ASSET /STORES MANAGEMENT PRESENTED BY CPA NELSON M. CHEGE COUNTY SCHOOLS AUDITOR MURANG’A

1. ASSET /STORES MANAGEMENTPRESENTED BY CPA NELSON M. CHEGECOUNTY SCHOOLS AUDITORMURANG’A A PRESENTATION DURING KATTI NAIROBI REGION, PRINCIPALS AND HODS TRAINING HELD AT CONTINENTAL RESORT, MOMBASA ON 18TH APRIL 2018

2. . A great thinker was asked, “what is the meaning of life?” He replied, “LIFE itself has no meaning, its an opportunity to create a meaning..! “Be honest when in trouble and be simple when in wealth. Be polite when in authority and be silent when in anger” “This is called life management”

3. Session Objectives • Introduction • Legal background • Definition • Functions of stores • Responsibility of store keeper • Categories of stores • Systems of stores management • Effective stock control • Public property inventory management • Stores management best practices

4. Introduction • Sound stores management fulfills the objectives among them of preventing wastage and loss, continuing utilization of supplies and obtaining a fair value upon disposal of supplies. • Stores represents cash, and the utmost economy in their use, and accuracy in all transactions relating to them is essential. • To avoid unprofitable lock up of funds, stocks must be kept to the minimum necessary or the efficient conduct of the institute.

5. Introduction continued • The principal shall ensure that all inventory, stores and assets purchased are received, but shall not be used until taken on charge and as a basis of ensuring that all procured items are properly accounted for and put in proper use as intended by the institute. • Stores, inventory and assets that are procured shall not be allowed to suffer deterioration from any preventable cause and overstocking of any particular item shall be avoided. • All procured items assigned for use to an officer shall be requisitioned from and issued by the head of the stores.

6. Legal Background • An accounting officer (principal) of a procuring entity shall manage its inventory, assets and stores for the purpose of preventing wastage and loss, and continuing utilization of supplies. PPAD Act sec 159-162. • Responsibility – The head of the institution is directly and financially responsible for the general supervision and control of all stores and for the due performance of the duties by the staff concerned. Financial Management Instructions Handbook, Unit 7.8.1.

7. Definitions • Stores can defined as below: • Stores are a temporally location for materials needed to meet operational requirements. • Stores are goods acquired or bought and stored for use in the institute.

8. Functions of Stores • To receive goods from suppliers and issue them to the user departments. • Provides security for goods in custody from damage and theft. • To efficiently and economically provide the right materials at the time it is required and in the condition in which it is required.

9. Categories of stores • Stores are classified in the following major categories: • Permanent- These are items which have an expected life of more than two years. When in use they are expected to be maintained and when they become unserviceable they are expected to have salvage value. They should be disposed off in accordance with the provisions of the Act and Regulations. • The store staff shall keep a fixed assets register and the permanent stores ledger (2) of all such items after they are procured and inspected by IAC. • The officer to whom they are issued from the stores shall enter them into an office inventory, use them and take care of them up to the time of disposal.

10. Format of Fixed asset registerName of institution…………………………………………………………………………………………..Section ………………. …………………………………….As at …………………….20………………….

11. . • Consumable stores - These are items whose nature changes in use or are consumed and are therefore issued once. Such items include, food stuff, stationery, drugs, lab chemicals, fuel, building materials, animal feeds etc. • They should be recorded in the consumable stores ledgers (S1). • Expendable stores – these are items which are procured and cannot be classified as permanent or consumable. Such items include, tools, cutlery, bulbs, rulers, staplers , textbooks ,etc. • The management of expendable stores is similar to the permanent stores.

12. Systems of stores management • Decentralized stores • Where supplies/ stock are received at consumption point e.g. maize being received in the kitchen store. • It’s a weak system as it is difficult to follow up receipts and issue. • Centralized store system • Where supplies are received at a central point recorded & then issued in bulk or on requisitions to consumption points. • Ideally it is the best as it makes control of stores easier & more efficient.

13. Effective stock control • For the purpose of effective stock control, the following must be carefully considered; • Stock control – this is the maintenance of stocks at the appropriate levels to satisfy the user requirements at the minimum cost • Lead time –this is the length of time from the notification of non availability of an item to the time the item is purchased and is in the store. • Reserve – extra stocks for critical items to take care of increased demand or lengthened lead time. • Dues in – these are orders which have been placed but the deliveries have not been made. • Dues out – these are items which have been requisitioned for but cannot be issued because there are no stocks in the store or any other reason

14. . • Re-order level- this is the quantity of stock for a particular item when action to replace a new order is taken. • Minimum stock level- this is the quantity of stock below which stocks should not be allowed to fall, before a new delivery is received to replenish the stocks. • Maximum stock level- this is the quantity of stock which is expected to be achieved when a new delivery for replenishment of stocks is received. • Provisioning period – this is the duration considered to be covered by the new order to be placed.(Lpo-delivery)

15. Public property inventory management • The principal is personally responsible for the general supervision and control of public property in the institute. He/she should ensure that the members of the store keeping department perform their duties satisfactorily. • He is financially responsible for any financial loss incurred through his or her failure to meet those responsibilities. • Employees are personally responsible for the proper use and care of public property in their custody or subject to their control. • Any employee using public property whether specifically assigned to them or not are responsible for that property.

16. . • If public property is lost, stolen, misplaced or damaged due to an employee’s neglect or carelessness, they may be required to reimburse to the institute. • Proper Management of the following stores categories is necessary; • Administrative and stationery supplies-computer papers, pen, toner, printer cartridges, CDs should be kept in locked facilities within the office.

17. . • Shelf life store items- characterized by expiry datese.g. drugs, medical supplies and chemicals require specialized storage facilities and the shelf life store register should include item identification code, location, quantity, expiry date, special storage instructions etc. Issuance of such stores should be strictly on FIFO • Durable stores- have no expiry dates e.g. spare parts and equipment consumables. • Foodstuff and other sensitive perishable items should be stored in a separate facility which is clean and do not permit contamination from chemicals and other toxic pollutant.

18. . • Fuel and lubricants- should be stored in a special facility approved specifically for fuel and lubricants and should be subject to the highest standards of safety and protection against environmental damage. • Assets such as stores of capital nature, such as plants and machinery, vehicles, house furniture and equipment should be recorded in appropriate asset inventory register indicating the location and the asset holder.

19. Stores management best practices • Placing of requisitions from user departments to the main stores or for approval • Use of LPO and LSO in placing orders from suppliers and service providers, • Good and services should be ordered from tendered suppliers. • Acceptance of goods delivered by IAC • Signing delivery notes, dating and stamping using the goods received stores stamp .

20. . • All stores received in the institution store must be verified against the order or the requisition to confirm they are of the right quantity and quality. • Use of delivery notes/invoices to make relevant and accurate entries in the ledger and inventory books. • The ledger page on which each entry has been made should be quoted on the copy of the delivery note against each item. • Every stores ledger should be indexed.

21. . • FIFO method of issue should be given preference. • Every issue from the store must be on signature by either the end user or inventory holder. • Any returns or losses must be properly reflected in the ledgers. • Ensure cleanliness, safety and security of stores. • Stores facilities should be organized for easy access to the storage and retrieval of items.

22. Disposal; • Disposal is a critical element of the stores, equipment and other assets management of a procuring entity. • When any equipment is obsolete, its keeping, through maintenance costs, storage, insurance etc may well exceed the returns that can be derived from that piece of equipment and the investment of additional monies.

23. . • Disposal is necessary as it guarantees that public monies are not applied to useless or obsolete equipment and assets and that when stores are disposed of, they are sold at the best achievable value in the market.

24. . • Disposal maybe considered as the third life of any acquired item. • First, it is procured and accepted • It is utilized by the procuring entity in the discharge of its duties • Disposed. Since disposal involves values that may be received and can contribute to the cost of renewal, it involves deciding when to dispose of a certain item and may involve health and safety standard issues. It has to be regulated and managed as provided for by the Act and Regulations

25. Items for disposal • Unserviceable • Obsolete • Surplus Authority to Dispose • The principal shall be primarily responsible for ensuring the institute fulfils its obligations under the Act and Regulations and PPRA manual • The user department shall have the responsibility of identification of items to be disposed off while the disposal committee shall recommend the disposal including the disposal method

26. . • The principal in consultation with the BOG has the final authority of accepting or rejecting the recommendations of the disposal committee. • Where items become unserviceable for reasons other than normal wear and tear such as through accidents or expiry the set procedure for handling losses shall be followed before the disposal process. • Obsolescence should be avoided by institutions by disposal of items before they become obsolete. • The cause of having excess surplus items in the stores shall also require to be investigated and justified before disposal process.

27. Disposal plan • The head of end user department and the head of stores shall identify the items which are due for disposal. • The list of all items identified shall be submitted to the principal. These submissions shall form the basis of the annual disposal plan.

28. . • Contents of the Disposal plan; • Detailed breakdown of the stores, assets and equipments to be disposed of • Schedule of the disposal • Indication of the justification for disposal • Estimate of the value of each store, asset or equipment • Reference to the asset register or records of the stores • Indication of the envisaged method of disposal • Indication of whether the disposal will be managed by the institute or any special agency • Indication of the resource available for managing the disposal.

29. . • The complete disposal cycle • Establish annual assets and stocks • Establish needs for disposal • Appointment of disposal committee • Plan each individual disposal • Conduct Auction • Advertise sale if open tender • Receive and open bids • Evaluate bids • Award contracts • Notify contract award • Receive payments • Administer contract • Write off the records • Report and deposit all monies from disposal

30. Methods of disposal: • Transfer To Another Entity • Sale By Public Tender • Sale By Public Auction • Destruction, Dumping Or Burying • Trade-in

31. ....end…. ‘One of the great responsibilities that I have is to manage my assets wisely, so that they create value’ Alice walton O720-813-164