Accounting information in the investment process
The investment process should become the driving force behind Cuba's development, for which it will be necessary to achieve higher accumulation rates. Achieving greater efficiency in the investment process remains a challenge for the Cuban economy. Although a change in the dynamics is projected in perspective, including the opening with greater force to investment with foreign capital, the desired levels have not yet been reached. None of the legal documents that are put into effect, not even those related to foreign capital investments, will automatically constitute the solution to the deficiencies of the investment process. It is essential to increase the discipline and rigor of the studies before undertaking investments, for which it is not enough to recognize the errors of estimates or evaluations,unfounded decisions must be avoided at all costs.
It pursues as fundamental objectives:
- Verify the control, use and destination of all types of resources assigned to the investment process. Verify the correct preparation of proposals and work progress certifications. Verify that the financing used was assigned for the execution of the work, according to the study by feasibility and the approved budget Verify that the work execution schedule responds to the approved feasibility study Evaluate the results of the quality of the work Evaluate the implementation and effectiveness of the Internal Control System and the effectiveness of the measures contained in the Risk Prevention Plan, linked to the investment process, taking into account the implementation program drawn up. (Resolution 60/10 of the Office of the Comptroller General of the Republic).
Capital and Material Investments
They include the amounts of the expenses incurred in these activities, either executed with their own means or contracted with third parties.
They include the equipment that requires assembly work and the materials that are transferred from the Equipment to Install and Materials for the Investment Process accounts.
They are debited for the Works Progress Certifications, for the real cost up to the established limit of the investments executed with own means and for the acquisition value of the installed equipment and the used construction materials and at the end of the year, for the estimate of the expenses of the works carried out and which have not yet been invoiced and are credited upon completion of the investment and transfer to Tangible Fixed Assets.
The progress of an investment is received, it is verified with the main investor that the works they are charging have been carried out, the initial documents of a given investment, which is contemplated in the entity's Investment Plan and are accounted for with a debit to the account 265 Investments in Process - Budgeted Unit and a credit to the account 425 Accounts Payable of the Investor Process .
Theoretical and referential framework
The investment is the expense of financial, human and material resources that are executed in order to obtain further economic and social benefits through the exploitation of new Tangible Fixed Assets.
Investments are classified into nominal and non-nominal; for the purposes of its evaluation, approval and treatment of the economy plan and taking into account its limit in total value and currency and its characteristics. These limits are established and updated periodically by the Ministry of Economy and Planning through complementary regulation.
The evaluation and approval of Nominal Investments is the power of the Ministry of Economy and Planning, depending on the importance, characteristics and economic and social effects of the investment evaluated.
For planning and control purposes, investments are structured in three fundamental components, Construction and Assembly, Equipment and Others:
Construction and Assembly: They are the works of preparation of the land corresponding to the investment area and the direct induced works, demolitions associated with the investment, civil construction and the assembly until its commissioning of facilities and equipment.
Equipment: It is the value of all the equipment and machinery, including transport and furniture, whether imported or domestically produced and regardless of whether or not they require assembly work; and that they constitute an integral part of the production or service process. Includes expenses for freight, insurance and transportation costs to your final destination.
Other expenses: Includes the investment expenses that are not classified in the previous components, such as the expenses of preparation, training, training, technical and project documentation, promotion and commercialization, administration and expenses required for testing and commissioning. It also protects the necessary tools for the initial authorization of investments and the increase of working capital during the period established in the approval opinion of the Feasibility Study.
The financing of the approved investments is carried out according to the activity in question, if it corresponds to the entrepreneurial activity, it is executed through decentralized resources from voluntary provisions and reserves from the profits created and bank credit. On the other hand, if it is the budgeted activity, as well as business activities that, due to their economic and social importance, cannot be undertaken with decentralized resources and are decided to be centrally financed, this is done through the allocation of resources from the State Budget.
The investment process is a dynamic system that integrates the activities and / or services carried out by the different subjects (Investor, designer, builder and supplier) who participate in it, from its initial conception to the start-up, this process materializes at Through three phases, pre investment, execution and deactivation and start of exploitation.
The Pre-investment phase is the conception phase of the investment. In this phase, the needs are identified, market data is obtained, the investment strategy and objectives are developed and determined, the technical documentation of Conceptual Ideas and Preliminary Project is developed, which supports the pre-feasibility and technical feasibility studies. -economic.
The Execution phase is the phase of granting and implementing the investment. Projects continue to be developed until their executive phase, and construction and assembly services and procurement of supplies begin and are carried out. For this, the team that undertakes the investment is consolidated, establishing the corresponding contracts. The schedule of activities and resources, the final costs and cash flows of the investment are specified and the Quality Assurance Plan is established. This phase culminates with the commissioning tests.
The phase of deactivation and start of exploitation is the phase where the investment ends. In it the tests of commissioning are carried out. Temporary facilities and other facilities used in the execution are deactivated. The final investment report is evaluated and rendered. Responsibilities are transferred and post-investment analyzes are carried out.
Aspects to verify the investment process
Pre-investment phase
- Verify by the investor that the type of investment under review corresponds to the amounts established for this purpose by the Ministry of Economy and Planning through complementary regulation (nominal or non-nominal). Verify in the budget of the work the following aspects:
- That there is correspondence with the budget that appears reflected in the Feasibility Study. It is a maximum limit for the total investment and for the Construction and Assembly, Equipment and Other components. That the investment project complies with the approved financial framework. Check the approved financing sources.
- Verify in the case of the National Currency the source of financing that is used. Verify the fulfillment of the tasks as programmed (schedule). In case of delay, analyze the negative scope it has had in the development of the investment process.
Investment execution phase
- Verify that all possible deviations have been included in the budget, which must be explicitly established in the approved opinion. Verify that the conditions and terms of invoicing of the projects are those agreed in the contract between the Investor and the Planner, according to the rules and principles dictated for these purposes.Check if the official consecutive registry of contracts is established with the following aspects: Consecutive number of contracts.Value agreed.Name of the commercial specialist who attends the contract.Name of the supplier.Other aspects Verify that the Contracting Committee is chaired by the person responsible for signing the contracts. Verify that the following is taken into account when reviewing the contracts: Check that there are no productions without contracts.Verify that the amount of the contracts signed corresponds to the established values, within the limits of the budget approved in the Feasibility Study. Verify that the scope of the work with its corresponding annexes is defined in the signed contract. Verify the execution of the contract, considering that the new updates are supported by the respective supplements. Verify that the most important clauses are included in the contract, such as: That the amounts to be paid by default for all the parties involved appear in the payment conditions. That the execution priorities have been agreed.Verify that the scope of work is defined in the signed contract with its corresponding annexes. Verify the execution of the contract, considering that new updates are supported by the respective supplements. Verify that the most important clauses are included in the contract, such as: That in the payment conditions appear the amounts to be paid by default of all the parties involved. That the execution priorities have been agreed.Verify that the scope of work is defined in the signed contract with its corresponding annexes. Verify the execution of the contract, considering that new updates are supported by the respective supplements. Verify that the most important clauses are included in the contract, such as: That in the payment conditions appear the amounts to be paid by default of all the parties involved. That the execution priorities have been agreed.That in the payment conditions appear the amounts to be paid by default of all the parties involved. That the execution priorities have been agreed.That in the payment conditions appear the amounts to be paid by default of all the parties involved. That the execution priorities have been agreed.
- Reference to the Work License and the Environmental License, in the latter it must be expressly stated in the contract that the work that begins without the aforementioned license due to the responsibility of the investor, must respond for all the consequences that this fact causes, including indemnifying the builder for damages if applicable.
- That the clauses appear that specify that due to the investor's failure to comply with the payment obligations, the builder can withdraw the service. Verify with the investor and the builder that the supply contracts exist and that they have the annexes with the agreed delivery terms. to the progress of the execution of the work.Check in the Work Book the following aspects: It must be endorsed by the director of the entity and the stamp of the entity.Relation of the officials who have access to make the annotations.General data of the work, names and dates when the annotations began to be made. The book must be under the custody of the technical head of the work, by means of an act, according to the Investment Process Regulation. It will also have access without being in the relationship,the director of the entity to which the construction brigade belongs, the territorial delegates, vice ministers and ministers of any of the entities participating in the investment, as well as the person in charge of Engineering Control of Banco Nacional de Cuba. Verify the technical documents that make up the Book Site: The executive project. The project of the organization of the work. The variations of the project and the budget made during the execution. The minutes of agreement taken between the parties involved in the investment. The names and surnames of the staff technician responsible for the construction. Changes that occur in the technical personnel of any of the parts. All the annotations will be made in ink and no blank spaces or sheets should appear between annotations. The minutes of the hidden works.Verify that the executors who are exercising any of the activities or providing any of the services related to construction, defined in the National Regulations for Builders, designers and Consultants of the Republic of Cuba; are registered and have the corresponding updated license that accredits their registration and authorization to practice as such, which is granted by the National Office of the Registry of Builders. Verify that the execution projects are prepared by a trained entity, it must be Registered in the Builders Registry. Check that the work consists of its Quality Plan and even having them, if these are met. Confirm that the reported production certifications have been approved by the investor.Verify the actual behavior of the work budget, determining the possible deviations and their causes. Review of the procedures and methodologies in force for the control of the execution and quality of the work. Verify that the project exists and is complied with Occupational Safety and Health.
Deactivation phase and start of exploitation
- Verify that the investment settlement file contains the following documentation: Certificate of delivery of the investment, in which the date on which the parties involved must proceed to proceed with the official delivery must be specified. Document that refers to the conditions in which the produces the delivery, defining aspects that may be pending, compliance period and others. General description of the investment and the systems. The total expenses originated by the investment, list of tangible fixed assets and their values. Documentation of projects containing at least the architecture project, network plans and installations of all the systems and projects updated with the as-built plans. Contract for the execution of works and supplies. User manual for the use and exploitation of the systems.Other legal documents inherent to the investment and its subsequent exploitation.
Accounting and internal control aspects
- Verify that the transactions or balances at the closing or during the audit period that support the balances of the Prepaid Accounts and Accounts Payable of the Investor Process, are broken down by the previous payments made and the pending obligations respectively, in accordance with the contracts signed. with the construction entities, projects or equipment suppliers that require installation and materials. Check that the investments put into operation have the certificate of usable habitable. Verify that the operations carried out with other entities are approved in their corporate purpose.; fundamentally for purchase-sale operations of materials and equipment. Review the prices of the productions carried out, based on the codes and certifications of progress of works,as regulated in the PRECONS.Perform physical measurement of the work, to determine if there are deviations of resources, materials or overconsumption, quantifying these, in quantity and amount, for which the results of the measurements must be compared with the output vouchers of the warehouse and the work progress certifications. Randomly review the output vouchers of the products destined for the work, verifying that the materials that have been requested by the authorized personnel do not present amendments or deletions. Verify if the entity has carried out physical inventories of the stored products and if there have been discrepancies, if the file of missing and surplus was enabled and was registered in the corresponding control account, confirm that the payments that have been made,come from the Cash account at Banco-Inversiones and are not being made from the bank's current account. Evaluate the implementation and effectiveness of the Internal Control System and the effectiveness of the measures contained in the Risk Prevention Plan, taking into account the elaborated schedule. (Resolution 60/2010 of the CGR). Verify that the entity has prepared the Risk Prevention Plan for the prevention of indisciplines, illegalities and manifestations of corruption and that it provides the expected effectiveness when the review deadlines are met.(Resolution 60/2010 of the CGR). Verify that the entity has prepared the Risk Prevention Plan for the prevention of indisciplines, illegalities and manifestations of corruption and that it provides the expected effectiveness when the review deadlines are met.(Resolution 60/2010 of the CGR). Verify that the entity has prepared the Risk Prevention Plan for the prevention of indisciplines, illegalities and manifestations of corruption and that it provides the expected effectiveness when the review deadlines are met.
