1. Immovable Assets Unbundling

2. Purpose The Fixed Asset Register does not function independently of the other financial and management systems. A comprehensive asset register is integral to effective asset management. It is the basis of an Asset management information system and contains relevant data beyond that required for financial reportin g.

3. Results It can be used as a very good budgeting tool in terms of capital expenditure requirements in the future years as well as repairs and maintenance requirements. Condition assessments of assets are vitally important to ensure effective utilisation of these assets and compliance with the necessary accounting standards regarding impairment of assets.

4. Background The City of Cape Town was a pilot site in the implementation of GAMAP. The two GAMAP statements at that time to consider were:  GAMAP 113 – Accounting for Fixed Assets  GAMAP 114 – Financing of Fixed Assets. (This was never accepted by the Accounting Standards Board)

5. Audit Opinion at that Time The City of Cape Town received for two consecutive financial years a disclaimer audit opinion from the Auditor General. One of the underlying causes were validity and the existence of globular assets in the City’s Fixed Asset Register. Non Compliance to the Accounting Standards regarding Fixed Assets.

6. GAMAP Implementation Team The City formed a GAMAP Implementation Team. It was headed up by the Director: Treasury. It comprised of the Accounting and Asset, Budget and SAP ERP staff. Supported by an external audit company and the Office of the Auditor General.

7. Why a Team It was to look at the GAMAP implementation from a holistic point of view and not in silos. Improve communication between departments. Ensure better understanding and impact the GAMAP had on the entire organisation.

8. Various Projects In the unbundling of the globular assets different projects were embarked upon: Land and Buildings Project Housing Project Roads Project Infrastructure Project:  Water and Sanitation  Electricity  Solid Waste Heritage Assets

9. Stage 1 This entailed purification of data  Asset Classes  Asset Life Span  Breaking down of the globular assets (componentisation)  Investment Profile Categories  Determine the backlog depreciation adjustments required

10. Stage 2 Details required of the reporting level  Asset Description  Asset Location  Functional Location Code  Asset Class and Asset Type (GAMAP list)  Discipline (Mechanical/Electrical/Civil)  Quantity (where applicable)  Unit ERV  Year Commissioned  Year Refurbished  Asset Age  Condition Grading  GAMAP Asset Life  Residual GAMAP Asset Life  Depreciated GAMAP Value  Alternative Asset Life  Residual Alternative Asset Life  Depreciated Alternative Value

11. Stage 3 There were various scenarios which existed at the onset of the project which form part of the projects methodology: 1. No assets in the FAR – too many immovable assets. 2. Many asset in the FAR - too no immovable assets. 3. One asset in the FAR - too one immovable asset. 4. One asset in the FAR - too many immovable assets. 5. Many assets in the FAR - too one immovable asset.

12. Like with Like Concept Wherever possible, assets within FAR will be matched to the actual assets identified. This will be achieved using the first and second descriptions within FAR and the information supplied for the physical asset. In the review the cost centre manager would be required to indicate reasons why these assets have been included originally in their physical asset returns.

13. Auditor-General Input We confirmed the process of “spreading” with the Auditor-General in cases where the like to like concept was not possible – the balance after the like to like exercise were insignificant. The method of application was fair and acceptable and was called “deemed cost” and should be disclosed in the Accounting policy. The current replacement value was identified and will be used as a basis. All previously written off assets were reinstated at the engineering estimated replacement value.

14. Opening Balance Challenges Assets purchased before 30/06/2002 Assets purchased after 30/06/2002 It was decided that the spreading exercise for each of the 4 projects cannot commence until the 2002/03 capitalisation process has been completed.

15. Valuation of Assets The assets will be valued at estimated 2002 replacement value. The ERV will be calculated using cost functions complied for the respective asset types. Where the age of the asset is available, a depreciated value will be calculated using the asset’s life as defined in GAMAP and the remaining useful life. Should the asset be older than the GAMAP Asset life. A nil value will be allocated. Where the age of the asset is unknown, and estimate of its age will be made. Condition of the asset will be used to determine or adjust the remaining useful life. Asset under construction should not be valued. These assets should, however, also be listed and brought to the attention of City of Cape Town finance department. The intention is to capitalise these assets but only bring them into the financial system once construction is completed. With the implementation of GRAP 17 asset useful lives had to be reviewed and assets fully depreciated during the implementation period were reinstated and respread over the remaining useful lives.

16. Current Practise Annual verification of movable and immovable assets. Insurance Asset Register aligned to the Fixed Asset Register. Standardised operating processes for the accounting register and equipment register. Roll up of assets to a more management level but not comprising componentisation of assets. Planning of Capital budget. Yearly conditioning assessments and revision of useful lives. Updating asset categories to be aligned with: NERSA Construction industries.

17. THANK YOU