2011 R - 003 - SETTING POLICIES AND GUIDELINES ON FIXED ASSETS

Excerpts from the Meeting of the Board of Directors of the Olongapo City Government Employees Multi-Purpose Cooperative (OCGEMPC) Held on 17 January 2011 at the CPDO Conference Room, City Hall, Olongapo City

Resolution No. 2011-003

SETTING POLICIES AND GUIDELINES ON FIXED ASSETS

WHEREAS, in order to effectively control and safeguard the fixed assets of the OCGEMPC and for proper monitoring, it is necessary to promulgate policies and guidelines regarding fixed assets, for the guidance all concerned;

NOW THEREFORE, upon motion duly made and seconded, the Board of Directors of the OCGEMPC in session assembled:

RESOLVE, AS IT IS HEREBY RESOLVED to, as it hereby promulgates the following:

Title: POLICIES AND GUIDELINES ON FIXED ASSETS

I. APPROVAL OF ACQUISITION

The acquisition of Fixed Assets must have prior approval by the appropriate approving authority. The authority to approve the acquisition of Fixed Assets is hereby assigned based on the acquisition cost of the asset, as follows:

1. Manager Up to P10,000

2. The Chairman Over P10,000 to P100,000

3. Majority of the Board of Directors Over P100,000 to P500,000

4. General Assembly Over P500,000

II. ACCOUNTING TREATMENT OF FIXED ASSETS

A. Capitalized

1. Fixed Assets of the OCGEMPC acquired/purchased with an acquisition cost of P2, 000.00 and above, with an estimated useful life of more than one year shall be treated as capital expenditures of the coop, which shall be subject to depreciation.

2. Major repairs/improvements on Fixed Assets of the OCGEMPC shall likewise be capitalized subject to existence of the following conditions:

a) The repairs/improvements should substantially increase/improve the useful life of the Fixed Assets; and

b) The cost of the repair/improvement should not be less than P2, 000.00 or 25% of the acquisition cost, whichever is higher.

B. Semi-expendable (Not capitalized)

The following purchased Fixed Assets shall be treated as outright expense (Supplies Used) of the coop:

1. Those whose acquisition cost are less than P2,000.00

2. Those whose estimated useful life are one year and below regardless of its acquisition cost

C. Depreciation

1. Depreciation shall be computed in accordance with the approved useful life of the assets’ rate of depreciation and must be taken up periodically in the books.

2. When a unit is fully depreciated, a nominal value of P1.00 shall be carried in both the controlling account and in the subsidiary ledger to represent each fully-depreciated unit.

3. As a general rule, the first depreciation charge on an asset item begins with the next reporting period after the acquisition.

4. Periodic provision for depreciation shall be made to cover the decline in value of the assets. The computation shall be based on the following formula:

Annual Depreciation = Cost of Property less Salvage Value

Estimated Years of Life of the Property

5. Some assets may be depreciated monthly using the following

formulas:

a) For the original acquisition cost, monthly depreciation shall be computed as follows:

Monthly Depreciation = (Acquisition Cost - 1.00) / (EUL x 12 mos.)

b) For those with capitalized major repairs/improvements, it shall be computed as follows:

Monthly Depreciation = (Book Value + Cost of Repairs – 1.00)

(New EUL x 12 mos.)

6. Whenever practicable, monthly depreciation of Fixed Assets may be booked every end of month. In such cases, for newly purchased Fixed Assets, the initial depreciation shall be booked in full the following month after acquisition. Thus, no depreciation shall be booked on the month of acquisition.

D. Useful Life of Fixed Assets

For purposes of computing depreciation of fixed assets, the following classification of assets and the corresponding useful life of each asset shall be used:

1. Furniture and Furnishings – 5 years

This classification covers building accessories, which are generally for the working and/or convenience of office staff and clients. Examples are chairs, tables, sofas, top glass, mirrors carpets, shades, draperies, moveable dividers, decorative boxes and frames, paintings, wall clocks, waste baskets and vases.

2. Fixtures – 5 Years

This group refers to permanent or semi-permanent attachments closely related to the building but not classed as building. Examples: counters, tellers’ cages, fixed dividers or partitions, built-in cabinets/shelves and bins.

3. Business Machines – 5 Years

This includes all standard office machines or mechanically-operated office equipment such as typewriters, adding/calculating machines, copying machines, check writers, Bundy clocks and numbering machines.

4. Office Equipment – 5 Years

This category embraces all office apparatus which are not mechanically operated. It includes cabinets, safe, vaults, trays, racks and paper cutters.

5. Computer Machines – 2 Years

This group includes all component units and peripherals of a computer system.

6. Appliances – 5 Years

This group includes devices used for improving working conditions in an office. It also covers musical, communication and ventilation facilities. Examples: air-conditioning unit, electric fan, radios, stereo set, refrigerator, intercom system, floor polisher, water dispenser, coffee maker and photo equipment.

7. Other Equipment and Instruments – 5 Years

This classification embraces power units, security and safety devices and trade equipment instruments. Examples: generators, motors, fire extinguishers, printing/bookbinding equipment and photo equipment.

8. Motor Vehicles – 5 Years

Included in this group are: cars, vans, pick-up trucks, and motorcycle

9. Books – 2 Years

This covers all technical, professional and general reference books.

10. Leasehold Improvements – 10 Years

III. MONITORING AND ACCOUNTABILITY

The effectively account the existence of Fixed Assets and their proper maintenance the OCGEMPC Administrative Officer shall serve concurrently as Property Officer who shall be responsible for its administration. The duties and responsibilities of the designated Property Officer shall be as follows.

1. Assign Property Numbers of all Fixed Assets of the Coop whether Capitalized or Semi- expendable.

2. Maintain a logbook for semi-expendable Fixed Assets.

3. Maintain list of Fixed Assets under the custody of officers or employees, who shall be directly accountable. The receipt of Fixed Assets should be duly acknowledged and properly filed by the Property Officer/Custodian. Likewise, he shall acknowledge any Fixed Assets returned or turned over to him. For such purposes, a Memorandum of Receipt and Invoice Receipt shall be accomplished.

4. Recommend the immediate repair of Fixed Assets being used in the operations of the coop.

5. Recommend the replacement of unserviceable Fixed Assets needed by management and staff.

6. Recommend the disposition of all unserviceable Fixed Assets or those no longer in use although still serviceable.

7. Preparation of monthly report of Fixed Assets as to Status (Serviceable/Unserviceable or no longer in use and for disposal)

8. Assist in the Annual Physical Inventory of Fixed Assets to be conducted by the Audit and Inventory Committee.

IV. DISPOSITION

Disposition of Fixed Assets must be approved by the Board of Directors unless the amount involved is more than P200, 000.00 in which case, the disposition must be approved by the General Assembly.

The following shall be strictly observed in the disposition of Fixed Assets:

1. Fixed Assets shall be disposed subject to the existence of any of the following conditions:

a) Fully depreciated Fixed Assets, the replacements of which are duly approved.

b) Fixed Assets that are no longer being utilized.

c) Unserviceable Fixed Assets or those beyond repair.

d) Fixed Assets whose repair would no longer be beneficial or economical.

2. Manner of Disposition

a) When the amount involved is P50, 000 or more, disposition shall be through Sealed Building, which should be participated in by at least three bidders. In case of failure in bidding for two (2) consecutive times, disposition shall be through Negotiated Sale.

b) When the amount involved is less than P50,000, disposition shall be by negotiated sale or in manner that is most beneficial to the OCGEMPC.

V. ACCOUNTING TREATMENT OF DISPOSED / RETIRED ASSETS

1. The Manager shall authorize the elimination from the Balance Sheet of an item of property, plant and equipment on disposal or when the asset is permanently withdrawn from use and no future economic benefits are expected from its disposal.

2. Gains or loses arising from the retirement or disposal of an item of property plant and equipment should be determined as the difference between the net disposal proceeds and the book value of the asset and should be recognized as income or expenses in the Income Statement.

RESOLVED FURTHER, that the foregoing policies and guidelines shall take effect immediately and that all concerned are enjoined to strictly implement, adhere to and abide by the same.

Done this 17th day of January 2011 at Olongapo City, Philippines.