SUMMARY: CAPITAL ASSETS / Modified Cash Standard

Summary of discussions on Capital Assets at MCS Workshop held on 09 September 2015

SECTION / ISSUE / PROPOSED RESOLUTION
  1. General
/ 1.1.Valuation of assets acquired before 1 April 2002, wording in the MCS resulted in negative audit consequences for some departments. / MCS paragraph 61 to be amended to cater for assets acquired prior 2002 which were subsequently fair valued
1.2.MCS paragraph .65 incorrect referencing / All the references to be double checked to ensure accuracy thereof
1.3.MCS blank paragraph .68 / MCS to be thoroughly reviewed for any other errors before being issued out included elimination of blank paragraphs if any
  1. Heritage Assets
/ 2.1.Identification thereof / The departments must consider all the listed MCS indicators not only one in isolation that happen to suit the department and the processes followed must be clearly documented.
2.2.More guidance on heritage assets / We are currently waiting for the response from SAHRA since we do not want to overstep their boundaries. According to National Heritage Resources Act 25 of 1999, SAHRA’s functions, powers and duties are as follows
“13. (1) The general functions of SAHRA are to—
(a) establish national principles, standards and policy for the identification, recording and management of the national estate in terms of which heritage resources authorities and other relevant bodies must function with respect to South African heritage resources;
(b) co-ordinate the management of the national estate by all agencies of the State and other bodies and monitor their activities to ensure that they comply with national principles, standards and policy for heritage resources management;
(c) identify, record and manage nationally significant heritage resources and keep permanent records of such work;
(d) advise, assist and provide professional expertise to any authority responsible for the management of the national estate at provincial or local level, and assist any other body concerned with heritage resources management;
(e) promote and encourage public understanding and enjoyment of the national estate and public interest and involvement in the identification, assessment, recording and management of heritage resources;
(f) promote education and training in fields related to the management of the national estate; and
(g) perform any other functions assigned to it by this Act or as directed by the Minister.
(2) Without limiting the generality of subsection (1) and in addition to the general powers and duties conferred in terms of section 25, SAHRA—
(a) must investigate and advise the Council on—
(i) the state of South Africa’s heritage resources and any steps necessary to protect and conserve them;
(ii) national policy for the management of the national estate;
(iii) legislative amendment and enactment for the management of the national estate;
(iv) the repatriation of heritage resources which have been removed from South Africa and which SAHRA considers to be significant as part of the national estate;
(v) the role of the national estate in the development and promotion of a cultural profile for South Africa;
(vi) action and expenditure by the State for the identification and management of heritage resources, including financial incentives and concessions for heritage resources management;
(vii) education and training at all levels to promote the effective identification and management of the national estate;
(viii) any matter related to the operation of this Act; and
(ix) any other matter pertaining to the national estate or its management;
(b) must establish and maintain, for its own use and for the use of all heritage authorities and bodies and the public, the national heritage resources library, including documentary and other records relating to the national estate;
(c) must promote the systematic identification and recording of the national estate by—
(i) the development of a national strategy for the identification and assessment of heritage resources;
(ii) the establishment and funding of a standing South African Heritage Resources Survey which is tasked with annual projects aimed at identifying, assessing and documenting heritage resources;
(iii) the co-ordination and support of initiatives by provincial heritage resources authorities, any other bodies and persons to survey and record heritage resources;
(iv) the administration, co-ordination and funding of projects and research programmes aimed at the creation of graphic and other records of heritage resources;
(v) training programmes and other relevant activities aimed at conserving and documenting traditional South African building techniques and structural forms;
(vi) promoting the identification and recording of aspects of living heritage associated with heritage resources; and
(vii) projects aimed at increasing the volume and detail of information held in the inventory of the national estate referred to in section 39; and
(d) must prescribe national norms and standards for the recording of information about heritage resources in data bases maintained by itself and by provincial heritage resources authorities.”
Below are the questions we asked
13 (1)(a) Your national principles, standards and policy for the identification of these heritage assets
13 (1)(d) and (f) are the departments at liberty to contact you directly if they need your expertise including training relating to heritage assets?
13 (2)(c)(ii) Are all the departments part of the target audience of this survey or who is part of it? What guidance is given to the entities in order to be able to effectively contribute?
13 (2)(d) is the database available to all the government institutions including the departments and if not so, what processes need to be followed in order to gain access?
2.3.Request for MCS to cater for assets in foreign countries / The MCS capital assets chapter caters for all as assets will always be assets irrespective of the country they are situated in.
  1. Intangible assets
/ 3.1.How do departments write off the software? What would be the evidence that the asset has been written off? If the software is scrapped, then how do the departments scrap software?, guidance requested in the MCS / The MCS cater for the removal of capital assets under .92 (page 94). Prior to removal from the asset register the usual process for authorisation for disposal should be followed. Once authorisation is obtained the software is removed from the asset register.
Guidance on the evidence that the software was scrapped will be included in the AMD chapter on capital assets.
  1. Biological Assets
/ 4.1.No issues were noted / N/A
  1. Exclusion list
/ 5.1.How should the excluded assets be classified as? / We were of the view that these assets should be classified as part of consumables as they are minor assets and in a way not budgeted for as capital assets. Any other suggestions are welcome
5.2.should the reclassification be accounted as? / We are proposing change in accounting policy
5.3.There was a suggestion to post the document on the website / The document is still the draft and comments consolidated and as soon as it is finalised, it will be published on the website
  1. Immovable assets
/ 6.1.Valuation methodologies / The departments are allowed to use municipal valuation rolls for the property on which they are paying rates where the cost price information is not unknown.
6.2.Assets under investigation (not verified) / These assets must not be removed from the FAR, add a narrative under this note providing details of assets under investigation.
Departments must ensure that their verification process is documented and conducted in a timely manner to allow time for investigation. Items should not appear as ‘under investigation’ for more than one reporting period.
6.3.Infrastructural development / Be accounted as WIP when they are still being developed. This expenditure must be disclosed as transfer payments, as budgeted as such. Should be linked as such in the Annexure as it would not be possible to report it on BAS. A phased approach may be considered. Further guidance will be given in the AMD
6.4.If department has incurred improvement on building, would the department be required to increase the original cost with refurbishment costs? / For now, departments are required to increase the cost, revaluation is not allowed per MCS. Aware that a fair value would be more accurate but revaluation is specifically excluded in .86, page 94.
6.5.Transfer payments: If the department does not intend to keep the asset for more than 12 months, why must it be classified as assets in the FAR as it will be transferred? / We cannot construct infrastructure and not account for it unless it is our mandate to construct for distribution which makes it inventory and if that’s the case, we still need to account for it as such including WIP until transferred.

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