State of Connecticut Property Control Manual March 2016 - Chapter 6 MATERIALS AND GOODS IN PROCESS AND STORES AND SUPPLIES INVENTORY

state of connecticut

Chapter 6


Questions regarding this chapter should be directed to the following:
Asset and Inventory Mailbox
Elizabeth Daly, CPPA 860-702-3436 
Fiscal Policy Statewide Services 860-702-3440  

Inventory Management System
Items stored must meet the capital threshold collectively. The storage area must be secured. An agency must perform a cost evaluation to determine if it is beneficial to retain inventory and determine if the benefit of storing the inventory is worth the cost. Staff time involved, personnel costs, overhead costs of the storage area, are among the costs that should be considered before establishing an inventory.

An effective inventory management system requires:

Managing Inventory Levels
Inventory is an asset that must be more closely guarded because inventory, if not managed properly, can lead to excessive spending. 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. Cash is not maintained as dormant so inventory should not be considered dormant either. Keep in mind, excess inventory levels should be avoided. Inventory items not being used during a reasonable period of time wastes State funds that could be used elsewhere.

Safeguarding Inventory
Safeguarding the inventory items is important to prevent theft and loss of State property that must be replaced by expending additional State funds. Review the adequacy of existing physical safeguards designed to protect State property that is under your responsibility. Appropriate safeguards should be implemented to prevent potential losses.

Inventory Property Control Records
Includes Materials and Goods in Process and Stores and Supplies Inventory Records. This information is also contained in Chapter 5, Maintaining the Property Control System.

The Inventory property control record for ALL inventories must contain the following minimum data:

1. Description of items
2. Storage location
3. Unit of measure
4. Cost
5. Minimum and maximum levels
6. Reorder quantity
7. Date and quantity of additions to inventory
8. Date and number of inventory requisition
9. Quantity deleted from inventory
10. Inventory balance
1. Materials & Goods-In-Process

Items under this section represent any resalable articles which are manufactured, fabricated or assembled in a school, prison or in any shop that is under the jurisdiction of any State agency.
The property record for INVENTORY MATERIALS & GOODS-IN-PROCESS item should contain the following data.
1. Item Description
2. Cost of Each Item
3. Raw Materials on hand
4. Materials partly processed - Goods-in-process that require additional work.
5. Description of items
6. Storage location
7. Unit of measure
8. Cost
9. Minimum and maximum levels
10. Reorder quantity
11. Date and quantity of additions to inventory
12. Date and number of inventory requisition
13. Quantity deleted from inventory
14. Inventory balance
2. Stores & Supplies

A separate perpetual (continuous) inventory should be maintained of all stores and supplies (including repair parts for machinery, plumbing, general housekeeping, etc.) if the estimated value of the entire inventory meets the capitalization threshold. Perpetual inventories that do not meet the capitalization threshold would not need to be maintained. Due to the rapid rate of turnover, strong internal controls are especially important. A perpetual inventory system can provide the strongest possible internal control over the inventory of merchandise. The information required for a perpetual inventory system can be processed electronically or manually. In a manual system a subsidiary record card is used for each type of merchandise on hand. If the agency has in stock 100 different kinds of products then 100 inventory record cards will make up the subsidiary inventory record. It should be reconciled annually for verification of amounts.
The property record for STORES & SUPPLIES INVENTORY should contain the following data:
1. Item Description
2. Storage location
3. Unit of measure
4. Unit Cost
5. Minimum and maximum levels the number of items that should be on hand before ordering and the greatest number of items on hand that can be effectively maintained in inventory without incurring unnecessary storage or handling charges and with a minimal risk of the inventory becoming obsolete.
6. Reorder quantity
7. Balance available to fill an order
8. Date, quantity, and dollar value of items received into inventory
9. Date and number of inventory requisition
10. Quantity deleted from inventory
11. Inventory balance on hand both quantity and dollar value

The inventory system must be maintained on a first-in, first-out (FIFO) basis. Listing the minimum and maximum levels on each inventory card strengths controls over the amount invested in the inventory. By maintaining quantities within these limits, overstocking and out-of-stock situations can be avoided. An adjusting entry can be made to reflect shortages, overages, or out-of-condition stock as disclosed by an annual or periodic physical inventory.

Physical Inventory
A complete physical inventory of all property must be taken by 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. Agencies using the Core-CT Inventory Module must use the Inventory Module for physical inventory. Agencies with Inventory that do not participate in the Core-CT Inventory Module must also conduct an annual physical inventory.

Each storage area, warehouse or facility must have a physical inventory completed by June 30th of each fiscal year. Agencies may choose one of two methods for their physical inventory, wall to wall or cycle counts.

Wall to wall inventories are inventories that count all items within a given storage area, warehouse or facility at the same time and are conducted once per year.

Cycle counts are inventories of a small subset of items, in a specific location, counted on a specified day, and conducted on a continuous basis throughout the fiscal year. If an agency chooses the cyclical inventory method, the physical inventory must be completed by the end of each fiscal year.

The inventory must be reconciled to the inventory system. If items are found to be stolen, vandalized, obsolete, expired or spoiled, damaged by criminal or malicious activities, lost or misplaced, missing (cause unknown) or damaged caused by wind, fire or lightning, impaired, the Report of Adjustment to State Owned Real and Personal Property (CO-853) must be completed to document the removal of the inventory item. The item must be removed from the inventory system. If an agency finds that items are obsolete, the item must be surplused and removed from the inventory record. Follow the instructions in Chapter 9 of this Manual, Disposition of Surplus Property to dispose the items.

See Chapter 5 for the policy on conducting a physical inventory.

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