|Preface | Contents | Chapter 1 | Chapter 2 | Chapter 3 | Chapter 4 | Chapter 5 | Chapter 6 | Chapter 7 | Chapter 8 | Chapter 9 | Appendix A | Appendix B | Appendix C | Appendix D|
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|Carol Hagstrom||(860) firstname.lastname@example.org|
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The Purpose for Maintaining the Property Control System - The main purpose of the property control system is to help ensure that the State's property, plant and equipment are acquired, managed and disposed of in the best interest of the State and its citizens. This mission is promoted through the development and maintenance of adequate accounting and property records both at the State and agency level. Such records are an essential tool for management in its effort to make sound decisions based on timely and accurate information.
Property represents the largest category of investment made by the State of Connecticut. The state's inventory includes assets ranging from land, buildings, artwork, furnishings and equipment to automobiles, boats, railroads, airplanes and livestock. Despite its importance, however, property control is often a low priority for State agencies.
Why has the problem worsened in recent years? First, this is a time of rapid technological and organizational change. The State's control systems have not kept up the pace. For example, many agencies face severe staff limitations in this area. In an era of tight budgets and limited personnel, other pressing needs have made property control a lower priority. However, limited staff and tight budgets are two very good reasons why property control policies need to be updated and improved. When implemented properly, improved property control procedures can save the State a substantial amount of money in a number of ways, including averting equipment loss and theft, by helping agencies avoid unnecessary purchases, and by helping to lower the State's insurance premiums.
Managing Inventory Levels - The best way to view inventory is to think of it as cash, an asset of the State. The State manages cash by ensuring it is adequately safeguarded and maintained in accounts that maximize earning power. We do not maintain cash as dormant so inventory should not be considered dormant either. The following management ideas should be considered:
Excess inventory levels should be avoided because (like cash) State assets should be productive assets. Inventory items not being used during a reasonable period of time is comparable to cash being maintained in non-interest bearing accounts.
State resources are not effectively utilized by carrying excessive inventory levels.
The following inventory management techniques should be considered:
Identify inventory items on hand, which exceed the level of usage that is usual for your agency. For example, if there are 25 of an item on hand and your department is using only 2-3 every six months, an excess inventory situation exists and assets are not being effectively utilized.
For items determined to be in excess of current needs, management should review the ordering decision process and make appropriate corrections; reduce the level of future orders and establish a formal plan to reduce existing inventory levels.
Identify obsolete inventory items on hand, which have not been used during the past six months. Determine whether there is a future use for the items. If no future use is identified, determine whether the items can be utilized in another department.
Review the status of items stored at off-site premises (exclusive of computerized backup). Ensure there is a formal plan to utilize the items at the agency within a reasonable period of time. Items without immediate use should be declared surplus. Storage costs should be eliminated for items stored off-site that do not have an identified use to the agency.
Safeguarding inventory items is important to prevent theft and loss of State assets that must be replaced by expending additional State funds. Review the adequacy of existing physical safeguards designed to protect State assets you are responsible for. Appropriate safeguards should be implemented to prevent potential losses.
Equipment Utilization - All agencies contain furniture and equipment, including personal computers, desks, chairs, tables, bookcases, cabinets, etc. Excess physical assets can arise due to various reasons, including State reorganizations and restructuring of employee responsibilities. It is important to ensure that these assets are effectively utilized.
A person should be assigned responsibility for each asset as the custodian. This assignment facilitates physical inventory procedures and is useful in making inquiries regarding the assets condition, status and location.
When the property control records have been established for all existing property, the system must be maintained in an orderly manner and on a current basis. Without proper maintenance the system will deteriorate quickly and the inventory process will have to be recreated. Property record/fixed asset systems are not stagnant. Procedures must be in place to manage the activity that occurs. Each agency must develop a procedure manual for the maintenance of their fixed asset system.
A screening process is necessary to avoid unneeded or duplicative purchases through systematic reviews of underutilized fixed assets already controlled by the agency.
Adequate maintenance procedures are necessary for controlling fixed assets. These procedures should be sufficient to keep assets in good working condition, without being overly costly or otherwise uncontrolled.
The forms to be used to effect the various changes in the upkeep of the data for the property control system will vary depending upon the type of control system established by the agency.
However, posting to the property control records should be done directly from the source document or an agency developed form.
Taking the Physical Inventory - A complete physical inventory of all property must be taken at the end of the fiscal year (June) to insure that property control records accurately reflect the actual inventory on hand within the current fiscal year. The key to ensuring an accurate physical inventory is the quality of the planning effort prior to conducting the physical counts.
Core-CT asset agencies must use the Asset Management Module for the physical inventory of assets.
It is permissible to perform physical inventories prior to the end of the fiscal year to redistribute the major time commitment involved. However, an adequate control system must exist for updating the inventory balance from the interim inventory date to year-end. The accuracy of the interim transactions may be tested during an audit.
In addition to the verification of the property control records, a physical inventory will identify if unrecorded or improperly recorded transactions have occurred, identify any excess, defective or obsolete assets on hand and identify losses not previously revealed. Conducting a physical inventory will enable you to inspect the physical condition of each item with respect to the need for repairs, maintenance, or replacement.
Guidelines for Conducting a Physical Inventory
The Comptroller recommends that the personal property physical inventories be conducted annually as follows:
That the individual responsible for the property management function of the agency should establish a timetable and coordinate the effort necessary to conduct the inventory. All locations where assets are stored should be identified. A building diagram is often helpful in ensuring that all areas are accounted for.
That all supervisory personnel should meet a few weeks prior to the physical inventory for a planning meeting.
The areas discussed at the planning meetings should include the specific counting, procedures, each person's responsibilities, cut-off procedures, the timing of the physical inventory, etc. As a result of the meeting, written procedures should be prepared for use by counters and supervisory personnel.
That a second planning meeting should take place after the aforementioned meeting. The second meeting should involve supervisory personnel and the individuals performing the counts. At the second meeting, the counters should be instructed concerning the counting procedures and all procedures agreed upon at the initial meeting. Written instructions should be distributed to individuals performing the counting. The units of measurement should be determined prior to counting. For example: Quantities may be in units, boxes, pounds, etc.
That the individual performing the property management function will be permitted access to each room controlled by the agency being inventoried.
Items to be counted should be physically arranged to facilitate simplified counting. All "like products" should be consolidated into one area.
Inventory should be counted in a systematic consistent manner (e.g., left to right, top to bottom).
Inventory counts should be documented on either pre-numbered inventory tickets or pre-numbered inventory sheets. A log should be used to account for all tickets/sheets issued to the individual counters. The log should also note the tickets/sheets used and unused.
All unused tickets/sheets should be returned.
Supervisory personnel should observe the counting and inspect the goods.
Counters and checkers should initial each ticket/sheet.
Errors should be corrected on tickets/sheets by crossing out the incorrect quantity and writing in the correct quantity. Individuals making changes should note their initials next to the changes.
Items that will not have any activity prior to the physical inventory may be pre-counted. Pre-counting items helps alleviate time pressures during the physical inventory.
That the equipment located in the room will be checked for tag number and the inventory listing will be scanned to locate the item.
If the equipment is listed, the following data should be rechecked; responsible person, equipment condition, and equipment availability. Tagged items in the room which are reported on the agency inventory report as located elsewhere will require a transfer document to be completed, to record the change of location.
If untagged items are identified as meeting the definition of either a capitalized or controlled asset, an inventory record must be completed at the time. The item should be subsequently researched and entered into the system.
Once all the agency locations have been checked for tagged and untagged items, the additions and deletions to departmental inventory records must be transmitted to the individual responsible for the agency property management on a timely basis. Property management personnel will process the required changes.
Note - "Lost/Missing/Unaccountable" Equipment - Equipment that is deemed "lost, missing or unaccountable" when taking a physical inventory must be accounted for. Instructions for reporting a loss are prescribed in this manual. The equipment is then considered to be "retired" until such time as it may be recovered. The item can then be added back to the inventory as "reinstated".
Physical Inventory Staffing - Individuals responsible for the property management function at the central and sub-agency organizational level within the agency are required to assist in conducting the physical inventory of assets.
Inventory count activities should be conducted by count teams made up of a team supervisor and agency personnel. The agency must determine the method of staffing the inventory count team that best utilizes its available resources.
Inventory Movement - There should be no movement of assets while the physical inventory is being conducted in order to ensure that items are not counted twice or inadvertently not counted. Transfers should also be prohibited during counting.
If movement of assets is unavoidable (such as certain dining operations), control sheets should be established for each area where previously counted assets are being transferred to work areas. To avoid double counting, assets should not be transferred back from working areas to storage areas.
Transfers - Any movement of an asset by virtue of change in location, either by department, building, and floor. A transfer may be a full or complete transfer or a partial transfer of an item. This is particularly useful for those pieces of equipment, which have multiple parts such as computers, where only certain pieces are changed frequently. Each request for transfer must be submitted to the Agency's Property Control Unit on a suitable agency form authorizing the transfer of the property.
Such forms should provide for a complete description of the property transferred, the name of the transferor and the transferee. The property control unit copy provides the basis for moving a subsidiary account from one department and putting it in the records of another department, thus effecting a change in the record of responsibility. Property should not be transferred without formal written authorization. Unless transfers are formally authorized, property cannot be controlled.
The Comptroller's Office has developed an “Equipment Transfer Within Agency” form which is available for agency use. The form is in Appendix B and is also available on the Comptroller's Website.
Reconciliation - All internally prepared property control accounting records, and other related property management data shall be reconciled to the Core-CT Asset Management Module insure the accounting data maintained is valid.
The format used for the reconciliation should establish an "audit trail" so that the reconciliation can be traced to the source documents.
It is critical to account for all physical inventory tickets/sheets issued to counters because the used tickets/sheets will become the basis for summarizing and recording the physical inventory in the accounting records.
All inventory tickets/sheets must be pre-numbered for accurate accountability.
If sheets are used, supervisory personnel should ensure that all used and unused sheets are received back from the counters and posted to the control log.
If tickets are used, the top copy of the ticket should be removed from the goods, placed in numerical sequence and returned to the supervisor for posting to the control log.
The principle of the reconciliation process is to reconcile the property control accounting data on a detail, line-by-line individual transaction basis. This method has the advantages of:
1. Reducing the reconciliation to the most basic level of comparison;
2. Being the easiest method of detecting data entry differences; and
3. Being a comprehensive approach to ensure that each transaction is properly recorded.
Corrections do not require a form, but corrections that involve "costs" should be noted on a control sheet for reconciliation purposes.
Property Internal Control Checklist - The checklist is designed to help agencies evaluate their internal control systems. Each Checklist begins with a flowchart that will help guide you through questions. Refer to Appendix C, Property Internal Control Checklist.
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