Equipment Inventory Management Training

1. Equipment Inventory Management Training Provided by Financial Services – General Accounting and Management Advisory Services January 2011

2. Why are We Here?? • To discuss the meaning of life? • To debate how we were created? • To figure out what came first – the chicken or the egg?

3. Why are We Here?? • To learn about equipment inventory management!

4. Why is this Important to Me? • It is part of your job. • You may not have been told how to do it – but are expected to do it properly. • Consider business process changes. • We are audited by: • Internal Auditors • Legislative Auditors • Federal Auditors • Other External Auditors …who all expect us to properly account for our equipment and will report on us if we do not.

5. Why is this Important to Me? • Lack of control over equipment inventory negatively impacts our F&A rate. • determines how much funding we get to cover our overhead type research costs. • majority of those funds are returned to the schools and departments for the furtherance of their research efforts. • allows for additional hiring, purchases, and flexibility in spending during these tight economic times. • We are required by OMB A-110 to maintain accurate equipment records, safeguard assets, and conduct physical inventories. • In short - It is important!

6. Definitions - (see attachment 1) • Real Property • Personal Property • Capital Equipment • Non-Capital Equipment • Sensitive Equipment • Physical Inventory

7. USM Internal Audit Results Equipment Inventory Audit January 1, 2008 – December 31, 2008

8. USM Internal Audit Results • Audit Scope: • Covered calendar year 2008 • Tested equipment inventory items in several departments in two Schools • Audit Objectives: • To determine if the business process over equipment inventory is free of significant weaknesses, is efficient and effective, and promotes reliable, accurate, and timely financial reporting. • To determine if internal controls over equipment inventory are adequate and in compliance with laws, regulations, and relevant policies. • To determine if inventory is properly disposed of and recorded in the financial statements.

9. USM Internal Audit Results • Overall Opinion: “UMB has not established and executed adequate controls over reporting and maintaining inventory equipment.” USM UMB

10. USM Internal Audit Results • Recommendations: • Ensure proper separation of duties. • Ensure inventory movements (i.e., additions, disposals, and donations) are documented and monitored. • Provide training on inventory management and disposal. • Conduct a proper, documented physical inventory within the departments/schools and independently verify the counts. • Maintain detailed listings of sensitive equipment, track and safeguard all items. • Develop one standard disposal form for the disposal, transfer or sale of equipment.

11. UMB Policies and Forms

12. Policies – Capital Equipment • UMB will maintain a perpetual capital asset inventory. • UMB will perform a biennial capital equipment physical inventory. Capital Equipment Policy http://www.fincsvc.umaryland.edu/images/capitalassetmanagement.pdf

13. Important Forms • Copies of these forms are in your handout: • Excess Property Declaration/Capital Asset Deletion Form (attachment 2) • Tag Certification Form (attachment 3) (Note: This is a system generated form and is not available on the Financial Services forms website) • Capital Equipment Transfer Form (attachment 4) • Non-Capital and Sensitive Equipment Inventory Sheet (attachment 5) • Non-Capital and Sensitive Equipment Certification Letter (attachment 6) • Financial Services Forms http://www.fincsvc.umaryland.edu/forms.cfm

14. Policies – Non-Capital/Sensitive Equipment • UMB will maintain a perpetual inventory of all non-capital and sensitive equipment. This responsibility is delegated to each School, Department or Division. • Each School, Department or Division must maintain physical control of all non-capital and sensitive equipment assigned to that unit and must complete a physical inventory once every two years. • All non-capital and sensitive equipment must be tagged. Non-Capital/Sensitive Equipment Policy http://www.fincsvc.umaryland.edu/images/Non-CapitalEquipment.pdf

15. QUESTIONS???

16. Procedures Capital Equipment

17. Procedures – Capital Equipment • Additions to Inventory - On Campus Donations, revolving loan and bond fund purchases – FSGA adds to dept records Note: FSGA will now be tagging items on campus Capital Equip accounts = 41xx, 42xx, 43xx

18. Procedures – Capital Equipment • Additions to Inventory – On Campus (cont’d)

19. Procedures – Capital Equipment • Additions to Inventory – Off Campus Capital equip accounts = 41xx, 42xx, 43xx Donations, revolving loan and bond fund purchases – FSGA adds to dept records Off campus depts will continue to tag items

20. Procedures – Capital Equipment • Additions to Inventory – Off Campus (cont’d) Fax # 410-706-2939 or email to ga-inventory@af.umaryland.edu

21. Procedures – Capital Equipment • Changes to Inventory – includes: • Transfers between departments • Requires signatures of both sending and receiving administrators • Movement within a department • Building, floor or room changes • Form – Capital Equipment Transfer Form (attachment 4)

22. Procedures – Capital Equipment • Deletions from Inventory • Each School, Department or Division must provide FSGA with notification of all deletions. • Form – Excess Property Declaration/Capital Asset Deletion Form (attachment 2) • Describes the acceptable reasons for deletions and supporting documentation required for each.

23. Procedures – Capital Equipment • Physical Inventory • Each School, Department or Division must complete a physical count of all their capital equipment once every 2 years. FSGA will coordinate the schedule. • FSGA will provide packet of information to assist in completing the physical count. Packet includes: • Inventory Receipt Form • Inventory Certification of Completion • Inventory Report in Room Sequence Order • Inventory Report in Tag Sequence Order • Excess Property Declaration/Capital Asset Deletion Form • Capital Equipment Transfer Form

24. Procedures – Capital Equipment • Physical Inventory (continued) • Upon receipt of the packet, Departments must sign the Inventory Receipt Form and return to FSGA. • Departments can utilize either Inventory Report to perform the physical count. This will involve: • Checking off items that are on the report and are found during the count • Noting items that are found during the count but are not on the report. They will need to be added. • Noting items that are on the report but are not found during the count. Departments must further investigate and resolve.

25. Procedures – Capital Equipment • Physical Inventory (continued) • Departments must provide updated inventory report to FSGA within 60 days. The Inventory Certification of Completion Form signed by Department Head/Administrator must accompany the updated inventory report. • FSGA will review information provided and will update the Capital Asset Management System. • FSGA will independently verify the existence of select items within 45 days after receiving updated inventory report. • FSGA will notify departments of location selected, look for items, provide results and determine if further investigation is necessary.

26. Procedures – Capital Equipment • Physical Inventory - Delinquencies • When an inventory report is not returned within 60 days, a notice of delinquency will be sent to the Department Administrator. • When the inventory report is not received 2 weeks after the initial notice, a follow-up notice will be sent to the Administrator with a copy to the Department Chair and Associate Director of Financial Services. • When the inventory report is not received 2 weeks after the second notice, a follow-up notice will be sent to the applicable Dean with a copy to the Dept Chair.

27. QUESTIONS???

28. Procedures Non-Capital/Sensitive Equipment

29. Procedures – Non-Capital/ Sensitive Equipment • Additions to Inventory • Each School, Department and Division must maintain a listing of all non-capital and sensitive equipment. • Listing must at least include: • Description of asset • Original cost • Date acquired • Physical location • Asset tag number • Standard form under Forms on Financial Services website. http://www.fincsvc.umaryland.edu/forms.cfm

30. Attachment 5

31. Procedures – Non-Capital/ Sensitive Equipment • Additions to Inventory (continued) • Custodial departments must affix an asset tag to the equipment upon receipt. Asset tags are issued to departments in blocks by FSGA. • Ensure that all methods of equipment purchases are accounted for: • PUR01 • PUR02 • Pcard • Academic Revenue Bonds • General Obligations Bonds • Revolving Loans • Donations

32. Procedures – Non-Capital/ Sensitive Equipment • Changes to Inventory • Includes movement within a department or transfers between departments. • Schools, departments and divisions must update their listing of non-capital and sensitive equipment as changes occur.

33. Procedures – Non-Capital/ Sensitive Equipment • Deletions from Inventory • Disposal of non-capital and sensitive equipment must be done in accordance with UMB Policy on Disposal of Surplus Property. UMB Policy VIII-1.20(A) UMB Policy on Disposal of Surplus Personal Property http://cf.umaryland.edu/hrpolicies/section8/t80120Asa.html

34. Procedures – Non-Capital/ Sensitive Equipment • Physical Inventory • Must be completed once every two years. • Start with your list of Non-Capital and Sensitive Equipment Inventory and follow same inventorying process as for Capital Equipment: • Check off items on the list and found during the count. • Note items found during the count but not on the list. Add them to your list. • Note items on the list but not found during the count. Investigate and resolve.

35. Procedures – Non-Capital/ Sensitive Equipment • Physical Inventory (continued) • Must notify FSGA of completion by sending: • Non-Capital and Sensitive Equipment Certification Letter (attachment 6), and • Copy of up-to-date Non-Capital and Sensitive Equipment Inventory List (attachment 5) • Delinquencies – same procedure as Capital Equipment Inventory. (see slide # 26)

36. QUESTIONS???

37. Surplus Property

38. UMB Policy and Procedure for Disposal of Surplus Property • Procurement Services Surplus Property Office http://www.procurement.umaryland.edu/GenProc/mail/surplusprop/index.cfm • Surplus Property = UMB owned property that is no longer needed or utilized. • Dept must complete Excess Property Declaration/Capital Asset Deletion Form (attachment 2), attach appropriate documentation, and forward to FSGA.

39. UMB Policy and Procedure for Disposal of Surplus Property • FSGA reviews and determines if item should be removed from Capital Asset records or referred to Procurement Services - Surplus Property Office to schedule removal of equipment from dept. • If item needs to be removed from dept FSGA will refer to Surplus Property Office (e.g., Discard as Unserviceable, Sell, Donate) • Item will be removed in 3 – 5 business days. • After removal, FSGA will remove from records.

40. General Process for Disposal Followed by Surplus Property Office • Departments should first consider if they can take advantage of a trade-in when purchasing new equipment. Contact the buyer in Procurement Services responsible for that commodity. Buyers and commodities purchased are listed at www.procurement.umaryland.edu. • The Surplus Property Office will offer property for sale or trade to other UMB departments via the UMB Surplus Property Trade List at http://www.procurement.umaryland.edu/GenProc/mail/surplusprop/index.cfm

41. General Process for Disposal Followed by Surplus Property Office • When possible, surplus property may be: • Offered for sale or trade within USM or to another State agency. • Offered for sale to the public via public auction (www.govdeals.com) • Donated to qualified non-profit charitable org (Non-Profit Certification Statement required) • If equipment was grant funded – contact ORD SPA first. Donation may not be allowed. • Dismantled for recovery of useable parts. • Disposed of as scrap and recycled. (UMB recycles hundreds of tons of PC and related equipment annually)

42. QUESTIONS???

43. Separation of Duties Inventory Management

44. Procedures – Separation of Duties • Equipment inventory management duties must be adequately separated so no one employee has control over the entire process. • The following duties should be separated: • Initiate a requisition to purchase equipment • Approve invoice for payment • Maintain equipment records • Perform physical inventory • Dispose of equipment • Reconcile purchases to eUMB

45. Procedures – Separation of Duties • If you don’t have enough employees to adequately separate duties, may be able to establish compensating controls (e.g., verifications, approvals, reports) • Contact MAS if you believe you need help properly separating duties.

46. Homework • Each Administrator must complete the Separation of Duties Summary (attachment 7) and Control Self Assessment Checklist (attachment 8) and return to MAS. • Either fax to x6-6128 or email to mevans@af.umaryland.edu • Due to MAS by January 31, 2011. • MAS will follow-up to ensure adequate controls are in place. • Compliance will be tracked and reported to VPAF and Deans.

47. Where to Get Help • Financial Services - General Accounting Sheri Myers smyers@af.umaryland.edu x6-6025 Vicki Dodson-Lake vdlake@af.umaryland.edu x6-7392 • Procurement Services – Surplus Property Office Larry Butler lbutler@af.umaryland.edu x6-6619 • Management Advisory Services Marc Wasserman mwasserman@af.umaryland.edu x6-6848 Michele Evans mevans@af.umaryland.edu x6-5584

48. QUESTIONS???