ORGANIZATIONS ASSETS DISPOSAL

DISPOSE ORGANIZATIONAL ASSETS

LECTURE GUIDE - NOTES
7.1 Introduction
Organizations assets disposal is a core unit of competence for TVET level 6 qualifications
for supply chain. This unit covers knowledge, skills and behavior for the disposal of
surplus, unserviceable obsolete and obsolescent assets in an organization. It also involves
identifying assets for disposal, classifying assets for disposal, executing disposal orders
and preparing disposal certificate. All this takes place in the supply chain sector. Its main
elements are monitoring the progress of procurement contracts, classifying assets for

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disposal, executing disposal orders and preparation of disposal certificates. Asset disposal

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allows an organization to keep track of their assets, by appointing a disposal committee

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which is in charge of the organizations asset disposal and being up to date with the current

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market trends.
The critical aspects of competency to be covered includes: verified list of unserviceable,

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obsolescent, obsolete or surplus assets, understanding of asset disposal and legal

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framework, knowledge of stakeholders and their role in asset disposal, knowledge of asset

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disposal method, prepared and disseminated schedules for asset disposal to relevant
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stakeholders documented and maintained asset disposal documents. The basic resources
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required include; computer, stationery, classroom and classroom resources, the constitution
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of Kenya 2010, public procurement and asset disposal Act 2015 and its regulations, public
officer Ethics Act, Anti-Corruption and Economics Crimes Act 2003, Public Finance
Management Act 2012, supplier’s manual and sample procurement documents. The unit
of competency covers four learning outcomes. Each of the learning outcome presents: how
to monitor progress of procurement contracts, classification of assets for disposal,
execution of disposal orders and preparation of disposal certificates, thus creating trainees
with an opportunity to demonstrate knowledge and skills in the occupation standards and
content in curriculum. Information sheet provides definition of key terms, content and
illustration to guide in training. The competency may be assessed through written test,
demonstrations, practical assignment, oral questioning and case study. Self-assessment is
provided at the end of each learning outcome. Further reading is recommended.

7.2Performance Standards
Organizations asset d0isposal monitors progress of procurement contracts, classify assets
for disposal, execute disposal orders and prepare disposal certificate as per the workplace
policy and legal requirement and the SOP guide.

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7.3 Learning Outcomes
7.3.1 List of learning outcomes
a) Prepare list of assets for disposal
b) Classify assets for disposal
c) Execute disposal orders
d) Prepare disposal certificate

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 7.3.2 Learning Outcome No 1: Monitor progress of procurement contracts
7.3.2.1 Learning Activities
Learning Outcome No 1: Monitor progress of procurement contracts
Learning Activities Special Instructions

7.1 Receive notification of unserviceable, obsolescent, obsolete or Case study.

surplus assets from user departments. Provide sample

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1.1 7.2 Verify list of unserviceable, obsolescent, obsolete or surplus assets assessment report for
based on organization’s needs and technological dynamics as per the trainees to

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workplace policy. familiarize.
7.3 Appoint a disposal committee as per legal requirement.

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7.4 Assess assets to be disposed as per standard operating procedures

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based on legal requirement.

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7.5 Prepare an assessment report as per workplace policy.

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7.3.2.2 Information Sheet No7/LO1: ts
Organization Asset Disposal/Dispose
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Organizational Asset
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Introduction
This learning outcome will train on skills, knowledge and behavior to receive notification
of unserviceable, obsolescent, obsolete or surplus assets from user departments. It will also
expose the trainee on how an assessment report is prepared and assessed

Definition of Key Terms

Asset: A valuable item that an organization owns.

Obsolescent: Is the process where the value of an item declines.

Unserviceable: Not worth to services or cannot be serviced.

Obsolete: An item that is obsolete is one that is out of date or no longer needed.

Surplus: This is the amount of materials or goods that will remain after requirement have
been met.

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Content/Procedures/Methods/Illustration
1.1 Receive notification of unserviceable, obsolescent, obsolete or surplus assets from
user department
Notification of asset disposal
Due to high technological change, large numbers of machines mostly become obsolete on
a regular basis and most machines have no residual value after some period of time. The
concerned department will therefore carryout assessment and notify the organization on
the obsolete machines to be disposed of. That department will use tendering process to
dispose the goods.

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Procedures for tendering disposal of assets

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a) The head of entity should approve the assessment recommendation giving full

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details and specification for the items offered for tender.
b) The tenders should be advertised to the public by the entity according to the level

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of exposure and the organizations policy requirements.

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c) Tenders should be submitted by interested parties to the entity’s tender box. Those

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tenders should be held until the closing date of the tenders.
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d) Tenders should be opened by tender committee. The tender evaluation committee
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should consist of the relevant departmental heads according to the entity’s policy
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requirements.
e) The details of each quotation are verified and recorded. The evaluation is then
carried out and results recorded.

If departments believe that they have justifiable reason to dispose equipment without
following the laid down procedures and policy of the organization, then approval must be
obtained from top management. The department should draft a written justification
explaining the reasons why they should receive an exception from top management.

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1.2 Verify List of Unserviceable, Obsolescent, Obsolete or Surplus Assets Based on
Organization’s Needs and Technological Dynamics
Disposal process flow chart
Action checklist
1. Decision to dispose of goods - consider if goods are obsolete, surplus or at optimum.
Selling time.

2. Undertake valuation -Establish reference point

-Undertake valuation of goods

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3. Identify disposal options -Consider all disposal options; transfer to another

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Procurement entity, invite competitive offers or

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carryout, public auction.

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4. Evaluate disposal options -Carryout cost benefit analysis of each disposal
option.

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5. Select preferred disposal option -Examine cost and benefit by evaluating the type and
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condition of goods, offers from other entities, the
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nature of recipient market and time and resources.
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6. Prepare goods for disposal -Ensure that goods are cleared of material unfit for
Disposal.
-Perform any necessary repairs.
-Store goods on a secure location.
7. Dispose of goods -Manage and monitor those undertaking the disposal.
-Record the goods in asset register.

8. Treal revenue from disposal -Deal with as per finance administration account of
the
Organization policy.

9. Review disposal process -Evaluate performance against organization disposal

goals.
-Seek continuous improvement.

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Methods of asset disposal
Disposal of assets takes various techniques and companies use their own version to dispose
assets. However, we will talk about the most commonly used methods of disposing assets.
One of the commonly used method is 7R’S technique illustrated in the figure below.

Recondition Resell Recycle

2 4 6

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Reuse 1 Return 5 Reclaim 7 Remove
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a) Reuse: This method is also called redeploying. It is the most rewarding option for

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a company. It is the relocation of goods to another department within the company.

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b) Recondition: This is the refurbishing and putting used machines and equipment

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back into service. It is less expensive than buying new equipment’s.
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c) Return: This method involves taking back the goods to the original seller or
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manufacturer and exchanging them for cash or credit value.
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d) Resell: It involves selling idle assets in the open market to resellers. Auction
platforms are good examples that are used to sell obsolete machinery and spare
parts.
e) Reclaim: Also known as investment recovery. It is the process of recovering assets
in a responsible environment.
f) Recycle: It is the sale of obsolete or underperforming assets to return the capital to
invest in new assets.
g) Remove: It is the method of sending the surplus assets to the landfills at the expense
of the company. It entails throwing or dumping outdated items from the warehouse
or store.
Reasons for disposing assets
Companies dispose assets because of various reasons. The following are some reasons of
disposing assets:
 Maximize return on investment of your industrial equipment.
 Free up warehouse space.
 Green industrial - CSR reporting benefits.

Health and safety in asset disposal

Organizations and entities should ensure health and safety of stakeholders and all those
participating in asset disposal. This can be achieved by preparing health and safety note

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where participants will sign, this will exonerate the company from any liability that arises
from asset disposal exercise.
The following is an example of health and safety notice:
“The organization will not be liable for any health and safety issue that may arise out of
the use of disposed equipment. It is the recipient’s responsibility to ensure that the item is
suitable and safe for intended use, positioned correctly and that it can be used without
causing health and safety risks. It is the recipient’s responsibility to obtain all relevant
instructions pertaining to the installation and use of equipment. It is the recipient’s
responsibility to carry out or have competent persons to carry out all necessary checks and
appropriateness of the goods. The organization will not be liable for any loss or damage or

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injury that arises out of the installation, use or handling of the items, however caused.”

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This safety and health notice will act as a disclaimer and will safeguard the organization

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against any legal suits that recipient fill.it is therefore very necessary to have the recipient

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sign this document before they take the equipment.

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1.3 Appointment of Disposal Committee as Per Legal Requirement

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Appointment of disposal committee

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The board members of the company should establish asset disposal committee comprising
of the following: ts
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 A chairperson who should be a head of department.
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 The head of finance function.

 At least three heads of user departments of which one of them should be head of
disposal department.
 The head of procurement function.
Where necessary the disposal committee may engage a relevant technical expert in the
process of carryout its functions. In most cases the quorum for the disposal committee
members should be three members including the chairperson.

1.4 Asses Assets to Be Disposed as Per Legal Requirements

Assessment of assets to be disposed
The disposal committee will carry out on assessment on the assets to be disposed. The
committee will verify all the existing assets of the organization. The committee should
carry out the assessment while making reference to the organizations laid down procedures
and policy requirements.

Conditions that assets should meet before disposal

 When the asset no longer meets the current technological requirement.
 When it has clearly been established by the head of departments that there is no
further business need for the equipment.
 When it no longer functions and its repair cost are very high.

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  When It is established that retaining the legal tittle over items under custody of
implementing partner is no longer in best interest of the organization.
1.5 An assessment report is prepared as per workplace policy
The supply chain process involves 5 steps i.e.
 Plan.
 Develop (source).
 Make demanded products.
 Deliver.
 Return.

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An assessment report may be written regarding any of the 5 steps. These reports help an
organization to keep track of the progress of the process. Reports are essential in

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maintaining the high levels that many clients expect.

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Conclusion

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In conclusion, this learning outcome has trained on skills, knowledge and behavior to
receive notification of unserviceable, obsolescent, obsolete or surplus assets from user

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department. The unit will have covered how to verify list of unserviceable, obsolescent,
obsolete or surplus assets based on the needs and technological dynamics of the workplace.
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Further Reading
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Gichio, D., (2014). Public procurement in Kenya.

7.3.2.3 Self-Assessment

Written assessment
1. Which of the following is not a method of asset disposal?
a) Purchase.
b) Resell.
c) Reuse.
d) Recycle.
2. “The asset disposal committee is drawn from logistics and procurement
departments” this statement is;
a) True.
b) False.

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 3. What is the minimum quorum of disposal committee?
a) 3
b) 5
c) 15
4. Which of the following is not a reason for asset disposal?
a) Free up warehouse space
b) Corporate social responsibility
c) Maximize return on investment
5. Which of the following is not a health and safety in asset disposal?

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a) Preparation of health and safety not.

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b) Keeping the assets for disposal in a tidy and clean area

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c) Drafting of disclaimer note

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d) All of the above
6. State two methods of asset disposal in an entity?

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7. Enumerate three reasons why organization dispose assets?

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8. What does ‘recycling ‘mean according to asset disposal management and waste

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management philosophy?
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9. Who is responsible for tender box opening when carrying out asset disposal in an
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entity?
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10. What are some of the legal frameworks of asset disposal and related laws in Kenya?

Oral Assessment
1. What are some of the criteria that equipment should meet before disposal?
2. What are the procedures to be followed when tendering asset disposal in an entity?
Practical Assessment
1. Assume you are supply chain expert. An organization engaged you to sensitive the
staff on the importance of asset disposal. What recommendations will you give?
2. An entity is contemplating to dispose assets without following the policy and
procedures requirements. As a supply chain expert what advice would you have
given the organization?
3. A company was sued by a beneficiary who received an equipment from the
company through asset disposal tendering. The beneficiary explained to the court
that he/she bought the asset from the organization but after a few days the item
caused fire in his/her house. What do you think the organization can use to win this
case against the complainant?

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7.3.2.4 Tools, Equipment, Supplies and Materials
 Computers.
 Classroom and classroom resources.
 The constitution of Kenya 2010.
 Public Procurement and Asset Disposal Act 2015 and its regulations.
 Public Officers Ethics Act.
 Anti-Corruption and Economic Crimes Act 2003.
 Public Finance Management Act 2012.

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 Suppliers Manual.
 Sample Procurement Documents.

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7.3.2.5 References
Chambers, R. (2006). Vulnerability, coping and policy (editorial introduction).

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Dolfsma, W. (2008). Knowledge economies: organization, location and innovation.

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Routledge.
Gichio, D., (2014). Public procurement in Kenya.

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7.3.3 Learning Outcome No 2: Classify assets for Disposal
7.3.3.1 Learning Activities
Learning Outcome No 2: Classify assets for Disposal
Learning Activities Special Instructions

2.1 Identify Serviceable/surplus assets and categorized as per the SOP. Role play among
2.2 Identify Unserviceable assets and categorized as per the SOP. groups.
2.3 Identify Obsolete and obsolescent assets and categorized as per the Visit a

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SOP. manufacturing firm
2.4 Prepare a classification report and recommendation for suitable and list the

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methods of assets disposal as per workplace policy and legal unserviceable assets.
requirements.

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7.3.3.2 Information Sheet No7/LO2: Classify Assets for Disposal

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Introduction ts
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This learning outcome will train on skills, knowledge and behavior to identify serviceable,
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obsolete, obsolescent assets and classify them as per workplace policy, sop and legal
requirements. It will cover methods of preparing classification report and recommendation
for suitable methods of assets disposal.

Definition of Key Terms

Serviceable: Can be serviced or repaired.
Surplus: This is the number of items or goods that will remain after requirements have
been made.
Unserviceable: This is when equipment is not worth to service or cannot be serviced.
Obsolete: An item is said to be obsolete when it is out of date or no longer needed.
Obsolescent: This is the process where the quality and value of an item declines.
SOP: This stands for Standard Operating Procedures.

Content/Procedures/Methods/Illustrations
2.1 Identification and Categorization of Assets
Because of increasing public expectation and continuous emergence of new technology,
companies are required to improve their efficiency. They are required to provide services
at acceptable level in terms of quality and cost effectiveness. As an input, government
entities and private companies should hold fixed assets and other equipment that facilitates
production of essential products efficiently and effectively. The intention of possessing
such assets is not for furnishing an organization or government or their department but

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helps organization run its business in effective and efficient manner since it is impossible
to achieve the intended goal without these assets (GASB, 2003, MOFC-D 2009).
Therefore, to establish expected benefits from such assets, efficient and effective
equipment management system is vital. This is because the asset management system will
enable to identify those items that are no longer needed so that they are disposed of. This
will help clear some space for new equipment and serviceable items.

Advantages of identifying serviceable and unserviceable material

 It facilitates disposal functions: This is because the materials will be handled and
categorized separately.

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 Removing materials on time: Once identified and categorized, the organization

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will know when to remove the items from the warehouse.

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 Saves time for disposal committee: The identification and categorization will save

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the disposal committee a great deal of time and make their task easy and achievable.
 Helps in planning: When the organization is aware of the number of equipment

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that require service, they will allocate resource of services. This will enhance the

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efficiency of management.

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2.2 Disposal of unserviceable materials ts
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Effective management and prompt measures on the growing quantity of no longer
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serviceable materials reduces challenges faced by disposal committee. Disposing the

unserviceable equipment promptly ensures safety and health within the organization. For
this reason, all the unserviceable materials should be disposed of the soonest possible.
According to MOFC-D (2011), removing unusable items is environmentally friendly and
fiscally accountable way on time reduces work burden and health and safety problems and
enables the organization to gain return and utilize space economically. Generally, when
items and equipment which are out of date are held by a company for a long period of time
without taking timely measure, they will be exposed to damage and may bring or cause
accidents on human beings as well as environment. Most importantly, those equipment on
which huge amount of money was invested, will lose their value and depreciate
considerably. This will therefore reduce return on investment if they are disposed on time
(Warren and Keeve, 2005, Queensland Government Chief Procurement Office department
of public works, 2010).
On the other hand, if wellbeing sensitive products like chemicals, medicine and food items
that are out of date are not removed on time, they may cause health problems on storehouse
or on warehouse workers and users, environment as well as living things in the surrounding
areas. The organization should have in mind that lack of timely disposal of
unserviceable materials will disrupt their plans. This is because accumulation of
unnecessary and unserviceable materials will occupy huge space of the warehouse. The
organization may find itself incurring extra cost to avail more space yet had there been

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proper disposal of unused items they would not have incurred this cost (Jones and White
2008).

2.3 Asset Classification Report

Asset classification is a system of assigning assets into groups based on number of common
characteristics. Different accounting rules and systems are used and applied to each asset
group within the asset classification system to properly account for each other group or
category of assets. These groups of assets are then clustered for reporting purposes in the
balance sheet.

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Common assets classification

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a) Cash: Cash includes cash in checking accounts, petty cash and cash in deposit

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accounts. it is the money the company is using in its daily operations to purchase

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items and pay its creditors. Money can reduce in value but there is nothing like
‘disposal of money’ since it can always be exchanged from the bank. For this

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reason, cash is not among the assets for disposal.

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b) Receivable: Receivable includes trade receivable and receivables from employees.

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This is also money exchanged as a matter of business transaction and therefore It
does not qualify for disposal. ts
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c) Inventory: Includes raw materials (inputs for production), work in progress and
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finished goods. When materials become out of use, they will be disposed.
d) Fixed assets: Includes building, land, computer hardware, computer software,
furniture and fixtures and vehicles. Movable items like computer hardware,
furniture items and vehicles can be disposed when they become obsolete.
Two broader classifications of assets are current assets and long-term assets. Current assets
are assets that will be used within one year while long term assets refer to all assets that
will be used in more than one year. Examples of current assets includes cash in hand, cash
in bank, inventory and receivable. Long term assets include building, land, vehicles,
furniture and fittings.

2.4 Identification of Suitable Methods of Disposal

It is not always clear on when and how to dispose assets. However, there are various
recommendations by different scholars who gave their best opinion on the identification of
proper methods of asset disposal. There are many factors to be considered when identifying
an appropriate method of asset disposal. This is because certain types of assets must be
disposed in a particular way to maintain customer privacy and data security. The following
factors call for prompt disposal of physical assets:
 The equipment is no longer working and cannot be sold.
 The equipment no longer supports the current needs of the organization.

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  The equipment is old and no longer meets company standards and the current
technological needs.
There are situations in which the identification of disposal is not obvious as those listed
above. For instance, the equipment may be running sluggishly or breaking down frequently
and forcing the company to pay for the repairs. The cost of replacing this machine may
seem too much. However, by calculating the amount of time and money spent repairing
the machine, you will notice the cost of replacement is much less than maintaining the old
and inefficient machine. This is mostly evidenced when the machine breaks down in the
midst of important operation thereby forcing the employees from completing their jobs
efficiently and timely. In such cases, the equipment should be sold either as a whole or in

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parts so that the proceeds can be topped up to purchase new and more reliable equipment.

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Conclusion

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In conclusion, this learning outcome has trained on skills, knowledge and behavior to
identify serviceable, unserviceable, obsolete, obsolescent assets and clarify them as per

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workplace policy, sop and legal requirements.

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Further Reading
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Waspharcode.com/buzz/asset-disposal/
https://www.csir.res.in

7.3.3.3 Self-Assessment

Written assessment
1. Which one of the following is not an advantage of identifying unserviceable items in
the warehouse?
a) It facilitates disposal functions.
b) Saves time for disposal committee.
c) Increases cost of the organization.
2. Which of the following equipment will put the health of employees at risk if not
disposed immediately, when they are out of use?
a) Chemical.
b) Drinking water bottle.
c) Laptop.

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3. Removing obsolete items on time is a good practice of asset disposal and management
a) True.
b) False.
4. Technological changes render some equipment out of use
a) True.
b) False.

5. Which of the following is not a current asset?

a) Inventory.
b) Cash.

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c) Receivables.

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d) Vehicles.

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6. State 2 benefits of identifying out of date assets early.

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7. Highlight three factors that call for immediate disposal of unserviceable assets.
8. Define obsolescent equipment.

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9. What are fixed assets?

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10. Differentiate between long-term and short-term assets.

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Oral Assessment ts
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1. What are the criteria of disposing surplus items?
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2. What is the procedure used to dispute an old and inefficient machine?

Practical Assessment
1. A company using an old photocopy machine uses sh.50, 000 to repair the machine
every month. A new photocopy machine costs sh.500, 000. As a supply chain
manager how would your advice the company?
2. Assume you are supply chain manager. The head of the company sought your
advice on the correct disposal of medical drugs that are out of use. What advice
would you give?
3. The committee of disposal of asset of a certain company found out that all the items
in the warehouse are completely disarranged and some even placed on warehouse
floor haphazardly. According to you, as a supply chain expert who do you think
slept on their job?

7.3.3.4 Tools, Equipment, Supplies and Materials

 Computers.
 Stationery.
 Classroom and classroom resources.
 The constitution of Kenya 2010.
 Public Procurement and Asset Disposal Act 2015 and its regulations.

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  Public Officers Ethics Act.
 Anti-Corruption and Economic Crimes Act 2003.
 Public Finance Management Act 2012.
 Suppliers Manual.
 Sample Procurement Documents.

7.3.3.5 References
Hastings, N. A. (2010). Physical asset management (Vol. 2). London: Springer.
Vernon, W. E. (2005). U.S. Patent No. 6,922,687. Washington, DC: U.S. Patent and

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Trademark Office.
Waara, F. (2008). Mitigating contractual hazards in public procurement: a study of Swedish

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local authorities. Construction Management and Economics, 26(2), 137-145.

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7.3.4 Learning Outcome No 3: Execute Disposal Orders
7.3.4.1 Learning Activities
Learning Outcome No 3: Execute disposal orders
Learning Activities Special
Instructions

3.1 Sought Authority to dispose (Organization Management, NEMA

regulations. Public Health) is sought as per legal requirements Activities may be
3.2 Prepare and disseminate Schedules for asset disposal to relevant carried out in groups

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stakeholders as per workplace policy guided by SOPs or individually
3.3 Execute the actual disposal (Sale by tender. Donations, Waste

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Disposal Management, Sale by auction, Trade-in, Transfer to other
entities) as per SOP and legal requirements.

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7.3.4.2 Information Sheet No7/LO3: Execute Disposal Orders

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Introduction ts
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This learning outcome will help the learner to acquire skills and knowledge on executing
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disposal orders. The learner will train on how to seek authorization to dispose products,
how to prepare and disseminate schedules for assets disposal and actual disposal execution.
Definition of Key Terms
Assets disposal: This is the act of a company or an organization selling off a long-term
asset that has decreased in value e.g. machines, motor vehicles, etc.
Execution of disposal orders: This is the process that is used in giving authority for
certain organizational assets to be sold, recycled or given out.

Content/Procedures/Methods/Illustrations
3.1 Seek Authorities Responsible for Disposal of Assets
Identification of methods for assets disposal
Disposal of assets occurs for various reasons. The following could be reasons of why assets
can be disposed:
 Required to be disposed of under a particular policy
 They are no longer required due to changed procedures functions or usage patterns
 They are occupying storage space and not being needed in the foreseeable future
 They have reached their optimum selling time to maximize returns
 They no longer complying with occupational health and safety standards
 They have been found to contain hazardous materials
 They are beyond repairing but able to be sold for scrap.

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There are various methods that can be adopted for assets disposal in supply chain practice.
The following are commonly practiced:
i. Transfer to government departments or other public entities with or without
financial adjustments.
ii. Announce tender and sell the items to the public at a considerable price.
iii. Sale through public action with a reserved price.
iv. Destroy, dump or bury the items appropriately if they cannot be useful anymore.
v. Recycling: Plastic equipment, metal, paper and glass can be easily recycled and
sent back to their usable states.
vi. Returning: This is taking back equipment or machines to the original manufacturers

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in exchange for money or on credit. This is only possible if manufacturers offer buy

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back solutions.

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vii. Refurbishing: This is putting back obsolete or used equipment and machine back

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to service. It is cheaper than buying.

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The decision to dispose of assets should be carefully planned to allow a proper evaluation

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of options. The following are some of the consideration one should have:

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 The type and condition of the surplus goods.
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 Whether there have been any offers from other public authorities.
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 The nature of the recipient market.
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 Time and resource issues.

 The costs and benefits provided by each disposal option.
 Location of goods and their market value.

NOTE: Goods to be disposed of must be reported and subsequently removed from assets
register.

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Table 1: Sample Template Assets Option Matrix
Disposal Option Advantages Disadvantages
Transfer  Achieves market price  May not achieve
 Achieves value for maximum price
money  Requires considerable
 Enables efficient disposal effort
 Process is transparent
Inviting Competitive  Achieves value for money  Resource intensive
Offers  Process is transparent  Requires advertising

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 Process is open and  Delays may result from
competitive appeals or a failure to

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 Achieves maximum return

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finalize purchase
 Tenderers may be vetted

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Auction  Enables efficient  Requires transporting

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disposal goods to auction
 Process is open and 

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May take considerable

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competitive time to dispose of goods or
 Achieves maximum
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return indisposed goods
 Costs are known prior to 
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Items may not be shown at

disposal real value
 Procurement entity uses  Buyers may enter into
minimal resources anti-competitive practice
 Effective disposal for  No control over who
spare parts, scrap purchases goods

Seeking Relevant Authority to dispose

The decision to dispose assets cannot be made independently without following a
systematic process and seeking the required authorization from relevant bodies. The
following are bodies that authorize disposal of assets in Kenya: The national treasury,
public procurement regulatory authority, procurement administrative review board,
director general’s office, accounting officer, and procurement officer. In Kenya the Public
Procurement and Assets Disposal Act commenced in January 2016. This Act provides
procedures and for assets disposal by public entities.
a) The national treasury
The national treasury provides policy guidelines, describes and provides technical
assistance for efficient procurement systems for the national and County Government.
Formulates, evaluates, promotes and researches on national and county procurement and
disposal policies.

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 b) The public procurement regulatory Authority
The PPRA monitors all public procurement systems, assesses and reviews disposal systems
that ensure national values and the Constitutions are respected. It also has the role of
ensuring that all functions are reported and presented to the Cabinet Secretary and county
executives. The authority further ensures that all standards developed under the Acts are
enforced ad research on public procurement and assets disposal systems and advise the
Cabinet Secretary on how to set standards on assets disposal.
c) Public procurement administrative review board.
They are responsible for determining the provisions to be made for capital and recurrent
expenditure, they also oversee the management, control and administration of assets,

44
approve policies of the Authority. The PPR board is also responsible for cooperating with

3
other organizations undertaking functions similar to its own within and outside the country.

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d) Director General’s Office

26
This office acts as the Chief Executive Officer of the authority and secretary of the board.
They hold office for a term of 3 years but are eligible for re-appointment. While in office,

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they are responsible for the day to day management of the affairs of the Authority and is

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answerable to the board.

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e) Accounting officer
ts
The accounting officers establish system procedures to facilitate systematic and structure
ha
decision making in procurement. They are also responsible for the public entity and ensure
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that they are compliant with the Act and set regulations. Accounting officers are to ensure
that disposal plans are prepared and are compliant with the PPAD Act. They are to approve
and sign all contracts while ensuring segregation of responsibilities. Accounting officers
are to ensure that procurement is within the approved budget
f) Procurement officer
The procurement officer is responsible for :
 Giving professional advice to accounting officers.
 Prepare, publish and issue procurement opportunities and documents.
 Maintain and keep procurement and disposal records.
 Initiate procurement and disposal processes.
 Maintain contract records.
 Identify items for disposal.

3.2 Prepare and Disseminate Schedules for Asset Disposal to Relevant Stakeholders
as Per Workplace Policy Guided by SOP
Asset scheduling is the listing of all assets within a company. Assets can be categorized
into two major types: the fixed and non-fixed assets. The schedule for fixed assets disposal
should contain the following details:
a) The asset description.
b) The net cost.

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 c) Accumulated depreciation.
d) Unique asset number.
e) Gross cost.
Information above is written down; the salvage value may also be included for each fixed
asset. The fixed asset schedule is used by organizations to verify the existence of these
assets as well as their life value. For asset disposal, a depreciation schedule can also be
used to show when and how much depreciation to put down, when to stop recording
depreciation for fully depreciated assets in order to know which assets to stop using and
which ones to replace.

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3.3 Execute the Actual Disposal as Per SOP and Legal Requirements

3
Execution of assets is a systematic procedure used to ensure that identified assets are

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disposed based on the policy and regulation of the company. Various activities are

26
undertaken to effectively dispose assets.
i. Establish a disposal Committee: The employee in charge of unserviceable,

07
obsolete and obsolescent goods establishes a disposal committee that will be

p
comprised of procurement officer, accounting officer, human resource personnel

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and any other technical person with the knowhow on how to disposal.
ts
ii. Preparation of technical disposal report: A technical report is prepared on the
ha
items to be prepared. The report will indicate the real market price and set the
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reserve price for assets to be disposed.

iii. Review by disposal committee: The disposal committee will conduct a survey and
review the items to be disposed. This meeting will also put in consideration the
technical report for disposal.
iv. Disclosure of disposal and reserve prices: After the committee is in agreement
on the items to be disposed and the reserve prices. The organization goes ahead to
announce tender, auction of disposal of the assets to the public or to a transfer
organization.
v. Seek approval for disposal: The officer in charge of disposal will seek approval
for disposal of the items form relevant parties. This will involve obtaining signed
consent from top management, PPRA for the case of public sector and any other
authorities as stipulated in the organization assets disposal regulations.
vi. Invite interested parties to purchase the assets (In case of sales).
vii. Document the sales from the sales and prepare transfer documents where
necessary.

Conclusion
At the end, the learning outcome will have covered the authority to dispose, legal
requirements and schedules for asset disposal disseminated to relevant stakeholders as per
workplace policy guided by SOPs. There exist several ways of organizational asset disposal

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according to the Procurement Act. Different organizations have different equipment,
machine and fixed assets which may need to be disposed from time to time and it is
important to adhere to the SOP set standards. It is also crucial that organizations consider
ways of disposal that are less costly and are SOP acceptable while following the right
guidelines.

Further Reading

OECD principles for integrity in public Procurement, 2009

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Public procurement and disposal manual guidelines, 2016

3
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7.3.4.3 Self-Assessment

26
07
Written Assessment

p
1. Which of the following is not a method of asset disposal?

Ap
a) Recycling
b) Fabrication ts
ha
c) Retirement
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d) Sale
2. What do you think should be considered in asset scheduling?
a) Time of schedule.
b) Method of asset disposal.
c) Accumulated depreciation.
d) Procurement act.
3. Which among this is not responsible for asset disposal?
a) Auditor general
b) Accounting officer
c) Procurement officer
d) National treasury
4. Which statement best describes the term disposal?
a) Giving out public property.
b) Exchanging valued property with a different entity.
c) Selling of a machine to make profit.
d) Getting rid of an organizational machine or equipment that has decreased in
value.

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 5. Which of the following is not a function of the public procurement regulatory
authority?
a) Reviewing
b) Assessment
c) Monitoring
d) Overseeing
6. Explain the main process of asset disposal?
7. Discuss the importance of establishing an assets disposal committee?
8. Describe benefits of two methods of asset disposal?

44
9. Highlight five main considerations by an organization before assets disposal?

3
10. Why is assets disposal important in an organization?

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Oral Assessment

26
1. Which two methods are common in assets disposal in Kenya?
2. Who should be involved in assets disposal?

07
3. Which are the main authorities to approve assets disposal?

p
Ap
Practical Assessment
ts
1. You have been appointed the assets disposal officer for a motor vehicle company.
ha
a) Describe the process you will use in identifying assets for disposal.
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b) Clearly elaborate methods and process you will use in disposing of the
identified assets.
c) Prepare an asset disposal technical report for the exercise.
7.3.4.4 Tools, Equipment, Supplies and Materials
 Computers.
 Stationery.
 Classroom and classroom resources.
 The constitution of Kenya 2010.
 Public Procurement and Asset Disposal Act 2015 and its regulations.
 Public Officers Ethics Act.
 Anti-Corruption and Economic Crimes Act 2003.
 Public Finance Management Act 2012.
 Suppliers Manual.
 Sample Procurement Documents.

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7.3.4.5 References

Khi, V.T., (2016). International Public Procurement Innovation and Knowledge Sharing.
Singer USA
Martin, C., (2013). Logistics and Supply Chain Management. 4 th ed. Pearson Harlow.
Nicholas, A., John, H., (2009). Physical Assets Management.

44
3
73
26
07
p
Ap
ts
ha
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7.3.5 Learning Outcome No 4: Prepare disposal orders
7.3.5.1 Learning Activities
Learning Outcome No 4: Prepare Disposal certificate
Learning Activities Special Instructions

5.1 Document disposal orders as per legal requirements and SOP. Activities may have
5.2 Ratified (Simple representation, Endorsements) as per the legal carried by oral
requirements. presentation.

44
5.3 File and maintain disposal documents as per workplace policy and
legal requirements.

3
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7.3.5.2 Information Sheet No7/LO4: Prepare Disposal Certificate

26
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p
Introduction

Ap
The learning outcome will train on skills, knowledge and behavior to document ratify, file
ts
and maintain disposal orders as per workplace policy and legal requirements.
ha
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Definition of Key Terms

Ratification: This is the process of making a contract or agreement officially valid by
signing or giving formal consent.

Endorsement: This is statement or action made which shows support or approval of

something.

Content/Procedures/Methods/Illustrations
4.1: Documentation of Disposal Orders
Documentation of disposal orders is an important part of management of records. t is done
in order to retain records that are needed for future reference and destroying of unwanted
ones.

Procedures of documenting disposal orders

 Records are first identified for disposal actions. This is done to differentiate the
unwanted documents from the wanted ones.
 The decision of disposing the orders is confirmed and verified so that one does not
end up disposing the unwanted documents.
 The unwanted documents are then categorized and packed in a designated place.

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Advantages of documenting disposal orders
 It helps one to find and retrieve information quicker and easier since it will take
less time to search for the documents.
 It will minimize storage costs incurred by using only small space in the store and
retain the records for longer period.
 Keeps continuing value records are identified and can be managed appropriately.
 It supports compliance with regulatory requirements for example, if records contain
personal information, the confidentiality of the information is enhanced.
 It enhances the efficiency of the organization. This is because the organization can

44
use automated systems when carrying out asset disposal. This saves the

3
organization both time and resources.

73
 The disposal committee can use the documents easily and ask the top management
to clarify any issues or concerns that they may have.

26
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4.2 Ratified (Simple Representation Endorsement) as Per the Legal Requirements

p
Ratification of disposal document

Ap
Ratification is the process of making a contract or agreement valid by signing officially or
ts
giving a formal consent. The disposal documents should be ratified sufficiently. This will
ha
provide evidence of the decision made. Reasons for reaching ratification decision include:
 To have complete description of the records reviewed.
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 When the ratification was made.

 The ground on which the decision was made.
Effects of ratification
It will put the principle and the third party into the positions that they would have been if
the agents act had been authorized.
Conditions to be met for ratification of documents to occur
 The agent must support the act on behave of the principal.
 The principal must be in existence at the time of contract agreement.
 The principal must have the capacity to enter into the contract.
Advantages of ratification of disposal documents
 It is an approval of an act by the principle that lacked the authority to bind the
principle legally.
 It defines the international act in which a state indicates its consent to be bound to
a contract if the parties intended to show their consent by such an act.
 It makes an agreement valid and this increases the confidence of the parties
involved.
 Ratification of disposal document is always accompanied by maintaining
instruments of confirmation as provided for in contract. This enforces the
convention at the early stage of agreement.

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4.3 File and Maintain Disposal Documents as Per Workplace Policy and Legal
Requirements
Filing and maintenance of disposal documents
Filling and maintenance of disposal documents ensures that the organization retains records
for as long as they are needed and when they are no longer needed, they are destroyed. The
objective of proper file management is to be able to find disposal records quickly and
economically.

44
Steps of filing and maintaining disposal documents

3
 Assign the responsibility of filling and maintaining disposal documents to the

73
employees.

26
 Obtain support of top management for reinforcement.
 Collect information on inventory records.

07
 Analyze the records in terms of expiry, value, size and importance.

p
 Develop an appropriate filling system.

Ap
 Implement the systems.
ts
 Train users on the system that you have developed.
ha
 Monitor implantation, follow up and revise the system.
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Advantage of filing and maintaining disposal of documents

 The business data will remain confidential.
 It makes recycling of data to be easy.
 It is quick and easy way to dispose papers and documents which are no longer
needed.
 It saves storage space in the warehouse or store.
 It enhances customers trust to make them confident that their data is being treated
securely and with utmost respect.
 To keep employees happy since they will get sense of achievement as far as filling
and maintenance of disposal of documents is concerned.
 Protect documents from possible theft that has become common crime with
criminals searching documents from rubbish bins.

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Conclusion
In conclusion, this learning outcome trained the learner on skills, knowledge and behavior
to document, ratify file and maintain disposal orders and documents as per workplace
policy and legal requirements.

Further Reading

File management and planning (finance.uw.edu/rec mgt/files-mgt)

44
Managing the creation, use and disposal of records (unit 3.4 page 33)

3
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7.3.5.3 Self-Assessment

26
07
Written Assessment

p
1. The decision of disposing documents is verified to avoid ending up disposing important

Ap
documents.
a) True ts
ha
b) False
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2. Effective detraction of unwanted documents is the responsibility of asset disposal

department.
a) True
b) False
3. Will efficient filling and maintenance of disposal documents save the storage space?
a) Yes
b) No
4. Ratification of disposal documents is not binding legally.
a) True
b) False
5. Documentation of disposal orders helps one to find information quickly and easier.
a) False
b) True
6. What is ratification of disposal documents?
7. State two procedures of documenting disposal orders.
8. What is the version of carrying out documentation of disposal orders?
9. Differentiate between ratification and filling of disposal orders.
10. State 3 advantages of filling and maintaining of disposal documents and orders.

Oral Assessment

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 1. What are the criteria used to dispose unwanted documents?
2. What are the conditions to be met for ratification of documents to occur?

Practical Assessment
1. Assume that you are supply chain expert.an organization had difficulties of records
filling and maintenance what recommendations would you have provided if they
engaged you?
2. A company warehouse is full of unwanted documents such that the company does
not have space to store new items. As a supply expert, how would you advice the
company?

44
3. The procurement department of a company flouted the company policy regarding

3
to the documentation of disposal orders. As a result the management is in longer

73
heads with the department head.As an expert of supply chain how would you

26
resolve this dispute?

07
7.3.5.4 Tools, Equipment, Supplies and Materials

p
 Computers.

Ap
 Stationery.
 Classroom and classroom resources. ts
ha
 The constitution of Kenya 2010.
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 Public Procurement and Asset Disposal Act 2015 and its regulations.
 Public Officers Ethics Act.
 Anti-Corruption and Economic Crimes Act 2003.
 Public Finance Management Act 2012.
 Suppliers Manual.
 Sample Procurement Documents.

7.3.5.5 References
Christopher, M. (2010). Logistics and Supply Chain Management| Martin Christopher.
Financial Times/Prentice Hall.
Mangan, J., & Lalwani, C. L. (2016). Global logistics and supply chain management. John
Wiley & Sons.
Slack, N. (1983). Flexibility as a manufacturing objective. International Journal of
Operations & Production Management, 3(3), 4-13.

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