Inventory & Supply Management

Inventory & Supply Management

July 10, 2023 | Financial Management

For most schools, Inventory is the last thing that you consider keeping track of throughout the year until audit time comes around. Per the Texas Education Agency (TEA) Financial Accountability System Resource Guide (FASRG), every school in the state of Texas is required to maintain an Inventory & Supply system using an acceptable software. Auditors will also review the school’s inventory policy annually at time of audit. Property purchased or leased with funds received by a charter holder is public property for all purposes under state law. It is property of Texas held in trust by the charter holder for the benefit of the students of the open-enrollment charter school and may be used only for a purpose for which a school district may use school district property. The TEA requires schools to maintain a listing of all capital assets purchased with state or federal funds. 

The following are key components to an effective inventory system:  

  • Policies and procedures 
  • Clear roles and responsibilities for inputting, tracking, and disposing of items. 
  • Clear and simple template for numbering and naming system, and inventory locations 
  • Consistent follow through on physical counts and reconciliation. 

Charter schools are responsible to account for current and non-current assets. Charter schools should have a policy on how inventory should be maintained and when the physical inventory will be completed. The inventory policy should identify what must be inventoried (as set by your charter’s asset level), and what other items may be considered for inventory. It is important to identify in the inventory policy – the threshold for other inventory that will have records kept. It should also provide inventory management procedures and examine the full life cycle of inventory from acquisition to maintenance, to disposition. When establishing the policy to name and number the items in your inventory system, use an easily understandable naming convention. The use of descriptive words like large and small or even adding a color will help during the physical inventory.  

Physical inventories must be conducted at least every two years, but it is advisable that you conduct a physical inventory every year. Inventory systems should track capital assets, non-capital assets, as well as consumables. When inventory is purchased using Federal funds, a separate naming system or template should be used to easily identify that this item was purchased using Federal funds.

You must maintain records of the percentage of federal participation in the cost record. This is vital information in the event of a loss due to theft or damage. All federally funded assets shall be maintained in an operable state.

On items that have been purchased using federal funds, in the event of loss due to theft or damage, asset records shall be recorded on the fixed assets database with the date of the loss. The disposition records such as the loss report shall be maintained with the asset records.

The inventory of all assets and reconciliation of the inventory reports shall be included in the inventory procedures. If items were purchased with federal funds, and were lost due to damage or theft, a disposition request form must be completed and filed with TEA. Items that are tangible in nature and have less than a 1-year lifespan are not necessary to be maintained in your inventory system.

Asset records should be maintained throughout the life of the asset or throughout the period that the asset is being depreciated. An inventory system is helpful to determine when stock needs to be re-ordered or when you have an overstock of a particular item.  

Consider the following items that may cause your  inventory  system  to be ineffective:

  • Inventory items that fail to get entered into the system  
  • Moved inventory items that were not tracked properly on a transfer form  
  • Complicated or ineffective numbering and naming system, and of inventory locations 
  • Lost or stolen items never identified and reported on the proper disposition form 
  • Never taking the time to do a physical inventory or not reconciling the inventory reports  

An inventory system will be used by many departments within the school. Charter Administrators, such as Program Coordinators, Department heads, and IT Managers will rely heavily on this information for planning throughout the year and especially when preparing budget requests and submitting requisitions for the next year.

Once the Inventory Policy is in place, be sure that it is updated and maintained regularly. Staff should be trained at least annually on what should get entered into the system and how to properly transfer or dispose of items. Consistency is most important in maintaining clear and clean inventory records.   

Questions?