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BUS-54, Operating Guidelines for University Supply Inventories
July 1, 1987
I. INTRODUCTION
This bulletin establishes basic guidelines for maintenance and control
of supply inventories within the University, e.g., central stores,
department storerooms, production facilities, and similar functions to
provide effective service and to maintain a high utilization of
University resources.
University stores operations, both central and departmental, are service
functions that maintain large inventories to aid teaching, research, and
public service programs. The operating guidelines established herein
apply primarily to these inventories. Substantial inventories are also
maintained to support University production facilities; e.g., physical
plant, reprographic departments, machine shops, and manufacturing
laboratories.
University supply inventories are established to give prompt service and
to obtain the economies available from aggregating demand and
consolidating distribution and administration. They shall be subject to
comprehensive, auditable material and financial control procedures.
University inventory investment and administrative expense should be
kept to the minimum consistent with need.
II. SCOPE
The provisions of this bulletin apply to supply inventories held for use
or issue within the University when the combined inventory value of new
and unissued material in a department exceeds $50,000 at one or more
locations on a campus or exceeds $50,000 at an off campus location. A
supply inventory is to be administered as a service enterprise or, if it
serves a single organizational unit, it is to be included in the account
structure of that unit. For production and manufacturing operations,
job-charged primary materials work-in-process inventories, and finished
goods inventories are considered issued material. Although the
provisions of this bulletin are mandatory for supply inventories that
meet or exceed these criteria, these guidelines may also be applied to
other inventories at campus option.
This bulletin does not apply to the major laboratories operated under
contract with the U.S. Department of Energy nor to University activities
selling to non-University customers: e.g., book stores, gift shops,
pharmacies. These inventories are the only University inventories not
subject to the provisions of BUS-54.
III. RESPONSIBILITY AND ORGANIZATIONAL RELATIONSHIPS
Coordination of all supply inventories that meet the criteria above
shall be a centralized responsibility on each campus assigned through
the Chancellor to the Materiel Manager. That authority, at the option
of the Chancellor, nay be either a coordinating responsibility or a
direct operating responsibility. The Materiel Manager, as part of his
or her coordinating responsibility, may review, question, and
disallow, subject to approval by the Chancellor, departmental supply
inventory practices, policies, and procedures.
Although overall coordinating authority rests with the Materiel Manager,
a supply inventory maintained to serve a single department may be a
direct responsibility of a department chairman so as to provide
flexibility in meeting individual department needs. If a significant
portion of the issue or recharge volume of a departmental supply
inventory is for other departments, the Materiel Manager should be
assigned direct operating authority for the operation.
If an administrative officer other than the Materiel Manager is assigned
this responsibility, these guidelines are also applicable to that
individual.
IV. USE OF UNIVERSITY SUPPLY INVENTORIES
Materials carried in University supply inventories are for the exclusive
use of university departments. These departments should be encouraged to
utilize to the fullest extent practical those supply inventories which
provide the goods or services which they are requisitioning. Other
(i.e., non-University) not-for-profit organizations and activities, with
the approval of the Chancellor, may be permitted to requisition from
those stocks, unless the material being requested was obtained by the
University under its Federal excise tax exemption or is tax-free Ethyl
Alcohol, in which case transfer is prohibited.
V. SUPPLY INVENTORY MANAGEMENT AND CONTROL
Inventories are to be maintained at levels which will provide a service
level commensurate with bonafide user need and at the lowest ultimate
cost to the University. An item should be placed in stock when usage is
repetitive and/or there is a net economic advantage to the University
which more than offsets the cost of handling as a stores item or when
the requisitioner's service requirement cannot be met by direct shipment
from the supplier.
The stock selection should be regularly reviewed to assure that the use
pattern qualifies the item for continued retention. Obsolete and
inactive items should be liquidated promptly to minimize losses. When an
item qualifies for stocking, but its use is controlled by a single user,
a commitment should be obtained that if the material becomes obsolete or
its use is discontinued, any liquidation costs for remaining stock will
be to the user. Every effort must be made to minimize such charges.
Standardization is to be encouraged on those item fulfilling a required
function at the lowest cost by continuing analysis of requisitioner
needs.
Adequate safeguards should be provided to protect University supply
inventories from pilferage or other loss. Inventories are to be verified
by physical count at least annually, preferably on a cyclical basis.
Stock adjustments are to have the signed approval of the Materiel
Manager or designee who must not be the individual responsible for the
inventory. Large adjustments shall be supported by an explanation.
Requisitioners are allowed to return excess materials to inventory for
credit providing they are in like-new condition suitable for reissue. An
equitable restocking charge may be established.
VI. DISCONTINUING A SUPPLY INVENTORY
When the value of a supply inventory or the total value of supply
inventories within a department falls and remains below $50,000 for an
entire fiscal year, the campus may initiate action to discontinue the
supply inventory's(ies') status.
VII. INVENTORIES FOR CONTRACT OR GRANT ACTIVITIES
Temporary inventories may be on hand for particular contract or grant
funded projects or programs. However, activities funded by contracts
and grants should not use such funds for acquiring supplies and
materials for recharge to other users. Contract and grant funds
should be charged only for supplies and materials used on each project
or program. All Federal projects are to be credited for any excess
material obtained that was expensed but not consumed during the
project (Reference OMB Cir. No. A21, Par. 21). All such credits
shall be borne by the department in which the contract or grant
activity is located.
VIII. OPERATING PROCEDURES
Operating procedures are to be developed and maintained by the
administrative officer or designee responsible for any supply inventory
covered by this bulletin, subject to approval by the campus Materiel
Manager. These procedures should provide comprehensive material and
financial controls consistent with the guidelines of this bulletin and
the individual department needs, and should be coordinated with other
administrative functions, when applicable, e.g., Accounting, Physical
Plant, etc.
IX. FUNDING OPERATIONS
The operating expenses of a store inventory are to be funded from a
markup on the cost of goods sold and/or charges for services performed,
so as to recover all elements of cost. For production and manufacturing
operations, the procurement, storage, and handling costs of a raw
materials inventory, as well as all other production costs, are to be
included and recovered in the selling price of finished goods (Business
and Finance Bulletin A-47).
X. PRICING MATERIALS OR SERVICES
Prices for materials or services are to be determined by an equitable
method that is uniform to all requisitioners. Prices may be established
to reflect quantities ordered or the value of services furnished. When a
markup is charged, a variable or adjusted markup may be applied to
achieve competitive pricing or to reflect operating economies; however,
excessive requisitioner stocks are not to be encouraged.
Accumulated earnings are to be held at the minimum required for funding
supply inventories and reasonable non-recurring expenditures.
XI. AUTHORITY TO APPROVE REQUISITIONS
Hard copy requisitions must have the signed approval of a person
specifically authorized to do so by a department chairperson or his or
her equivalent. it is the responsibility of the requisitioning
department to review orders for unusual quantities, accuracy, and proper
signature authorizations by establishing adequate controls to ensure
existence of a complete audit trail.
Campuses may establish procedures for placing, accepting, and processing
unsigned storehouse orders via telephone, teletype, or other electronic
data processing equipment. Such procedures will include provisions for
adequate controls to ensure the existence of a complete audit trail
regardless of order method.
XII. ESTABLISHING AND DIRECT ORDERING AGAINST AGREEMENTS
The Materiel Manager should delegate authority to the individual
responsible for a supply inventory to place orders for stock or issue
directly with designated suppliers for items under University or campus
agreements.
Planned Purchasing Program Commodity Managers should establish with
suppliers that reflect the price savings for supply inventories that
bulk order quantities, reduced delivery and administrative costs
provide. For certain high-volume items, University and campus agreements
may be specifically designed to consolidate the activities of order
placement and delivery within a small group of authorized users if that
is cost effective. To the extent practical, agreements shall optimize
opportunities for business contracting with small business enterprises,
particularly small disadvantaged and women's business enterprises.
XIII. RESPONSIBILITY
Chancellors are responsible for implementing the provisions of this
bulletin.
XIV. REFERENCES
A. Office of Management and Budget Circular No. A21
B. Business and Finance Bulletin A-47, "University Direct Costing
Procedures"
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