Operating Policies and Procedures Manual

Effective Date: 07/01/92
Policy Number: 05-31
Section: Finance and Administration
Subject: Inventory/Property Management

POLICY

The property and equipment of the university comprises a substantial portion of the university's total assets. Therefore, it is necessary to properly record and account for the acquisition, transfer, addition or deletion of all inventory items.

  1. Property that can be inventoried should be included in the inventory system with focus on items costing $2,500 or more.
  2. Department heads are responsible for taking adequate measures to safeguard items with a purchase price less than $2,500 that would otherwise be capitalized. Therefore, departments should maintain in-house inventory listings of those items.
REGULATIONS AND PROCEDURES
  1. Inventory Management Standards

    The following inventory management standards govern the acquisition, utilization, and disposition of inventory items.

    1. All items with a unit cost of $2,500 or more and having an expected useful life of two years or more and which are not installed are capitalized. Installed items include central heat and air units, water heaters, water coolers, appliances and furniture for manufactured housing. Window air conditioners are inventoried.
    2. Inventory records should be accurate and reflect the following:
      1. Equipment number
      2. Equipment description
      3. Manufacturer's serial number, when applicable
      4. Acquisition date
      5. Cost of inventory item
      6. Location of property, including building and department
      7. Voucher number and date
      8. Class code
      9. Account number and expense code
      10. Vendor
      11. Ultimate disposition data
    3. Each year, a list of all equipment is sent to each department for verification by the department's inventory liaison. One copy is signed by the appropriate administrator and returned to Finance and Administration.
    4. A physical inventory of property is taken as necessary to verify existence, current utilization, and continued need for property.
    5. Equipment should be placed on inventory and numbered within two weeks after payment of the invoice.
    6. A control system is in effect to ensure adequate safeguards against loss, damage or theft. Any loss, damage, or theft is investigated and fully documented by appropriate officials.
    7. Adequate maintenance procedures are implemented to keep property in good condition.
    8. Proper sales procedures are followed for unneeded property.
    9. All property is used solely for authorized purposes.
  2. Classification of Fixed Assets

    3. Fixed assets are often referred to by other general terms such as plant assets, long-term assets or property. The term fixed assets as used in this policy includes all long-term property, both real and personal, that is owned by the institution or is in its custody. classifications of fixed assets include:

    1. Real Property
      1. Land
      2. Buildings
      3. Improvements
    2. Personal Property
      1. Equipment
      2. Library books
      3. Livestock
      4. Museum and art collections
    3. Construction in Progress

  3. Personal Property

    4. Personal property is classified according to the following guidelines.

    1. Equipment to be capitalized includes all personal property with an acquisition cost of $2,500 or more and an expected useful life of two years or more.
    2. Library books, bound periodicals and other literary items are included as inventory items.
    3. Museum and art collections, including scientific collections, slide collections and permanent displays are inventoried.
    4. Livestock used for instruction in agriculture and other purposes are capitalized. Laboratory animals are not inventoried.

  4. Valuation of Fixed Assets

    5. Personal property is valued according to the acquisition method outlined below.

    1. Purchased property
      1. Record inventories at cost, which includes net invoice price, freight, insurance, installation charges, and other applicable charges. Trade-in allowances are not deducted to determine the asset value. If a group of assets is purchased on one invoice reflecting one invoice price, each item of inventory must be assigned a value. When additional items are purchased and added to a present inventory item, the new item should be added to the value of the original item and not as a separate inventory item.
      2. Valuation of livestock is fair market value.
    2. Gifts and donations
      1. Record inventories at fair estimate of value at date of acquisition. If items are of significant value, a professional appraisal is advisable.
    3. Government or other grants, contracts or agreements
      1. Record inventories at the cost reflected in the grant, contract or agreement. Equipment purchased under a grant or contract specifying a minimum value of less than $2,500 and/or a useful life of less than the specified minimum period, and equipment whose title remains within external agency but in the custody university, should be included in inventory at $0 value.)
    4. Fabricated
      1. Record the total of all identifiable direct costs, including blueprints, materials and supplies consumed in fabrication, labor and installation, as well as indirect costs.
  5. Inventory Records of Fixed Assets

    6. (Acquisitions, Transfers and Dispositions)

    General

    1. Each department and Finance and Administration have responsibility to ensure that all fixed assets are entered promptly and accurately on inventory records.
    2. Maximum usefulness of inventory records depends on consistent application of the following principles:
      1. Inventory all items with a unit cost of $2,500 or more and having an expected useful life of two years or more.
      2. Consistently describe like items.
      3. Reconcile detailed records to the university's financial records (general ledger).
      4. Periodically verify the existence, need and usability of all items in the inventory records.
  6. Acquisitions - Purchases

    7. The most typical method of acquisition is by purchase. Listed below are procedures to be followed for purchases.

    1. Invoice is processed through Finance and Administration after an item is received.
    2. An equipment inventory record is prepared by the inventory accountant using the invoices as documentation. The equipment inventory consists of the following:
      1. Equipment Number. This number is pre-printed on each form and a corresponding numbered tag is placed on the item.
      2. Equipment Description. Describe each item using consistent language. Include manufacturer, model number and serial number(s).
      3. Voucher Year. The fiscal year that the voucher is processed.
      4. Class code. A six-digit number is used to classify each item. New class codes are created for items that do not fit into a previous code.
      5. Department Area. Designates the department in which the equipment will be used and readily identifies the department accountable for the item.
      6. Building. The code designates the building in which the equipment is located.
      7. Cost. Acquisition cost includes the net invoice price plus taxes, freight, insurance and any installation expenses. The cost or value is determined by guidelines in the section, "Valuation of Fixed Assets."
      8. Voucher Number. The voucher number on which the payment for the item is processed.
      9. Order Number. The purchase order number.
      10. Account Number. The coding that reflects which area will be charged for the item.
      11. Expense Code. Shows expenditure classification.
      12. Vendor. Name of the company from which the item was purchased.
      13. Voucher Date. List the month, day and year of the voucher for payment.
    3. The item is permanently tagged with an equipment number by the inventory accountant.
    4. A computer listing of purchases is sent annually.
      1. The list should be verified within 2 weeks.
      2. Errors are brought to the attention of the inventory accountant.
      3. Additions become part of the inventory file and each department is held accountable for all items on its inventory. Property that meets the definition of capitalization or is owned by or in the custody of the university is carried on the official university inventory records.
  7. Acquisition - Gifts

    8. Listed below are the procedures for acquisition of gifts.

    1. When a gift is accepted by the university, Finance and Administration should be notified by means of a memo containing inventory information which includes property department area and building where used, estimated value of the item and method of valuation, donor, and date of receipt.
    2. The department determines whether property bears any restrictions on use or disposition. If there are such restrictions, the inventory record should reflect those restrictions.

  8. Acquisitions - Grants, Contracts and Agreements

    9. Grants, contracts and agreements are recorded on inventory records using information contained in the grant, contract or agreement. Regulations governing the documents require adequate records of original costs and detailed inventory records of equipment purchased with such funds.

  9. Acquisition - Library

    10. Records of purchases of books and other holdings of the library are kept by the librarian. This data should suffice as detailed inventory records.

  10. Acquisition - Livestock

    11. Records of livestock are kept by the appropriate department head. A monthly livestock report shows transfers, purchases, deaths, births and sales. The report is sent each month to Finance and Administration.

  11. Transfers/Excess Equipment

    12. Transfers result from physical moves of equipment or transfer of accountability. Departments may transfer equipment to other departments if an item is determined to be in excess of the needs of a department. All other excess equipment should be transferred to Central Stores.

    Transfers should follow the procedures listed below:

    1. An "excess equipment inventory memo" is completed by the department transferring the equipment.
    2. The memo is given to Facilities Management personnel when equipment is picked up, along with a signed requisition with proper account number.
    3. After Central Stores receives the equipment, the transfer/excess memo is signed and dated, and forwarded to Finance and Administration.
    4. As purchase requisitions are processed, items that are available in Central Stores are sent to the requesting department.
    5. A property transfer form is completed by Central Stores and sent along with the requisition to the inventory accountant, completing the change in accountability.
    6. Any item appearing on the inventory of a department remains the responsibility of that department until necessary paperwork for transferring the item has been processed through Finance and Administration.

  12. Dispositions
    1. Ownership of property rests with the university rather than the academic or administrative departments.
    2. An "equipment borrowed form" must be completed if equipment is removed from a department for business purposes.
    3. If equipment, including obsolete and worn-out items, is no longer in inventory, one of the following reasons must be established: lost; damaged/destroyed; stolen; traded-in; sold through marketing and redistribution or government-owned.
    4. The following procedures for disposition apply in the categories listed below:
      1. Lost and/or
      2. Damaged/destroyed
        1. Notify the vice chancellor for finance and administration immediately.
        2. Submit a memo with the signatures of the appropriate administrators to Finance and Administration explaining the circumstances regarding the lost or damaged/destroyed item(s).
        3. Conduct a review is conducted using standard audit programs and a investigation report prepared by the appropriate officials.
        4. Drop the item is dropped from inventory records.
      3. Stolen
        1. Report stolen equipment immediately to University Police along with a complaint report.
        2. Submit a memo and copy of the police report to Finance and Administration.
        3. After 90 days have elapsed, remove the item from inventory by processing a Credit for State Property form.
        4. If the item is later found, notify Finance and Administration promptly and revise inventory records.
      4. Trade-ins
        1. Send a memo stating a trade-in was made and a copy of the invoice to the inventory accountant.
        2. The inventory record is adjusted by the inventory accountant.
      5. Obsolete, Worn-out
        1. Complete an "excess equipment inventory memo" and forward to Central Stores along with the item.
        2. Central Stores determines the value of the item.
        3. Items disposed of as junk are deleted from the inventory via documentation from Procurement Services.
        4. Usable items are transferred to Central Stores inventory.
        5. Items no longer usable at the university are taken to Marketing and Redistribution for sale.
        6. Upon final disposition of obsolete or worn-out property by sale, the items are deleted from inventory via a transfer document from Marketing and Redistribution.
      6. Government-owned
        1. The disposition of property purchased under federal or state grants, contracts, and agreements should be handled in accordance with the regulations and specific instructions from the contracting agency.
  13. Physical Inventory of Equipment

    14. A physical inventory is conducted to establish the following:

    1. Equipment items as listed actually exist.
    2. Listed items are usable.
    3. Only needed equipment is acquired and kept.
    4. Equipment on hand is properly recorded on inventory records.
    5. Equipment is properly used and maintained.
    6. Inventory records are adequate for external auditors, contract requirements, and other guidelines.

  14. Annual Physical Inventory Procedures
    1. Departments are furnished annually with an inventory report that must be verified by department personnel with assistance from the inventory accountant when necessary.
    2. Department personnel conduct a physical inventory comparing equipment on hand with the inventory report.
    3. Discrepancies are listed in writing on the current year report.
    4. The completed report is signed by the appropriate administrator and sent to Finance and Administration.
    5. Periodically, inventory verification may also be performed by the inventory accountant or the internal auditor.

This page is maintained by Cassey Tune
Last updated on 06/27/2005