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MANUAL OF BUSINESS PROCEDURES - SECTION 224
INVENTORY DEPARTMENT
Last Updated: February 2008
Inventory Department
102 Angell Building
East Lansing, MI 48824-1234
Telephone: 517-355-0357
Fax: 517-353-2024
Business Hours: 8:00 a.m. to 5:00 p.m.
INVENTORY DEPARTMENT
I. POLICY STATEMENT
All equipment obtained by the university is subject to university control and may be disposed of only in accordance with established university policies and procedures as outlined in this manual. Equipment obtained by the university includes that which is purchased with university or grant or contract funds, equipment loaned or contracted by public or private entities, equipment received as a gift, or obtained by other means.
Departments obtaining equipment are responsible for its use, maintenance, safeguarding, and disposal. Departments are also responsible for notifying the Inventory Department of any equipment status changes, such as transfers, disposals, or transfers of title on non-university owned or loaned equipment.
II. FUNCTION
The Inventory Department was established to be the official source of equipment information. The Inventory Department is responsible for tracking the equipment obtained by the university and maintaining the records associated with the equipment from the date of acquisition to three years after the date of disposal. This is accomplished by obtaining relevant data for each item, assigning unique identification numbers, recording and maintaining the information on an automated tracking system, and retaining equipment records for audit and internal tracking purposes.
The Inventory Department is also responsible for coordinating the university's annual physical inventory and federal property control reviews. The information is provided to the Office of Financial Analysis for depreciation and financial reporting purposes, Contract and Grant Administration for determining overhead rates and ensuring compliance with grant and contract agreements, Internal Audit to monitor compliance with university equipment guidelines, various external auditing agencies, and campus departments for internal tracking purposes and equipment screening. Therefore, it is absolutely essential that equipment records are precise and up-to-date.
III. EQUIPMENT CRITERIA
Since the University uses equipment furnished (loaned) by the federal government and purchased with government funds, guidelines established by the Federal Office of Management and Budget (OMB) in Circulars A21 and A-110 are followed. The university is responsible and accountable for all government property provided under any contract and must comply with Federal Acquisition Regulations (FAR) Subpart 45.5 as in effect on the date of the contract.
(http://www.whitehouse.gov/omb/circulars/a021/a021.html)
(http://www.whitehouse.gov/omb/circulars/a110/a110.html)
Definitions
Acquisition Cost: Purchase price less all discounts plus any trade-in allowance
Accessory item: An item that facilitates or enhances the operation of equipment but which is not necessary for its operation
Essential item: An item without which the basic unit of equipment cannot operate
Fabricated Equipment: Any equipment that 1) meets the criteria for equipment as identified below and 2) is fabricated, from separately acquired materials and assembled by Michigan State University trades people, principle investigator(s), project representative(s) or any combination of these individuals.
Criteria
MSU classifies items as equipment based on the following criteria:
- Non-expendable, tangible personal property with an acquisition cost of $5,000 or more per unit that has a useful life of more than one year, and that,
- has the capacity to function as a stand-alone unit without the assistance of another unit.
Systems purchased on a single purchase order, meeting the above criteria, will be inventoried as a single inventory record (one inventory tag). Systems can include both essential items and accessory-auxiliary apparatus necessary to make the equipment usable for the purpose for which it was acquired. However, items purchased after the initial order will not be classified as equipment.
Upgrades of $5,000 or more to an existing system must be reported to the Inventory Department to allow the inventory record to be amended to include the new purchase.
Personal computers, printers and fax machines costing $5,000 or more are considered “General Purpose Equipment" and are generally not allowed on federal projects unless a convincing case can be made to show that these items will be used primarily to conduct the research associated with a particular grant or contract and that similar items are not readily available for use on the project.
IV. EQUIPMENT ACQUISITION
The University obtains equipment from a variety of sources. This section lists the various methods of obtaining equipment at Michigan State University.
Purchase Orders
Equipment obtained by university or grant or contract funds is acquired by issuing a purchase order. The Inventory Department receives copies of all purchase orders initiated by the Purchasing Department, the National Superconducting Cyclotron Laboratory (NSCL), Food Stores, and Purchase Order releases from the Computer Store. Equipment purchases are identified by the following expenditure object codes:
090 - Equipment
091 - Equipment purchased on a lease, lease-purchase or installment purchase
agreement (See Section 320, Evaluation Criteria)
092 - Fabricated equipment components (prior approval required)
098 - Equipment agency owned (non-MSU and non-federal government)
099 - Equipment federal government-owned only
The Accounting Department initiates payment notification labels that are forwarded to the Inventory Department when invoices for equipment are paid. Upon notification of payment, the Inventory Department collects all pertinent data on the equipment and assigns identification labels.
Gifts
All items, not just equipment, obtained by the university as gifts require the completion of the Consignment/Non-Cash Gift Form (University Stores stock #14024980). The form should be completed by the recipient and forwarded to the MSU Foundation for processing. See Section 315 for further instructions.
The Inventory Department receives this form for all gifts after acceptance by the Board of Trustees. If the gift meets the definition of equipment, it will be recorded in the equipment inventory system and assigned an identification number. The value of the item is determined by its fair market value at the time the gift is given. The value will be indicated on the gift form.
After receiving the original form with all the pertinent signatures and attachments, a copy will be returned to the originating department.
Consignment Equipment - On Loan
All items, not just equipment, obtained by the university on loan require the completion of the Consignment/Non-Cash Gift Form (University Stores stock #14024980). The form should be completed by the recipient and forwarded to the appropriate areas. See Section 315 for further instructions. Any questions should be directed to Contract and Grant Administration, 355-5040 or the Inventory Department, 355-0357 x141.
The Inventory Department maintains records for all items, not just equipment, that are loaned to the university. Once the items have been accepted, information will be gathered and recorded in the equipment inventory system with a code to signify the item is a "loan". It is the department's responsibility to notify the Inventory Department of any consignment status changes (i.e. loan changed to a gift, returned to the donor, or purchased by the department).
Fabricated Equipment
Any equipment that meets the criteria for equipment as identified in Section III and is fabricated, from separately acquired materials and assembled by Michigan State University trades people, principle investigator(s), project representative(s) or any combination of these individuals is considered fabricated equipment. All non-labor costs, such as, component parts, materials, supplies, shop charges, etc., associated with the fabrication of the item are generally exempt from indirect cost charges. The exemption from indirect cost charges does not apply when ownership of the final item will reside with the sponsor. Items purchased as part of the fabrication which otherwise would qualify as equipment, however, will not be subject to indirect cost charges.
Departments wishing to purchase materials for the purpose of fabricating equipment must first obtain written approval from Contract and Grant Administration (who will check for award restrictions). The requisitioning department(s) must then provide a description of the item to be fabricated to the Inventory Department. If appropriate, the Inventory Department will assign an inventory number which must be included on all requisitions. The equipment fabrication expenditure object code of 092 should be included on all requisitions and other purchases associated with the item to be fabricated. Any requisition with expenditure code 092 that does not provide the inventory number will be returned to the department by Purchasing.
The Inventory Department is responsible for assignment of the inventory tag upon notification from the requisitioning department(s) of its intent to fabricate equipment. The initial inventory tag assigned to the fabricated equipment will carry a “B” disposal code as long as the equipment is being built. When notification of substantial completion is received by the Inventory Department, the “B” will be changed to “IN USE” in the e+ Fixed Asset module and the equipment will be moved from the expenditure object code 092 to expenditure object code 090. Once the equipment is completed, the department needs to prepare a JVE to reclassify the equipment fabrication items from 092 to 090.
An item is considered substantially complete when the equipment can be put into service and used for the basic intended purpose.
NOTE: Work may continue to enhance the equipment after the date of substantial completion. Grant/contract monies can continue to be spent, if allowed by the sponsoring agency and approved by Contract and Grant Administration for additional options or accessories, that are equal to or in excess of $5,000.00 that may be added to the value of the equipment.
It is the responsibility of the requisitioning department(s) to track all readily identifiable costs associated with fabricating the equipment. The department is required to follow Generally Accepted Accounting Principles (GAAP), which allow for capitalization of costs that are “normal and necessary for the asset to be used for its intended purpose.” Such costs that are allowed and need to be tracked include but are not limited to: normal freight charges, customs charges, installation and set up costs (including cables and software installation), site preparation, and discounts. Examples of unallowed costs are: expedited freight charges, maintenance plans and warranties, operating supplies, handling fees and training costs, software licenses and project personnel salaries.
Equipment cost is the total cost to date and assumed to be $0 at the beginning of the fabrication and not the budgeted dollar amount.
On a semi-annual basis, but preferably quarterly basis, the requisitioning department(s) is required to record and report all readily identifiable non-labor/non-salary costs (092 expenditures) associated with the fabricated equipment. The Inventory Department Fabricated Equipment Expenditure Update Form (Exhibit 1) must be completed and faxed or e-mailed to the Inventory Department. All annual reporting will occur prior to year end, and must be submitted to the Inventory Department on or before May 31st each fiscal year.
The requisitioning department(s) is required to submit (Exhibit 1) confirmation of completion of the fabricated equipment upon first use of the equipment for its basic intended use. If, upon substantial completion, the fabricated item meets the equipment definition an Inventory Department staff member will arrange to attach the inventory tag and collect any additional information required. Before the Inventory Department can correctly capitalize the equipment, it will need all cost documentation associated with the fabrication including account number(s) charged, purchase order numbers (or other purchase identifiers), a clear description of what was purchased, copies of ledgers reflecting the expenses and the amount of each item making up the fabricated item. The quarterly and/or annual reports described above should provide most of the information necessary.
Federal Funds
All equipment purchased with federal funds (i.e. from accounts 61-0000 to 61-5999) must be necessary and reasonable for proper and efficient accomplishment of the project or program objectives. Screening for duplicative or unnecessary items is no longer required; however, the department and principal investigator are responsible to ensure that duplicative or unnecessary purchases are avoided. Also, the following statement, certified by the project's principal investigator, must be included on all equipment requisitions:
I certify that this equipment is necessary and will be used primarily, or exclusively for the project(s) to which the costs will be charged and that similar equipment is not available for my use.
______________________________________________
Principal Investigator or Project Representative
V. EQUIPMENT STATUS CHANGES
Transfer or Disposal of Equipment
All university-owned property, equipment, and supplies that are no longer needed should be transferred to another department or consigned to the MSU Surplus Store for disposition. Departments are prohibited from selling or donating property. All property consigned to the MSU Surplus Store will be subject to one of the following procedures:
- Property will be made available for purchase by other campus departments to promote reutilization.
- Property will be made available for purchase by the general public to obtain funds for the university.
- Property will be donated, recycled, or disposed of by other means.
Departments that want to salvage, sell, or transfer equipment must complete an Equipment Transfer Notice. Refer to the Manual of Business Procedures, Volume II, Section 300 for specific procedures.
NOTE: Equipment purchased with sponsored research funds (61-0000 to 61-5999) may require specific approval of the granting agency prior to any disposal. Contact Contract and Grant Administration at 355-5040 for instructions on the proper procedures to follow.
The MSU Surplus Store receives a copy of all Equipment Transfer Notices, not just for equipment. Equipment Transfer Notices with equipment listed are forwarded to the Inventory Department. Upon receipt by the Inventory Department, the equipment records are altered, if applicable, to reflect the revised status of the equipment (i.e. salvaged, sold, or transferred). If the equipment is transferred to another university department, the records will be altered to indicate the new department responsible for the item. Transfers within the university do not impact the value of the equipment, regardless of the amount another department pays for the item.
Equipment consigned to MSU Surplus for disposition is in the possession of MSU Surplus, but ownership remains with the releasing department until the equipment is sold. Equipment consigned to MSU Surplus is coded “C” on all physical inventory reports.
All changes in equipment status made during a fiscal year will be reflected in the annual listing provided to all departments.
Loaning Equipment
The university prohibits loaning or borrowing university-owned or government-owned property to entities, agencies, or individuals outside of the university. All property owned by the university, government-owned or on loan from the government must be used exclusively for university-related business.
Special Written Notice
Research equipment purchased from accounts (61-0000 to 61-9999) may be added to or removed from inventory records upon approval and completion of a written notice from Contract and Grant Administration. This includes equipment added or removed as a result of a researcher changing universities. Details of the action requested should be documented (i.e. contract number or letter of agreement) and approved by Contract and Grant Administration. If government-owned equipment is to be removed from the inventory records, Contract & Grant Administration must provide the Inventory Department a letter of approval from the federal agency that owns the equipment showing that title now belongs to MSU or that the government requests the transfer of the equipment elsewhere. Additional information and examples can be found at http://www.cga.msu.edu/equiptrans.htm.
Memos from departmental administrators may initiate a change in the inventory equipment record. However, this change will only result after appropriate documentation or approvals are received by the Inventory Department.
Equipment Taken Off-Campus
Departments that identify a need to temporarily use equipment owned by the university at an off-campus location must first document the removal and obtain approval from the department chairperson, director, or administrative head. The department must document the removal by recording the description of the item(s), inventory number(s), off-campus location, and person responsible for the item(s) while off campus and retain the information with the signed approval of the department chairperson, director, or administrative head. For temporary relocations, it is no longer necessary to submit documentation to the Inventory Department. However, if relocations are permanent or long term (cross into a new fiscal year), departments are required to notify the Inventory Department.
Lost, Damaged, Destroyed or Stolen Equipment
Departments must have appropriate safeguards in place to prevent loss, damage, destruction or theft of equipment. It is the department's responsibility to notify the Inventory Department, as soon as the facts become known, of all cases of loss, damage, destruction or theft of university and government-owned equipment in its possession or control.
In addition, government-owned equipment requires a report detailing the exact status of the equipment and must be furnished to both the Inventory Department and Contract & Grant Administration. Contract & Grant Administration is then required to promptly notify the appropriate government agency's property administrator of all cases of loss, damage or destruction of government property. (Note: The department could be liable for this government property.)
MSU must require that any of its subcontractors possessing or controlling government property accountable under a government contract investigate and report all instances of loss, damage, or destruction of such property as well.
According to university policy, if equipment (university or government) is deemed stolen, then it must be immediately reported to the department chairperson, director or dean and to the Department of Police and Public Safety. A written report outlining the description of the stolen item, the date and circumstances of the loss, building and room number, steps taken to recover the property, and any other relevant information must be provided to the Department of Police and Public Safety. A copy of this report must also be sent to the Inventory Department and the Office of Risk Management & Insurance.
Upon receipt of either report, the Inventory Department will update the asset record so the department's annual disposal list reflects the status change.
VI. EQUIPMENT TRACKING
The tracking process begins when the Inventory Department receives payment notification from the Accounting Department. The information collected and recorded in the inventory system is the same for each piece of equipment. The information consists of the following: description, model number, serial number, unique identification number (inventory number), department number, building number, room number, purchase order number, account number, account code (indicates funding source), check number, acquisition value, equipment classification code, disposal code (indicates last status change), and date paid. Each item is specifically identified by the unique number on the identification label. There are only two different types of labels used to identify the three different entities owning equipment, which are the university, governmental, and other entities that loan equipment to the university.
It is the responsibility of the owner department to inspect equipment on a regular basis to ascertain that it is in good working condition and to oversee a maintenance program for the protection and preservation of the equipment. Disposition codes are used as indicators to describe the condition of equipment.
IN USE
- Good working condition
Code S
- Equipment has been sent to MSU Surplus for sale or disposal; equipment may need an evaluation to determine if it is in working condition and/or saleable
Code X
- Equipment no longer functions for its intended purpose so it is cannibalized for spare parts or discarded and sold for scrap by the MSU Surplus Store
University-owned Equipment
All university-owned equipment will receive a "Property of Michigan State University" identification label with a unique number. Under most circumstances, the identification label is placed on the front of the equipment where it is visible and easy to identify. If this is not feasible, an alternate location will be chosen.
Government-owned Equipment
Government-owned equipment, where title remains vested with the federal government, can only be used to perform the specific grant or contract activity for which it was obtained, unless otherwise specified in the award document or approved by the government Contracting Officer. Written approval to use government-owned equipment must be authorized in writing by the Contracting Officer, not just the Program Officer.
All government-owned equipment will receive a "Property of the U.S. Government" label and a "Property of Michigan State University" label. The government label will indicate federal ownership and will be located next to the "Property of Michigan State University" label. It is the responsibility of the department to ensure that the proper identification labels are on the equipment and to remove the "Property of U.S. Government" label when title is transferred to the university. The Inventory Department and Contract & Grant Administration must be notified when or if title is transferred to the university so that the equipment inventory records will reflect the change in ownership. The correspondence giving MSU title must be signed by an authorized agency official, that will be verified by Contract and Grant Administration and a copy forwarded to the Inventory Department.
Maintenance, Repair and Protection of Government-owned Property:
Government-owned property, versus the majority of MSU equipment that was purchased with government or MSU funds, is unusual and, as a result, requires special oversight procedures. It is usually provided directly from a federal agency, or purchased on a MSU account that has the unusual contract condition that title of the equipment remains with the government. It is the responsibility of the project's Principal Investigator(s) (PIs) to oversee the maintenance program for government-owned equipment. The physical maintenance, repair, protection and preservation of the property can be performed by departmental or university personnel, or through external maintenance contracts. In all cases of government-owned property, the PI(s) must have a plan to insure proper repair, protection and preservation of the asset.
The PI(s) and/or other project personnel under the supervision of the PI(s) should regularly inspect the equipment to ascertain that it is in good working condition and still needed for the project for which it was obtained or a follow-on project if approved by the federal sponsoring agency. In addition, any excess equipment that is no longer needed for the federally-sponsored project must be reported to the Inventory Department as well. The Inventory Department will contact Contract & Grant Administration for proper action and notification of the government property administrator when required. Surplus (unneeded) equipment must be adequately protected by the department and PI(s) and properly maintained pending disposition instructions.
The annual equipment inventory that is coordinated by the Inventory Department will separately identify government-owned property to assist in meeting these federal requirements.
Government Furnished Equipment (GFE)
A copy of all documents concerning each item of government-loaned equipment must be sent to the Inventory Department and Contract and Grant Administration so that the university can comply with federal regulations governing loaned equipment. The tracking procedures and the information maintained for the item is the same as for other government-owned equipment. The equipment will be coded as a "loan" in the equipment inventory system.
Loaned Equipment
Equipment loaned to the university from non-government sponsors will be handled in the same manner as government-furnished equipment.
VII. PHYSICAL INVENTORY
The university has the fiduciary responsibility of maintaining proper control over all of its equipment, regardless of the location or purpose. Failure to accurately account for equipment could preclude the university as a whole from applying for federal grants, as inventory records are subject to federal and other external audits. Because adequate insurance requires accurate documentation of university-owned equipment, each department must review records and submit any changes to ensure that inventory system records are correct.
The Inventory Department conducts actual physical inventory for departments on an alternating yearly basis. This process allows one half of university departments, plus all off-campus departments, to verify inventory, make appropriate corrections with corresponding documentation, complete the certification form and return the information to the Inventory Department by a specified date. The Inventory Department conducts a physical inventory for the remaining departments. It is the recommendation of Internal Audit and the Inventory Department that for a large department and/or complex inventory list, a department representative assist with the physical inventory to locate and identify equipment.
Verification of records includes not only the information about the equipment, but also its location and use. If the location of the equipment changes during the year, the department must notify the Inventory Department immediately so that the inventory record can be updated. Verification also means that the equipment is being properly utilized and that a continued need exists. Corrections can be noted directly on the computer-generated list, but disposals or transfers must be accompanied by the appropriate paperwork. Any equipment that is coded as missing at the annual inventory must be accompanied by an explanation as to why the equipment was not located. If it has been determined that the equipment has been stolen, it must be reported to the Department of Police and Public Safety. It is the department’s responsibility to send a copy of the “verification of loss” from Department of Police and Public Safety to the Inventory Department at the time of the incident or include it with the reconciled Active Tabulated List. Lost and/or stolen equipment may require additional notifications; see Loss, Damaged or Destroyed Equipment for more detail.
As part of the year-end physical inventory process, the Inventory Department issues the following reports:
1. Active Tabulated List - List of all inventoried items, active or transferred, within a department.
- Distribution Lists: Each department receives their individual section; Internal Audit and Financial Analysis receive the entire report.
2. Active Summary - Table for all inventoried items, active or transferred, within the university.
- Distribution Lists: Financial Analysis.
3. Building Summary - Dollar value of all inventoried items, active or transferred, within a building.
4. Plant Fund Report - List of all inventoried items, active or transferred, purchased on any 41- accounts within the reporting fiscal year.
- Distribution Lists: Financial Analysis.
5. Transferring Department Tabulated List - List of all inventoried items transferred from a department within the reporting fiscal year by prior/transferring department.
- Distribution Lists: Each transferring/prior department receives its individual section; Internal Audit receives the entire report.
6. Department Disposal Tabulated List - List of all disposed inventoried items within the reporting fiscal year: donated/gifted, MSU Surplus, stolen, trade in/sold, returned to company, discarded/cannibalized, missing, sold off-campus.
- Distribution Lists: Department Contact, Deans, Directors, Chairpersons and Executive Managers, Financial Analysis, Internal Audit; Contract and Grant Administration (federal government-owned or object code 099 only).
7. University Wide Disposal Summary Reports - Summary of all disposed inventoried items within the reporting fiscal year by
a) Disposal code & equipment class and
b) Equipment class & department number .
- Distribution Lists: Financial Analysis.
8. Deleted Tabulated List - List of all deleted inventoried items within the reporting fiscal year.
- Distribution Lists: Financial Analysis, Internal Audit; Contract and Grant Administration (federal government-owned or object code 099 only).
9. University Wide Missing Tabulated List - List of tagged items with disposition code of "Y"=Missing, sorted by department number, sub-department code, equipment class and building number.
- Distribution List: Deans, Directors, Chairpersons and Executive Managers, Financial Analysis, Internal Audit; Contract and Grant Administration (federal government-owned or object code 099 only).
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