SPRING 2014
FMI
*
IGF JOURNAL
11
THE INTERNAL ATOMIC ENERGY AGENCY’S PROPERTY, PLANT AND EQUIPMENT (PP+E) LIFECYCLE FRAMEWORK
falls between the minimum floor cost
and the asset capitalization threshold.
The term “for which there is a market” is
what makes the asset attractive. A market
refers to the
relative ease
in which an asset
can be used personally, sold in a white/
grey market (pawnbroker, classified
advertisement); or if there is a black or
illicit market for the item. Relative ease
is constrained by the following:
• Demand for the item.
• Its use outside the organization.
• The ability to track or identify the
property as being stolen.
• The real and perceived administrative
or legal consequences to the individual
(staff member or otherwise) detected
holding or distributing the Agency’s
asset.
SIDE BAR – ASSET
VERIFICATION FRAMEWORK
IPSAS is silent on verification but it
does require assets to be impaired if
the functionality has decreased by a
material amount. Thus, if an asset
is missing, it is impaired. Physical
verification was traditionally the best
way to ensure an asset exists (e.g. go and
kick it). However, what happens when
the asset is intangible or is in a hot room
of a nuclear reactor? This is an ongoing
challenge for most organizations and
the IAEA is no exception.
The author implemented an earlier
version of the Asset Verification Frame-
work in the IAEA in 2011. The basis for
the framework is the principle that in-
ternal control efficiency and reliability
is a function of standardization and au-
tomation. The more standardized or au-
tomated an internal control – the more
reliable it is.
A 2x2matrixmaps these two functions.
Different asset verification methods can
be plotted onto the matrix with the top
right quadrant (high standardization/
high automation) being the sweet spot.
This is not to say the other quadrants
should be empty though; they are still
important as quality assurance methods.
The 90-9-1%+DataMining allocation
is inspired from a similar Social Media
rule of thumb. In this context, 90% of
the social media users will never create
content, 9% will contribute to existing
content but only 1% will actually
create content. Extended to the asset
verification context:
• 90% of the verification activities
should be via highly standardized and
automated means.
• 9% of the verification activities will
contribute to the confidence of the
automated functions.
• 1% of the activities should be used to
audit the other 99%.
• Data mining is not an internal con-
trol but can be used to discover the
“unknown unknowns” about how the
organization buys, uses and manages
assets.
About the Author
Frank Potter is a professional accountant (CMA) and holds a MBA
from the University of Athabasca. He is currently with the Ministry of
Alberta Health and is the Director of Strategic Planning for Information
Management and Technology. Previous to this he has held variety
roles, typically at the Director level, within governmental and consulting
organizations. Contact:
or
.
90% Quadrant:
by asset count or
other measure, conduct about
90% of all asset verifications
here.
9% Quadrant:
used to calibrate and
verify the accuracy and reliability
of the 90% quadrant. About 9%
of all assets should be included
in this quadrant on a periodic
basis (e.g. yearly).
1% Quadrant:
used to ‘discover’
the unusual and outliers. This
quadrant includes external
auditor and internal sampling
(e.g. verification by walking
around).
Data Mining:
Not suitable
as an internal control but
organizational insights may be
revealed through techniques
such as data mining.
The position and size of the various methods are for illustrative purposes only.
The actual placement will vary based on the organization and methods used.
Be sure to visit
for blogs and information about the above methods.
Figure 3: Asset Verification Framework
Asset Verification Framework
