3.4 Public Assets, Inventory, and Deposit Accounting in Nepal

Public Assets, Inventory, and Deposit Accounting in Nepal

Public Assets

Public assets are resources owned by the state, encompassing both tangible and intangible forms such as inventory, cash, bank balances, shares, and intellectual property. These assets are managed to serve the public interest and generate economic benefits for government entities. According to the Government Accounting Guidelines, 2073 BS (2016), public assets include physical items that provide future economic value or utility.

Key Characteristics:

Can be tangible (e.g., buildings, equipment) or intangible (e.g., intellectual property).
Acquired through purchase, transfer, in-kind aid, confiscation, donation, or gifts.
In a broader sense, includes movable and immovable assets; in a specific sense, refers to physical assets.
Accounting procedures are governed by the Financial Procedures and Fiscal Accountability Regulations, 2077 BS (2020).

Legal Provisions for Public Assets

The Financial Procedures and Fiscal Accountability Regulations, 2077 BS, Chapter 10, outlines the following responsibilities:

Custody and Protection: Cash, bank balances, payment orders, checkbooks, deposits, and revenue records are managed by the Financial Administration Section Head. Revenue records may be delegated to a designated employee under the office head’s supervision.
Inventory Management: Inventory and related records are the responsibility of the Store Section Head, with the office head ensuring protection against misuse.
Asset Register: Office heads must update the asset and inventory register within seven days of acquisition, specifying details and values. In the absence of a Store Section Head, a designated employee takes responsibility.
Technical Assets: Technical assets must be inspected and certified by technical staff before being recorded.
Closed Offices: For dissolved or merged offices, the office head must prepare and transfer asset details within 35 days or as specified, with a report submitted to the relevant ministry.
Inspection: Office heads must conduct at least one annual inspection through a three-member committee (excluding the Store Section Head), using the Auditor General-approved format (Form No. 411).

Inspection Report Details:

Quantity and condition of recorded and unrecorded assets.
Status of asset protection and maintenance.
Details of assets requiring repair.
Identification of unusable, damaged, or obsolete assets (e.g., repair costs exceeding 25% of market value).
Usage, damage, or loss details, including responsible parties.
Comparative analysis of asset usage from the previous and current fiscal years.
Additional details as specified by the Office of the Financial Comptroller General (OFCG).

General Asset Management Policies:

Record assets at the time of acquisition or transfer based on cash payments.
Cash-based accounting does not record depreciation.
Maintain separate accounts for consumable and non-consumable assets.
Record non-consumable assets at purchase price or official acquisition value.
Update records for write-offs, disposals, or sales per financial regulations.

Inventory Accounting

Inventory accounting involves recording, analyzing, and reporting the acquisition, storage, use, transfer, and disposal of physical assets. It includes planning, registering, disbursing, expending, auctioning, and writing off assets, ensuring systematic management.

Importance and Necessity:

Ensures proper protection and utilization of public assets.
Promotes regularity, economy, efficiency, effectiveness, and transparency in inventory management.
Strengthens inventory control systems.
Provides real-time data on asset acquisition, expenditure, and balances.
Facilitates clear processes for transfers, auctions, and disposals.
Prevents misuse or loss of assets.
Supports decision-making with accurate data.
Ensures timely availability of necessary items.
Promotes uniformity and good governance.

Legal and Institutional Framework:

Legal Basis: Governed by the Financial Procedures and Fiscal Accountability Act, 2076 BS, Public Procurement Act, 2063 BS, and Government Accounting Guidelines, 2073 BS.
Institutions: OFCG prepares consolidated asset records, the Public Procurement Monitoring Office oversees procurement, and procurement units and store sections manage assets at the office level.

Inventory Record Details:

Asset specifications (brand, name).
Manufacturer and country of origin.
Size and capacity.
Quantity and estimated lifespan.
Acquisition source.
Details of revenue exemptions for foreign aid assets.
Depreciation rate, if applicable.

Foreign Aid Assets:

Record in-kind aid per financial regulations.
Submit agreement copies to the OFCG within 30 days (Ministry of Finance).
Provide asset details to the OFCG and relevant ministry within 15 days.
Include in-kind aid in central financial statements.
Maintain records of assets transferred to other projects/offices, including unit price and customs exemption details.

Inventory Accounting Procedures:

Record acquisitions with vouchers, debiting the expenditure head and crediting the inventory account.
Use OFCG-approved forms (e.g., Form No. 407 for consumable, Form No. 408 for non-consumable assets).
Update records for additions, disposals, or transfers.
Attach supporting documents to vouchers.
Prepare annual fixed asset reports.

Inventory Procurement:

Follow the Public Procurement Act, 2063 BS and Regulations, 2064 BS.
Obtain requisition forms (Form No. 401) and procurement orders (Form No. 402).
Verify acquired items against specifications by specialists.
Prepare receipt reports (Form No. 403) and record in appropriate inventory accounts.

Auction Procedures:

Auction items identified as unusable per inspection reports and office head approval.
Follow procedures in the Financial Procedures Act (Clause 45, Rules 106-109).
Require written authorization from the office head.
Update records by removing auctioned items.
Deposit auction proceeds into revenue accounts.

Inventory Forms:

Form	Form No.	Purpose
Requisition Form	401	Request inventory items
Procurement Order	402	Authorize procurement
Receipt Report	403	Record received inventory
Disbursement Form	404	Record inventory issuance
Return Form	405	Record returned unused items
Transfer Form	406	Record inter-office transfers
Consumable Inventory Account	407	Record items lasting less than a year
Non-Consumable Inventory Account	408	Record items lasting over a year
Bin Card	409	Track item usage and lifespan
Write-Off Form	410	Remove unusable or lost items
Inspection Form	411	Document inspection findings
Auxiliary Inventory Account	412	Track user-specific inventory
Annual Inventory Statement	413	Detail current inventory status
Maintenance Request	414	Request maintenance
Maintenance Record	415	Log maintenance activities
Rental Record	416	Track rented assets
Land and Building Register	417	Record real estate assets
Fixed Asset Valuation	418	Assess fixed asset values

Strengths of Nepal’s Inventory Accounting:

Clear legal framework via the Financial Procedures Act and Regulations.
Structured procurement under the Public Procurement Act.
Defined responsibilities for office heads and staff.
Separate records for consumable and non-consumable assets.
Use of 18 standardized forms for uniformity across government tiers.
Regular inspections and control mechanisms.
Integration of in-kind aid and turnkey project assets.
Transparent auction and write-off procedures.

Challenges in Inventory Accounting:

Lack of clear criteria for classifying consumable vs. non-consumable assets.
Ineffective auction and write-off implementation, leading to outdated records.
Non-application of depreciation, complicating asset valuation.
Treating disbursed items as expended, even if unused.
Non-compliance with procurement and financial regulations.
Ineffective inspections and follow-up on recommendations.
Complex auction and write-off processes.
Lack of integration with modern IT systems.
Insufficient transparency and staff training.
Delayed consolidated asset records.

Recommendations for Improvement:

Develop clear criteria for classifying assets.
Simplify auction and write-off processes.
Implement depreciation accounting.
Encourage return of unused disbursed items.
Strengthen compliance with financial and procurement laws.
Enhance inspection effectiveness and follow-up.
Integrate inventory accounting with IT systems (e.g., Public Asset Management System).
Promote transparency and accountability.
Provide regular staff training.
Develop a unified Public Asset Management Information System across all government tiers.

Example: An office purchases 10 computers for NPR 500,000. The acquisition is recorded in Form No. 408 (Non-Consumable Inventory Account) with details like brand, specifications, and purchase date. The expenditure is debited to the budget head (e.g., 22311), and the asset is credited to the inventory account.

Deposit Accounting

Deposit accounting involves recording, analyzing, and reporting transactions related to security deposits, which are refundable amounts held for specific purposes (e.g., contracts, revenue payments). These deposits may be refunded or forfeited per legal provisions.

Deposit Scenarios (Financial Procedures Regulations, 2077 BS, Rule 62):

Advance revenue payments before final assessment.
Bidding or auction participation.
Advance deposits for specified tasks.
Court or office-required guarantees.
Other legally mandated deposits.

Deposit Accounting Policy:

Deposits collected for contracts, supplies, or services are liabilities for the government until refunded.
Deposits paid by the government to other entities are assets, refundable upon task completion.

Legal and Institutional Framework:

Governed by the Financial Procedures Act, Regulations, and Accounting Guidelines, 2073 BS.
OFCG, Provincial Comptroller Offices, and Treasury and Comptroller Offices manage centralized deposit accounting.
Deposits are held in a single account under the Treasury’s name.
Accounting and reporting use Auditor General-approved forms (Form No. 601–608).
Internal audits by Treasury and external audits by the Auditor General.

Deposit Forms:

Form	Form No.	Purpose
Personal Deposit Account	601	Track individual or entity deposits
Consolidated Deposit Account	602	Maintain unified deposit records
Bank/Cash Deposit Book	603	Track deposit transactions
Bank Guarantee Record	604	Record bank guarantees
Government Deposits in Other Entities	605	Track deposits paid for utilities or cases
Consolidated External Deposit Account	606	Summary of external deposits
Deposit Financial Statement	607	Monthly/annual deposit reports
Government Guarantee Record	608	Track guarantees issued by the government

Deposit Procedures:

Record deposits in personal and consolidated accounts.
Reconcile bank statements with deposit records annually.
Transfer unclaimed deposits to revenue accounts after one year or specified periods.
Forfeit deposits for incomplete tasks per legal or contractual terms.
Refund deposits after verifying tax compliance.
Prepare periodic deposit statements for ministries and the OFCG.

Forfeiture and Write-Off:

Forfeited deposits are transferred to revenue accounts within 30 days or as specified.
Unclaimed deposits are written off to revenue after the specified period.
Deposits cannot be used for other purposes.

Example: A contractor deposits NPR 100,000 for a project bid. The deposit is recorded in Form No. 601 (Personal Deposit Account). Upon project completion, the deposit is refunded after tax clearance. If forfeited due to non-compliance, it is recorded in Form No. 602 and transferred to revenue.

Conclusion

Nepal’s public asset, inventory, and deposit accounting systems are critical for transparent and efficient public financial management. Supported by robust legal frameworks, these systems ensure accountability and proper resource utilization. Addressing challenges like outdated processes and lack of IT integration will further enhance their effectiveness.

References

Financial Procedures and Fiscal Accountability Act, 2076 BS (2019).
Financial Procedures and Fiscal Accountability Regulations, 2077 BS (2020).
Public Procurement Act, 2063 BS (2007).
Government Accounting Guidelines, 2073 BS (2016).
Office of the Financial Comptroller General, Nepal.