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New York State Accounting System User Procedures Manual

Volume Name
CONTROLS AND SPECIAL PROCEDURES
Volume
XI
Date
3/31/06
Section Name
Internal Controls - Equipment Control
Section
3.0400

 

     The purpose of this section is to present guidelines for State departments and agencies in establishing and maintaining control over equipment and providing the detail for a suggested accounting system. Although individual agencies are authorized to establish different systems to meet their specific needs, it is expected that all agencies will meet the basic standard requirements.

OBJECTIVES AND STANDARDS

     The fundamental objectives of a system of equipment control are to provide a safeguard against loss and to facilitate effective utilization. No attempt has been made to design a single equipment control system to meet the needs of all agencies. Certain administrative agencies will require a very simple system, since their equipment is primarily of an office type. Other agencies will require more complex systems which will yield detailed information as to equipment utilization, repair costs and standby equipment. Sometimes, a combination of systems may best serve the needs of an agency, depending upon the types of equipment is use. Certain fundamental standards, however, are applicable to all systems:

a.     All items of equipment to be brought under control should be identified by a serial number affixed to each item.

b.      Equipment control records should be maintained for each item of equipment identified by a serial number.

c.      Periodic physical inventories should be taken of all items of equipment placed under serial number control.

d.      Some form of equipment utilization controls should be maintained for significant items, whether they are in the form of daily usage records or simple periodic observations.

e.      No item of equipment should be permitted to leave the premises without a pass signed by the proper authority.

f.      The location unit supervisor should be administratively responsible for the equipment assigned to the unit. The equipment assigned should not be permanently transferred without written approval of this individual.

DEFINITIONS

     Agency - Denotes the unit level of government at which the control of equipment is to be maintained. This may be a department, hospital, institution, university, college, board, commission or other administrative unit.

     Location Unit - Denotes the level within an agency at which the responsibility for equipment is to be established. The number and size of the location units depends on the size and type of the agency. No location unit should cover more than one general physical area. The determination of each unit may be based on a functional responsibility within a physical area, such as a storeroom located within a warehouse.

     Equipment - Includes items of machinery, vehicles and apparatus which may be used repeatedly without any material impairment of physical condition and which have a probable life of more than two years. Not included are fixed building equipment such as heating, ventilating, plumbing and electrical items.

     While the distinction between equipment and supplies is basically one of durability, minor items such as those listed below, are considered as supplies:

Small Surgical instruments
Flasks, retorts and other ordinary glass apparatus for laboratory use Axes, hoes, rakes, saws, shears, shovels, hand tools
Staplers, pencil sharpeners and other minor items of office equipment
Dishes, tableware and kitchen utensils.

   Generally, all equipment purchased must be placed under control. However, different levels of equipment control can be established. For the larger, more cumbersome equipment, such as desks and file cabinets, the item should be identified with a tag showing that it belongs to the facility. The records should show the total number of items in particular areas of responsibility. For the more sensitive items, such as those susceptible to theft, tags with individual serial numbers should be affixed to the equipment and detailed records should be maintained.

     Unit of Accountability - An item of equipment may be small, integrated item, such as a notebook computer or it may be a complex aggregation of components, such as a fire engine with accessory equipment.

RESPONSIBILITY FOR SYSTEM OPERATION

Each agency head is responsible for the maintenance of its equipment control system. Procedures to be applied in discharging this responsibility follow:

     Custodian of Equipment - A qualified employee should be appointed as property manager. This person shall maintain the required central equipment control records, and shall exercise supervision over the system to assure that the central records accurately reflect the physical inventories at the location units.

     Assignment of Equipment - When equipment is assigned to be used in the operation of the agency, the supervisor of the location unit where the equipment is assigned becomes administratively responsible for the equipment. Transfer of responsibility from the property manager to the supervisor at the location unit will be accomplished by means of a written receipt for the equipment.

     It will be the responsibility of the supervisor of each location unit to: cooperate with the property manager in carrying out his duties; ensure the proper use and maintenance of the equipment by employees under his supervision; promptly report any loss or misuse of equipment, or any equipment which requires repairs or which creates a hazardous working condition; be responsible for the assignment of equipment within his area; and identify and report any surplus or underutilized equipment.

     Inventory of Equipment - The property manager or a designated representative who is not responsible for custody of equipment, should take an annual inventory of all equipment assigned to each location unit. These inventories may be scheduled on a rotation basis.

     Transfer of Responsibility - When the employee who is held accountable for an agency's property is transferred from one location to another or terminates service with any agency, the following procedures are recommended:

a.      A physical inventory should be taken by the property manager, or his designated representative, of all property charged to the location unit. This inventory should be checked against the equipment control records.

b.      If the equipment records and the physical inventory do not agree, the differences should be reconciled and adjustment documents submitted so that the records will reflect the quantity and location of the property.

c.      If differences are not reconcilable, the final decision as to the action to be taken will be made by the agency head.

VALUATION OF EQUIPMENT

     A dollar value should be given to each item of equipment. Such values are useful in the identification of a particular item or group of items and in establishing financial accountability. Generally, values should be recorded at cost. Cost is defined to included purchase prices (less discounts), freight or other cartage charges and installation costs. These elements can be secured from purchase vouchers and contracts. The cost of equipment constructed by an agency should include the applicable direct labor, materials and overhead. Equipment donated to the agency, such as Federal surplus equipment, should be priced at fair market value.

     When an agency initially established the equipment inventory system, it may not be possible to obtain costs for all items of equipment. This would occur in those instances where such costs cannot readily be found or where equipment has been acquired without charge through surplus property disposal procedures. In these cases, a fair market value as of the date of recordation should be placed on each item.

CONTROL LEVEL

     The control of the system may be established at various levels. For example, a department may find it practicable to maintain the system at the department level. In those departments which operate institutions or district offices, it may be more suitable to maintain the records at the lower level. For some departments the most desirable method may be initially to establish the control at the lower level, and at a future time consolidate at the department level.

     Equipment control records should be located in the finance or business office of an agency. An excessive number of location units increases effort by requiring more transfers to be recorded and more records to be maintained. There is also an increased possibility of errors. Therefore, a minimal number of location units should be established. These location units might be established at the bureau level or at sub-units within a bureau. The small size of some agencies might dictate that the entire equipment control system be at a single location under the control of the property manager. Each location unit in an agency should be assigned a control number, beginning with the number one.

OPERATION OF SYSTEM

     A central inventory of all equipment items of the agency is maintained by the property manager. The equipment items controlled by this central file are segregated by type and within type according to the location unit to which they are assigned. Since only one series of identification numbers is used, the property manager will also maintain a register to control the assignment of these numbers. In addition, all items assigned to a location unit are listed on a record of physical inventory of equipment, a copy of which is kept on file in the locating unit. The transfer, addition and disposal of equipment is controlled by the property manager. The suggested procedures to be followed to make the system operational are detailed in the succeeding paragraphs.

INITIAL INVENTORY

     An initial inventory of equipment must be taken to commence the installation of an equipment control system. (If lack of manpower precludes the immediate taking of an inventory, the system should nevertheless be installed immediately for new equipment purchases. A complete inventory should be taken systematically within each location unit as time permits.)

IDENTIFICATION OF EQUIPMENT

     After the necessary data has been accumulated, the property manager should visit each location to attach an identification number to each item. The identification number should be entered on the Inventory by the property manager who, at the same time, should check the data previously entered.

a.      Method of Attaching Identification Numbers: In general, the identification number should be attached to the item so that it can be inventoried without moving the item. Equipment of the same or similar type should have the number attached to the same general location. This will facilitate the taking of later physical inventories. Caution should be taken to ensure that the number is not attached to a part of the item that can be easily detached.

b.      Types of Identification Systems: The best method for the identification of equipment is to affix a number of each item. For this purpose a sequence of numbers is established. Several types of identification labels may be used. The type which can be attached easiest to the majority of items is commonly known as a decal. When decals are used they should be press-numbered. Some types of equipment, however, are not suitable for the attachment of decals. For these items another type of identification label should be substituted. The other types available are: metal tags with precoated adhesive on the back, metal tags affixed with rivets or nails, stenciled numbers, or die-stamped numbers. It is recommended that the decal be used wherever possible.

c.      "Register of Equipment Identification Numbers": The sequence of identification numbers available for use by an agency is controlled by a register. This register is maintained in control number sequence and should contain a brief description of the item controlled. This register, besides serving as a numeric listing of all numbers, also aids in verifying that all equipment has been placed under control.

ASSIGNING RESPONSIBILITY FOR EQUIPMENT

     The fixing of responsibility is a key element in an effective system of equipment control. This is initially accomplished by providing a listing of all equipment assigned to a particular location unit. This record is to be signed by the employee of the location unit who has been given the responsibility for the equipment assigned to the unit. Since this signature constitutes a receipt for the equipment, the unit employee should be satisfied with the accuracy of the record before signing.

     Subsequently, equipment responsibility is re-established when annual physical inventories are taken under the supervision of the property manager and this inventory is reconciled with the central equipment control records.

TRANSFER, ADDITION AND DISPOSAL OF EQUIPMENT

     As the needs of each location unit change, new equipment may be acquired, obsolete equipment may be disposed of, or equipment may be permanently transferred between location unit. A record of such changes must be kept if the controls initially established are to be properly maintained. All equipment transfers, additions and disposals, therefore, must be documented.

     The procedure for completing each type of transaction is described below:

a.      Method of Transferring Equipment: Whenever an item of equipment is to be permanently transferred between location units, notification is sent to the property manager. The inventory should be updated to reflect the change.

Whenever an equipment item is temporarily transferred between location units, a simple method of keeping track of such transfers should be devised.

b.     Method of Acquiring New Equipment: Communication should be established between the property manager and the purchasing unit for the purpose of informing the property manager when new acquisitions of equipment are made. At this time, all the data necessary should be furnished to the property manager. The property manager should add all new items to the inventory.

c.      Method of Disposing of Equipment: When equipment is to be disposed of, the property manager should update the inventory to reflect the deletion.

If equipment is lost or stolen it should be written off and items in excess of $250 reported to OSC (see Section 7.0200 of this Manual). The circumstances concerning the loss or theft, and the measures taken to recover the missing equipment, should be documented and retained for audit purposes.

EQUIPMENT SECURITY

     It is the responsibility of agency managers to safeguard equipment from loss or misuses. Guidelines addressing equipment security should be incorporated in agency public safety or building security manuals and should include provisions for:

  • limiting and controlling access to buildings;
  • controlling keys to facilities, including an agency-wide key control policy and supporting key issuance records;
  • conducting periodic building security surveys;
  • employing special precautions such as lockdown pads to secure valuable equipment which is also portable, such as microcomputers and typewriters;
  • controlling equipment on loan, by utilizing passes signed by the proper authority. Location unit managers should also maintain records of equipment on loan.

ANNUAL PHYSICAL INVENTORIES

     Annually, the property manager, or his designated representative should take a physical inventory of the equipment assigned to each location. These inventories should be scheduled on a rotation basis with the inventory being taken at each location unit once during a twelve-month period. The inventory should be documented.

     The inventory for each location unit is reconciled by the property manager with the prior physical Inventory of equipment. All material difference should be reconciled.

     A record of lost or unaccounted for items should be submitted by the property manager to the agency head for approval to remove such items from the equipment records. Those items which are authorized by the agency head to be removed from the records should be entered by the property manager.

EQUIPMENT UTILIZATION

     One of the most significant aspects of the equipment control system is equipment utilization. It is the responsibility of the property manager and the responsible individuals at the several location units to (1) keep control over stand-by equipment; (2) ensure the continuing need for such stand-by equipment; (3) detect underutilized equipment; and (4) make arrangements for the disposal of any equipment which exceeds foreseeable future needs,

     Certain departments will find it necessary to maintain continuing records of equipment utilization. (The design of such a system is not within the scope of this section.) As a minimum, however, all agencies should make a periodic review of unutilized and underutilized equipment to determine the extent to which such equipment should be reported as surplus. These reviews should not be limited to the equipment items placed under control, but should cover all equipment belonging to the agency, including office and classroom furniture. Property managers should assist in such reviews by developing lists of (1) unused stand-by equipment based upon location unit notations on the several equipment records, and (2) apparent underutilized equipment based upon physical observations during annual inventory-taking and other visits. The results of such periodic appraisals should be documented.