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HomeMy WebLinkAboutFollow-up - Road DeptReport# 04/05 - 4 (Dated August 20, 2004) Follow-up on ROAD DEPARTMENT - Observation of Physical Inventory as of June 30, 2003 Presented to the Deschutes County Audit Committee by the Internal Audit Program David Givans, CPA – County Internal Auditor Report# 04/05 - 4 Dated August 20, 2004 Deschutes County, Oregon Report# 04/05 - 4 (Dated August 20, 2004) {This page left blank} Report# 04/05 - 4 (Dated August 20, 2004) To: Audit Co mmittee CC: Mike Daly, Tom DeWolf, Tom Blust, Bob Dean, Krist i Michaelis From: David Givans, Count y Internal Auditor Subject: Fo llow-up on Road Department recommendat ions (Report #03/04-2) Date: August 20, 2004 This fo llow-up covers the Road Department audit covering the “Observat ion of Physical Inventory as o f June 30, 2003” as covered in Internal Audit Report #03/04-2. As directed by the Audit Committee, a follow-up is performed for all audit reports to assess the implementation of recommendations. Bob Dean, Informat ion Systems Manager, prepared the attached memorandum addressing their implementation of the proposed recommendat ions. We have relied on the assertions made and did not attempt to independent ly verify them. Since no audit work was performed, Government Auditing Standards issued by the Co mptroller General of the United States were not fo llowed. Overview of implementation The original audit report had two proposed adjustments and seven reco mmendat ions. The adjustments suggested were made in the last fiscal year (02/03). Staff have substantially implemented all reco mmendat ions in keeping wit h the intent of those suggestions. There were meet ings during the last year with Bob Dean and Krist i Michaelis to discuss inventory tags and instructions. They have spent a lot of time planning and implement ing the recommendat ions. Their dedicat ion in responding to the recommendations and making meaningful change within their department was apparent. Latest inventory observat ion The external auditors observed the June 30, 2004 inventory at the Road Department. Discussions with the external auditors indicate they did not have any reco mmendat ions based on those observat ions. No additional fo llo w-up is deemed necessary. Internal Audit Program David Givans, CPA County Internal Auditor Deschutes Services Center 1300 NW Wall Street, Suite 200 Bend, OR 97701 Phone: 541-330-4674 Fax: 541-385-3202 davidg@co.deschutes.or.us Deschutes County, Oregon Report# 04/05 - 4 (Dated August 20, 2004) {This page left blank} - 1 - M E M O R A N D U M DATE: August 17, 2004 TO: David Givans, CPA – County Internal Auditor Deschutes County Audit Committee FROM: Bob Dean, Information Systems Manager RE: Observation of Physical Inventory – Implementation of Recommendations CC: Tom Blust, Director This memo provides a summary of the procedures put in place during this past observ ation of physical inventory to meet the recommendations provided after the 2003 observ ation. All of the recommendations hav e been implemented to some degree. Inventory instructions not prepared “Office staff should develop written inventory procedures. The procedures should emphasize organization, proper cutoff, and counting procedures.” Attached is a copy of the inventory instructions. The instructions are generic in nature and emphasize timeliness and procedure. Employees that perform the inv entory counts hav e been doing so for sev eral years and hav e a good understanding of how to obtain accurate and timely counts. Additional preparation needed for physical inventory “Inventory to be counted should generally be well organized. · All items should be clearly marked by item# and description (especially needed for aggregate stockpiles). · Items that are difficult to count or measure should be prepared for easier counting (especially needed for aggregate stockpiles). · All items that are not to be inventoried should be clearly marked and/or segregated. · All like items should be grouped together when possible. · Like items in several areas should be identified by location.” Items in the Parts Shop, Sign Shop and Herbicide Storage locations hav e been labeled with item number and description. Signs hav e been posted at aggregate stockpiles with the item number and description. The Sign Shop implemented inventory tags this year. This allowed the count to be taken a few days earlier than in previous years. Aggregate stockpiles where “dressed up” and shaped for easier measurement. Some stockpiles where physically eliminated and consolidated with stockpiles at other locations. - 2 - Slow moving and potentially obsolete inventory identified “Reports should be developed to identify slow moving or obsolete parts. This might include a turnover analysis.” In August of 2003 the construction and temporary signs were removed from inventory and are now treated as ov erhead. Pre-made sign letters hav e also been removed from inventory. These letters are seldom used as we now hav e the ability to produce the letters in-house with a graphic cutter and software. In June 2004 reports where generated listing inventory items that had no activity in the 2003/2004 fiscal year. The reports where distributed to the division managers who were instructed to indicate which of these items could be eliminated from inventory. The managers elected not to remove any of the items. Inventory takers utilized count sheets, which included expected counts “Inventory takers should utilize count sheets with the expected quantities omitted. Inventory takers will not need the quantities if pre-inventory procedures include removing unused inventory item numbers and making sure the inventory is properly identified.” Inv entory takers did not use count sheets containing expected counts. - 3 - DESCHUTES COUNTY ROAD DEPARTMENT PHYSICAL INVENTORY COUNT FISCAL YEAR END JUNE 30, 2004 TO ALL DIVISIONS: Attached is the inventory listing for your division, sorted by location and item. Count each item of inventory and put the quantity in the “actual count” column on the right hand side of the inventory listing page. The physical inventory count should be performed as close to the cutoff time of midnight, June 30th as possible. This is to minimize the adjustments that will need to be done for any inventory activity after the count is taken. To ease the rush of getting all the inventory counted at the last minute, items that will not have any activity between now and the cutoff time can be counted at your convenience. All items must be counted by the cutoff time. If the inventory contains items that are no longer used, including old - out dated items, they need to be deleted from the inventory. To do this, count the item and put the total in the “actual count” column on the listing page and write “delete” next to the item. The deleted item should be removed from the inventory area if possible. If the item no longer has any value to the department it should be disposed of. Perhaps another department may have a use for the item. The item will be removed from the inventory accounting system. If the item is kept for possible future use it will be considered a “supply”. If the item is used in the future it should not be entered on a time card. Deleting unused items from the inventory will make future physical inventory counts simpler and less time consuming. When the physical inventory count is complete, fill out the “Physical Inventory Count” cover sheet by entering the date of the count and who took the count. After the physical inventory count is complete, any inventory activity up to midnight on June 30th must be accounted for. Use the attached “Physical Inventory Adjustment” form to record this activity. Fill in the Division, Inventory Location and Item information. The grid on the form is much like a checkbook registry. On the first line of the table enter the date and quantity of the initial physical count from the inventory listing. The white rows are used to entry the activity. Enter the date, a description of the adjustment such as a project for an issue or a vendor for a receipt, and the quantity received or issued. In the last column enter the quantity of the adjustment and then subtracted the issued quantity or add the received quantity to the previous total and enter the new total on the following gray row. Any questions that you may have regarding the physical inventory count should be directed to Kristi Michaelis. - 4 - {END OF REPORT - This page left blank}