3.4 Physical Inventory

A physical inventory is performed in accordance with University policy and Sponsor compliance requirements.  At a minimum, the process includes a physical sighting or other approved method of verification to confirm the existence, location, department, project accountability, and use status of equipment.

In general, inventory results are indicators of the overall effectiveness and level of compliance with property management processes and controls.  Inventory results confirm the accuracy of the property records and are used as the basis for financial, stewardship, and compliance reporting.  Results confirm what may be considered as a best practice or may be used to identify areas of potential improvement.

Contact

Questions about this policy can be answered by:

Stanley Dunn

Associate Director

Property Management Office

(650) 725-0081

To report a broken link or send comments/suggestions about property management content, send email to:

pmo-dor-webmasters@lists.stanford.edu

1. Key Policy Statements

  • A campus-wide inventory is performed on a biennial basis; more frequent inventory events may occur depending on the terms and conditions of the accountable sponsored project or other identified risk.
  • Asset accountability is at the department level, with additional stewardship responsibilities at the custodian or user level.
  • To ensure separation of duties, the primary inventory verification is performed by the Property Management Office (PMO), with reconciliation of exceptions done by departments.
  • The Sunflower (SFA) property management database is used as the data source and system of record for equipment for physical inventory activity

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2. Inventory Performance Goal

Departments are required to meet a performance goal of 98% (100% for sponsor owned) which conforms to current industry standards for property management.

Departments not meeting inventory performance goals may be required to submit a corrective action plan to PMO.

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3. Inventory Frequency

A biennial physical inventory is performed on a cyclical basis at Stanford.  Circumstances which may warrant more frequent inventories include:

  • Award close-out or termination
  • Terms and conditions of a sponsored project
  • Results of a prior inventory
  • Changes in level of departmental compliance
  • Large organizational changes
  • Emergency response or support
  • Other identified risks

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4. Inventory Baseline

At a minimum, the assets included in an inventory baseline are comprised of the following asset groupings for which the University is responsible and accountable, regardless of their physical location:

  • Stanford-owned capital assets
  • Government or other Sponsor-owned equipment and material (regardless of cost)
  • Leased equipment
  • Equipment on loan to the University
  • Designated sensitive property

Other assets, such as Stanford-owned non-capital equipment, may be identified and recorded in the SFA property management database.  Such assets, if encountered during the verification process, may be scanned but are not included in the baseline results of the biennial inventory.

Special inventories are performed as needed.  Assets included in the baseline for a particular event will be based on the circumstances leading to the requirement for performing the inventory.

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5. Physical Inventory Planning, Preparation and Scheduling

PMO is responsible for the development and implementation of the biennial inventory schedule.  Prior to each inventory, communications occur with each department involved to confirm details including:

  • Schedule
  • Key personnel
  • Area escorts and access
  • Asset baseline
  • Space to be included in walkthrough
  • Verification and reconciliation expectations
  • Documentation requirements
  • Inventory event communications
  • Additional considerations as needed

Critical factors contributing to the success of an inventory include:

  1. Visible management advocacy of property administration requirements
  2. Department-wide understanding of property management processes and performance goals
  3. Timely and effective interaction with the Department Property Administrator (DPA) by all personnel
  4. Accurate and timely record-keeping by DPA
  5. Completion of the steps included in the Pre-Inventory Checklist

Inventory Schedule Changes

The Biennial Physical Inventory schedule is developed by PMO in collaboration with the designated Department Property Administrator (DPA). 

A primary objective in scheduling is to maintain approximately a 2-year interval between inventory events for a given area/department; however, we strive to support the needs and availability of departmental staff.     Should a schedule change be required, please contact PMO at (650)723-1735.

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6. Key Roles and Responsibilities

Property Management Office 

  • Establish policy, procedure, performance criteria, and process implementation
  • Define inventory schedule
  • Conduct initial scanning event
  • Provide interim,  reconciliation and final reports  
  • Review and approve inventory adjustments

Department Management

  • Ensure adequate resources are available to support inventory event
  • Disseminate inventory information to maximize staff participation
  • Support ongoing property management awareness and compliance

Principal Investigator (For equipment accountable to sponsored projects)

  • Ensure assets are accessible for inventory verification
  • Maintain ongoing communication with the DPA regarding property activities and record updates
  • Assist in subcontractor communication, as needed
  • Provide assistance to DPA during reconciliation

Department Property Administrator 

  • Ensure property is tagged and records are current, complete, and accurate
  • Provide adequate escort and access during scanning and reconciliation activities
  • Provide documentation for untaggable and off-campus assets, including those in storage
  • Research and provide resolution for unfound assets within reconciliation period

Asset Custodian

  • Assist the DPA as needed during inventory scanning and the reconciliation periods

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7. Verification and Data Collection

Methodology

The majority of assets are verified during the inventory via one of the following three methods:

  • Wall to wall physical verification

    • Searching each room of a building for all assets within

  • Inventory by exception

    • Substantiating asset via pre-defined alternate method (e.g. maintenance or calibration record, transfer documents, network pinging report)

  • Attestation with sample verification

    • Used in low volume, low risk areas only

    • Selecting and verifying a random sample from a listing which an authorized department representative provided as confirmation of inventory

Wall to wall verification is the primary method used for physical inventory.  Inventory by exception and sample inventories may be used for special situations and require the prior approval of the Director of the Property Management Office.

Technology/Data Gathering

For the majority of assets, barcode technology is used to record the equipment location and verify the following data elements:

  • Stanford ID number (SU barcode number)
  • Description
  • Location
  • Manufacturer Name
  • Model Number
  • Serial Number
  • General Use Status
  • General Asset Condition
  • Other data elements as needed or specified in the biennial inventory plan

Each asset physically verified during the inventory is marked with an inventory decal identifying the current inventory cycle.  Missing or damaged ID tags may be identified and replaced as needed.

The Sunflower property management database is updated to correct inaccurate data which is discovered during the physical inventory scanning and verification process.

Asset Record History

The Sunflower asset record for each item included in an inventory baseline has an inventory event recorded in its transaction summary and history.  The posting will include an inventory resolution type and inventory date.

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8. Special Circumstances

In addition to the verification methods stated above, the following special circumstances may require alternate inventory protocols:

Untaggable Assets

Untaggable assets (As defined in Section 3.2– Identification) are to be fully inventoried in conjunction with the initial scanning event for the area in question.

Department Property Administrators (DPA's) are expected to provide the Inventory team with current copies of the required supporting documentation (e.g. “Untaggable Binder”) for all untaggable assets in their department(s), and identify them during the wall to wall scan.

Off–Campus Assets

Assets may be located off-campus and inaccessible for physical verification.  Such circumstances include:

  • Items in use at a subcontractor facility
  • Items approved for use at a residential location of a University employee
  • Items in use at an alternate business/work location
  • Items out for repair

Generally, for verification of an item that is inaccessible due to an off-campus location, the DPA is expected to provide the Inventory Group with a copy of a current (updated within the last 12 months)  Off Campus Equipment Verification Form.  This document serves to verify the current asset status.  Periodically, the custodian may be required to return the item(s) to campus for physical verification.

Government Owned or Furnished Property at Subcontractor Facility

Government-owned or Government furnished equipment at a subcontractor’s facility for which Stanford is accountable may have specific inventory requirements per the terms and conditions of the accountable award.  PMO will work closely with the PI and the subcontractor to ensure the inventory is completed, reconciled, and reported.

Items in Storage

Stored equipment may or may not be located on campus.  Items in storage on campus can usually be inventoried during the wall to wall physical scanning and verification of a department’s assets.  On-campus assets that are inaccessible (i.e. packed or crated) should have an accompanying listing verifying the contents of each storage container for use as an attestation.  Sampling verification may be used as needed.

Equipment stored off campus should be documented as an off campus asset, and inventoried as such. Refer to Section 3.3, Records regarding the proper documentation and accounting for equipment stored off-campus.

Particular attention should be paid by the DPA to verify that the status of the equipment is correctly annotated as “Inactive” while the item is in storage.

Cannibalized Assets

Cannibalized assets should be immediately identified as such and the record retired from the system.

Fabrications - Work in Process

Until completed, fabrications are not considered capital equipment; they are work-in-process (WIP).  This includes components that exceed the capital threshold, which have been clearly identified as fabrication components. Unless otherwise specified in the agreement terms and conditions, WIP is not included in the biennial physical inventory. 

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9. Material Inventories

Material that is Government-owned or Furnished (GFM) and is accountable to a sponsored project is inventoried biennially and/or per the terms and conditions of the sponsored award.

Material items are not usually bar coded.  Quantities are verified in a method appropriate to the type of material.  The inventory of GFM is limited to the balance on hand items as reflected in the Material Tracking Database (See Section 3.3 – Records). 

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10. Reconciliation and Reporting

Reconciliation Period

After the initial sweep of an area by the inventory team, preliminary results are provided to the DPA and the department’s management, usually within 5 working days.   The preliminary results indicate progress to date and identify items still to be located.  This hand-off initiates the start of the reconciliation period. 

Reconciliation periods vary based on the number of assets in a department.   The specific timeframe will be communicated to the department prior to the start of the inventory.  Departments should plan to have personnel available through the completion of the inventory and reconciliation, to identify, locate or otherwise account for unfound equipment.  As unfound items are located, the DPA should contact the Inventory group to arrange for the items to be scanned. Documenting extraordinary circumstances requires prior approval from the UPA and the Inventory Manager in order to resolve the inventory discrepancy.

Interim Reporting

At the end of each department’s reconciliation period, a report detailing final results of the inventory will be generated by PMO and sent to the DPA and higher management as applicable.

Corrective Actions

Departments not meeting the inventory performance goals will be required to submit a corrective action plan, outlining in detail the steps they will take to improve performance in subsequent cycles going forward. Failure by a department to successfully meet the inventory performance goal may also result in a department’s physical inventory being performed more frequently than every two years.

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11. Final Reporting and Financial Adjustments

At the conclusion of the two-year cycle, items not located will be declared unaccounted in the SFA property management database.  Overall University results are analyzed and final reports generated.  Inventory results of government-owned property are provided to the cognizant sponsor representatives per the terms of each accountable agreement. 

Should Government-owned assets remain unaccounted at the conclusion of the inventory period the Sponsor will be notified.  A corrective action plan is submitted with a request for relief of accountability in compliance with Federal Acquisition Regulations (FAR) regulations and terms and conditions of the award.  If a Government-owned asset reported as unfound is later located, the sponsor will be notified and the property record reactivated.  Adjustments to the property record will be made in accordance with Sponsor directives.

Non-federal Sponsor-owned assets not located during the inventory cycle are reported to the Sponsor as required by the terms and conditions of the award.

Stanford-owned items not found for two consecutive cycles will be evaluated for potential write-off.  Financial adjustments are recorded in the SFA and Oracle Fixed Asset systems.

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12. Special Inventories

Location Updates

Location inventories are usually independent of the biennial physical inventory.  Moves of equipment into or out of labs, administrative areas, etc. necessitate updating the location information in the SFA property management database.  For large moves, a “Location Inventory” is an expeditious method to update the records with the new location.  This will help to ensure that equipment affected by the move has been accounted for.

Contact your UPA to arrange a location inventory.

Contract Closeout

A final physical inventory of the equipment accountable to a sponsored award and associated subawards is often required as part of the contract closeout process. These inventories are conducted on an award by award basis at the end of the award period, or as required by the terms and conditions of the sponsoring agency. All accountable property, regardless of location, must be included.  The results are reported to the sponsoring agency as specified by the terms of the award.

Contract Terminations

Per Federal Acquisition Regulations (FAR) 52.245-1.f. (iv), a complete inventory of equipment or material accountable to the contract is usually required if a contract is terminated before the end of the performance period.  Contract terminations are time-sensitive. Contact your UPA as soon as the issue arises.      

Subcontracts

Government-owned property at sub-contractor facilities, for which Stanford University is ultimately accountable, is also subject to physical inventory.  Sub-contractor physical inventories are performed biennially or as required by the terms and conditions of the sponsored award.  The subcontractor provides signed attestation as to the accountable property in their possession.  The attestation information is subsequently reported by PMO to the Sponsor as required.

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