Inventory Management

Governments, like most businesses, have considerable investments in inventory. While governments are not primarily engaged in manufacturing or sales, they stock significant amounts of inventory of various types: gas, oil and supplies for car pools; weapons for public safety and correctional officers; salt for ice control; books and laboratory equipment for universities; drugs in hospitals; inventories of laptops and other computer equipment; etc. Many of these items have a fairly high value to weight or value to size ratio, making them targets for thieves. Once stolen, they can be disposed of easily.

Proper controls must be in place to account for governmental inventories. Receiving records should be validated against deliveries. Materials should be stored in secured areas. Frequent physical inventories may be necessary and annual inventories are generally required.

There should be adequate segregation of duties between receiving, payment processing and inventory reconciliation. Certain stewardship resources, such as firearms and laptops, should be charged out to individuals and their return should be verified.     

Risks Risks Risks
Accounting Data Accounting data can be compromised as easily as inventory or cash. Criminals can do considerable financial damage by manipulating accounting records as well as by physical theft.

Protect all servers and computer workstations with passwords.

Hire a third-party network security expert to secure access to files.

Compare internal financial data with bank statements and financial documents to ensure records remain accurate.

Separate duties.

Conduct independent audits.

Prepare internal reports.

Helpful Links:

Damage Products get damaged during normal business operations. Some products have a higher risk of damage than others.

High risk damage products need special inventory control policies in place to minimize damage.

Helpful Links:

General Guidance Governments have a lot of taxpayer resources tied up in inventories. From nuclear weapons to paper clips, governments are among the largest purchasers and warehousers of goods. These goods are subject theft and misuse. Some tools for mitigating fraud are offered to the right.

National Association of State Controllers (NASC) Control Questionnaire for Capital Assets

The following links provided courtesy of Accounting, Financial & Tax (AFT):


Theft Prevention and Inventory Management – What’s the Connection?

First-In, First-Out (FIFO)

Detecting and Preventing Accounts Payable Fraud

Life Cycle/Shelf Life

Product Type: Short or long shelf life. Adopt a First in/First out (FIFO) policy. However, if at any time goods come into the warehouse out of expiration date sequence, a FIFO policy will fail to manage the inventory properly.

Product Cost: High cost of a specific inventory.

Lead time: The time from receipt of an order to the time of delivery. When suppliers are overseas, the lead time in inventory increases.

FIFO policy.

A serial number placed on the external packaging and the actual product itself. This number is used to track items through every move into and out of the warehouse.

In libraries, the call number, or, a new electronic code.

Audio-visual equipment.

Signatures from authorized personnel.

Security guards in front of warehouse or, accompanying the movement or transfer.

Helpful Links:

Mismanagement Inventory control manager with few years of experience. Not having clear policies and procedures to maintain the proper inventory levels. Lack of staff training in policies and procedures. Lack of standard operating procedures or handbook that highlights procedures. Not following the guidelines of any pre-existing service agreement.

Auditing on a constant basis and at all levels.

Tracking new product line manually or, with an electronic inventory management system.

The following helpful links are provided courtesy of Accounting, Financial & Tax (AFT):

Theft/Lost Inventory Missing items due to physical theft.

Security cameras with recording devices.

Performing regular and random inventory counts to uncover issues of theft or waste quickly.

Security guards.

Separation of duties.

Internal reports.

Good space utilization so that products are not to be moved frequently. This also reduces the labor cost associated with inventory.

Helpful Links: