Type: Article (downloadable)
This article discusses how the value of Assets (specifically municipal infrastructure) could be derived from historic costs and recommends an index which is the most representative.
Dr H.M.S Belmonte
The Public Finance Management Act and the Municipal Finance Management Act requires that Municipalities comply to GRAP (Generally Recognized Accounting Practices) to account for their assets. These assets need to be identified and valuated in an asset register that is audited annually by the Auditor General. Updating the values annually however is an immense effort (and cost), and there is not a national system in place to assist with the updates. Most values are derived from history, and that is why knowing how to escalate their values is crucial.
This article will discuss why using the %CPA (Contract Price Adjustment) is recommended instead of PPI or CPI for municipal infrastructure.