve Summary Reportcolumn, (GL) Trial Balance Summary 1Report column and Doc Ref. Column ifcomputerised.

It should be noted that the AccumulatedDepreciation (Reserve) Accounts shown in(GL) Trial Balance Summary Report are anegative figure whilst the AccumulatedDepreciation (Reserve) Accounts shown in(Assets) Reserve Summary Report are apositive figure. (irrespective if manual orcomputerised).

4. If there is any variance, report it to theAsset Accounting Officer who willinvestigate the problem.



Assets clearingaccountsreconciliation

1. Prepare or run Reconciliation of AssetsClearing Accounts.

Assets depreciationexpense accountsreconciliation

1. Prepare in a manual system or run aJournal Entry Reserve Ledger Report incomputerised assets module (do by costcentre and the period of reconciliation).

2. Prepare or run an Accounts AnalysisReport in a manual system or a GeneralLedger module (select by entity, accounts,cost centre and the period ofreconciliation).

3. Prepare for manual systems or run TrialBalance Summary Report in the GeneralLedger module (select by cost centre andthe period of reconciliation).

4. Select all Assets Depreciation Amountcolumns from the Journal Entry ReserveLedger Report. (select account total, andtotals of particular Depreciation ExpenseAccounts from Accounts Analysis Report).

5. Fill in (Assets) Reserve Ledger Report,period Depreciation Amount column and(GL) Accounts Analysis Report of periodDepreciation Amount column and Doc Ref.Column if computerised.

6. Prepare or select all assets Year –To-Date Depreciation column from the JournalEntry Reserve Ledger Report, of yourselected account total and selectDepreciation Expense Account from TrialBalance Summary Report which showsYTD Depreciation Expenses.

7. Transfer in (Assets) Journal EntryReserve Ledger Report amount into YTDDepreciation Ending Balance column, (GL)Trial Balance Summary 1 Report, YTDDepreciation Ending Balance column.

8. If there is any variance, report it to theManager responsible for assets accountingwho will investigate the problem.

(a) General ledger has been updated but the assetregister has not

All purchases and acquisitions (including attractiveitems) should be traced to the asset register



(manual or oomputerised assets model) as part ofthe reconciliation of asset purchases. Thisrequires transactions to be cleared each agreedperiod from the ‘Mass Additions’ area of acomputerised financial system (ie the clearingexpense account).

Note: Never allow transactions to accumulate inthe ‘Mass Additions’ area.

(b) Asset register has been updated but not thegeneral ledger

This situation may occur through disposal and/orretirement but there may also be other reasons.

Reconcile the proceeds of the asset disposalsrecorded in an ‘Asset Disposal Suspense Account’with the Disposal or Retirement/Invalid Recordsforms or other supporting information. You maycreate unreconciled or unsupported amounts tosundry revenue if the Responsibility CentreManager approves.

The ‘Asset Disposal Suspense Account’ is to becleared through automatic postings from the assetregister ( manual or computerised assets module)on posting of the retirement details.

(c) Invalid records in ‘Mass Additions’

While asset records are in the ‘Mass Additions’ orclearing account of a computerised system,records may be ‘deleted’ for valid reasons.

It is possible to ‘delete’ any these records prior tothe first depreciation run. No depreciation willhave been incurred because the items have notbeen posted to the asset register (manual orcomputerised assets module). A manual journalentry is required to correct the clearing account.

Once the depreciation schedule has been run orentered into a manual system, you can no longerdelete any asset records, instead, the asset mustbe formally ‘disposed’ of and retired (seeProcedure 4.8.4: Deleting asset records).

(d) Invalid record in asset register

An record may have been capitalised on the assetregister but:



does not meet all the required recognitioncriteria of an asset, eg have an originalacquisition cost of less than 50,000 baht

due to an administrative error has beenrecorded twice

the asset may not have been received by theResponsibility Centre (and can be proven andsubstantiated by the Responsibility CentreManager). Such cases must stand up to anyexamination by Internal or External Audit

the control of the asset has moved to anotheragency or another Responsibility Centre of theagency (and can be substantiated thatGovernment or organisational change hasoccurred).

In all instances refer to Procedure 4.8.4: Deletingasset records.

Note: Responsibility Centres should checkwhether depreciation adjustments are required.Responsibility Centre Managers must ensure alldepreciation journal entries are performed. Failureto adjust depreciation in these circumstances willlead to an overstatement of depreciation expensesand accumulated depreciation. If the adjustmentis not made, these errors will continue to have anadverse effect on the consolidated accounts.

(e) asset revaluations are not recorded

Appropriate adjustments should be made to theindividual asset records. Refer Procedure 4.8:Maintaining data on existing assets.

(f) additions to assets have not been capitalised

Appropriate adjustments should be made to theindividual asset records. Refer Procedure 4.8:Maintaining data on existing assets.

Business Units 2. Clear the Asset Clearing Account at agreed periods aspart of the accounting process. This will show for eachResponsibility Centre and each period, the items whichhave:

been purchased, ie paid and accrued

not yet been transferred to the asset register.



Note: The Asset Clearing Account is a centralclearing account from which assets are transferred tothe asset register (manual or computerised assetsmodule).

------------------------------- End of Procedure 4.8.3 ------------------------------



Procedure 4.8.4 Deleting asset records

Policy The agency requires that records may only be deletedunder the following conditions:

a full and unambiguous description of the invalidasset must be provided to ensure that it cannot beconfused with other assets at the ResponsibilityCentre

the Responsibility Centre Manager must providewritten authorisation by signing theRetirement/Invalid Records form

there must be a segregation of duties that requiresthat at least two officers authorise the form, ie theappropriate Responsibility Centre Manager andone other authorised officer in accordance with theappropriate level of conferral (delegation)

the reason for deleting invalid records must satisfyinternal control procedures.

Scope All asset records which have been confirmed as invaliddue to an administrative error

Purpose Invalid asset records must be deleted from the assetregister to enable decisions to be made based onreliable and up-to-date information.

Frequency Whenever an asset record is confirmed to be invalid,and preferably before the monthly depreciationschedule is run by Finance.

Responsibility Business Unit Manager; Asset Officers



Actions


1. Develop authorisation procedures and controls tosafeguard against unauthorised deletion of assetrecords.

Note: Security arrangements are necessary tosafeguard against fraud, theft and anyunauthorised deletions. This applies particularly tohigh-risk exposures when large numbers of itemswith an acquisition cost of less than 50,000 bahtare deleted from the asset register.

These items may be low in value but are in thehigh-risk category because of their susceptibility totheft and pilfering.

Business Unit Managers should periodicallyinspect control reports relating to deletions andsatisfy themselves that adequate internal controlsand security mechanisms are in place and areoperating efficiently and effectively in theResponsibility Centres for which they areresponsible.

Ref: Refer to Appendix A at the end of section 4for further details on securing assets.

Asset Officers 2. Identify any invalid asset records by reviewing theperiod’s control reports for records which:

do not meet all the required recognition criteria ofan asset

have an original acquisition cost of less than50,000 baht

are assets but, due to an administrative error,have been recorded twice

can be proven and substantiated by theResponsibility Centre Manager that theResponsibility Centre did not receive the asset.Such cases must stand up to any examination byInternal or External Audit.



can be substantiated that, due to Government ororganisational change, the control of the asset hasmoved to another agency or anotherResponsibility Centre of the agency .

3. Establish valid reasons for the deletion of assetrecords which may have arisen from:

feedback from the asset verification procedure(refer Procedure 4.8.2: Stocktaking assets)

review of the period control reports on thereconciliation of the asset register (refer Procedure4.8.3: Undertaking general ledger reconciliations).

Note: Vague reasons (such as asset is missing, assetcould not be found at the time of the stock take, andasset is located at another Responsibility Centre) arenot acceptable. A descriptive explanation of themissing asset must be provided, for example, if anasset is missing you must report the investigation youhave performed and the officers you have contacted toobtain the information supporting the deletion.

If there is no physical asset to dispose of, a Board ofSurvey is not required, but a Retirement/InvalidRecords form should be completed by the disposalofficer and authorised by the approved delegate.

This situation can also arise if you miss the time beforethe first depreciation run. After this event, you can nolonger ‘delete’ the unnecessary record but you mustnow ‘dispose’ of this asset and then officially retire it. Ifassets have been recorded on the asset register, butare no longer valid, the Responsibility Centre Managershould initiate the removal of these invalid assets

Note: The depreciation adjustment will need to beperformed by the Responsibility Centre.

4. Prepare the Retirement/Invalid Records form.

5. Obtain approval for deletion of the invalid record inaccordance with the appropriate level of delegation.

6. Delete the invalid record and file the Retirement/InvalidRecords form for later examination by audit.

Ref: Refer to 4 - Accounting treatment for details ofaccounting actions related to deleting asset records.



7. Re-enter the correct asset record if required.

------------------------------- End of Procedure 4.8.4 ------------------------------

4.9 (page 1)


Procedure 4.9 Developing and using performancemeasures

Scope All products and services delivered by the BusinessUnit which require assets to be used in the product orservice delivery.

Purpose Performance measures are quantifiable units ofmeasurement used to assess whether the output hasbeen provided as intended. These measures are usedin planning and management to:

assist decision making

provide information needed for internal andexternal reporting

provide a basis for establishing targets.

Performance measures do not measure managementor organisational performance, which are usuallyassessed in terms of efficiency, effectiveness orequity.

Frequency Performance measures should be determined andpresented on a regular basis (generally monthly andquarterly) consistent with management reportingrequirements for the asset. The performancemeasures developed should be reviewed at leastannually to ensure that they continue to be relevantand valid measures of the Business Unit’s outputs.

Targets are specific measures of quantity, quality, costand timeliness of an output against which an BusinessUnit can assess progress and manage performance.


Developing performance measures 4.9 (page 2)


Key words Outputs: products and services produced anddelivered by a Business Unit for customers outside theUnit. (Inputs are the labour, materials and otherresources used to produce outputs.)

Output groups: groups of homogeneous outputswhich contribute to a common service and have thesame customers, and usually relate to a discrete policyobjective.

Performance measures: measures of quantity,quality, cost and timeliness used to assess theproduction or delivery of outputs.

Targets: the intended quantity, quality, cost andtimely provision of the output.

References Chapter ???

Actions

Performance measures will be automatically generatedby the manual or computerised InfrastructureManagement System when it is fully implemented.


1. Review the Corporate Plan, and the Business Unit’sservice delivery strategy and Business Plan to identifythe outputs to be provided by the Business Unit.

Ref: Chapter ???

2. Group those outputs which:

contribute to a common service; or

have the same customers; or

usually relate to a discrete policy objective.

3. In consultation with customers, if appropriate, developperformance measures for each output group. Theperformance measures should preferably beexpressed as a ratio or per unit assessment of whetherthe output has been provided as intended, in terms of



at least one of the following criteria:

quantity (how much or how many?)

quality (how well?)

timeliness (frequency or promptness)

cost (unit cost).

Selection of performance measures

Consider measures used by customers to judgethe outputs received - that is, value and service -in selecting appropriate measures. Value ismeasured by quantity and cost, and service byquality and timeliness.

Quantity measures should never be used on theirown as they only measure throughput, which is nota reliable measure of performance.

Select appropriate measures rather than oneswhich are easy to collect data.

Make sure that there is a sufficientlycomprehensive range of performance measures tocover all significant elements and attributes of theoutput.

4. For each performance measure:

identify its purpose

determine the staff member who is accountable forthe outputs.

5. Make sure that relevant performance measures havebeen adopted by using a checklist, such as the one inOutput Specification and Performance Measurement(1997), Department of Treasury and Finance, p 25,Victorian Government, Australia.

6. Identify the base information required to prepareperformance measures and establish processes tocollect and record the necessary data.

7. For each performance measure, establish at least onetarget to suit the circumstances of the Business Unit.

Consider the following approaches in establishingtargets:

current performance

current performance plus a percentage increase



best existing practice (state/national/industry)

best theoretical practice

published standards (professional organisations)

management decisions considering internalresource limitations.

Note: The targets selected should be presentedas numbers or percentages as appropriate andshould be realistic and achievable yet challenging.

8. Prepare a summary for each output group detailing theperformance measures, purpose, accountability,target(s), time frame or milestone for achievement ofthe target.

9. Calculate performance measures regularly to allowperformance to be tracked over time and compare withtargets established in actions 7 and 8.

10. Systematically review the performance measures andtargets at least annually to ensure relevance, validityand practicality. Repeat action 5 above as part of thisprocess.

--------------------------------- End of Procedure 4.9 -------------------------------

4.10 (page 1)


Procedure 4.10 Reporting on assets


Purpose Reporting on assets assists in three managementfunctions:

physical security and control of assets

communication of aggregated financial informationdetailing the extent to which resources wereconsumed in providing services, the suitability ofthe assets in meeting the Business Unit’sobjectives, and the ability of the asset base tocontinue to provide services

helping management make decisions about:

the assets required to meet service provisionobjectives

asset performance in delivering services

repair, refurbishment or replacement of assets

costing of services to determine economicviability of charges or to quantify the value ofsubsidies.

Frequency The frequency of reporting varies:

issues relating to control and security of assetsneed to be reported monthly

accounting statements need to be prepared anddistributed monthly

financial and non-financial reports formanagement purposes need to be prepared anddistributed either monthly or quarterly

other reports as required.

Responsibility Finance or Technical Manager; Responsibility CentreManager

References Refer to International Accounting Standards and not toAustralian Accounting Standard 29 (AAS29): FinancialReporting by Government departments

Reporting on assets 4.10 (page 2)


Actions

This procedure should be carried out in accordancewith (Refer to International Accounting Standards andnot to Australian Accounting Standard 29 (AAS29):Financial Reporting by Government departments

Finance or TechnicalManager

1. With individual managers, agree on the level of detailand format for each of the following types of reports:

(a) Reports for control purposes (manual orcomputerised assets module and manual orcomputerised Infrastructure ManagementSystem)

These should be compiled and reconciled withactions authorised in the previous period. Reportsshould be provided to each Responsibility CentreManager covering assets for which the centre hasresponsibility. The reports should include:

assets written off

asset acquisitions including purchases andconstruction

disposed assets

assets transferred between business units

exception reports.

(b) Accounting statements (manual orcomputerised)

These should be compiled at agreed periods foreach Responsibility Centre Manager. The reportsshould include:

written-down value of assets held at thebeginning of the period

depreciation for the period (and accumulated)

cost of additions for the period

cost or replacement value of assets held atthe beginning of the period



cost or replacement value of disposals madeduring the period

written-down value of disposals made duringthe period

written-down value of write-offs made duringthe period

proceeds for disposals made during the period

value of asset revaluations made during theperiod

value of asset devaluations made during theperiod

written-down value of assets held at the endof the period.

Reports on assets received free of charge orthrough finance leases should be separatelyidentified to reports on owned (and controlled)assets.

(c) Management reports (manual or computerisedInfrastructure Management System)

These should include both financial and non-financial information, which will be sourced fromthe asset register and financial systems as well asfrom other records and systems.

Financial reports should include:

actual versus budgeted capital expenditure(agreed period)

life cycle costs for each significant asset (lifeto date, month and year to date andanticipated future expenditure) (agreedperiod)

maintenance programs to occur over the nextperiod (quarterly)

replacement programs to occur over the nextperiod (quarterly).

Non-financial reports may include:

condition, utilisation and functionality reportsfor significant assets (annually)

Ref: Procedure 4.4.1: Assessing theperformance of built assets

service delivery outcomes which may be



measured through customer satisfaction,number of accidents, number of complaints,etc

service delivery outputs which may bemeasured by number of customers serviced,etc

service delivery inputs including resourcecosts, number of staff, hours of operation,usage of equipment, etc.

The presentation of non-financial reports willgenerally include the use of performancemeasures. These measures should be used toshow trends over time and performance againstbenchmarks or targets.

Ref: Procedure 4.9: Developing and usingperformance measures

(d) Insurance reports (manual or InfrastructureManagement System)

The Risk management expert requires BusinessUnits to provide annually:

a copy of the asset risk register and riskmanagement strategy

a report on the implementation of the riskmanagement strategy.

(e) Government reports (manual or computerised)

The reports which must be submitted togovernment are:

a statement of assets and liabilities (balancesheet)

an income and expenditure (operating)statement

a cash flow statement (sources andapplications of funds).

(f) Output management reports (manual orcomputerised Infrastructure ManagementSystem)

Business Units are required to report performancemeasures and targets annually in the Agency’sBusiness Plan.



2. Prepare and distribute the reports.


3. Assess the information provided in the reports andtake appropriate action if required.

-------------------------------- End of Procedure 4.10 ------------------------------

4 - Accounting treatment (page 1)


Accounting actions

Transferring assets (Procedure 4.8.1: Transferring assets betweenlocations)

Commissioning repairs

An asset may become unusable and require temporaryreplacement during the time of a repair. In this situationyou must treat the replacement activity as individualtransfers within Oracle.

The first transfer initiated is to move the asset torepairs.

The second transfer is of a spare part to replace theasset being repaired (refer below).

When the repairs have been concluded and the asset isready to be recommissioned, further transfers may berequired.

The third transfer recommissions the repaired assetback to its original location or into the spares pool.

If the repaired asset is recommissioned, then the sparewhich was used temporarily will need to be transferredback to the spares pool.

Transferring plant and equipment spares

When plant and equipment spares are transferred togetherwith an asset or by themselves, they are effectively soldand repurchased:

the forwarding Responsibility Centre records disposalof spares

the receiving Responsibility Centre records anacquisition.

Allocating depreciation charges

When the transfer of an asset is recorded in the assetregister (manual or computerised assets module), allaccounting responsibility is transferred to the receivingResponsibility Centre or Location. Consequently, futuredepreciation charges will accrue to the new ‘owner’ fromthen on.

Modifying asset records (Procedure 4.7: Recording asset expenditure)

Capital works undertaken to an existing asset



When capital works are undertaken to modify an existingasset, the following procedure applies:

all costs in relation to the modification of the asset arerecorded in a work in progress account

when the modification process is completed, costsfrom the work in progress account are transferred tothe relevant asset

useful life of the modified asset is reassessed.

When the modification is complete ie capital works are forthe upgrade of an existing asset, you should describe thenew asset accordingly and ask the Asset Officer to recordit as a ‘child’ of the existing asset.

Adjustment to acquisition cost

Cost adjustment is a variation (increase or decrease) to theacquisition cost previously recorded for an asset.

Cost adjustments apply to those assets where the servicepotential is varied as a result of additional componentsbeing purchased or produced for that existing asset.These components normally enhance the service potentialof the existing asset, but have a limited value asindependent components until they become an integralpart of the existing asset.

Cost adjustments are treated as an acquisition (or negativeacquisition) with regard to the asset register (manual orcomputerised assets module).

If you think this applies to you, please contact youragency’s financial management operations.

Valuing and revaluing assets (Procedure 4.6: Asset valuations anddepreciation)

Revaluation of individual and categories of assets

All assets, including antiques, must be revalued every fiveyears to comply with the guidelines of the Bureau of theBudget.

Where a non-current asset is revalued, all the assets withinthe category must be revalued on a consistent basis. Thismust happen immediately after the revaluation is made andbe stated at values of substantially the same date, exceptwhere:

items of property, plant and equipment may berevalued progressively, providing that the revaluations



are conducted in a systematic manner and that allassets within that category are revalued on aconsistent basis within a three year period

downwards revaluations of individual assets may bemade without revaluing the entire category of asset.

The following section describes the responsibilities andapproach to valuing specific classes of assets:

Land and buildings

The co-ordination of the valuation of land and buildings willgenerally be the responsibility of a centralised unit in theagency.

Valuation of land and buildings must comply with theInternational Accounting Standards, the guidelines issuedby the CGD and the guidance notes on the valuation offixed assets for financial statements issued by expertbodies such as the Australian Institute of Valuers and LandEconomists Inc.

Land

Land is revalued and offset in the Asset RevaluationReserve in circumstances where the value:

increases or decreases due to market forces

would have a material effect on the Statement ofFinancial Position.

Buildings

Buildings are valued on a periodic basis by anindependent valuation.

Historical, heritage and cultural buildings

Historical, heritage and cultural buildings are valued attheir written-down historical cost.

Computer equipment and communications systems

Personal computers

The commercial replacement value for personalcomputers should be used where their useful life isestimated to be a maximum of three years.

Owned hardware and host software

The written-down value for both, mainframes and mid-



range computers (not including personal computersand printers) is calculated as original cost lessaccumulated depreciation, where the useful life isestimated to be a maximum of five years.

Network equipment

The written-down value for both, mainframe and mid-range network equipment is calculated as original costless accumulated depreciation, where the useful life isestimated to be a maximum of five years.

Communications systems

A centralised Information Systems and Technologygroup in the agency should controls and regulate theuse of sophisticated network equipment associatedwith the Computer Communications Networks of theagency.

Due to ongoing changes in technology, these assetsshould be valued at the current replacement cost ofthe existing assets. It is also necessary to take intoaccount the different useful lives of the existing andcurrent assets in assessing the accumulateddepreciation.

Note: If computer or communications equipment issubject to a Finance Lease, it is amortised over itsuseful life or over the term of the lease, whichever isshorter. The value of those assets should reflect themarket value.

Registered vehicles

Motor vehicles and other registered vehicles

Passenger and fleet vehicles that are subject to aleasing arrangement should be recorded by financialmanagement operations.

Other registered vehicles will be recorded on the assetregister (Computerised System - such as OracleAssets).

The value of other registered vehicles is based on theiracquisition cost, including all non recurrent on the roadcosts, ie stamp duty and sales tax where applicable.Recurrent costs, ie registration fees, are notcapitalised and should be excluded from the originalacquisition cost.



Boats

Estimate the value of boats and equipment (egoutboard motors, communications equipment) by:

establishing the written-down cost of a new assetadjusted for the same service capacity andeconomic life

taking into consideration the replacement value ofthe asset.

Registered trailers, carriers and graders

If there is a secondary market for the asset (non-specialised assets), use the current market buyingprice. Where new assets are acquired, new prices arerelevant. Where second-hand assets are acquired,second-hand prices are relevant.

If there is no secondary market for the asset(specialised vehicles or equipment), use the lower ofthe following values:

current replacement cost of the existing asset

current reproduction cost of the existing asset.

Plant and equipment (spares)

Value and record spares at their current market value.

Spares are defined as items which:

are purchased or built specifically for a particular asset(host) or category of assets

would be redundant if that asset or category wasretired or use of that asset was discontinued.

Spares are used for:

rotating repairable parts (eg outboard motors)

asset construction or maintenance.

Some assets considered plant and equipment spares maybe used in conjunction with other assets.

Parent-child assets

An example of a parent-child asset is an asset:

which comprises individual items from differentcategories (eg a motor vehicle equipped withcommunications equipment)



where the functionality and service potential of thoseindividual items are independent of each other.

To value a parent-child asset, use the revalued amounts ofeach of these individual items. The revalued amountsshould reflect the value of the item within the particularcategory to which it belongs.

Capital Work in Progress (CIP)

Value this type of asset at an amount not exceeding itsrecoverable value.

Antiques (including original paintings and works ofart)

A professional independent valuer should value thosecategories of antiques for which they have the mostexpertise. They should also provide a report supportingtheir valuation.

Business Unit Managers should maintain a physicalCatalogue of Antiques and Works of Art. The catalogueshould contain photographs (preferably colour), descriptionand dimensions, physical location (ie judges chamber roomF16) and the value of the antique. The catalogue musthave cross-references to the asset register (ComputerisedSystem - such as Oracle Assets).

Libraries

An independent expert should value library assets atcurrent replacement value. It may be useful to categoriselibrary collections into:

books (texts and references)

periodicals (subscriptions)

audio visual equipment.

Revaluation of fully depreciated assets

Assets which have been fully depreciated at the date ofrevaluation should be stated at their net written-downreplacement value.

Accounting for revalued assets

Account for revalued assets as follows:

if the value of an asset has decreased by the end of a



reporting period, write down the carrying value of thatasset to reflect this decrease. Financial managementoperations should write-off the decreased value of theasset to the Operating Statement. This does not applywhere it reverses a revaluation increase held in thebalance sheet for the category of asset to which itbelongs.

if depreciable assets are revalued upwards ordownwards as a result of a revaluation of the categoryof non-current assets to which they belong, anybalances of accumulated depreciation existing at therevaluation date in respect of those assets shall becredited to the asset accounts to which they relate

the asset accounts shall then be increased ordecreased by the revaluation increments ordecrements.

After the date of revaluation, you should depreciate therevalued amount over the remaining useful life of the asset.

Disclosures

If a category of assets has been revalued to theirrecoverable values, or a single asset has been revalued,disclose the following:

the reporting period in which the revaluation was made

the basis of the revaluation

whether the revalued carrying amounts have beendetermined in accordance with an independentvaluation

the names of the persons who made the valuation andtheir qualifications

for each category of assets, whether the revaluationwas made in accordance with a policy of a regularrevaluation, and the particulars of that policy and theperiod between revaluations

the accounting policy in respect of any taxes ifapplicable.

Where assets within a category are carried at the revaluedamounts or at the cost of acquisition, separate disclosureof those at the revalued amounts less accumulateddepreciation shall be made along with the basis ofvaluation for each of those amounts.Regardless of whether a revaluation has been undertaken,



the financial report shall disclose whether the expected netcash flows in determining the recoverable amounts of non-current assets have been discounted to their present value.

Depreciating assets (Procedure 4.6.3: Calculating depreciation)

Application of depreciation

The following section describes the approach todepreciating specific categories of assets:

Extensions or additions to assets

Any extension or to an existing asset which becomesan integral part of that asset should be depreciatedover the remaining useful life of that asset.

Any extension or addition to an existing asset whichretains a separate identity capable of being used afterthat asset is disposed of, should be depreciatedindependently of that existing asset based on its ownuseful life.

Land

Land is not depreciated for reporting purposes.

Buildings and leasehold improvements

To calculate depreciation, apportion the historic valueor revalued amount between the land and the buildingson it. Charge depreciation only on the buildings and itsfixtures and fittings, not on the land.

When charging depreciation on leaseholdimprovements, recognise this over the shorter of thefollowing:

unexpired period of the lease

useful lives of the improvements.

Antiques (including original paintings and works of art)

Antiques are not depreciated, as their service has notin any material sense been consumed during thereporting period.

Plant and equipment spares

Spares purchased specifically for a particular assetthat would become redundant if that asset was retired,or its use discontinued, should be depreciated over thelife of the asset. Examples are winches or hydraulic



equipment used with rescue vehicles in StateEmergency Services.

Capital Work in Progress (CIP)

Depreciation expense should be charged from thepoint of time when a depreciable asset is first put touse or held ready for use (‘date in service’).

Accordingly, you should not charge any depreciationon Capital Work in Progress (CIP) or on newlyacquired assets awaiting installation.

Libraries

Categorise library collections into the following groups:

Group Effective life

Books (texts and references)Periodicals (subscriptions)Audio visual equipment

10 years5 years5 years

Accounting for depreciation

Account for depreciation as follows:

Revalued assets

Where a depreciable asset has been revalued and therevalued amount has been recognised as either arevaluation increment or revaluation decrement,depreciation expenses should be based on therevalued amount of the asset.

Finance Leases

Amortisation and accumulated amortisation iscalculated on the straight-line method. Take intoaccount also the expected useful life of the category ofasset, even though a lease term for a specific asset inthat category may be for a shorter period.

Securing assets Appendix A (page 1)


Physical security

Implementing physical security involves:

securing building premises after hours

security procedures and systems to restrict access bythe general public to office areas where assets arelocated

control procedures if assets are used away from theResponsibility Centre, eg staff using portablecomputers or expensive tools and equipment awayfrom Agency premises

restricting access to identified areas to authorisedmembers of staff

securing attractive items under lock and key when notin use

installing alarms and fire safety equipment to protectand safeguard assets against theft, loss or damage

ensuring that unauthorised staff do not have access tothe asset register by frequently changing passwords

ensuring that an asset verification mechanism is inplace at the Responsibility Centre (refer to Procedure4.8.2: Stocktaking assets).

Responsibility

The Responsibility Centre Manager is responsible forensuring that physical security controls over assets andtheir utilisation is adequate at all times. Requirements willvary widely between Responsibility Centres or locations.The degree of control exercised should be in proportion tothe degree of risk.

5Disposing of assets

Once assets have been identified as surplus to the Business Unit’sneeds, obsolete, unserviceable, under-performing, or too expensiveto repair they should be disposed of to:

achieve the maximum return to the agency/government

enable resources to be redirected to enhance service delivery.

The options available for disposal should be assessed in terms ofcosts, impacts and risks to the Business Unit.

Procedures

5.1 Implementing a disposal plan5.2 Disposing of assets

5.2.1 Disposing of land and buildings5.2.2 Disposing of other assets5.2.3 Evaluating disposal options

5.3 Terminating property leases




Thai Government

Entities are to:

evaluate the effectiveness of their redeployment/disposalstrategies in maintaining an asset portfolio that best meetsservice needs; and

establish arrangements for the retirement or decommissioning ofassets and for under-performing or surplus assets as efficientlyas possible, before redeployment or disposal.

5.1 (page 1)


Procedure 5.1 Implementing a disposal plan

Scope All assets identified for disposal in the approveddisposal plan, and any subsequent requests

Purpose A disposal plan is necessary to guide the BusinessUnit’s disposals in order to enhance service deliveryand release capital that is not productively employed.

A disposal plan lists projected asset disposals over thefive-year period together with priorities, disposalmethods and timing, based on an evaluation of costsand impacts.

Disposal plans are prepared from the asset strategy(refer to Procedure 2.1: Developing an assetstrategy).

Frequency The disposal plan should cover a rolling five-yearperiod and be reviewed annually.



References Supply Policies and Guidelines ??, GovernmentPurchasing Board???

Actions

Strategic Planner 1. Each year, review the assets to be disposed over thenext five-year period, as set out in the approveddisposal plan (developed in Procedure 2.1: Developingan asset strategy).

2. Sort assets into categories according to whichResponsibility Centre will be responsible for theirdisposal.

Implementing a disposal plan 5.1 (page 2)


3. Advise the appropriate Responsibility Centre Managerthat they will be responsible for managing and co-ordinating the disposal process for their group ofassets.

4. Update the disposal plan annually based on the actualdisposals carried out in Procedure 5.2: Disposing ofassets, and any changes to the asset strategy (refer toProcedure 2.1: Developing an asset strategy).

5. Monitor the performance of the disposal plan. Thisshould include assessment of:

quantitative aspects encompassing:

accounting policies – consistency between theactual and expected useful life of the assetand its residual value

operational performance of maintenanceprograms where assets do not reach theexpected useful life

relevant and supportable disposal optionsidentified

level of certainty of recommendations

expectations or estimated proceeds ondisposal

costs of disposal in relation to return

qualitative aspects encompassing:

client/user satisfaction with disposal outcomes

public reaction

compliance with principles stated in SupplyPolicies ?? given by the ProcurementBoard???.

--------------------------------- End of Procedure 5.1 -------------------------------

5.2 (page 1)


Procedure 5.2 Retirement or disposing of assets

Policy Retirement or Disposal?

The agency requires:

that when an asset no longer has the capacity toprovide economic benefit or service potential tothe agency for the function it was acquired toperform, the agency should consider whether theasset can still effectively meet another servicedemand in the agency.

Thorough examination and economic appraisal isto be used to reach a decision to either retire or todispose of an asset that cannot meet its requiredservice capacity.

If appraisal of the asset determines that the assetcan provide a different and essential servicepotential from that it was originally designed todeliver, the economics of such retirement shouldbe considered of the agency.

Example: A small school building is in a conditionand in a location on the school site that renders itunfit and unsuitable to meet the needs of modernteaching practices even if major works were to beundertaken. This building is however very suitedand well located to provide the storage needed forthe school.

On this site, if this small school building were tobecome available for storage, this would enableanother building on the school site (the buildingcurrently used for storage) that is ideally located tomeet the needs of modern teaching to released forteaching purposes.

The small school building unsuitable for teachingpurposes could therefore be retired from itspresent service as teaching space when theexisting and better located building presently usedfor storage is refurbished and becomes availablefor teaching.

In this example – economic evaluation has lead tothe small building being retired to a lessdemanding service which enabled another buildingon the site to be refurbished to meet the higherservice need for the school.

5.2 (page 2)


As shown above, assets can be retired from oneservice provision and still contribute to meetingservice demand.

Retirement from the provision of one service maymean it can be used for a lesser service withoutundertaking much or any remedial work, oralternatively, may involve further work to enablethe asset to be retired from one service provisionin order to be used to meet the demands of ahigher service provision.

Thorough examination and economic appraisal isto used in making a decision to retire or to disposeof an asset

Disposal

If an asset is not suitable to be retired andredeployed as indicated above, it should bedisposed of.

If disposed of, this should be reflected in the assetregister (manual or computerised asset module).

Thorough examination and economic appraisal isto be used in making a decision to dispose of anasset

asset disposals are to be undertaken inaccordance with the agency’s DisposalManagement Plan

approval for the disposal of any asset (other thanland and buildings) to be obtained from theResponsible Person in accordance with theagency’s Disposal Management Plan

disposals of land and buildings are referred to theManager responsible for assets in the agency forconsideration including that is to include probity

the ‘deletion’ of unwanted records from the assetregister (manual or computerised assets module)is to be governed by strict rules.

Scope All assets included in the disposal plan, assets beingreplaced, and any subsequent requests arising due tothe asset reaching the end of its service life or anaccident.

Purpose To avoid wastage and enable resources to be directed

5.2 (page 3)


to enhance service delivery.

Frequency Disposal should be undertaken regularly, as set out inthe disposal plan.

Key words Disposal Management Plan: a plan developed bythe agency’s Accredited Purchasing Unit providinginstruction on disposal options and procedures, egDisposal Management Plan.

Disposing of assets 5.2 (page 4)


Actions

This procedure contains three sub-procedures:

Disposing of land and buildings (5.2.1)

Disposing of other assets (5.2.2)

Evaluating disposal options (5.2.3).

--------------------------------- End of Procedure 5.2 -------------------------------



Procedure 5.2.1 Disposing of land and buildings

Scope Land and buildings (excluding leased properties)included in the disposal plan

Responsibility Technical Manager or Responsibility Centre Manager;Technical Officer; Asset Manager

Key words Board of Survey: a mechanism by which analysis isundertaken, a recommendation is made and approvalgiven for the disposal of an asset on whatever termsand conditions considered appropriate to thecircumstances.

Decommissioning: activities required to return theproperty, including fit-out and any plant andequipment, to the desired end state prior to sale ordemolition.

Disposal Management Plan: a plan developed bythe agency’s Accredited Purchasing Unit providinginstruction on disposal options and procedures, egDisposal Management Plan.


OH&S: Occupational Health and Safety

Technical Officer: assesses the condition of assets


References Disposal Management Plan for the agency

Actions

Technical Manager 1. From the disposal plan, identify the properties to be



or ResponsibilityCentre Manager

disposed of over the next period.

2. Investigate the status of properties on the disposal listin terms of condition, utilisation and functionality (referto the Manual or computerised Manual orcomputerised Infrastructure Management System andother records).

Note: Business Units with identified surplus land andproperty assets should inform the Managerresponsible for asset management who will undertakethe transfer of the asset to that Group’s register. Thiswill result in the Business Unit no longer having toincur the capital charge if such has been levied by theagency.

3. Identify and follow-up any issues which requireadditional action before disposal.

Relevant issues may include:

the asset’s heritage significance

financial or budgetary constraints

environmental considerations

legal or statutory restrictions

potential for value-adding, such asrefurbishment or rezoning, before sale.

Note: The manager responsible for assetmanagement in the agency will offer surplus heritageassets to all government entities through the Bureau ofthe Budget. If no appropriate use can be found, theywill be offered to the Historic Buildings ManagementCommittee (Agency accountable for NaturalResources), then to the relevant local government, orfinally be sold or leased.

4. Ensure that the users and the community have beenconsulted, if appropriate, over decommissioning theproperty and the time frame for vacating the property.

Issues for consultation may include:

the potential future use of the asset

changes in service delivery needs orcorporate objectives

the economic, social or political impact onlocal communities

the property’s heritage value.



Technical Officer 5. Conduct a physical inspection to verify and confirm theassets and their condition.

6. During the inspection, identify and record the extent offit-out, fixtures and furniture in the building.


7. In conjunction with any users, identify the time framefor vacating and decommissioning the property. Verifythat arrangements are consistent with the timing of theavailability of any facilities to be provided, if applicable.


8. Prepare a schedule of land and property disposals,gain approval in accordance with the appropriate levelof delegation for the current year and proceed withactions 9 to 21 for properties to be disposed of withinthe following two to three years.

9. Giving consideration to the risks arising from reducedmaintenance, request appropriate maintenancepersonnel to ensure that the properties are notincluded in ongoing maintenance or minor worksscheduling (except for statutory and OH&S works).

10. Confirm that all details in the asset register areaccurate.

Collate any information required to update the assetregister (manual or computerised assets module), egcapital improvements, and have the register amended.

11. Record the details from action 7 in the asset register(manual or computerised assets module) to ensurethat the status and timing of the disposal is widelyknown.

12. Advise the manager responsible for assetmanagement in your agency in writing of:

details of properties for disposal

reasons properties have been identified fordisposal

timing for vacation and decommissioning

extent of decommissioning to occur

extent of fit-out (partitions, work-stations, carpet,fixed cupboards, etc).

13. Confirm the parties responsible for administering,



securing, holding, and keeping the property andcontents in an appropriate state up until thedecommissioning.

14. Establish the arrangements for decommissioning.Arrangements should include:

nominating responsible parties

securing the property (to minimise the risk ofdamage, loss or deterioration); eg:

locking doors and windows to prevent access

security surveillance may also be appropriate

identifying and addressing any risks associatedwith holding the property; eg:

reducing maintenance works to a minimumwhile ensuring that public health and safetyissues are addressed.

15. If there are furniture and other fittings to be disposedof, refer to Procedure 5.2.2: Disposing of other assets.

Manager responsiblefor assetmanagement

16. Determine the appropriate disposal method for landand buildings (refer to Procedure 5.2.3: Evaluatingdisposal options).

17. If the existing valuation in the asset register (manualcomputerised assets module) is unrealistic orinappropriate, arrange for a revaluation (refer toProcedure 4.6.1: Valuing and revaluing assets).

An asset’s recorded value will depend upon the assetand its service delivery status in the agency. Forexample, assets that are ‘core’ in that they are essentialto service provision are valued in a different way to ‘non-core’ assets, the assets that are to be disposed of.

18. Review and update the disposal plan and asset valueon the agency register immediately before theindividual property disposal date, to take into accountcurrent market conditions and the physical condition ofthe property, and the asset’s status.

In the case of ‘core’ simple assets in use in an agency,such as plant and equipment, these assets are generallyto be recorded at historical cost in the register. Morecomplex ‘core’ assets such as buildings may be at



historical cost and for strategically important assets, beat current cost (written-down replacement cost or atcurrent market buying price).

When it is determined that an asset is no longer ‘core’ tothe agency and that it has become a ‘non-core’ asset,an asset to be disposed of, its value recorded on theregister should recognise this different status. Its valueon the asset register should become its net realisablevalue anticipated at disposal.

19. Advise Bureau of the Budget in writing of land beingdisposed of.

GovernmentProcurement Board

20. Negotiate conditions of appointment, and appoint anagent to manage the disposal.

Asset Officers 21. When an unconditional contract for the disposal issigned, amend the asset register (manual orcomputerised assets module).

Note: The Agency will continue to incur any capitalcharges that may apply until the record of the disposedasset is removed from the manual or the computerisedsystem.

Ref: Refer to 5 - Accounting treatment for details ofaccounting actions relating to disposals.

------------------------------- End of Procedure 5.2.1 ------------------------------



Procedure 5.2.3 Disposing of other assets

Scope Antiques, personal computers, vehicles other than fleetvehicles (including boats, earth moving equipmenttractors, etc), plant and equipment, building contents(fixtures, fittings and furniture), computer equipment,and communications systems included in the disposalplan, and any subsequent requests

Responsibility Asset Officers; Responsibility Centre Manager

Key words Decommissioning: activities required to return plantand equipment to the desired end state prior to sale ordisposal


References Disposal Management Plan.

Actions

Asset Officers 1. Identify the ‘other assets’ intended for disposalaccording to the disposal plan and any subsequentrequests.

2. Advise a responsible person, in accordance with theappropriate level of delegation, that there are ‘otherassets’ to be disposed of.

3. Appoint a person(s) responsible for the disposalprocess.

Important: In the case of cultural collectionassets, including antiques, ensure that anydisposal actions are rigorous and transparent, foraccountability and probity purposes. Check thatthe items to be disposed of are not covered bycontrols under any heritage acts or regulations.



Note: The Agency requires a Board of Survey to beconvened to make a recommendation regarding thedisposal of items over 100,000 baht. Refer to theagency’s Disposal Management Plan for furtherdetails.


4. Identify the financial and social (political andcommunity) issues relating to the disposal of eachasset or category of asset.

Relevant issues may include:

the asset’s heritage significance

potential future use of the asset

changes in service delivery needs or corporateobjectives


accessibility


the nature of the asset (specialised or ‘off the shelf’item).

5. Ensure that users and the community have beenconsulted, if appropriate, over the decommissioningtime frame and any other concerns.

6. Carry out a physical inspection to verify and confirmthe assets and their condition.

7. Confirm that all details in the asset register(Computerised System - such as Oracle Assets) areaccurate.

8. Identify appropriate methods of disposal, analysedisposal options, and recommend a preferred option.

Ref: Procedure 5.2.3: Evaluating disposal options inaccordance with the Agency’s Disposal ManagementPlan.

9. Determine whether the disposal will generate the needfor a replacement to support the continuing delivery ofservice.

Note: Co-ordinate the disposal timing to ensurethat any cash flow available from the disposal canbe used in the reinvestment process and that the



user’s time without the asset is minimised.

10. Ensure that, if a replacement asset is needed, theacquisition process takes place in a timeframe thatsatisfies requirements.

Asset Officers orResponsibility CentreManager

11. Establish the arrangements for decommissioning.Arrangements should include:

nominating responsible parties

removing the asset from ongoing maintenanceprograms

identifying where the assets are to be stored

securing the assets (to minimise the risk of theft,damage, loss or deterioration)

Securing small items may mean shifting themto a storeroom with a lockable door. For otherassets it means preventing access, andreducing maintenance works to a minimumwhile ensuring that public health and safetyissues are addressed. Security surveillancemay also be appropriate. Assets awaitingdisposal should not be stored on location,particularly not in fire escapes, engine rooms,or stairwells.

identifying any risks associated with holding theassets.

12. Review and update the disposal plan immediatelybefore individual asset disposal dates, to take intoaccount current market conditions and the physicalcondition of the asset.

13. If appropriate, transfer the asset to the point of sale ordisposal, eg if it is to be auctioned, transport the assetto auction premises.

Note: When an asset is to be transferred to anotheragency there will need to be a form completed aTransfer form that is to be sent to the AccreditedPurchasing Unit within 10 days of disposal of both thereceiving and relinquishing agency.

If sale to staff is the recommended disposal method,complete the Sales to Staff Submission InstructionSheet and return to the Accredited Purchasing Unit atleast 10 working days prior to the closing date of staffbids.



Before disposing of computer equipment, particularlypersonal computers, the Responsibility CentreManager must remove any software and informationwhich may be confidential to the agency, or of asensitive nature.

14. Obtain an acknowledgment of receipt of the assetsfrom the receiving party.

15. Once confirmation of the disposal (including advice ofproceeds) has been received, complete the sale ortrade-in price on the original disposal form.

16. Update the status of the asset in the asset register(manual or computerised assets module) and verifythe posting of proceeds to the correct disposalsuspense account in accordance with 5 - Accountingtreatment at the end of section 5.

17. File the original and copy of the Disposal Form foraudit purposes.

------------------------------- End of Procedure 5.2.2 ------------------------------



Procedure 5.2.3 Evaluating disposal options

Scope Non-property assets

Purpose To compare alternative methods of disposal,considering both costs and impacts in consistentterms.

Frequency As required in the disposal process.



Board of Survey: a mechanism by which analysis isundertaken, a recommendation is made and approvalgiven for the disposal of an asset on whatever termsand conditions considered appropriate to thecircumstances.


References Disposal Management Plan.

Supply Policy Guidelines Government PurchasingBoard

Actions

Board of Survey 1. Consider the full range of asset categories to bedisposed of.

2. Identify appropriate alternative methods of disposal foreach asset category.

Guidelines

Disposal Management Plan presents the approveddisposal methods:



public tender

public auction

transfer to another agency

trade-in

destruction, dumping or cannibalisation

other method approved in accordance with theappropriate level of conferral (delegation)

sale to staff

donation.

Other considerations

Special requirements for the disposal of computerequipment are set out in the Agency’s DisposalManagement Plan.

3. Analyse the issues identified, such as:



legal or statutory restrictions

potential for value-adding, such as refurbishmentor rezoning, before sale.

4. Assess impacts, costs and risks associated with eachdisposal option, and present them as a financial cost-benefit analysis.

Note: Impacts on service delivery, capacity,quality, range and efficiency need to beconsidered.

Some assets previously identified as surplus torequirements may be required to be kept (at leastin the short term) due to other requirements orconsiderations.

5. Determine the best disposal approach to maximisereturn to the agency.

Ref: Refer to the agency’s Disposal ManagementPlan for guidance on choosing the best disposalmethod.

6. Prepare recommendations regarding the best disposaloption, in terms of feasibility and viability, for eachasset category.



7. Complete the Disposal Form and gain approval inaccordance with the appropriate level of delegation.

Ref: Supply Policy & Guidelines GovernmentPurchasing Board.

8. Advise the Asset Officer of the recommended disposalmethod and approval. Retain all originaldocumentation at the Responsibility Centre in case it isrequired for audit purposes.

------------------------------- End of Procedure 5.2.3 ------------------------------

Terminating property leases 5.3 (page 17)


Procedure 5.3 Terminating property leases

Scope Leased land and buildings included in the disposalplan

Purpose To avoid wastage and enable resources to be directedto enhance service delivery.

Frequency Termination should be undertaken as set out in thedisposal plan.

Responsibility Technical Manager or Property Manager in conjunctionwith the manager responsible for asset management.

Actions

Technical Manageror Property Manager

1. In conjunction with Manager responsible foraccommodation planning in the agency, identify theproperty leases from the approved disposal plan to beterminated over the next five-year period.

The manager responsible for accommodationplanning will manage the disposal processincluding arranging for inspections, leasenegotiations, removal of fit-out and final payments.

2. When utilities are paid by the occupant, the occupantis responsible for arranging termination of theconnections.

--------------------------------- End of Procedure 5.3 -------------------------------

5.4 (page 1)


Procedure 5.4 Implementing a replacement strategy

Scope Plant and equipment which is essential to the BusinessUnit’s service delivery

Purpose A replacement strategy enables Business Units to planfor the future by setting aside funds to replaceessential assets and reducing disruption to servicedelivery.

Frequency Replacement strategies usually cover a rolling five-year period, depending on the complexity of and thelead time for acquiring the asset. The strategy shouldbe reviewed following the first asset replacement (foreach category of asset) and before completion of theasset replacement program (for each category ofasset).

Responsibility Technical Manager or Responsibility Centre Manger



Actions


1. From the asset register (manual or computerisedInfrastructure Management System), identify the assetcategories which should be considered for inclusion ona replacement program.

2. For each asset category, take the following actions.

3. Review the reasons for the need of each asset; ie

5.4 (page 2)


whether changes may have occurred in the BusinessUnit’s service delivery requirements or approach.

Implementing a replacement strategy 5.4 (page 3)


4. Ascertain whether a non-asset solution is appropriate.

Ref: Procedure 2.1.2: Identifying non-asset solutions

5. Determine whether the asset should be replaced withan identical asset or whether changes in technology orfunctionality considerations apply.

6. Identify any factors which will influence the timing ofthe replacement of the asset; eg:

manufacturer’s recommended life

number of operations/cycles

cost of maintenance

major works requirements

assessment of current condition

ability to continue to satisfy service deliveryrequirements over time.

7. Using the above factors, calculate the replacementfrequency based on the asset’s expected life.

8. Determine the period for which the replacementprogram should operate.

How to do it

This will require a consideration of factorsidentified in actions 5 and 6 and the quantity ofassets involved.

9. Prepare a replacement schedule based on thefrequency of asset replacement.

10. Prepare a budget for the asset replacement program.

11. Gain approval in accordance with the appropriate levelof delegation for all asset replacement programs andbudgets as part of the budget process.

Ref: Procedure 2.3: Preparing an output submission

12. Carry out the replacement in accordance withProcedure 3.2: Acquiring assets.

Implementing a replacement strategy 5.4 (page 4)


13. Review the performance of the replacement program,including:

comparing actual expenditure against budget

assessing user satisfaction.

--------------------------------- End of Procedure 5.4 -------------------------------

Attachment 1 Agency responsibilities (page 1)


Accounting actions

Completing the Disposal Form

The disposal officer records the proceeds from disposal onthe Disposal Form under the heading ‘Sale Result’. Thevalue recorded is net of any selling expenses.

If multiple assets are sold via auction or tender, ensure thatall relevant details are recorded for each asset disposed of.In this case, also ensure that the total proceeds arecorrectly apportioned in accordance with the net bookvalue of the individual assets sold.

Recording the proceeds of asset disposals

Proceeds from disposal of assets are charged to an AssetDisposal Suspense Account in the agency.

Disposal expenses

Disposal expenses should be netted off against thegross proceeds when those are posted to the AssetDisposal Suspense Account. This ensures that theprofit or loss on disposal of an asset is net of alldisposal expenses.

Profit or loss on disposal

The profit or loss on disposal is to be calculated. Thiswill generally automatically done if a computerisedsystem - such as Oracle Financials is used, once theasset disposal has been entered into the system. Thisprocess is to post entries to the profit or loss ondisposal account in the General Ledger.

Financial management operations will reconcile theamount recorded in the Operating Statement with thedisposals from the asset register manually or in acomputerised system - such as Oracle Assets.

The profit or loss will be attributable to theResponsibility Centre which controlled the asset at thetime of disposal.

Note: If an asset was previously expensed in errorinstead of being capitalised, the proceeds from thesale must be treated as miscellaneous revenue ratherthan profit or loss on sale of asset.

Trade-ins

If you are disposing of assets through trade-ins, completethe Disposal Form as for any other disposal.



Always record a trade in price that is net of any trade-inexpenses.

The trade-in value of an asset must be treated as cashproceeds and should not be netted off against thepurchase value of another asset.

Use a manual journal to transfer the trade in value from theAsset Purchase Suspense Account to the Asset DisposalSuspense Account, where necessary, to return thepurchase cost of the new asset to its gross value.

Cannibalisation of assets

If you are cannibalising an asset, the disposal officer stillcompletes a Disposal Form requesting the Asset Officer atthe Responsibility Centre to retire the asset from the assetregister (In a manual system or in a computerised system -such as Oracle Assets. The disposal proceeds are set toNIL.

If the remaining parts are to be kept as spares or regardedas another asset, an Asset Adjustment Request formshould be completed for them and returned to the AssetOfficer at the Responsibility Centre. Where the remainingparts are to be used within twelve months it may beappropriate to keep them in stores. In this instance, aDisposal Form should be completed and forwarded to theStores Officer.

Lost or destroyed assets - write-offs

Where disposal is the result of loss through theft ordestruction by wilful mishandling or negligence,Responsibility Centre Managers must notify theresponsible Business Unit Manager in writing.

Disposal through loss, destruction and dumping results inan accounting write-off as the service potential of the assetis lost.

The Disposal Form is used as for any other method ofdisposal. The proceeds on disposal are recorded as NIL.Asset write-offs can only be authorised by those officerswho have the written authority of the Head to the agency.

For destroyed or lost assets, record a NIL sale price ortrade-in value (proceeds) on the asset register be it amanual or computerised assets module. Treat the amountwritten off as a loss on disposal and post it to the Profit orLoss on Disposal Account.

Donations by the Agency

Donations involve the discontinuation of ownership andcontrol of that asset by the Agency . This action also



triggers the need to use the Disposal Form to effect thedisposal. The proceeds for disposal should be NIL.

Donations require the authorisation in writing by theDirector/ Manager of the appropriate Business Unit.

Special cases

Disposal of items not recorded on the asset register

The sale of items with values below 50,000 baht must beapproved by staff with the appropriate level of delegationand proceeds are remitted to consolidated revenue. TheBusiness Unit Manager should be notified of any assetdisposals in which the assets have not been recorded onthe asset register be it a manual or a computerised assetsmodule.

Depreciation expense on surplus assets

Depreciation will be charged on assets awaiting disposal.This will be done by financial management operations inthe agency.

Transfer to Capital Work in Progress (CIP)

When an asset is decommissioned in preparation forcapital works (eg refurbishment, alteration or extension),the asset record should be transferred to Capital Works inProgress. Once the asset has been decommissioned itceases to function in its own capacity and the servicepotential is considered to have expired. This is treated asa disposal for accounting purposes, although it is not adisposal in the physical sense.

Accordingly, transfers to work in progress are treated aswrite offs, triggering the need to formally dispose of theasset transferred. The Disposal Form is completed withNIL proceeds. This results in a ‘loss’ posting to the Profitor Loss on Disposal Account. Use a journal entry toeliminate the loss by transferring the ‘debit’ to the Work inProgress Account.

When the capital works are completed the new orcomposite asset is recommissioned for use.

Disposal of Capital Works in Progress

Occasionally, assets purchased or constructed as CapitalWork in Progress require disposal. The disposalprocedures, method and authorisation for these assets isthe same as for any other assets.

However, the proceeds on disposal (net of sellingexpenses) are accounted for as miscellaneous revenue,not as profit or loss.



Disposing of plant and equipment spares

Plant and equipment spares are items which cost over50,000 baht are to be treated as separate assets.

When plant and equipment spares are transferred togetherwith an asset or by themselves, they are effectively soldand repurchased:

the forwarding Responsibility Centre records disposalof spares

the receiving Responsibility Centre records anacquisition.

Attachment 2 Depreciation schedule (page 1)


Indicative rates

While many standardised depreciation schedules areavailable these tend to have been developed for taxationpurposes in commercial environments. The use of suchschedules should be restricted to assets that are tradeablein commercial or comparable markets.

The agency has to determine its own depreciation rates fornon-tradeable special purpose assets valued at written-down replacement value. The agency has to take intoaccount their specific environment and the particular,possibly unique, manner in which its assets are used. Thefollowing schedule is given to assist agencies indetermining the useful lives and depreciation rates forassets.

Asset Period (years) Depreciation rate (%)

AntiquesArtworks

Not subject to depreciationNot subject to depreciation

Audio visual equipment 5 20

Books (text and references)BridgesBuildings (consider each building)

109040

101.112.5

Car parks (see Roads)Communications systems (networks)Communication towersCommunity hallsComputer equipment - MainframesComputer equipment - Mid rangeComputer equipment - PCsComputer software (developed in house)

-525505533

-2042202033.333.3

DecorationsDog squad animalsDrinking fountainsDwellings

4-2050

25-52

Earthmoving equipment 6 16.66

Fire access trucksFlower beds and shrubs (generally expensed)FootpathsFurniture and fittings

40-5010

2.5-210

GaragesGarbage collection trucksGraders

5066

216.6616.66

IncineratorsIndoor sports or recreation centresIndoor furniture

105010

10210




Kitchen equipment 10 10

Laboratory equipmentLaboratory supplies (generally expensed)

8-

12.5-

Land Not subject to depreciationLanes (see Roads) - -

Medical equipment 10 10Monuments Not subject to depreciationMotor vehicles (see Registered vehicles)MuralsMusical instruments

-2010

-510

Office equipmentOffice furnitureOutdoor furniture and equipment

51010

201010

PavingPeriodicals (subscriptions)PlantPlant boxesPlant nurseriesPlayground equipmentPower generatorsPrisoner transport vehiclesProtective clothingPublic changing roomsPumping equipment

30510520510635010

3.332010205201016.6633.33210

Recreation equipmentRegistered vehicles (excl. passenger and fleet)Retarding basinsRoad pavement – sealedRoad pavements – major - sealedRoad pavement - substructureRubbish bins (industrial only)

5510020401003

2020152.5133.33

Safety equipmentScaffoldingScientific equipment

10208

10512.5

Sculptures Not subject to depreciationSeats and benchesSecurity systemsShedsSound equipmentSports reserves (consider each component)Sports equipmentStockyardsStreet lights

10102010-35020

1010510-33.3325

TarpaulinsTelephone systemsToiletsTools

510503

2010233.33

Uniforms (special)* 5 20




Waste disposal machinesWaste disposal vehiclesWatering systems

10620

1016.665

Note:

* Applicable if individual uniform is over 50,000 baht.

Contact Financial Management if you have any queriesregarding depreciation rates

Non-tradeable assets

Estimating depreciation is particularly important whendetermining the value of non-tradeable assets. Unliketradeable assets, assessment of changes in value byperiodic reference to market evidence is not possible.

Where an active private sector market is operating,potential buyers take into account the age, obsolescenceand condition of the asset at the time. Theseconsiderations are reflected in the market value. Thewritten-down replacement cost approach is aimed atapproximating this market process through adjusting thegross replacement cost. It does so by using:

an age and obsolescence derived from a standarddepreciation rate for the type of asset referenced to theoriginally intended useful life

a present condition factor determined from periodicmaintenance inspection reports and estimates of thecost of restoration to a fully serviceable condition foran asset of its age and type.

The age and obsolescence factor reflects the generaldepreciation in value of assets of the type in question,which assumes the assets will be maintained in ‘mint’ orperfect condition.

The condition factor reflects the discrepancy between mintcondition and actual condition of assets that have not beenmaintained in mint condition. Nor should they be asagencies should strive to retain all core assets at requiredcondition throughout their service life.

Documents

OPEN V2 Asset Management Handbook DRS 14112011 Dr Rovel Shackleford