ASTM E3015-15(2020)

This international standard was developed in accordance with internationally recognized principles on standardization established in the Decision on Principles for the
Development of International Standards, Guides and Recommendations issued by the World Trade Organization Technical Barriers to Trade (TBT) Committee.
Designation: E3015 − 15 (Reapproved 2020)
Standard Guide for
Management of Customer-Owned Property Assets in
Possession of Supplier, Contractor or Subcontractor
This standard is issued under the fixed designation E3015; the number immediately following the designation indicates the year of
original adoption or, in the case of revision, the year of last revision. A number in parentheses indicates the year of last reapproval. A
superscript epsilon (´) indicates an editorial change since the last revision or reapproval.
1. Scope E2936 Guide for Contractor Self Assessment for U.S. Gov-
ernment Property Management Systems
1.1 This guide addresses infrastructure and practices for the
2.2 IAASB Standard:
life-cyclemanagementofsupplier,contractororsubcontractor-
3402 International Standard on Assurance Engagements
held customer-owned property in the possession of a supplier,
(ISAE)
contractor or subcontractor. This includes the infrastructure
2.3 PCAOB Standard:
and processes and subprocesses in the efforts of acquisition,
Auditing Standard No. 2 An Audit of Internal Control Over
use, and disposition.
Financial Reporting Performed in Conjunction With an
1.2 This guide covers property that is owned by a customer
Audit of Financial Statements
or a buyer (referred to as customer-owned property) that is
2.4 Federal Standards:
either directly furnished by a buyer, customer, or acquired by a 5
GAO-12-331G Government Auditing Standards
supplier on behalf of a customer where title to the property
U.S. OMB CircularA-123 Management’s Responsibility for
ultimately vests with the customer while in the possession of a
Internal Control
supplier, contractor or subcontractor.
18 U.S.C. 641 Public Money, Property or Records
1.3 This standard does not purport to address all of the
3. Terminology
safety concerns, if any, associated with its use. It is the
responsibility of the user of this standard to establish appro- 3.1 Definitions: For definitions related to property and asset
priate safety, health, and environmental practices and deter- management, refer to Terminology E2135.
mine the applicability of regulatory limitations prior to use. 3.1.1 acquired property, n—property under the possession
1.4 This international standard was developed in accor- or control of an entity that is not deemed “furnished property”
dance with internationally recognized principles on standard- and was acquired for business operation purposes.
ization established in the Decision on Principles for the
3.1.2 contract, n—agreement creating obligations enforce-
Development of International Standards, Guides and Recom-
able by law. [http://www.law.cornell.edu/wex/contract]
mendations issued by the World Trade Organization Technical
3.1.3 contractor, n—independent entity that agrees to fur-
Barriers to Trade (TBT) Committee.
nish a certain number or quantity of goods, material,
equipment, personnel, or services that meet or exceed stated
2. Referenced Documents
requirements or specifications at a mutually agreed upon price
2.1 ASTM Standards:
and within a specified timeframe.
E2135 Terminology for Property and Asset Management
[http://www.businessdictionary.com/definition/
E2279 Practice for Establishing the Guiding Principles of
contractor.html]
Property Asset Management
3.1.4 customer, n—for customer furnished property
E2452 Practice for Equipment Management Process Matu-
arrangements, the customer is generally considered the entity
rity (EMPM) Model
or decision maker that has issued a contract or subcontract.
1 3
This guide is under the jurisdiction of ASTM Committee E53 on Asset Available from International Federation of Accountants (IFAC), 529 5th
Management and is the direct responsibility of Subcommittee E53.20 on United Avenue, New York, NY 10017, http://www.ifac.org.
States Government Property Management. Available from Public CompanyAccounting Oversight Board (PCAOB), 1666
CurrenteditionapprovedJuly1,2020.PublishedJuly2020.Originallyapproved K St., NW, Washington, DC 20006-2803, http://pcaobus.org.
in 2015. Last previous edition approved in 2015 as E3015–15. DOI: 10.1520/ AvailablefromU.S.GovernmentAccountabilityOffice(GAO),441GSt.,NW,
E3015-15R20. Washington, DC 20548, http://www.gao.gov.
2 6
For referenced ASTM standards, visit the ASTM website, www.astm.org, or Available from The Office of Management and Budget, 725 17th Street, NW,
contact ASTM Customer Service at service@astm.org. For Annual Book of ASTM Washington, DC 20503, http://www.whitehouse.gov/omb/circulars.
Standards volume information, refer to the standard’s Document Summary page on Available from U.S. Government Publishing Office (GPO), 732 N. Capitol St.,
the ASTM website. NW, Washington, DC 20401, http://www.gpo.gov.
Copyright © ASTM International, 100 Barr Harbor Drive, PO Box C700, West Conshohocken, PA 19428-2959. United States
E3015 − 15 (2020)
3.1.4.1 Discussion—The customer may be the issuer of the standards for international applicability include International
original contract or may be a prime contractor to a subcontrac- Auditing and Assurance Standards Board (IAASB) and Inter-
tor. Synonyms may include: buyer, purchaser, contracting national Standard on Assurance Engagements (ISAE) 3402.
officer and client. Customers have authority to issue and make Internal controls in business operations are analogous to “vital
determinations, commitments and administer a contract or signs” in the medical field—it is the starting point, providing
subcontractor and are limited to those individuals who have the fundamental indicators of good health.
delegated authority by the asset’s owner. Lessors are not
3.1.9 must, v—an unconditional requirement: practitioners
customers.Notallemployeesofanentityarecustomersasthey
must comply with an unconditional requirement in all cases
do not have delegated authority to make determinations and
where such requirement is relevant.
commitmentsonbehalfoftheentity,forexample,auditorswho
[Adapted from GAO-12-331G]
are working in an auditor capacity that require independence.
3.1.10 prime contractor, n—contractor that has issued one
3.1.5 customer-owned property—property owned by a cus-
or more subcontracts.
tomer.
3.1.10.1 Discussion—The prime contractor is frequently
3.1.5.1 Discussion—If an entity receives a government con-
referred to as the “buyer” or “customer” by the subcontractor.
tract and is required, by contract, to be furnished property to
Fromtheperspectiveofasubcontractor,theprimecontractoris
complete the work—this is defined as customer-owned or
the entity with whom the subcontractor is directly engaged in
customer furnished. This may include property that is subse-
a subcontract. There are numerous variations to this
quently furnished to suppliers and subcontractors. Those who
relationship, for example, a prime contractor may, in turn, be a
are furnished this property generally refer to this property as
subcontractor to another entity, which would then be that
customer furnished property or customer-owned property.
subcontractor’s prime contractor. In another context, the prime
3.1.6 entity owned—property owned by an entity.
contractor may refer to the contractor that holds the direct
3.1.6.1 Discussion—If entity (ZXY Corporation) is in the
contract with the ultimate customer.
business of selling commercial products and needs to provide
3.1.11 reasonable assurance, n—management’s assessment
owned property to a supplier to do work, this is entity (XYZ
or opinion regarding the effectiveness of internal controls
Corporation) owned property from the perspective of the
relating to effective and efficient operations, reliable reporting,
owner, but is customer-owned property from the perspective of
and compliance to laws and regulations. [Adapted from
the supplier.
Paragraph 17 of the PCAOB Auditing Standard No. 2]
3.1.7 furnished property, n—property actually furnished to
3.1.11.1 Discussion—Reasonable assurance includes the
but not paid for by a supplier, contractor or subcontractor
understanding there is a remote likelihood that material mis-
within the contractual arrangement. This guide does not
statements or occurrences will not be prevented or detected on
include controls specifically for items sent in for repair,
a timely basis. Although not absolute assurance, reasonable
modification, or upgrade under service agreements.
assurance is, nevertheless, a high level of assurance.
3.1.8 internal controls, n—organization’s business system
3.1.12 should—a presumptively mandatory requirement:
of internal control designed to provide reasonable assurance of
practitioners must comply with a presumptively mandatory
achieving: (1) effective and efficient operations (E&EO), (2)
requirement in all cases where such a requirement is relevant,
reliable reporting (RR), including financial and performance,
except in rare circumstances. In such rare circumstances,
and (3) compliance with applicable laws and regulations
practitioners should perform alternative practices to achieve
(CLR). [Adapted from GAO-12-331G]
the intent of that requirement. Documentation justifying the
3.1.8.1 Discussion—The framework and elements of inter-
departure should be maintained. Cost-benefit and materiality
nal controls have remained fairly consistent for operational,
concepts apply. [Adapted from GAO-12-331G]
accounting, and auditing purposes over the years and generally
3.1.13 subcontract, n—contract subordinate to another con-
apply internationally. In the United States, internal control
tract in which a party has contracted for the performance of
requirements apply to publicly traded corporations as well as
certain work and, in turn, engages a third party to perform the
U.S. Government operations. For publicly traded corporations
whole or a part of that which is included in the original
the requirement for internal controls is included in the:
contract.
Securities ExchangeAct of 1934; Sarbanes OxleyAct of 2002;
and the Committee of Sponsoring Organizations of the Tread-
3.1.13.1 Discussion—Asubcontract may also be referred to
way Commission (COSO) publication Internal Control –
as a “purchase order,” “purchase contract,” or “purchase
Integrated Framework (2013). For the U.S. Federal Govern-
agreement.”
ment operations guidance and contractual requirements are
3.1.14 subcontractor, n—contractor that has engaged in a
included in OMB CircularA-123, Management’s Responsibil-
contract to perform a whole or a part of another contractor’s
ityforInternalControl;andtheFederalAcquisitionRegulation
original contract.
(FAR) Part 45 and the associated Clause 52.245-1 Government
3.1.14.1 Discussion—Subcontractor may also be referred to
Property, under Paragraph (b) Property Management. Other
as the “seller,” or “supplier.”
3.1.15 timely manner, n—within an agreement, the action to
Available from http://www.coso.org. be taken by a specified date, or within a given or reasonable
E3015 − 15 (2020)
time frame. What is reasonable is determined by the decision 6.1.1 Internal controls should strive to promote and achieve
making needs of the owner, the contracting parties, or other optimum operational effectiveness and efficiency under the
interested parties. circumstances. These plans and policies should:
3.1.15.1 Discussion—When a finite quantitative direction is
6.1.1.1 Reflect appropriate requirements, directions, and
not provided—a timely manner is subjective, circumstantial
needs of the owner, customers, and other stakeholders;
and reasonable—cost-benefit considerations apply.
6.1.1.2 Be harmonized among the functional elements and
business system owners, for example, asset management,
3.2 Acronyms and Abbreviations:
procurement, quality, program management, and accounting,
3.3 CLR—Compliance with applicable laws and regulations
via internal policies and management practices. In addition,
3.4 E&EO—Effective and efficient operations
various functional elements may all have a different under-
3.5 EAR—U.S. Export Administration Regulation
standing of property ownership when a supplier acquires
3.6 ITAR—U.S. International Trafficking in Arms Require-
property against a subcontract;
ments
6.1.1.3 Be scalable and adaptable to various operational and
3.7 OMB—U.S. Office of Management and Budget contractual needs, controls and processes to manage assets.
6.1.1.4 Bereasonableandachievablewithadequatestaffing,
3.8 RR—Reliable reporting
technology,andresourcesandshouldreflectcircumstancesand
4. Summary of Guide
considerations of materiality, risks, and cost-benefit while
striving to minimize administrative costs; and
4.1 Organizations must establish internal control systems to
manage the life cycle of customer or entity owned property 6.1.1.5 Have built-in processes and practices that identify
held or under the responsibility of suppliers, contractors or and eliminate or substantially ameliorate deficiencies or less
subcontractors. than optimal conditions.
6.1.2 Plansandpoliciesandassociatedinfrastructureshould
4.2 Internal controls must be built into the elements of each
include the capability and processes to be able to generate
phase (acquisition, use, and disposition) of the life cycle rather
useful, reliable, relevant, and timely financial and operational
than a break-then-fix approach or an inspect-in approach.
reports that are suitable for necessary financial and recovery
4.3 Internalcontrolsandeffortsshouldreflectcircumstances
reporting and decision making. These plans and policies and
and considerations of materiality, risks, and cost-benefit.
associated infrastructure should include:
4.4 The goal of good supplier, contractor or subcontract
6.1.2.1 Functional roles of individuals, processes,
management of customer or entity owned property is to
databases, data streams, and functional systems to achieve
optimize the short- and long-term value of the property,
sound end-to-end processes;
including considerations such as associated capability,
6.1.2.2 Automated electronic systems over manual paper-
availability, minimization of administrative requirements and
based systems; and
costs, care and handling costs, and risk management.
6.1.2.3 Appropriate security systems and processes for the
4.5 Internal policies to manage and account properly for
proper collection, protection, and access to classified
supplier, contractor or subcontract held property must be
information, that is, items identified as “confidential,” “secret,”
harmonized among various owners of internal business
or “top secret.”An example of this, if the entity is engaging in
systems,forexample,assetmanagement,procurement,quality,
certain U.S. Government contracts, is subject to U.S. Interna-
program management, and accounting.
tional Trafficking in Arms Requirements (ITAR); and Export
Administration Regulation (EAR), entity operational or propri-
5. Significance and Use
etary data should be secure. This may include for example,
5.1 This guide promotes the importance of effective and
contractual information.
efficient use of resources to satisfy various needs of partici-
6.1.3 Plans and policies and associated infrastructure must
pants: those who furnish property–customers and owners,
be, in all material respects, consistent with applicable laws,
those who receive customer or entity property–suppliers,
regulations, standards, contractual requirements, and internal
contractors, and subcontractors, and the audit community,
policy and associated controls.
while providing reasonable assurance of effective internal
6.1.3.1 Requirements, directions, contracts, other actions,
controls.
and behaviors of the entity and individuals must be in
5.2 The objective of this guide is to promote a life-cycle compliance with these applicable governmental laws,
approach using the elements of good internal controls.
regulations, standards, and so forth.
6.1.3.2 Management of publicly traded corporations are
5.3 For optimization, this guide may be used in conjunction
required to establish a system of internal controls by the
with Practice E2279 and Practice E2452.
Securities Exchange Act of 1934. The U.S. Federal Govern-
6. Life-Cycle Phases and Elements
ment is required to do the same through OMB CircularA-123.
6.1 General—Organizations should have documented plans 6.1.3.3 Managementandemployeesarerequiredtoabideby
and policies covering the life cycle, internal processes, orga- the internal controls. Circumvention of internal controls de-
nizational responsibilities, and controls of subcontractor and feats the purpose of having internal controls and may even be
supplier management. illegal and, in some cases, criminal.
E3015 − 15 (2020)
6.1.3.4 When inconsistencies become apparent through re- (2) Timing of deliveries should be time phased and consis-
views or reporting processes they should be recognized, tent with production schedules.
addressed, and corrected. (3) Proper vesting of title for ownership and the classifica-
6.1.3.5 Contract requirements regarding the life cycle of tion of the type of property are very important in this phase; it
should be documented in the agreement consistent with the
property management at the prime contract and subcontract
level should be specific and understandable amongst and intent of the owner and compliant with regulatory
requirements, accounting standards, and internal instructions,
between the parties to where there is a reasonable understand-
ing of the requirements. The contract requirements should be for example, Federal Acquisition Regulations, Cost Account-
ing Standards, Generally Accepted Accounting Principles,
appropriately funded and include an expectation of adequate
performance or completion. For example, liability for the risk International Financial Reporting Standards, etc.
(4) Administrative cost and responsibilities associated with
of loss of customer property should be clearly expressed and
mutually understood in each of the contract tiers. Ambiguity ownership should be considered in taking ownership of prop-
erty. Ownership of property outside of normal operating
results in misunderstandings, unreasonable cost, and perfor-
mance risk. locations may be very expensive to administer, protect, and
control. Once ownership of property is acquired, responsibili-
6.1.3.6 Agreed upon operational and performance plans and
ties and management costs may increase significantly. Costs
procedures should be used as a vehicle to clarify and confirm
and benefits should justify initial and long-term ownership.
expectations, identify approach, and build appropriate infra-
Administrativecostincludescostoftheacquisitionprocessand
structure to accomplish agreed upon requirements within the
care and handling such as maintenance, insurance cost, inven-
plan among the various organizational ele
...