Reporting for Accounting and - National Treasury

Accounting and Reporting for Immovable Assets

Effective 1 April 2019 1

Accounting and

Reporting for

Immovable Assets



Contents

1. Purpose ......................................................................................................................... 3

2. Applicable legislation ..................................................................................................... 3

3. Recording of land parcels and facilities (SDF’s) ............................................................. 4

4. Road construction, recording and reporting .................................................................... 7

5. Reporting on land parcels and facilities ........................................................................ 11

6. Measurement of land and structures ............................................................................ 13

7. Interim arrangements ................................................................................................... 14

8. Concluding remarks ..................................................................................................... 18

Application of the Fair Value Model ..................................................................................... 28

1. Purpose of this document ............................................................................................. 28

2. Background .................................................................................................................. 28

3. Valuation Methods ....................................................................................................... 28

4. Exceptional Cases ....................................................................................................... 29

5. Motivation and Benefits of Using Municipal Valuation Rolls and Nominal Value for

Exceptional Cases ....................................................................................................... 32

6. Sources to be Used ...................................................................................................... 32

7. Procedures to be Followed ........................................................................................... 32

8. Glossary of Terms & Abbreviations / Acronyms/ Definitions ......................................... 34

9. Definitions .................................................................................................................... 34



1. Purpose

The purpose of this document, an extension of the Modified Cash Standard, Chapter 11 Capital

Assets, is to provide clarity on the recording of and reporting on immovable assets in the financial

statements and asset register of a department as custodian or budget holder (for the construction of

immovable assets). The overall objective is to ensure that all identifiable immovable assets (land and

or improvements/ construction on land) funded by government, are accurately reflected in an

appropriate register for reporting on immovable assets by national and provincial government thus

providing a complete picture of the immovable assets at the disposal of government for decision making

and accountability purposes.

2. Applicable legislation

The guidance has been developed after due consideration of the following various pieces of legislation,

which amongst other, govern the acquisition, construction, management and disposal of immovable

assets:

The Constitution of the Republic of South Africa, No. 108 of 1996;

The Constitution of the Republic of South Africa, No. 200 of 1993;

The Public Finance Management Act, No. 1 of 1999;

Land Administration Act, No. 2 of 1995;

State Land Disposal Act, No 48 of 1961 (as amended)

Land Survey Act, No. 8 of 1997;

Deeds Registries Act, No. 47 of 1937;

Government Immovable Asset Management Act, No. 19 of 2007 (GIAMA);

Eastern Cape Land Disposal Act, No 7 of 2000;

Free State Land Administration Act, No. 1 of 1998;

Gauteng Land Administration Act, No. 11 of 1996;

Kwazulu-Natal Land Administration and Immovable Asset Management Act, No. 2 of 2014;

Mpumalanga Land Administration Act, No. 5 of 1998;

Northern Cape Land Administration Act, No. 6 of 2002;

Northern Province Land Administration Act, No. 6 of 1999;

North West Land Administration Act, No 4 of 2001;

Western Cape Land Administration Act, No. 6 of 1998;

Western Cape Transport Infrastructure Act, No 1 of 2013;

Western Cape Land Use Planning Act, No 3 of 2014;

Education Affairs Act (House of Assembly), No. 70 of 1988

KwaZulu-Natal Ingonyama Trust Act, No. 3 of 1994 (as amended) ;

Housing Act, No. 107 of 1997 (as amended);

South African Schools Act, No. 84 of 1996

Spatial Planning and Land Use Management Act, No 16 of 2013



Roads Acts (per province as applicable)

Roads Ordinances (per province where applicable)

Municipal Property Rates Act, No 4 of 2004 (sections relevant to content)

Mining and Petroleum Resources Development Act, No 28 of 2002 (sections relevant to content)

3. Recording of land parcels and facilities (SDF’s)

3.1 The National Department of Rural Development and Land Reform (DRDLR) shall record the following:

a. All un-surveyed state land, including those from the former TBVC States and Self Governing

Territories and state land in the former territory of the Republic of South Africa (pre 27 April 1994);

b. all surveyed but unregistered land parcels falling into the custodian function of the department;

c. all land vested with the national government situated in the former TBVC states and the former Self

Governing Territories including any communal land located in these areas with the exclusion of land

governed by the KwaZulu-Natal Ingonyama Trust Act, 1994 (Act 3 of 1994) as amended;

d. all former South African Development Trust land unless custodianship clearly resides with another

party in terms of specific legislation or have been confirmed vested in a province;

e. all land held for land reform purposes; and

f. any land where the department is deemed to be the custodian.

3.2 The National Department of Public Works (DPW) shall record the following:

a. all facilities used by the national government located on un-surveyed land or surveyed but

unregistered land including those from the former TBVC States and Self Governing Territories and

state land in the former territory of the Republic of South Africa (pre 27 April 1994), or located on

land governed by the KwaZulu-Natal Ingonyama Trust Act (pre 24 April 1994) as Amended;

DRDLR is responsible for driving the process to ensure that all abovementioned land parcels

are identified. Where the un-surveyed land cannot be quantified a description of the land should

be disclosed in a narrative format in the secondary information notes to the financial statements.

For example: ‘There are land parcels in the following provinces that have not been surveyed

yet Gauteng, Limpopo and North West. It is estimated that surveying would be completed

during the next ‘number of’ financial years.’



b. all land in the former territory of the Republic of South Africa (pre 27 April 1994) registered in the

name of the National Government of the Republic of South Africa, where custodial powers have not

been assigned to another national department in terms of section 4 of the GIAMA;

c. all land in the former territory of the Republic of South Africa (pre 27 April 1994) registered in the

name of any of the historical holders of national state land (e.g. Governor of the Cape of Good

Hope; Union of South Africa; Minister of Lands, Republic of South Africa; etc.) before the advent of

the democratic dispensation in 1994, that is deemed to vest in the national government, where

custodial powers have not been assigned to another national department in terms of section 4 of

the GIAMA;

d. all land vested with national government and situated in the former TBVC states and Self Governing

Territories occupied by a national department in support of its service delivery objectives (e.g. a

magistrate’s court or prison) and or where DPW performs the custodial functions (barring the

disposal thereof) in terms of section 4 of the GIAMA;

e. all former South African Development Trust land, which by proclamation vest with DPW;

f. all surveyed but unregistered land parcels falling within the custodian function of the department;

g. all facilities constructed and used by the national government on land where DPW is not the

custodian subject to the terms any agreement written or oral;

h. all properties acquired by DPW for the discharge of its mandate;

i. any properties that fall within the custodianship of the national government through a process of

law or other process except those specifically related to land reform;

j. any properties listed in the Deeds Registry as State properties not claimed by another custodian

(national or provincial) until such time as a rightful custodian can be identified; and

k. any property where the department is deemed to be the custodian.

DPW is responsible for the co-ordination and identification of properties vested with national

and provincial government and as such should liaise with the national departments and the

provinces to identify any possible omissions or duplications. The department should also liaise

with the Director-General of DRDLR (as the competent authority to issue the certificate)

regarding Item 28 (1) Certificates that have been issued (also referred to as Section 239

Certificates in terms of the Constitution).



3.3 Provincial custodians should record the following:

a. all properties confirmed vested with a province shall be recorded by the department to which the

Premier has designated the function for the administration of such assets. In the absence of such

delegation, the assets shall be reflected in the asset register of the Premier’s office;

b. where more than one custodian exists in a province, legislation should prevail for example, land

parcels designated for human settlement (including areas for roads and public open spaces related

thereto) should be recorded by the Department of Human Settlements as the custodian in terms of

the National Housing legislation (land in this instance represents ‘assets held for distribution or sale

in the ordinary course of business’ and should be reflected as Inventory and not immovable assets);

c. all facilities used by the provincial government located on un-surveyed land, or surveyed but

unregistered land or land governed by the KwaZulu-Natal Ingonyama Trust Amendment Act;

d. any properties where the province is deemed to be the custodian;

e. all facilities constructed, used and or maintained relating to a provincial function but not on provincial

land, subject to the terms of any agreement written or oral; and

f. all surveyed but unregistered provincial land parcels falling within the custodian function of the

province.

3.4 Other custodians should record the following:

a. all properties where custodianship is confirmed vested in them through section 4 of the GIAMA;

b. all land allocated by any other legislation, proclamations or assignment prior to the GIAMA e.g. land

allocated for construction and storage of water reserves, land parcels and or structures in foreign

territories used for international relations activities, land for the cultivation of forestry, land for

The provincial department responsible for the administration of the immovable assets must

ensure that all provincial properties are identified and recorded.

The department should also liaise with the national DPW as well as the Director-General of

DRDLR (as the competent authority to issue the certificate) regarding Item 28 (1) Certificates

that have been issued.

Where an agreement of deemed custodianship has been reached between a province and the

national custodians regarding land that should vest in a province, such agreement should be

formalised. A Section 42 transfer should be done to the province by the DRDLR/DPW for

recording purposes where the property was previously recorded in a register of the national

department, except where an Item 28(1) Certificate is issued at the same time.



strategic defence purposes, or for use to create human settlement and to be administered by the

relevant functional departments; or

c. properties assigned to custodians through section 18 of GIAMA.

4. Road construction, recording and reporting

In the preceding paragraphs the focus was on the recording of land parcels and facilities (administration

buildings, schools, hospitals) constructed thereon, as separable assets. Different types of construction

can however take place on a land parcel which may result in the creation of an immovable asset. An

example is the construction of roads by national and provincial departments creating road infrastructure

to advance movement of goods and persons. These networks (consisting of bridges, tunnels, drainage,

road furniture, etc. which may be managed differently but forming a ‘system’) add to the immovable

asset base of government and needs administration and continued maintenance.

In certain instances, construction of one asset may result in other ‘rights’ either of use and/or access

which may constitute assets and/or obligations that need recording such as quarries and borrow pits,

which are integral to construction activities, but especially road construction. The rights and obligations

need to be assessed and any possible assets resulting therefrom recorded appropriately.

4.1 Custodians should record and report on:

a. the land parcels utilised for road construction, also referred to as road reserves;

In recording land parcels related to roads the ownership of such land parcel (as is the principle for

land parcels) should be taken into account. Where the land parcel is State owned, the relevant

custodian will record the parcel and report thereon in the note for immovable assets in its financial

statements. A road however, is usually constructed across multiple land parcels and it is thus

important to determine which road reserves should be recorded and the classification - an

immovable asset or an intangible right of use/ access or not at all.

b the whole completed road structure (as defined) and as a separable asset (without reference to

land ownership in the note for immovable assets in its financial statements);

4.2. Budget holders should record and report on:

a. the road structure as capital work in progress while construction is underway;

The cost of the actual road structure should be accumulated by the budget holder as incurred and

the movement reflected year on year in the note for capital work in progress in its financial

statements.



b. the road asset when ready for use, the status so identified as per criteria or policy of the budget

holder;

When the road is ready for use the cost of the structure to date should be taken from capital work

in progress to the asset register of the budget holder. The movement will be reported on in the note

for immovable assets and capital work in progress in the financial statements.

c. additional cost to complete the structure from its ready for use status to completion (prior to transfer

to the custodian) and added to the road asset in the asset register;

On completion of the structure and fulfilment of contractual obligations, the budget holder should

update its asset register and then transfer the total cost of the road from its asset register to the

custodian, using the Section 42 process. Reporting by the budget holder will depend on the status

of the Section 42 process, as is the case for all capital assets. The custodian will on acceptance of

the transfer update its asset register and report on the asset in the notes for immovable assets in

its financial statements.

d. Where the budget holder is also the custodian the asset (the road structure) will remain in the asset

register at final cost and reported on in the note for immovable assets in its financial statements.

4.3 Roads classification for reporting purposes are aligned to the Roads Infrastructure Strategic

Framework for South Africa, 2006. The classification covers six different types of roads according to

purpose and function.

The full classification is on page 25 of the document and summarised as follows:

Class Type road Nature of road

1 Primary distributor Public roads between, through and within regions of national importance e.g. between key cities, ports, neighbouring countries

2 Regional distributor Public roads between, through and within centres of provincial importance e.g. between capitals, large towns and municipal centres

3 District distributor Public roads through and within centres and towns and linking with rural residential areas, industrial/ farming areas

4 District collector Public roads between, through and within villages, farming areas, scattered settlements and commercial, residential and industrial areas

5 Access road Public roads between class 3 and 4 type roads and residential areas, within residential areas and roads providing direct access to industries, business and specific destinations such as heritage sites, national parks and safe mobility of pedestrians and non-motor transport

6 Non-motorised access ways Rights of way that provide safe dedicated access for pedestrians, cyclists and animal drawn transport to social, recreational and economic areas



4.4 Roads structures for reporting purposes:

Road classes one to three of the classification must be recorded and reported on by national and

provincial custodians (or budget holders during construction, where relevant) complying with the

following timeline:

a. Existing Class 1 and 2 roads; all roads by the financial year ending 31 March 2022 and reported on

in the relevant immovable asset register note to the financial statements;

b. Existing Class 3 roads; all roads by the financial year ending 31 March 2024 and reported on in the

relevant immovable asset register note to the financial statements;

c. Roads currently under construction; all cost relating to the entire road structure (as defined) should

be recorded as part of capital work in progress as construction costs are incurred by the budget

holder and reported on in the relevant note for capital work in progress to the financial statements

(and Annexure thereto) including aging of projects and related payables (limited to progress

certificates/ invoices received not paid) and narrative required for longer duration of projects;

4.5 Rights associated with road construction

Different rights could emanate from road construction activities which should be assessed to ascertain

whether any capital asset need to be recorded. The following should be considered:

a. Rights obtained to access land but which is not State land (as defined), during the construction

phase, may be an intangible asset and should be assessed and recorded and reported on as such

(the land parcel in this instance is not the asset) at cost. Access is usually allowed to a specific

portion of a land parcel by the owner or permanent resident and by agreement (the duration and

terms of agreement will be indicative including the cost of the right);

b. A mining permit or license (whichever is applicable) obtained for mining of aggregate is also a right

and should be considered for recording as an intangible asset at cost (a 2004 regulation issued by

Minerals and Energy exempted Sanral and roads departments from the legislative requirements to

apply for permits or licenses to mine but not the requirement to have an environmental management

plan);

c. A borrow pit or quarry should not be recorded as an immovable asset even though connected to

land (rights relating to the land parcel should be assessed). The ‘asset’ in the case of a borrow pit

or quarry is the aggregate taken out which is inventory by nature (construction material) and not

currently a reporting requirement (in instances where the land parcel on which the pit/ quarry is

located, is State land, the land parcel shall be recorded together with all other land parcels by the

custodian);

d. The remaining aggregate (or potential inventory) is not recorded or reported on;



e. A borrow pit or quarry may be utilised over a period of time and for different construction activities

and the cost of extraction becomes part of the cost of the road structure and should be allocated to

the different projects. The equipment used to extract and transport the aggregate will be capital

assets in their own right and should be recorded and reported on in the appropriate note for capital

assets in the financial statements;

f. Rights as described above must all be assessed and where appropriate recorded in an asset

register and reported on in the relevant note to the financial statements in accordance with the

following timeline:

i. All rights relating to pits and quarries newly established for use on projects to be

operated during 2019/20 or thereafter, assessed, recorded and reported on by the end

of the financial year, ending 31 March 2020;

ii. All rights relating to pits and quarries newly established and actively used for projects

during the period 1 April 2017 to 31 March 2019 assessed, recorded and reported on

by the end of the financial year, ending 31 March 2021;

iii. All rights relating to pits and quarries newly established and actively used for projects



iv. All rights relating to pits and quarries newly established and actively used for projects



v. All rights relating to pits and quarries established and used for projects before the

period starting 1 April 2013 assessed, recorded and reported on by the end of the

financial year, ending 31 March 2025;

vi. All rights relating to pits and quarries must also, when assessed within the required

timeline and at every reporting date thereafter, be distinguished based on whether still

active or inactive. Where assessed as inactive the estimation should also indicate

whether it is a permanent or temporary situation. The list of permanently inactive pits

and quarries must be matched to the obligations as set out under 4.6 below and the

provincial environmental management and rehabilitation plan;

4.6 Potential commitments or liabilities associated with road construction

a. The use of land parcels for mining of aggregate during construction such as for the creation of

borrow pits and quarries has an environmental impact which may lead to a potential outflow of

resources to make the land parcel safe and fit for alternative use or back to its previous condition;



b. In terms of legislation the topsoil (which includes ground to the water level) of a potential borrow pit

or quarry must be removed and stored safely for reintroduction on closing down of the facility. The

storage of such material is a responsibility (of the holder of the right to access/use) during active

use of the pit or quarry and may incur a cost for storage and transport to initially remove and later

bring back to site on closing of facility;

c. Environmental legislation requires reversing of the damage done during excavation, which can be

enforced despite an agreement entered into with the land owner or permanent resident not to repair.

The reversal of damage may entail (apart from replacement of the topsoil) reseeding of plants and

grasses, reintroducing and populating living creatures previously found in the area;

d. The potential outflow as a result of responsibilities or commitments as mentioned above must be

assessed, recorded and reported on in terms of the MCS Chapter 14 on Provisions and

Contingents, while complying with the timeline set out in 4.5 (f) above for the rights relating to

borrow pits and quarries. This implies that the assessments done must be holistic and include the

rights as well as related obligations;

5. Reporting on land parcels and facilities

The recording and reporting principles listed below must be applied (depending on the specific reporting

framework used, it may require additional disclosure, including measurement and recognition

considerations, by the trading entity):

a. all land for which an endorsed title deed is on hand in the name of the appropriate government,

national or provincial, should be recorded in the Asset Register of the custodian and reported on in

the note for immovable assets in the financial statements;

b. all land for which an Item 28 (1) Certificate (or Section 239 Certificate) has been issued, should be

recorded in the Asset Register of the custodian so appointed and reported on in the note for

immovable assets in the financial statements;

c. all land which by virtue of legislation is under the custodianship of a national or provincial custodian

and where there is no requirement to vest such land, should be recorded in the Asset Register of

the relevant custodian and reported on in the note for immovable assets in the financial statements;

d. all land for which a title deed is on hand in the name of a national or provincial government (including

those in the name of a recognised historical name for the province or national) or confirmed with

the Deeds Registry, and appropriate for the custodian, should be recorded in the Asset Register of

that custodian and reported on in the note for immovable assets in the financial statements, read

with Section 239 of the Constitution, Act 200 of 1993;



e. all property which is deemed to vest in the custodian (per definition) should be recorded in the

Register of the deemed custodian and reported on in a narrative format below the note for

immovable assets in the financial statements;

f. land not yet surveyed should not be included in the Asset Register of the DRDLR but separately

disclosed in a narrative form, reflecting the province it is situated in and an estimation of when it will

be surveyed, below the disclosure note for immovable assets in the financial statements;

g. all surveyed but unregistered land parcels, without Item 28(1) certificates, should be reflected in the

Register of the relevant national or provincial custodian and reported on in an annexure to the

financial statements, reflecting movement during the year of properties registered;

h. all facilities constructed on land not yet surveyed and occupied by a national or provincial

department must be recorded in a separate Register by the national custodian or relevant provincial

custodian and reported on in a narrative format below the note for immovable assets in the financial

statements, indicating the number of facilities, functions of the facilities and average duration of any

agreements to use;

i. all facilities constructed on land where only a right to use exists must be recorded in a Register and

reported on in a narrative format below the note for immovable assets in the financial statements,

indicating the number of facilities, functions of and duration of use as per the right given (the ‘right

to use’ may be an intangible asset and should be assessed against the definition);

j. properties, for which an agreement of custodianship had been reached and a transfer received,

(was in another register before) complying with Section 42 (of the PFMA), must be recorded in a

separate Register and disclosed in a narrative note to the financial statements, awaiting vesting.

The note should indicate the number of land parcels. A reconciliation indicating movement during

the year in terms of transfers received and issued, should be indicated (it must be noted that the

Section 42 transfer is not a substitute for the vesting process);

k. the national custodian must present in narrative format an overall view reflecting requests for Item

28 (1) lodged and issued for national custodians and per province during the year, as well as the

balance to be issued. An estimate should be given for issuing the remainder with motivation for the

timeline. An overall view of total land parcels still to be vested could be given by the national

custodians expressed as a percentage of total identified state land, where available;

l. construction of or improvement to a facility on a custodian’s land should be recorded in the Asset

Register of the budget holder when the asset is ready for use and reported on in the note for

immovable assets in the financial statements. On final completion of the project the asset must be

transferred to the relevant custodian fulfilling the requirements of Section 42 of the PFMA. In the

year of transfer (both parties signed the transfer form) it must be recorded in the Asset Register of

the custodian and reported on as a non-cash transfer in, in the notes for immovable assets to the



financial statements. The budget holder should record a transfer out in the Asset Register and

report a non-cash transfer out in the notes to the financial statements;

m. any land acquired by a user for the construction of a facility must be reflected in its Asset Register

on registration of title and subsequently transferred to the appropriate national or provincial

custodian complying with Section 42 of the PFMA;

n. any properties recorded (by the National DPW) as a result of an indication by the Deeds Registry

that land is state land, but unclaimed by another custodian, must be recorded in a Register and

reported on as a contingent asset in an annexure to the financial statements until such time as the

rightful custodian or owner can be identified.

6. Measurement of land and structures

Measurement should be done in line with the Modified Cash Standard (MCS). Assets captured in the

Asset Register should comply with paragraphs .69 to .73 of the MCS Chapter 11 on Capital Assets,

which dictates that measurement should be at cost and where not reliably determinable, at fair value.

a. Fair value can be determined by applying the Fair Value Model developed for and by custodians

attached as Annexure A;

b. Where land parcels are utilised for mixed-use purposes and or where the possible benefit to the

entity in the use of the land may be limited due to circumstances, it may be necessary to re-assess

the determination of the value by the municipality;

c. Where land parcels have been subdivided or consolidated the MVR value must be assessed to

ensure that this information was taken into account by the municipality and that there is no

duplication of information;

d. When applying an average value to land parcels any limitation in the benefits that may be enjoyed

by the entity, should be taken into account as it would impact the value of a particular land parcel;

e. Where property is held in trust on behalf of beneficiaries (excluding land for human settlement

which is reported on as inventory) the value for exceptional cases can be used;

f. Where roads are recorded and the actual cost is not available due to the age of the road, the value

used per the roads management system may be used as a deemed cost for the structure;

g. Land parcels forming part of the road reserve are valued for inclusion in the asset register in terms

of Annexure A;



7. Interim arrangements

Until the identification, vesting and recording process has been finalised the following arrangements

should be followed:

a. The recording of structures constructed or under construction on tribal, communal, private or

municipal land will be dependent on the terms and conditions of the agreement with the relevant

tribal/communal/municipal authority. Matters to be taken into consideration include the

responsibility for the maintenance of the structure in future and or who will pay for the municipal

services and or who will benefit from the construction and use of the asset (the transfer to the

beneficiary or entity responsible for the long-term maintenance of the structure should be done

through the asset register of the budget holder);

b. The cost of construction on a custodian’s land (new structure or improvement of existing facilities)

should be recorded by the budget holder during construction (reported on as capital work in

progress) and once the facility is ready for use included in the Asset Register of the budget holder

(unless exempted by MCS Chapter 11.91A). On final completion of the project (project close out)

the costing should be done by the budget holder and its Asset Register updated. Subsequent to

that the facility must be transferred to the appropriate custodian complying with section 42 of the

PFMA;

If custodianship over a property is transferred to another department both departments should

comply with Section 42 of the PFMA.

The department (user or previous recorder) with the immovable asset in its asset register is

responsible for initiating communication with the appropriate custodian and on agreement

prepare the documentation, as required by Section 42, to transfer the custodianship over the

property to the appropriate custodian department.

Note: The use of a Section 42 transfer is not applicable where a transfer is done as part of the

vesting process or in an arms’ length commercial transaction.

Further, the use of a Section 42 transfer, is not a replacement or substitute for the legal process

of title registration or endorsement whichever is appropriate.

Construction on a custodian’s land must be recorded in the asset register by the budget holder

when ready for use (taken out of work in progress) and the improvement transferred to the

custodian on final completion of the project.



c. Structures, ready for use, should be excluded from capital work in progress and recorded and

disclosed in the asset register from the 2013/14 financial year forward. The requirement was thus

set for prospective application not retrospective. This should allow for newer structures to be

recorded at cost of construction on final completion and transfer;

d. Where land that should be recorded and disclosed by another custodian (national or provincial) are

included in an inappropriate register or asset register, a transfer in terms of Section 42 of the PFMA

must be initiated from the side where the land parcel is currently recorded;

e. The timing of entitlement that conveys custodianship should be used as guidance for inclusion in

the asset register of a custodian, for example:

i. An agreement between national and provincial custodians that property should vest with a

provincial custodian is the point where sufficient evidence of custodianship has been provided

to request an Item 28 (1) Certificate. The assets can be transferred to the provincial custodian

using the Section 42 process and the assets disclosed in narrative form until the issue of the

Item 28 (1) Certificate, where after it will be recorded in the Asset Register and disclosed in

financial terms in the note to the financial statements as the registration process (with the

Deeds Office) can be seen as the administrative completion of the entitlement already gained;

ii. Where a situation of deemed custodianship exists the property can be included in the Register

of the deemed custodian but, for available verifiable reasons, cannot be done at present;

iii. The date as set out in the notification afforded through legislation (for example Schools Act

including proclamations, for State-aided schools) will be the date entitlement is gained of

custodianship and will be the indicator for inclusion in the relevant Asset Register. The

endorsement of the title deed by the Deeds Office will be seen as the administrative completion

Until a project is finalised the budget and the underlying asset should not be separated by the

budget holder. On finalising the project, the asset with verifying documentation should be

transferred to the custodian as required by Section 42 of the PFMA.

Note:

Where the municipal value was used by the custodian as deemed cost for the existing asset,

the custodian should on updating its asset register, ensure that the improvement is not already

included in the municipal value used. Where the municipal value was dated before the

improvement was made the value of the improvement as per the Section 42 documentation

must be added to the municipal value to determine a new carrying value for the asset. The

custodian should then request the municipality to update its valuation of the property, taking

the improvement into account, but the asset register value should not be changed to that of the

new valuation by the municipality as that will constitute a revaluation and be in contravention of

the MCS chapter on capital assets paragraph .88.



of the entitlement already gained (in these instances the original title was with the State and

removal of an endorsement administrative);

iv. In circumstances where an Item 28 (1) Certificate is issued for surveyed but unregistered land

parcels the custodian must include such land parcels in the Asset Register as the registration

process will be seen as the administrative completion of ownership already entitled to. In such

circumstances the municipality must be contacted and requested to value the property to

ensure a valuation is included in the next supplementary municipal roll. The custodian should

include a narrative under the secondary information note to the financial statements relating

to immovable assets, to indicate to users the number of such properties included in the Asset

Register awaiting valuation by the municipality and valued as for exceptional cases in the

interim (custodians are discouraged from obtaining costly formal valuations instead of a

municipal valuation (default value per Fair Value Model (Annexure A)) as this could lead to

duplication of effort and incurrence of fruitless and wasteful expenditure);

v. Where an entire land parcel, previously surveyed, are expropriated for use by the State, the

date of entitlement of ownership is seen as the date of the gazette confirming the expropriation

(all due processes have been completed at this stage). The land parcel can be recorded in the

asset register of the custodian at cost of expropriation or in accordance with the Fair Value

Model, where there is no cost. The endorsement of title is seen as an administrative completion

of ownership already gained as the land parcel can be uniquely identified in accordance with

its cadastral description and valued for reporting purposes;

vi. Where a portion of a land parcel is expropriated for use by the State the date of entitlement of

ownership is also seen as the date of the gazette confirming the expropriation. Such a portion

and the remainder (other part of the original it used to be part of) must however be separately

surveyed as new land parcels, in order to be uniquely identifiable by description. Title to the

portion so expropriated cannot be registered with the Registrar of Deeds without the survey.

Thus in this instance though entitlement is gained the process is incomplete and not

administrative. The portion must be included in the Register of the custodian with a best

approximate description and at cost of expropriation, where applicable, but only reported on

as additional information in number of land portions and function, in a narrative format, below

the notes to immovable assets in the financial statements. Reasons for the incomplete process

must be noted as part of the narrative. As the land parcel cannot be uniquely identified it does

not meet the criteria for inclusion in the asset register;

vii. In certain instances, the State can use proclamations to gain access to or the right to use land

to enable service delivery. In the case of a proclamation of a road for example, the State takes

responsibility for the construction, management and maintenance of the road structure but

ownership of the affected land parcels remains with the title holder thereof and does not

transfer. Thus a right to use or access is gained. When access to the land through the road

structure is no longer needed, for whatever reason, a proclamation is issued to the effect and



the land reverts to the owners for normal use. The land parcels affected by proclamation will

therefore not be recorded in the asset register as a land asset. The right of use or access to

the land could however be considered for recording. Where assessed as an asset, it should

be recorded at cost. The road structure is an immovable asset and recorded as a separable

asset in the asset register;

f. As an interim measure, where a custodian does not have a reliable cost or fair value and is awaiting

the municipal valuation or is still in progress with the valuation process, such as for newly surveyed

and vested properties, whether registered or not, the affected properties may be reflected in the

asset register at the same value as for exceptional cases. Where this option is used the custodian

must indicate the fact, number of such land parcels and reason for the lack of cost and or fair value,

as a narrative under the secondary information note for the immovable assets in the financial

statements. Under additional information and to indicate the progress made during a particular year

towards establishing a fair value for such properties included in the asset register, the custodian

must year on year reflect a reconciliation showing the movement in number of parcels and indicate

reasons for any lack of progress or increase in numbers.

g. Any issues experienced with measurement (such as mixed use or subdivisions) should be

explained in narrative format, giving the user an understanding of the problem. These issues should

be addressed during the implementation process of the Model and with a view to possible future

alignment to best practice (principles of generally recognised accounting practice) which, may result

in different classification and treatment in recording going forward.

h. Where custodians have sufficient reason to dispute the municipal value as determined by a

municipality (the default valuation method suggested for use), reasons should be documented and

a dispute opened with the municipality. During the dispute process and until the issues are resolved

the affected land parcels can be measured at the same value as for exceptional cases. Reporting

on the fact and on the progress should be done in a narrative format below the notes for immovable

assets in the financial statements and an indication given on the number of land parcels affected

and timeframes for solution, where possible.

i. Where the road assets of a province were previously reported on in alignment with the principle of

ownership of the land parcel as for other immovable structures, this status quo may be retained for

the 2018/19 reporting period. The policy to report on road structures as separable assets rather

than based on land parcel ownership resulting from the view of responsibility for management and

maintenance of the total road structure, must however be implemented and reported on in

alignment with the requirements and timelines set out in paragraphs 4.3 and 4.4.

j. Where servitudes exist, they should be the differentiated on between registered and non-registered.

The right to these road reserve can be recorded in the register and reflected at cost where available.

Information regarding these road reserves, where currently available, can as an interim measure

be reflected in a narrative format under the notes for additional information on immovable assets.



The number of reserves and the split between registered and non-registered should be indicated

until a timeline for recording and reporting has been established by the sector. Reporting as

indicated is suggested as additional information to users and to promote transparency regarding

assets in general.

k. Information currently included with regards to the asset register and register is for purposes of

transparency and aligned to the legislative requirements of custodians. Where custodians are not

able to reliably quantify issues in financial terms, the issues should be covered as additional

disclosure in narrative format, under the section for additional information.

l. Where level four to six roads are under the custodianship of a province, while not included in the

timeline as yet, disclosure under additional information can be given in narrative format regarding

the fact and information per classification i.e. the province is the custodian of class 4 roads but not

class 5 or 6 roads. Where available, kilometres per classification can be disclosed (capital projects

on such roads will flow through capital work–in-progress of the budget holder, following the process

as for all capital projects). In the interim the custodian can record such roads in a register until the

prevalence and materiality of such custodianship can be assessed. It may be useful to users of the

financial statements to be aware of the situation but no financial information is required.

8. Concluding remarks

The above principles are based on various pieces of legislation with impact on possible recording of

and reporting on the immovable asset environment. The requirements are not all embracing as a

phased approach has to be followed for practical implementation without contravention of the spirit of

the legislation. Practice/ Instruction notes or exemptions previously issued which contradicts the above

are considered null and void.

The custodial functions (based on GIAMA) as referred to in this document should be interpreted as

broad principles applicable but not overriding specific provincial legislation on the matter. Any

differences should be dealt with in the spirit of principles applied.

The responsibility is also placed on the national custodians to actively lead the completion of the

surveying and vesting processes to ensure all State land parcels and structures are appropriately

recorded and reported on.

The utilisation of the Section 42 process is considered appropriate as the transfer of custodianship is

seen as a transfer of function (of managing the asset) from one accounting officer to another. The

intention is further to ensure accountability and spending responsibility are dealt with prior to a transfer

with the creation of an audit trail of documentation which is currently lacking in the immovable asset

environment impacting on custodians to create reliable registers of State assets for reporting purposes.



The mandate of a specific department could give an indication in deciding where recording and reporting

should take place for example, land specifically acquired or allocated for human settlement should be

recorded and reported on by the Department of Human Settlement as inventory. Reporting should be

done in terms of the applicable inventory framework.

The requirement for an asset management plan (user or custodian) should not be confused with the

requirement for recording of assets in the asset register or register (refer postponement of the

implementation of certain sections of GIAMA as outlined in Government Gazette no 32109 of 28 April

2009). Asset management plans concern the day to day and long-term management of an asset while

recording and reporting in accordance with the document may only indicate responsibility and

accountability relating a specific reporting period.

This document was finalized in consultation with DRDLR and NDPW including provincial Departments

of Works, Roads and or Transport as a sector.



DEFINITION OF DOCUMENT SPECIFIC TERMINOLOGY USED

Agreement consensus has been reached between the national and provincial custodians as to the appropriate custodian of a land parcel and sufficient information has been handed to such custodian to initiate the request for the Item 28 (1) certificate

Asset register the formal record of assets under the confirmed custodianship of an entity utilised for financial reporting purposes

Confirmed vested a property is confirmed vested once the Item 28 (1) certificate has been issued whether title had been registered yet or not

Deemed custodian where the vesting process has not been finalised but there is sufficient verifiable evidence available that indicates who the appropriate custodian will be using Section 239 of The Constitution, Act 200 of 1993. The following, among others, in combination could be used as possible indicators:

- the property is occupied/ utilised by the department in performance of a mandate on a full-time / permanent basis and has done so for a considerable length of time;

- the property is being used exclusively to provide a service in terms of an allocated Schedule 6 competency (e.g. a school or clinic);

- the property is unlikely to be utilised for any other function or transferred to another custodian in the foreseeable future;

- there is a responsibility to perform maintenance and or improvements and costs have and are being incurred to this end;

- the municipal rates are being paid on a regular basis, (where applicable) for the property and has been done for a considerable period of time;

- there is a legal process underway or to be initiated to vest the property with the custodian (for relevant sphere) or sufficient verifiable evidence exist to motivate why it has not started as yet;

- the deemed custodian acknowledges accountability and responsibility for the property;

- other evidence that indicates that the department should be the custodian (evidence must be verifiable);

- a title deed for the property is not on hand as it has been lost or misplaced and a duplicate must be requested from the relevant Deeds Registrar. However, the property is reflected as State property per the information from the Deeds Office (Aktex);

- there is agreement with other custodians with regards to the claim over the land parcel

Facilities the structures built on or attached to land parcels and utilised for service delivery and or administration

Final completion when all contractual obligations under the contract has been fulfilled, including the payment of retention monies, and a final costing can be done and the project closed

Item 28 (1) Certificate the certificate issued to confirm vesting also known as the Section 239 Certificate issued in terms of the Constitution to confirm vesting of land in a provincial or national government

Property the word is used in its widest form as including land and or structures on the land. The word must thus be read as appropriate for the



situation for example, where only land should be recorded only land should be understood

Ready for use the project has progressed to the stage where the facility can be occupied for use as intended by management for example, access is available for vehicles, people, etc., to the extent that normal business can be conducted

Recognition accountability to keep a record of the asset for management and reporting purposes

Record documented detail of the asset in a register or otherwise for management purposes

Reporting the disclosure of information in the financial statements or the notes thereto in the form of a narration or representation in financial terms

Register a record of properties (land and or facilities) utilised, but for which no formal title exits in the name of the reporting entity

Registered a record has been created in the deeds registry for the land parcel

Road the pathway created or constructed for use, usually by vehicles, motorised or otherwise

Road reserve the land parcel(s) stretching from ‘fence to fence’ including the land underneath the road structure (whole road corridor)

Road structure the entire construction of the road including culverts, bridges (including pedestrian bridges), tunnels, drainage and furniture of the road network

Self-Governing Territories

territories that were established in terms of the Self-governing Territories Act, 21of 1971. Examples are the territories formerly known as Kwazulu, Lebowa or Gazankulu

State land in this document the wording is used to describe land under the ownership of national and/or provincial government

Surveyed land parcels for which a formal surveying diagram signed by the Surveyor-General is available

TBVC States specific territories with a degree of autonomous government established by Proclamation during any period before 27 April 1994 previously known as Transkei, Bophuthatswana, Venda and Ciskei

Transfer the process of transferring an asset with all relevant documentation as envisaged by legislation (Section 42 of the PFMA). It may not necessarily involve an endorsement of a title deed

Vested the process followed to conclusion leading to the issue of an Item 28 (1) certificate and eventual endorsement of the title or creation of a title deed

Un-surveyed land for which a formal cadastral description and surveying diagram is not available



MATRIX FOR RECORDING AND REPORTING

NDPW DRDLR PROVINCE

PROPERTY RECORD REPORT RECORD REPORT RECORD REPORT

Land not surveyed

No No No Narrative per province estimated survey schedule

No No

Surveyed not registered

In Register of custodian

Narrative note, number of land parcels and movement





Surveyed not registered Item 28 (1) issued to custodian

In Asset Register of custodian

Financial disclosure and narrative note, number of land parcels and movement in respect of valuations requested





Title deed In Asset Register

Financial disclosure

In Asset Register


In Asset Register


Title deed – historical name

In Asset Register


In Asset Register


In Asset Register


Item 28 (1) certificate issued

In Asset Register


In Asset Register


In Asset Register


Agreements and Section 42 transfer done (land)

No (out)

In register (in)

Narrative and reconciliation of movement

No

In register (in)


In register (in)

No (out)


Road reserve

(registered)

Asset register


No No Asset register




(where applicable)

for land parcels

for land parcels

NDPW DRDLR PROVINCE

PROPERTY RECORD REPORT RECORD REPORT RECORD REPORT

Road reserve (not registered or no title)

Register (where applicable)

Narrative for land parcels

No No Register Narrative for land parcels

Road structure (class 1 to 3)

N/a N/a No No Asset Register (budget holder then custodian)


Road / other structure work in progress (all road classes)

N/a N/a N/a N/a CWIP of budget holder

Financial Disclosure

Land held in trust

N/a N/a No Narrative for land parcels

N/a N/a

Facilities on land that is not in the Asset Register

In Register where used by national department

Narrative note; number of facilities and purpose of use

No No In Register where used by provincial department

Narrative note; number of facilities and purpose of use



SUMMARY OF CONCEPTS AND PRINCIPLES

Recognition Concept Basis for recording

Reporting

Asset Register Title Endorsed Title deed

Item 28(1)

Historic name

Specific legislation

Capital budget spend (ready for use)

Financial terms

(Apply valuation model)

Ownership

Existence

Use

Control

Register Control State land used without title

Facilities used

Deemed custodian

Section 42

Narrative note with or without an annexure

(Not yet requirement to apply valuation model)

Existence

Use

Control

Register Deeds Registry information indicates State land

No claim from any government for custodianship

Contingent possible asset narrative and annexure

Existence

No register Un-surveyed land

None Narrative Existence

Use and payment of rates:

Where the asset is being used by the State municipal rates will normally be paid by the custodian or

user depending on the agreement of use. Payments will in certain instances be made where title has

not necessarily been registered, but in the spirit of co-operative government with the municipal sphere

of government and clear evidence of use. The vesting and registration processes are taking longer than

anticipated and custodians are encouraged to come to an agreement with municipalities to make interim

payments where there is clear evidence of State use. The custodians are further encouraged to, as a

sector and on a national basis, come to an agreement with local government regarding standardised

rates for State usage as provided for in the MPRA.

Deeds Registry information and payment of rates:

National custodians are responsible to record as contingent assets, information on properties reflected

as State property by the Deeds Registry but for which no custodian has come forward. It is suggested

that while investigation is underway to ascertain confirmation of title, the municipal rates are paid as an

interim relief to municipalities and claimed back from the title holder on confirmation thereof.



ROADS CLASSIFICATION - THE ROADS INFRASTRUCTURE STRATEGIC FRAMEWORK (a

summary of key principles)

Class Type road Strategic Function Nature of road

1 Primary distributor High mobility, limited access for rapid movement of large volumes of people, materials, goods and produce of national importance

Public roads between, through and within regions of national importance e.g. between key cities, ports, neighbouring countries

2 Regional distributor Relatively high mobility, lower level of access for the movement of large volumes of people, materials, goods and produce in rural and urban areas

Public roads between, through and within centres of provincial importance e.g. between capitals, large towns and municipal centres

3 District distributor Moderate mobility with controlled higher levels of access for the movement of people, materials, goods and produce in rural and urban areas of regional importance

Public roads through and within centres and towns and linking with rural residential areas, industrial/ farming areas

4 District collector High levels of access and lower levels of mobility for the movement of lower volumes of people, materials, goods and produce in rural and urban areas of local importance

Public roads between, through and within villages, farming areas, scattered settlements and commercial, residential and industrial areas

5 Access road High levels of access and very low mobility for the movement of people and goods within urban and rural areas

Public roads between class 3 and 4 type roads and residential areas. Roads within residential areas. Roads providing direct access to industries, business and specific destinations such as heritage sites, national parks. Accommodates the safe mobility of pedestrians and non-motor transport

6 Non-motorised access ways Public rights of way for non-motorised transport providing basic and dedicated movement

Rights of way that provide safe dedicated access for pedestrians, cyclists and animal drawn transport to social, recreational and economic areas



ANNEXURE A

The Fair Value Model

Based on Municipal Valuation Rolls, Sales Comparison, Exceptional Cases,

and Replacement Cost to Immovable Asset Registers

of National and Provincial Custodians as a Carrying Value



Content

Application of the Fair Value Model .......................................................................................... 28

1. Purpose of this document .................................................................................................. 28

2. Background ....................................................................................................................... 28

3. Valuation Methods ............................................................................................................ 28

4. Exceptional Cases ............................................................................................................ 29

5. Other specific cases .......................................................................................................... 31

6. Motivation and Benefits of Using Municipal Valuation Rolls and Nominal Value for

Exceptional Cases ........................................................................................................... 32

7. Sources to be Used ........................................................................................................... 32

8. Procedures to be Followed ................................................................................................ 32

9. Glossary of Terms & Abbreviations / Acronyms/ Definitions .............................................. 34

10. Definitions ......................................................................................................................... 34

Accounting for Immovable Assets (Property)

December 2019 (Updated May 2019) Page 28 of 43

Application of the Fair Value Model

1. Purpose of this document

The purpose of this document is to propose the application of a fair value (at reasonable cost

to the State) or a nominal value as deemed cost, for certain exceptional cases, in alignment

with provisions of the MRPA. The deemed cost is to be applied to properties that have carrying

values that need to be replaced given that they are unreliable and cannot be supported by

adequate records to satisfy the current reporting and/ or external audit requirements.

2. Background

The National and Provincial Departments initially record immovable assets based on the cost

of the item. The cost of an asset is defined as the total cost of acquisition or construction. As

an interim measure, where the cost could not be determined reliably, the immovable capital

asset was recorded and reported on at a R1 value, unless the fair value had been reliably

estimated. This was a special interim allowance in terms of the MCS chapter on capital assets.

Reporting immovable assets at R1 did not aid the users of financial statements and rather

raised concern. It also did not assist custodians in creating reliable information for

management of these assets.

The majority of carrying values (historical cost) in the Immovable Asset Registers (IARs) and

Annual Financial Statements (AFS) are not reliable and can no longer be traced to supporting

documentation or valuation methods given the state of accounting records and lack of audit

trail.

In the current accounting framework, the application of fair value or a deemed cost to older

assets is permitted where the initial cost of an asset is either unknown, cannot be reliably

determined, or where the asset was acquired at a value less than the actual cost (MCS chapter

on capital assets .71).

3. Valuation Methods

The IAR GITC Asset Register Task Team has recommended three methods to be considered

in determining the fair values of immovable assets:

Municipal valuation rolls (and supplementary rolls) (MVR) can be utilised as the default

method to determine a fair value as deemed cost. The municipal rolls, where rates are

paid in accordance with the rolls, are considered to be third party documents

(independent from the department) and the audit outcome of the municipality thus

irrelevant. Where the Municipal value is disputed an alternative fair value should be

determined.

Market based value (Sales Comparison method): – This method takes into account

comparable properties that have been sold recently in the same area and adjustments



for rights, location, time, size, shape and layout. It can be used in the absence of

Municipal values or where MVR values were deemed to be out-dated /unreliable (with

reasons documented). This method can be used for vacant land, farms & some

residential properties.

Depreciated replacement cost (DRC) – value calculated by using the acquisition cost

of a similar asset which is then adjusted by taking into account condition

(depreciation/impairment) or functionality of the asset, this method can also be used

in the absence of reliable Municipal values for certain specialised properties, e.g.

hospitals, airports, weighbridges, etc. The value typically used by and approved for

Roads Management Systems (RAMS).

4. Exceptional Cases

Admiralty Reserve

Definition: Usually an un-surveyed area wherever it exists, that is mostly delineated

as the area between the high water mark and a specific distance inland from the high

water mark (the distance to the point of the first surveyed land parcels).

- Apply the nominal value of R1,000 per Admiralty Reserve

Note: Coastal reserves/ protected areas usually fall within the admiralty reserve and

where the first land parcel is bounded by the high water mark no admiralty reserve is

applicable

Commonages

Definition: Commonage or common pasture lands are lands adjoining a town or

village over which the inhabitants of such town or village either have a usufruct right

for grazing for their stock, and, more rarely, the right to cultivate a certain portion of

such lands, or in respect of which the inhabitants have conferred upon them by

regulation certain grazing rights. The modern commonage is characterized by

miscellaneous land uses

Examples: Grazing, pastures, low cost housing and public infrastructure on same land

- Apply the nominal value of R1,000 per land parcel

Communal Land

Definition: State Land allocated to tribal authorities and managed by Department of

Rural Development and Land Reform (DRDLR), and other custodians/institutions.

Example: Farms or Land in the former TBVC States traditionally/beneficially occupied.




Inaccessible / Mountainous areas

Definition: Areas that is not valued due to their inaccessible geographical location and

topographical nature, including proclaimed or non-proclaimed conservation and

protected areas

Examples: National and provincial nature reserves and protected areas, mountain

catchment areas, wetlands, marshlands, swamps, caves, rivers, etc. like the Great

Fish River Wetland nature Reserve.


Islands , Offshore Rock Outcrops and Conservation Areas

Definition: Any piece of sub-continental land that is surrounded by water. Islands can

be offshore as well as inland islands (e.g. in rivers)

Examples: Off-shore islands will include islands such as Bird Island and St Croix

Island and inland islands, which can be found in a lake, a river or a reservoir will include

Driekops Island, the Kosi Bay islands and an example of a rocky outcrop is found in

‘Hole in the Wall’ at Aasbank.

- Apply the nominal value of R1,000 per land parcel.

Note: Conservation Islands/Rocks, conservation areas such as world heritage sites

can fall into this category. Where the merits of the situation for the subject

property/island warrant it, a professional valuer may be appointed to undertake a

valuation. This is however envisaged to be necessary only in unusual circumstances.

Land parcels with Graves and Cemeteries

Definition: A land parcel used as a place of burial for the remains of people and usually

referred to as a cemetery or graveyard. Although used interchangeably a graveyard is

primarily the place of burial within the property of a church.

- Apply the nominal value of R1,000 per land parcel (whether fully developed or

not)

Note: Custodians should prioritise the transfer of land on which cemeteries and

graveyards are situated to local authorities (or churches where applicable) with the

exclusion of grave sites of a historic, military or heritage nature for example the Cullinan

Military Cemetery and the Prince Imperial burial site.

Road reserves

Definition: Land parcel surveyed or framed for the exclusive usage of road or access

purposes (all road classifications).



- Apply the nominal value of R1,000 per registered road reserve, regardless of

classification;

Note: The nominal value can also be applied to unregistered road reserves where the

reserve can be properly identified. Where a municipal value exists for a particular

registered road reserve, such value may include the improvements to the land parcel

and the nominal value should still be used. The cost of the improvements will form part

of the road structure asset.

Seashore

Definition: The seashore is the land that borders the ocean or sea. The area is

typically un-surveyed and consists of the land between the low water mark and the

high water mark commonly referred to as the beach.

Examples: Beaches are commonly referred to by the name of the area in which it is

situated in, such as Camps Bay, Shelley Beach, and Durban South Beach, etc.

- Apply the nominal value of R1,000 per beach

Other specific cases

Accounting for one Facility built over a number of Land Parcels (Where there are

Municipal Values)

Challenge: The current manner in which municipal valuation rolls are drafted is to

reflect a value for the land parcel including any improvements thereon. Splitting of the

land value from the structure value disclosed together on a municipal valuation roll thus

requires a methodology or policy for consistent treatment.

Example: Addington Hospital – 1 Facility built over 21 land parcels, with only 3 land

parcels indicated as having a municipal value. The value of the three land parcels

represents the municipal value for the entire facility (thus the structures and the other

18 land parcels).

- In these instances, the asset register should reflect the values exactly as per MVR

– i.e. per land parcel including the value of the structure. The other land parcels

without value (after checking with the municipality) should be noted as being

included in the value.

- The exercise of splitting the value of the land parcel from the value of the structure

should be undertaken by a professional (thus expensive). Although land and the

buildings thereon are separable assets it is currently allowed to report the total

value under buildings and other fixed structures, where the value cannot be split,

until a methodology has been developed.

Custodians should embark on a process to consolidate land parcels where a facility is

constructed over more than one land parcel to alleviate problems in this regard.



5. Motivation and Benefits of Using Municipal Valuation Rolls and

Nominal Value for Exceptional Cases

Municipalities use professional valuators to perform property valuations in order to

fairly and objectively determine the approximate market values. Property valuations

are performed at least every 4 years and the market values obtained are used in

determining rates and taxes paid by the property owners. Property valuations are

performed in accordance with Local Government Municipal Property Rates Act 6 of

2004 (MPRA), which requires a market related value to be determined.

Section 81 of the MPRA assigned the responsibility to the MEC for Local Government

to monitor and to ensure that municipalities comply with all provisions of the Act,

including the appointment of qualified valuators as required in terms of Section 39 and

processing the objections etc. Custodians can therefore assume that Local

Government has complied with the requirement of MPRA of 2004.

All municipalities are required to perform regular general property valuations and

update the rolls with information relating to new valuations (supplementary rolls) and

therefore such values should reflect or approximate market value.

The use of a nominal value in exceptional cases, where values cannot be determined,

is restricted to specific cases and thereby limits abuse of the nominal value and

strengthens the reliability of the IAR and reporting thereon. The exceptional cases

include exceptions noted in the MPRA which are thus unlikely to be valued by

municipalities in the near to distant future. Certain interim allowances were made for

properties awaiting valuation which, should reduce year on year as valuation

information is obtained.

6. Sources to be Used

Municipal valuation rolls (MVR)

Aging Indices – ABSA Housing Review (www.absa.co.za)

Building cost Indices – aecom Africa Property and Construction Handbook

(www.aecom.com)

Additional information from third parties such as Lightstone (www.lightstone.co.za)

and Rode & Associates (www.rode.co.za) recognised as industry leaders

7. Procedures to be Followed

Obtain the latest MVR’s from all relevant municipalities or use previous rolls where the

latest rolls are unavailable

Determine if MVR is reliable with the correct data fields e.g. age of MVR, Extent etc.

Convert MVR into useable format i.e. excel

http://www.absa.co.za/

http://www.aecom.com/

http://www.lightstone.co.za/

http://www.rode.co.za/



If the MVR is an older version (the previous issue), adjust it using aging index (Vacant

land and residential properties only)

Match MVR value to IAR land parcel

Use this default method to determine value of land without improvements:

- Calculate total vacant land value and total extent for each town using the MVRs

- Calculate the average vacant land ratio (total land value of vacant land divided by

total extent)

- Apply the vacant land ratio (per town) to the actual extent in the IAR (in that town)

to calculate land carrying value (average vacant land ratio x actual IAR extent for

the land parcel = land carrying value)

- Subtract the calculated land carrying value from the market value in the MVR to

determine improvement carrying value (MVR value less calculated land carrying

value = improvement carrying value)

- Subtract the calculated component value(s) from the improvement carrying value

Where, there is no or an unreliable municipal value or where there is no extent in the

IAR/MVR, use the Comparison approach:

This method takes into account comparable properties in the MVR that appear in the

same area and that are similar in size, shape and layout. This method can be used for

vacant land, farms, residential and some specialised properties like defence facilities,

prisons etc. Then follow these steps from the default method:

- Apply the average vacant land ratio to the actual extent in the IAR to calculate land

carrying value (average vacant land ratio x actual IAR extent for the land parcel =

land carrying value)

- Subtract calculated land carrying value from the compared market value from the

MVR to determine improvement carrying value (compared MVR value – calculated

land carrying value = improvement carrying value)

- Subtract the calculated component value(s) from the improvement carrying value

Where a similar property cannot be identified, use the Replacement cost method:

This method makes use of the vacant land ratio used in the default method to calculate

the land carrying value (vacant land ratio x land parcel extent in the IAR) and building

cost indices (www.aecom.com – Africa Property and Construction Handbook) to

calculate the improvement carrying value (cost indices per sqm. x the extent of the

improvement(s)). This method can be used for vacant land, residential and specialised

properties e.g. defence facilities, prisons etc.



8. Glossary of Terms & Abbreviations / Acronyms/ Definitions

MCS Modified Cash Standard

MVR Municipal Valuation Roll

IAR Immovable Asset Register

SDF State Domestic Facilities

DRC Depreciated Replacement Cost/ Replacement Cost

GITC Giama Implementation Technical committee

RAMS Roads Asset Management System (including related road sytems)

SQM Square Meters

TBVC - States Transkei, Bophuthatswana, Venda, Ciskei

DPWRT Department of Public Works, Roads and Transport

GRAP Generally recognised accounting practice

9. Definitions

An active market is a market in which all the following conditions exists:

o The items traded within the market are homogeneous;

o Willing buyers and sellers can normally be found at any time; and

o Prices are available to the public.

Condition assessment is an assessment of the current condition of an asset (and its components)

in relation to its service performance, as well as the maintenance or renovation required and

associated costs.

Fair Value refers to the amount for which an asset could be exchanged, or a liability settled,

between knowledgeable, willing parties at arms’ length transaction.

Immovable asset means any tangible asset acquired or owned by government, excluding any right

contemplated in the Mineral and Petroleum Resources Development Act, 2002 (Act No.28 of 2002).

Immovable assets may include land, fixed structures such as buildings and infrastructure assets.

Plant that is built-in to the fixed structures and is an essential part of the functional performance of

the primary asset is considered an immovable asset (though it may be temporarily removed for

repair)

Improvements refer to structures built or constructed on land, e.g. a building, Immovable

infrastructure assets on a land parcel.

Infrastructure assets are assets that usually display some or all of the following characteristics:

o They are part of a system or network;

o They are specialised in nature and do not have alternative uses;

o They are immovable, and

o They may be subject to constraints on disposal.

State Domestic Facilities (SDF)’s are improvements controlled by DPW but situated on land that

is not under the custodianship of the Minister of Public Works.

Useful life is: the period over which an asset is expected to be available for use by an entity, or The

number of production or similar units expected to be obtained from the asset by an entity.



REQUIRED FIELDS FOR AN IMMOVABLE ASSET REGISTER

The requirements for immovable assets are dealt with under the following headings:

A) Land

B) Improvements (Buildings and other structures)

C) Financial

The minimum information required for properties recorded in the immovable asset registers of National and

Provincial custodian departments is as follows:

A) LAND

REQUIREMENT DESCRIPTION OF REQUIREMENT

1. GENERAL

1.1 ASSET NUMBER Unique property code as per the asset register

1.2 ASSET CLASS Indicate URBAN or RURAL

1.3 ASSET TYPE Indicate ERF / FARM / AGRICULTURAL HOLDING (AH) / SECTIONAL TITLE (SS)/ etc.

1.4 DEEDS OFFICE Indicate relevant Deeds Office where the asset is registered or to be registered (in the case of surveyed but unregistered State Land)

2. GEOGRAPHICAL LOCATION

2.1 PROVINCE The relevant Province in which the asset is located

2.2 DISTRICT MUNICIPALITY

The relevant District Municipality in which the asset is located

2.3 LOCAL AUTHORITY

The relevant Local or Metropolitan Municipality in which the asset is located

2.4 MAGISTERIAL DISTRICT

The relevant magisterial district in which the property is located

2.5 PHYSICAL ADDRESS

The street address of the asset situated in a formalized urban area. Where a street address is not available, e.g. land locked property, property in rural area and townships without formal street names indicate NO STREET ADDRESS. Custodians may refer to a general locality description should there be no street address Notes:

- The physical address may not be applicable to certain land parcels for the Department of Rural Development and Land Reform.

- Departmental policy of a custodian should indicate how to describe and which properties the ‘no street address’ situation would apply to.




2.6 GPS COORDINATES

Either the physical address (2.5) or GPS-coordinates (2.6) must be

recorded as a minimum (Custodians should however strive to include both).

The global positioning coordinates of the immovable asset to be reflected

in any of the following recognized formats:

Coordinates Decimal Decimal Deg. Min. & Sec. Deg. & Decimal Min.

Latitude -32.3638° S 32.3638° S 32° 21' 49.68" -32° 21.828'

Longitude 28.4897° E 28.4897° E 28° 29' 22.92" 28° 29.382'

The GPS-points obtained from the Office of the Chief Surveyor-General or

any recognized GIS-system (e.g. Lapsis, Google Earth) is acceptable as a

geo-reference requirement.

Notes:

- One GPS co-ordinate will be acceptable in the case of a facility (land

use function) i.e. school or nature reserve situated on multiple land

parcels.

- Custodians using other formats of reflecting co-ordinates are

encouraged to change to one of the above examples with effect from

1 April 2016.

- The GPS-coordinates obtained from the Surveyor-General dataset

refer to the central point of the property polygon.

- Should GPS-coordinates be sourced from GIS-sources, it should be

taken as close as possible to the centre point of the land parcel.

- Should GPS-coordinates be sourced in situ, it should be taken at the

entrance to the property or any point on the property (custodian policy

should be developed).

3. PROPERTY DESCRIPTION – formal cadastral description as per approved Surveyor-General diagram

3.1 REGISTRATION DIVISION

The relevant registration division / administrative district under which the

asset is registered in the relevant Deeds Office – e.g. JR; Cape RD,

Colesberg RD

(Referred to as the Major Region Code)

3.2 TOWNSHIP NAME The relevant town name with regard to urban assets and relevant

registration division with regard to rural assets (farms) – e.g. Matatiele

(urban); Matatiele RD (rural)

(Referred to as the Minor Region Code)




3.3 LAND PARCEL The erf number / farm number / agricultural holding number / sectional title

number.

(Referred to as the Parcel Region Code)

3.4 LAND PORTION The erf portion number / farm portion number / agricultural holding portion

number.

(Referred to as the Portion Region Code)

3.5 LAND REMAINDER

Indicate if the land parcel or land portion is a remainder or not, by using the

following indicators: R/E = remainder and 0 = no remainder

3.6 FARM NAME The official name of the farm (where applicable) as depicted on the official

surveyor-general diagram, e.g. Aloe Ridge, Ntlaza Trading Station, Farm

65

3.7 S.G.-DIAGRAM NUMBER

The number of the approved S.G.-diagram / General Plan / Sectional

Diagram

3.8 EXTENT (ha) The extent of the asset in the metric unit of hectare as depicted on the

official survey-general diagram.

3.9 LPI CODE The land parcel indicator / giskey (21 digit code) as generated by the Office

of the Chief Surveyor-General.

Examples:

- N0ET00000000825100001, or

- T0JQ00000000005400002, or

- C00900000000017100002

(Combination of relevant Survey Office, major, minor, parcel and portion codes)

4. OWNERSHIP DETAILS

4.1 TITLE DEED NUMBER

The number as reflected on the Title Deed. In the event that the asset is not

registered in the Deeds Office (unregistered State Land), indicate

UNREGISTERED

Examples:

- T3344/1999

- G4/1908

- TX12/1977

4.2 REGISTRATION DATE

Date on which the asset was registered or endorsed in the name of

Government




4.3 REGISTERED OWNER

The registered owner(s) of the asset as described in the Title Deed. There

may be more than one owner in the case of shares held in a property (in

this instance the percentage ownership should be recorded).

Note:

The registered owner as reflected on Aktex / WinDeed is acceptable where

the Title Deed is unavailable (an indicator should reflect the source of

information – custodian policy needed).

4.4 VESTING DATE Date on which the Item 28(1) / Section 239 Certificate was issued by the

Department of Rural Development and Land Reform.

Note:

If the immovable asset is not subject to confirmation of vesting in terms of

the Constitution – indicate NOT APPLICABLE (e.g. property purchased by

custodian for exercising of its mandate)

4.5 OWNERSHIP CATEGORY

Refer to either ‘State-owned’ or ‘Non State-owned’

Note:

Lease-in properties (expense leases) are included under ‘non state-owned’,

where capital expenditure has been incurred on a site, but a separate

expense lease register should be available for recording all leases.

5. LAND USE AND MANAGEMENT DETAILS

5.1 LAND USE Land use classification or facility type (where applicable) should be

indicated.

Note:

Land use and certain management details may not always be applicable to

the Department of Rural Development and Land Reform. Custodian policy

should indicate the applicability or not.

5.2 USER DEPARTMENT

Name of the relevant User Department that the asset is allocated to for

service delivery purposes.

If not allocated to a User Department, the Custodian Department should be

reflected as the User Department

5.3 FACILITY NAME Is the name of the facility as for the function that is performed on the site

e.g. Health District Office – Upington, Coleford Nature Reserve, Extension

Office for Agriculture, Government Garage, etc.

Notes:

In cases where land is vacant, a facility name will not be applicable. It

should be noted that one property (land parcel) might have more than




one facility. In these instances departmental policy should dictate how

this should be indicated to avoid duplication.

It is possible that the name of the facility can be the same as the name

of the building e.g. for schools, hospitals and clinics, etc. See 6.1

5.4 INCOME LEASE STATUS

This should be indicated with only a YES (valid lease agreement in place)

or a NO (valid lease agreement not in place).

In cases where there is a valid lease agreement, the relevant detail should

be reflected in a separate lease register with a linkage/unique

identifier/cross-reference to the immovable asset register. A policy on what

identifier to be used as the cross-reference should be developed to ensure

consistency.

The following minimum requirements must be covered in the Lease

Register:

Nature of lease (e.g. residential, business, etc.)

Name of lessee

ID-number of lessee / Company registration number

Commencement date

Expiry date

Escalation rate (percentage) and date

Rental per month / annual

Lease number and location

B) IMPROVEMENTS (BUILDINGS OR OTHER STRUCTURES)


6. IMPROVEMENT DETAILS

6.1 STRUCTURE NAME

Indicate the name of the building(s)/structure located on the land.

Note:

It is possible that ‘building name’ can also be the facility name, e.g.

Nompumelelo Clinic; Bluedowns Police Station; Stutterheim High

School, etc. In this instance it will be important to ensure no duplicate

names occur for facilities/ structures in different locations e.g. Madiba

High School, where one is in located in Queenstown and the other in

East London. Should this occur an additional identifier should be




available to distinguish the structures. A policy to the effect should be

developed.

Improvement details may not be relevant for the Department of Rural

Development and Land Reform but documented motivation should be

available where structures are not reflected.

6.2 FACILITY CODE A unique code generated by the Custodian for each facility/ structure).

Note:

To be phased in over a 2 (two) year period for reporting purposes. It will be

a minimum requirement for the 2020/2021 financial year.

6.3 LEVEL OF UTILIZATION

Utilization of facilities should be covered in the respective user asset

management plans (U-AMPs) of User Department.

Note:

This will not be required in the Asset Register, of custodians at this stage.

The following value-added information can be covered in the respective user asset management plans (U-

AMPs) and not in the Asset Register (IAR) until the 2022/2023 financial year. These requirements will be

phased in over the next 5 (five) years and are not an immediate requirement in this document:


IMPROVEMENT DETAILS

a SITE COVERAGE Combined extent (in m²) of the foot print of all improvements

(buildings/structures) of a facility over the site.

Note:

The extent may be calculated manually or vide GIS-calculation.

b EXTENT OF BUILDINGS

Combined and individual extent (in m²) of the floor areas (foot print) of all

improvements (buildings/structures) in a facility

Note:

This information must be available in the U-AMPs of User Departments.

c USABLE AREA Area, excluding common areas (e.g. balcony, lifts, passage, etc.) that is

available for accommodating line function work (Office accommodation

only)

Note:

This information should be available in the U-AMPs of User Departments.




d LEVEL OF UTILIZATION

Level of utilization expressed in a percentage against the usable area of a

facility.

e CONDITION RATING

The custodian assessment rating of the condition of a building / facility /

structure (by way of using a technical condition assessment for example,

as stipulated in the Guideline for Custodians: Custodian Asset Management

Plans)

Notes:

The Custodian Assessment Rating for office accommodation to be

phased in over a period (2022/2023 FY) for C1, C2 and C3 functional

performance rated buildings only

Condition Assessments to be completed within a five-year cycle for

example, as required for applicable structures in terms of Section

13(1)(d)(iii) of Act 19/2007

f FUNCTIONAL PERFORMANCE RATING

The user’s perception of the functional performance of a building / facility /

structure by way of using a functional performance assessment as

stipulated in the Guideline for Users: User Asset Management Plans.

Note:

Functional performance ratings for office accommodation to be phased in

over a two year period (2020/2021 FY) and the balance of the portfolio over

a three year period (2023/2024 FY)

C) FINANCIAL The financial component of the Asset Register is guided by the Accounting Guide for Immovable

Assets (Modified Cash Standard towards alignment to GRAP)


7. GENERAL

7.1 LAND USE CLASS Refer to the categorisation of assets according to the Financial Accounting

Framework and SCOA (e.g. dwellings, non-residential buildings, heritage

assets, land and other fix structures including infrastructure networks)

7.2 NATURE OF ASSET

Refer to the categorisation of assets as per Accounting Manual for

Department (Capital Assets) (e.g. property, plant and equipment,

investment assets, infrastructure assets; heritage assets; biological assets)

8. SECONDARY INFORMATION NOTE

8.1 ADDITIONS CASH Total value of money spend to acquiring (purchase price with transfer costs)

or constructing a structure including while still part of work in process

8.2 ADDITIONS NON-CASH

Properties acquired without cash valued at fair value.

Newly confirmed vested properties to be recorded based on municipal

valuation or fair value as determined in terms of the Fair Value Model.




(Where municipal value not available yet, documented request to

municipality to value should be on hand.

Properties constructed and ready for use at total cost to date (by budget

holder).

Section 42 transfer received by a custodian from a budget holder at the total

cost of property.

Note:

As from 2016/2017 FY the initial cost of all newly confirmed vested

properties must be recorded at municipal value or fair value in terms of

the Fair Value Model

8.3 ADDITIONS - RECEIVED CURRENT YEAR, BUT PAID IN PRIOR YEAR

Newly acquired properties which are not yet registered in the name of

Government, but for which the purchase price has been paid (monies held

in trust by conveyance attorney), where legal transfer is pending registration

8.4 DISPOSALS – TRANSFERRED OUT / DESTROYED / SCRAPPED

Not disposed for money – e.g. exchanged, gratis transfer or write-off (latter

would only be applicable to structures)

Newly constructed structures transferred out (Section 42) from budget

holder to custodian on formal completion of project at total cost of project.

8.5 CLOSING BALANCE

The closing value of the asset as on 31 March of a financial year

9. VALUATIONS – applicable for current non-cash additions only (where cost is not available)

Note:

Valuations may not necessarily be applicable/ appropriate for the Department of Rural Development

and Land Reform but documented motivation must be available in instances where valuation is

thought to be inappropriate

9.1 MUNICIPAL VALUATION

As per latest valuation roll of the local municipality (consider prior or

subsequent improvements)

9.2 DATE OF MUNICIPAL VALUATION

Date when valuation roll was published by the local municipality – or if

different, the effective date of the valuation

9.3 NON-MUNICIPAL VALUATION

Valuation determined by – individual and qualification (professional/ expert)

9.4 DATE OF NON-MUNICIPAL VALUATION

Date of valuation certificate signed by professional

As from 1 April 2016, all immovable assets recorded in the asset register should be stated at cost, replaced

with the fair value of the property as per the approved Fair Value Model, where not available or at nominal

value where applicable.

Notes:



Where the immovable asset register cannot maintain all the critical information it is recommended that

additional documentation with sufficient cross-referencing be kept to facilitate the proper management of

these assets. Separate registers for leases are acceptable. Information of or on buildings should be

available (cross checked) in the U-AMPs of User Departments.

The use of documentation outside the asset register to carry outstanding or additional information is

encouraged in order to improve the management of assets and application of the life-cycle approach. Since

various systems being utilised at present, are not all able to create additional fields of information as needed

it therefore necessitates the use of documentation outside the AR. More information is better than less, it

creates a database for future decision making, which can be more informed and thereby more effective,

efficient and economical in the long run.

Additional information that can assist in the management of immovable assets could include detail on

occupants of buildings such as period of lease, escalation of rent, etc. In the case of land any claim by a

person or group with regards to the land would assist in the proper management of said land. This

information would normally be included under the heading ‘Accountability’ as a ‘Restriction’ but as the field

is not as yet required, it is encouraged that such information, once known, be accumulated as additional to

the AR for future use.

This information can be accumulated a numerical code such as the unique property code as per the asset

register or the 21 digit (LPI code), generated by the Surveyor- General. The choice will be based on the

volume of information needed and the ease of identification and matching to the chosen code.

Documents

Reporting for Accounting and - National Treasury