ORGANIZATIONAL ASSETS DISPOSAL STUDY NOTES
CHAPTER ONE
PREPARING LIST OF ASSETS FOR DISPOSAL
Introduction:
Organization assets defines the history of an organization and its achievements, it’s current
capabilities and net worth, while these same assets set the possible milestones for future plans for the
organization. The assets could be built from start but could likewise be procured ready for work, they
provide support to carry out tasks by organization Personnel or they do the actual task. These assets
are in different categories and include office electronic equipment, capital equipment and machines,
automobiles, plant equipment and technology.
What is asset disposal?
Asset disposal is the removal of a long-term asset from the company’s possession and accounting
records. It is an important concept because capital assets are essential to successful business
operations. Moreover, proper accounting of the disposal of an asset is critical to maintaining updated
and clean accounting records.
The asset disposal may be a result of several events:
An asset is fully depreciated and must be disposed of.
An asset is sold because it is no longer useful or needed.
An asset must be removed from the books due to unforeseen circumstances (e.g., theft).
Asset disposal is mostly known as the act of selling an asset usually a long term asset that has been
depreciated over its useful life like production plant and vehicles.
Disposal may be considered as the third life of any item acquired by a procuring entity; first it is
procured and accepted- the procurement cycle; second it is utilized by the procuring entity in the
discharge of its duties-the life cycle; third it has to be disposed- the disposal cycle (Public
Procurement Oversight Authority, 2009).
The user department should have the responsibility of identifying items to be disposed and where
possible assemble them together. The head of stores should be responsible for identification of
stocked items which are candidates for disposal and the lists of all items identified for disposal should
be submitted to the head of procurement unit or the head of assets management unit depending on
the internal organization of the procuring entity (Public Procurement Oversight Authority, 2009).
These submissions should form the basis of the annual disposal plan. The disposal planning should be
done at the same time as the procurement planning. Procuring entities should dispose of their assets
at least once every year. A disposal committee should be formed to work with the user departments
and the head of procurement to prepare the disposal plan. The disposal committee should
recommend, to the accounting officer, the disposal including the disposal method (Public
Procurement Oversight Authority, 2009).
Disposal of assets is an important part of strategic asset management in organizations. Keeping
unwanted stores results in risks of unnecessary expenditure on storage costs; misguided management
effort; gradual loss of the value in those items; and the possibility of disposing assets, at a value lesser
than the residual value or best achievable value in the market. Disposal should always be treated as
PREPARED BY MR. ANTONY AMBIA Page 1
,the last phase of asset management because it is a function that is necessary for guaranteeing that
organization funds are not wasted on obsolete and unserviceable equipment and assets; and that
when stores are disposed, they are sold at the best achievable value in the market. A disposal plan
should therefore be prepared by an organization annually to include all disposals decided to be
necessary.
Disposal by public sector organizations in Kenya is usually governed by the Public Procurement and
Disposal Act and Public Procurement and Disposal Regulations. With the guidance of the Act and the
Regulations on how to carry out procurement planning for disposal of assets by public entities: it
becomes questionable when visits to public sector organizations reveal that assets lie idle; vehicles
grow grass in parking yards; offices have dusty equipment that are not being used; and storage
facilities hold items that have not been issued or used in many years.
METHODS OF DISPOSAL
As a general principle, sale of assets to staff is not to occur outside of a public process. Authorized
disposal methods are:
a. Public Tender (conducted in accordance with the same principles as tendering Policy);
b. Public Auction (maximizes opportunity for public participation);
c. Expressions of Interest/Quotations (conducted in accordance with the same principles as
Purchasing Policy;
d. Trade In (must be based on a clear analysis of the benefits of the trade in as opposed to separate
sale of surplus goods);
e. Writing off the Value of the Goods (where the goods are deemed to have no value; are beyond
economical repair or that the disposal cost is higher than the likely return.)
Procurement Planning for Disposal of Assets
The responsibility for the disposal of surplus material and scrap is usually that of the purchase
department .The operating department is usually responsible for declaring surplus or obsolete raw
materials and operating supplies while the Engineering and Maintenance departments are responsible
for replacement parts and maintenance supplies. The store will be responsible to report on non-
moving items and it is usual for many companies to have a committee to decide on surplus materials.
A procuring entity should establish a disposal committee comprising of at least five members who are
The officer in charge of finance;
The head of the procurement unit who should be the secretary;
The head of the accounting department; and
Two heads of end user departments, of whom one should be the head of the end user department
disposing of the stores or equipment (Government of Kenya, 2005).
The head of stores should be responsible for identification of stocked items which are candidates for
disposal. The lists of all items identified for disposal should be submitted to the head of procurement
unit or the head of assets management unit depending on the internal organization of the procuring
entity (Government of Kenya, 2006). These submissions should form the basis of the annual disposal
plan. Where a procuring entity has departments which are also located in different parts of the
country, disposal may be arranged at the stations with different disposal committees being appointed
to conduct the exercise. The disposal committees should recommend the disposal including the
disposal method (Public Procurement Oversight Authority, 2009).
PREPARED BY MR. ANTONY AMBIA Page 2
, The procuring entity should design a form which should contain the following information:
Item number;
Description of item;
Unit of issue; quantity;
Date of purchase;
Purchase unit price; total purchase price;
General condition;
Disposal recommendation of the disposal committee;
Estimated current value; and
Decision of the accounting officer (public procurement oversight authority, 2009).
The following aspects should be considered in planning for disposal:
The contents of an annual disposal plan;
Budgeting and allocation of funds;
Independent valuation of stores; and
The award of disposal and documentation of proceedings (public procurement oversight
authority, 2009).
The annual disposal plan of the procuring entity should include:
a. A detailed breakdown of the stores, assets and equipment to be disposed of;
b. A schedule of disposal; an indication of the justification;
c. An estimate of the value of each store, asset or equipment;
d. A reference of the asset register or records of the stores; an indication of the method of disposal
envisaged for each disposal requirement, including any need for pre-qualification, and
e. The anticipated time for the complete disposal cycle,taking into account the applicable approval
requirements;
f. An indication of whether the disposal of the stores, assets or equipment will be managed by the
procuring entity or any special agency designated or hired; and
g. An indication of the resources available for managing the disposal workload (public procurement
oversight authority, 2009).
It is extremely important to ensure that the control systems associated with scrap disposals are clear
and watertight.
LEGAL & POLICY FRAMEWORK FOR ASSETS DISPOSAL
The Public Procurement and Asset Disposal Act of 2015
An accounting officer of a procuring entity shall ensure that an annual assets disposal plan is prepared
of items declared as unserviceable, surplus or obsolete, obsolescence stores, asset or equipment as set
out under section 53(4) of the Act.
An annual disposal plan format referred to in this regulation shall include the following—
Item description for boarding;
Quantity;
Unit of issue;
Date of purchase;
Purchase price;
Estimated current value;
Justification for disposal; annual assets disposal plan.
PREPARED BY MR. ANTONY AMBIA Page 3
CHAPTER ONE
PREPARING LIST OF ASSETS FOR DISPOSAL
Introduction:
Organization assets defines the history of an organization and its achievements, it’s current
capabilities and net worth, while these same assets set the possible milestones for future plans for the
organization. The assets could be built from start but could likewise be procured ready for work, they
provide support to carry out tasks by organization Personnel or they do the actual task. These assets
are in different categories and include office electronic equipment, capital equipment and machines,
automobiles, plant equipment and technology.
What is asset disposal?
Asset disposal is the removal of a long-term asset from the company’s possession and accounting
records. It is an important concept because capital assets are essential to successful business
operations. Moreover, proper accounting of the disposal of an asset is critical to maintaining updated
and clean accounting records.
The asset disposal may be a result of several events:
An asset is fully depreciated and must be disposed of.
An asset is sold because it is no longer useful or needed.
An asset must be removed from the books due to unforeseen circumstances (e.g., theft).
Asset disposal is mostly known as the act of selling an asset usually a long term asset that has been
depreciated over its useful life like production plant and vehicles.
Disposal may be considered as the third life of any item acquired by a procuring entity; first it is
procured and accepted- the procurement cycle; second it is utilized by the procuring entity in the
discharge of its duties-the life cycle; third it has to be disposed- the disposal cycle (Public
Procurement Oversight Authority, 2009).
The user department should have the responsibility of identifying items to be disposed and where
possible assemble them together. The head of stores should be responsible for identification of
stocked items which are candidates for disposal and the lists of all items identified for disposal should
be submitted to the head of procurement unit or the head of assets management unit depending on
the internal organization of the procuring entity (Public Procurement Oversight Authority, 2009).
These submissions should form the basis of the annual disposal plan. The disposal planning should be
done at the same time as the procurement planning. Procuring entities should dispose of their assets
at least once every year. A disposal committee should be formed to work with the user departments
and the head of procurement to prepare the disposal plan. The disposal committee should
recommend, to the accounting officer, the disposal including the disposal method (Public
Procurement Oversight Authority, 2009).
Disposal of assets is an important part of strategic asset management in organizations. Keeping
unwanted stores results in risks of unnecessary expenditure on storage costs; misguided management
effort; gradual loss of the value in those items; and the possibility of disposing assets, at a value lesser
than the residual value or best achievable value in the market. Disposal should always be treated as
PREPARED BY MR. ANTONY AMBIA Page 1
,the last phase of asset management because it is a function that is necessary for guaranteeing that
organization funds are not wasted on obsolete and unserviceable equipment and assets; and that
when stores are disposed, they are sold at the best achievable value in the market. A disposal plan
should therefore be prepared by an organization annually to include all disposals decided to be
necessary.
Disposal by public sector organizations in Kenya is usually governed by the Public Procurement and
Disposal Act and Public Procurement and Disposal Regulations. With the guidance of the Act and the
Regulations on how to carry out procurement planning for disposal of assets by public entities: it
becomes questionable when visits to public sector organizations reveal that assets lie idle; vehicles
grow grass in parking yards; offices have dusty equipment that are not being used; and storage
facilities hold items that have not been issued or used in many years.
METHODS OF DISPOSAL
As a general principle, sale of assets to staff is not to occur outside of a public process. Authorized
disposal methods are:
a. Public Tender (conducted in accordance with the same principles as tendering Policy);
b. Public Auction (maximizes opportunity for public participation);
c. Expressions of Interest/Quotations (conducted in accordance with the same principles as
Purchasing Policy;
d. Trade In (must be based on a clear analysis of the benefits of the trade in as opposed to separate
sale of surplus goods);
e. Writing off the Value of the Goods (where the goods are deemed to have no value; are beyond
economical repair or that the disposal cost is higher than the likely return.)
Procurement Planning for Disposal of Assets
The responsibility for the disposal of surplus material and scrap is usually that of the purchase
department .The operating department is usually responsible for declaring surplus or obsolete raw
materials and operating supplies while the Engineering and Maintenance departments are responsible
for replacement parts and maintenance supplies. The store will be responsible to report on non-
moving items and it is usual for many companies to have a committee to decide on surplus materials.
A procuring entity should establish a disposal committee comprising of at least five members who are
The officer in charge of finance;
The head of the procurement unit who should be the secretary;
The head of the accounting department; and
Two heads of end user departments, of whom one should be the head of the end user department
disposing of the stores or equipment (Government of Kenya, 2005).
The head of stores should be responsible for identification of stocked items which are candidates for
disposal. The lists of all items identified for disposal should be submitted to the head of procurement
unit or the head of assets management unit depending on the internal organization of the procuring
entity (Government of Kenya, 2006). These submissions should form the basis of the annual disposal
plan. Where a procuring entity has departments which are also located in different parts of the
country, disposal may be arranged at the stations with different disposal committees being appointed
to conduct the exercise. The disposal committees should recommend the disposal including the
disposal method (Public Procurement Oversight Authority, 2009).
PREPARED BY MR. ANTONY AMBIA Page 2
, The procuring entity should design a form which should contain the following information:
Item number;
Description of item;
Unit of issue; quantity;
Date of purchase;
Purchase unit price; total purchase price;
General condition;
Disposal recommendation of the disposal committee;
Estimated current value; and
Decision of the accounting officer (public procurement oversight authority, 2009).
The following aspects should be considered in planning for disposal:
The contents of an annual disposal plan;
Budgeting and allocation of funds;
Independent valuation of stores; and
The award of disposal and documentation of proceedings (public procurement oversight
authority, 2009).
The annual disposal plan of the procuring entity should include:
a. A detailed breakdown of the stores, assets and equipment to be disposed of;
b. A schedule of disposal; an indication of the justification;
c. An estimate of the value of each store, asset or equipment;
d. A reference of the asset register or records of the stores; an indication of the method of disposal
envisaged for each disposal requirement, including any need for pre-qualification, and
e. The anticipated time for the complete disposal cycle,taking into account the applicable approval
requirements;
f. An indication of whether the disposal of the stores, assets or equipment will be managed by the
procuring entity or any special agency designated or hired; and
g. An indication of the resources available for managing the disposal workload (public procurement
oversight authority, 2009).
It is extremely important to ensure that the control systems associated with scrap disposals are clear
and watertight.
LEGAL & POLICY FRAMEWORK FOR ASSETS DISPOSAL
The Public Procurement and Asset Disposal Act of 2015
An accounting officer of a procuring entity shall ensure that an annual assets disposal plan is prepared
of items declared as unserviceable, surplus or obsolete, obsolescence stores, asset or equipment as set
out under section 53(4) of the Act.
An annual disposal plan format referred to in this regulation shall include the following—
Item description for boarding;
Quantity;
Unit of issue;
Date of purchase;
Purchase price;
Estimated current value;
Justification for disposal; annual assets disposal plan.
PREPARED BY MR. ANTONY AMBIA Page 3
