• Novice
  • Aware
  • Competent

Finance System

The financial functions of an information system should be able to fully accommodate the normal range of financial activities such as:

  • Payroll
  • General ledger
  • Customers/accounts receivable
  • Products/inventory control
  • Order entry/invoicing
  • Project costing
  • Departmental costing
  • Organization financial reporting.

For an organization that relies heavily on its asset base to provide services, constant monitoring of the performance of these assets and their replacement/ rehabilitation program will be of major concern.

Forward financial planning is an integral part of sound financial management; the financial model should allow program and capital works expenditure to be prioritised to complement program budgeting.

Where there is a large asset base, the financial function of the information system should be able to derive:

  • Initial capital cost
  • Past renewal costs
  • Past operating costs
  • Past maintenance costs
  • Current cost valuation
  • Method of valuation
  • Method for revaluation (CCI)
  • Method of depreciation
  • Written down current cost valuation
  • Actual depreciation (physical)
  • Economic depreciation
  • Taxable depreciation
  • Future capital requirements :
    • Rehabilitation/renewal
    • Replacement
    • Augmentation, etc.
  • Future recurrent requirements:
    • Operations
    • Maintenance
    • Labour
    • Materials
    • Energy/chemical
  • Return on assets
  • Future cash flows required (income)
  • Tariff/pricing policy outputs (cost of service present and future)
  • Other.

This table best represents the need for information, and shows that details are aggregated upwards.

General Audit and Accounting Requirements

The prime objective of accrual accounting is to ensure that the true consumption or depreciation of the assets is known and allowed for in the operating statements.

Capturing this information is one part of proper life cycle management.

For those organizations that have adopted accrual accounting standards, the information system must have the functionality to :

  • Identify the asset and where it is located
  • Determine appropriate asset categories and sub-categories. The list should be user definable
  • Record a valuation amount, accumulated depreciation, useful life and residual life, valuation method and date
  • Threshold for capitalisation, flagged for checking as per audit requirements
  • Record new assets, disposal and write off of old assets and transfer of assets between responsibility centres
  • Full integration with the general ledger
  • Revalue assets on an individual basis by amount, or by a percentage rate across a category of assets.
  • Depreciation must be able to be charged monthly quarterly or annually
  • Periods must be capable of being "rolled" back after being closed for record maintenance purposes, and archiving of old data
  • Reports, showing assets at cost and associated accumulated depreciation as well as assets at reproduction and association accumulated depreciation
  • Enhancements to assets in a different reporting period need to be attached to the original asset record (assuming the same life)
  • Reports for asset acquisitions, disposals, profit or loss on disposal etc.
  • Audit trails are necessary for the maintenance of asset records
  • Reports by cost or responsibility centres.

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