Session IV

1. Session IV • Protests, Claims & Controversies • Purchase Orders • Vendor Contract Documents • Warehousing Stock items Inventory Levels Issuing and Receiving Stock Physical Inventory Inventory Pricing • Fixed Assets Types of Items General Fixed Assets Listing Identification Physical Inventory • Disposition of Surplus Materials Affected Methods of Disposal Other Considerations • Compliance

2. Protests, Claims & Controversies • Resolution of Protests Informal resolution of disputes is allowed. The district representative decides formal protests. A hearing officer hears appeals of the district representative’s decision. • Filing a Protest Any interested party may protest a solicitation or award. The protest must include certain specified information. The protester shall promptly supply any other information requested by the district representative. • Time for Filing Protests Protests of a solicitation must be filed prior to the date and time for opening the solicitation. All other protests shall be filed within ten days after the protester knows or should have known the basis of the protest, whichever is earlier. If the protester shows good cause and it is in the best interests of the district, the district representative may consider a protest that is not filed timely. Protests shall be filed with the district representative. The district representative shall immediately give notice of the protest to the successful contractor. If no award has been made, notice must be given to all interested parties. The district representative may refer the protest to the governing board for resolution.

3. Protests, Claims & Controversies • Stay of Procurement A contract may be awarded prior to resolution of a protest, unless the district representative makes a determination that award of the contract is not in the best interests of the district • Decision by the District Representative The district representative shall issue a written decision within 14 days after a protest has been filed. The decision shall include a statement of the decision with supporting rationale. The district representative for good cause may extend the time for decisions for a reasonable time not to exceed 30 days. The district representative shall notify the protester in writing that the time for issuing a decision has been extended and the date a decision will be issued. If the district representative fails to issue a decision within the specified time limits, the protester may proceed as if the district representative had issued an adverse decision. The district representative shall furnish a copy of the decision to the protester by any method that provides evidence of receipt.

4. Protests, Claims & Controversies • Remedies The district representative has a number of remedies available for a sustained protest. • Appeals to the Governing Board An appeal from a protest decision shall be filed with the district representative within ten days from the date of decision. Appeals are heard and decided by an independent hearing officer. The Arizona State Board of Education maintains a list of hearing officers. Hearing officers are selected through a specified procedure. The hearing is the equivalent of an administrative trial. The hearing officer renders a decision, not a recommendation. Either the district or appellant may request a rehearing. The district pays the hearing cost. If the district prevails, it is reimbursed for the hearing cost. Reimbursement does not necessarily mean the district will recoup all of costs associated with the hearing. The protest, claim or controversy may be submitted to superior court, after the administrative procedures have been exhausted.

5. Purchase Orders • A purchase order is generally required before materials are ordered or received. • A purchase order is a legal contract. • A purchase order should do much more than list the materials, construction or services to be purchased. • A purchase order should include the terms under which the school district enters into the procurement contract. • Applicable terms should be included on the vendor copy of the purchase order. • However, some terms can be incorporated by reference, i.e., the terms of a bid or proposal. Is a requisition the same as a purchase order?!?

6. Vendor Contract Documents • Vendors often include separate contracts (or agreements) for the district to sign. • If the contract is part of a bid or proposal, it must be included in that bid or proposal. • Never accept a vendor contract unless you read it first. • Vendor contracts may contain provisions that are objectionable to the school district. • Clarify and correct any objectionable provisions prior to awarding a bid or proposal that contains a vendor contract. • Clarify and correct any objectionable provisions prior to signing a vendor contract. • Never give a blanket waiver of the terms of your purchase order or competitive procurement contract.

7. Warehousing • The warehouse should stock items goods and materials consumed in the normal course of operating the district. • Stock items should be routinely requisitioned by a reasonable number of schools and departments on a recurring basis. • Stock items should be easily stored and maintained in the warehouse. • Stock items should have a shelf life equal to the stocking & use period used by the district. • Readily perishable items should not be stocked, unless the district has proper warehousing facilities. • Stock items should be adequately safeguarded to minimize the risk of loss from fire, theft, temperature changes, humidity, and other elements.

8. Warehousing • Setting proper minimum and maximum inventory levels is a key component of inventory control. • The range between the minimum and maximum quantities is the optimal range of stock that should be carried for each inventory item. • Proper ranges minimize the risk of stockouts, lower inventory carrying costs and reduce incidences of stock obsolescence. • To determine the minimum stocking level, school districts should take into consideration each item’s volume of usage and the time required to replenish the item. • To determine the maximum stocking level, school districts should consider the cost of carrying the item, the benefits of quantity discounts, and the risk of obsolescence. • A stock item should be discontinued (removed from inventory) when the risk of obsolescence, volume of usage, or cost of carrying the item in inventory outweighs the benefits of stocking it.

9. Warehousing • Issuing and Receiving Warehouse Stock The procedures for issuing and receiving warehouse stock items are in Section VI-D and VI-G of the USFR. Those procedures are designed to separate employee functions to protect the inventory. They all provide guides for protecting the inventory from theft by outside parties. • Physical Inventory The procedure for conducting the physical inventory is in VI-D-4-6 of the USFR. Districts should take an annual physical inventory if a perpetual inventory system is not utilized. Physical inventory may be taken every three years if a perpetual inventory system is utilized. Physical inventories should be taken at year-end, if possible. If a perpetual inventory system is utilized, periodic test counts should be made at reasonable intervals to determine the accuracy of the inventory records. • Periodic Inventory is a system where transactions are not recorded directly in the inventory accounting records. • Perpetual Inventory is a system where purchases and issues are recorded directly in the inventory accounting records as transactions occur.

10. Warehousing • Inventory Pricing The value of inventory should be based upon actual cost of the stock items. Actual cost includes invoice price, plus ancillary costs such as freight, tax and any other handling costs. The cost of supplies in the inventory is determined by associating a cost flow assumption with the flow of supplies inventory transactions. The cost flow assumptions specified in the USFR are First In, First Out (FIFO), Last In, First Out (LIFO), and Average Cost. The school district should be consistent in applying the cost flow assumption.

11. Fixed Assets • Types of Items Fixed assets consist of land and improvements; buildings and improvements; furniture, equipment and vehicles (equipment), and construction in progress. School districts should establish adequate control and accountability over their fixed assets. An individual at the district level should be assigned direct responsibility for administering the policies and procedures of the school district’s property control system. • General Fixed Assets List The district should prepare a detailed listing of general fixed assets that includes all equipment with unit costs of $5,000 or more and useful lives of one year or more; and all land, buildings and related improvements with costs of $5,000 or more. The district may use a lower threshold if adopted by the governing board. The district should update and reconcile the general fixed assets list annually. • Stewardship List The district must maintain a stewardship list of equipment, including vehicles, with a cost of $1,000 or more, but less than the capital asset threshold. The district may include equipment costing less than $1,000 on the stewardship list. The district should update the stewardship list annually.

12. Fixed Assets • Contents of the Fixed Assets List 1. Location (school, department, building, etc.) 2. Identification number for equipment (tag number, serial number, or other number that specifically identifies the item) 3. Description (model number, size, color, etc.) 4. Method of acquisition (purchase, construction, trade, lease-purchase, or donation) 5. Source of funding (the fund from which the item was purchased) 6. Acquisition date (month and year of acquisition). If the acquisition date is unknown, an estimated date may be recorded 7. Purchase document number (P.O. number, voucher number, or other document number that can be used to trace to the supporting documentation) 8. Cost (see Valuation of Fixed Assets, VI-E-3) 9. Condition of asset (required only for assets with unit costs of $5,000 or more purchased with federal monies) 10. Percentage of federal participation (required only for assets with unit costs of $5,000 or more purchased with federal monies) • Contents of the Stewardship List 1. Location (school, department, building, etc.) 2. Identification number for equipment (tag number, serial number, or other number that specifically identifies the item) 3. Description (model number, size, color, etc.) 4. Month & year of acquisition

13. Fixed Assets • Identification The district should specifically tag or mark all equipment with unit costs of at least $1,000. Property tags should be numerically controlled and issued sequentially. A record of property tag numbers should be prepared and maintained. Equipment with costs between $50 and $1,000 should be specifically identified as property of the school district. These items do not require numeric tagging. • Physical Inventory The district should take a physical inventory of all equipment at least every three years. Items on the stewardship list should be included. Equipment purchased with federal funds, and with a unit cost of $5,000 or more, should be inventoried every two years.

14. Disposal of Surplus • Materials Affected The procurement rules apply to the disposal of all surplus materials. The only excluded items are sales or leases to the state, county or city (A.R.S. §15-342(7)), and the disposition of surplus or outdated learning materials (A.R.S. §15-342(18)). Surplus materials means any materials that no longer have any use to the school district or materials acquired from the United States government. This includes obsolete materials, scrap materials and nonexpendable materials that have completed their useful life cycle. (R7-2-1001-87). Materials means all property, including equipment, supplies, printing, insurance and leases of property, but does not include land, a permanent interest in land or real property or leasing space. (R7-2-1001.50) • The rules apply regardless of the value of the surplus materials.

15. Disposal of Surplus • Prescribed Disposal Methods Competitive Sealed Bids. Public Auction Established Markets Trade In Posted Prices State Surplus Property Before surplus materials are disposed of by trade-in to a vendor for credit on an acquisition, the school district shall approve such disposal. The school district shall base this determination on whether the trade-in value is expected to exceed the value realized through the sale or other disposition of such materials. • Optional Disposal Methods Appraisal Barter Other Reasonable Methods These methods are available when unusual circumstances render the prescribed methods impractical, provided the school district makes a determination that such methods are advantageous to the school district.

16. Disposal of Surplus • Payment Only United States Postal Money Orders, certified checks, cashiers' checks or cash shall be accepted for sales of surplus property unless otherwise approved by the school district or for sales of less than $100. • Competitive Sealed Bidding Notice for sale bids shall be publicly available from the school district at least ten days before the date set for opening bids. Notice of the sale bids shall be mailed to prospective bidders, including those bidders on lists maintained by the school district. The notice for sale bids shall list the materials offered for sale, their location, availability for inspection, the terms and conditions of sale and instructions to bidders including the place, date, and time set for bid opening. Bids shall be opened publicly pursuant to the requirements of R7-2-1029. The award shall be made in accordance with the provisions of the notice for sale bids to the highest responsive and responsible bidder, provided that the price offered by such bidder is acceptable to the school district. If the school district determines that the bid is not advantageous to the school district, the school district may reject the bids in whole or in part and may resolicit bids or the school district may negotiate the sale, provided that the negotiated sale price is higher than the highest responsive and responsible bidder's price.

17. Disposal of Surplus • Public Auctions Auctions shall be advertised at least two times prior to the auction date in a newspaper of the county. Advertisements must be at least seven days apart. All the terms and conditions of any sale shall be available to the public at least 24 hours prior to the auction date. The services of the auctioneer are subject to the competitive purchase requirements. • Other Considerations An employee or governing board member shall not directly or indirectly purchase or agree with another person to purchase surplus property if said employee or board member is, or has been, directly or indirectly involved in the purchase, disposal, maintenance, or preparation for sale of the surplus material. Except as provided in A.R.S. § 15-342(7), the district may enter into an agreement with the State Surplus Property Manager for the disposition of property pursuant to Article 8 of the Arizona Procurement Code (A.R.S. § 41-2601 et seq.) and the rules adopted thereunder. The governing board may acquire surplus materials from the State and the United States government, by entering into an agreement with the State Surplus Property Manager pursuant to A.R.S. § 41-2603 and the rules adopted thereunder. Notwithstanding any provision of law to the contrary, the governing board may secure the transfer of surplus materials and obligate its monies to the extent necessary to comply with the laws and conditions of such transfers.

18. Compliance • The USFR Compliance Questionnaire contains requirements for the following topics: Purchase Orders Supplies Inventory Capital Assets Disposal of Surplus • A copy of the requirements are included in the supplemental handout.