Internal Controls

Each department is responsible for safeguarding the university’s assets, whether those assets are in the form of cash, merchandise or supplies.

A system of internal control is needed to ensure that appropriate management of these assets occurs. Good inventory internal controls incorporate the following:

  1. Written departmental inventory management policy and procedures. Staff must be trained on departmental policy and procedures.
  2. Adequate separation of duties between those responsible for the physical inventory (e.g., ordering, receiving, distributing/selling) and those responsible for the inventory accounting records (e.g., approving payments, charging departments/customers, maintaining the perpetual inventory balance in the Finance System, and reconciling the Finance System).
  3. An internal inventory system that records all inventory activities, including acquisitions, sales, returns and adjustments.
  4. Adjusting the Finance System inventory value for all inventory activities, including acquisitions, sales, returns and adjustments.
  5. Securing the inventory in such a manner so that inventory may not be removed or otherwise affected without a record being made of the event.
  6. Conducting a periodic count and costing of the inventory. For inventories >$100,000, this must be done at least annually for the university’s June 30 fiscal year-end. More frequent counts should be made depending upon the size and vulnerability to misappropriation of the inventory. Compare the count and costing to the inventory record system and to the Finance System. All differences should be investigated and explained.