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  5. Management of Inventory

Management of Inventory

Directive Statement

This directive establishes the proper methods of managing inventory at the University of Florida.  Departmental accountable officers are responsible for ensuring accurate accounting for the inventory of merchandise for resale.  In addition, the department must establish proper safeguards in accordance with sound business practices.

Reason for Directive

Educational Business Activity (EBA) units are responsible for the stewardship of the University’s resources, including inventory.  This directive provides assurance that inventory will be well-safeguarded, appropriately managed, and proper records will be maintained.

Who must comply?

Departmental accountable officers of the EBA’s.

Procedures

Safeguarding Inventory

Prior to establishing inventories for supply and resale, a department must establish proper internal controls in accordance with sound business practices, including:

  1. Segregate duties so that different people are responsible for ordering inventory, distributing inventory, and paying vendors
  2. Independence of the staff performing the physical inventory counts from the merchandise ordering, sales, and reconciliation functions
  3. Create written procedures detailing how inventory is protected from theft, abuse or physical damage, and how obsolete inventory is determined
  4. Cooperate with the Office of Internal Audit when it establishes and reviews operating procedures

Inventory Management

To appropriately manage inventory and ensure proper recordkeeping, departments should ensure the following are part of their inventory processes:

  1. Label items when put in stock to make later identification and valuation possible
  2. Require management approval of adjustments to inventory records because of physical inventory counts
  3. Ensure punctual and accurate recording of the approved adjustments in the unit’s inventory management system
  4. Reconcile physical inventory counts to inventory records (whether periodic or perpetual)
  5. Determine if the department will use a perpetual or periodic inventory system

Definitions

Educational Business Activity

Revenue-generating activity from the provision of goods and/or services.  Such activity enhances, promotes, or supports the University’s instruction, research, public service and campus support functions, and other educational and support functions in order to meet the needs of students, faculty, staff, and members of the public participating in University events and programs.

Periodic Inventory

A system of inventory in which updates are made on a periodic basis.  This differs from perpetual inventory systems, where updates are made immediately.

Perpetual Inventory

A method of accounting for inventory that records the sale or purchase of inventory immediately through the use of computerized point-of-sale (POS) systems and enterprise asset management software.

Last Reviewed

05/01/2020: reviewed content

Training

PRO 303: Internal Controls

PRO 304: Basic Accounting Concepts

Contacts

Educational Business Activity/Auxiliary Accounting: (352) 294-7236