INVENTORY CONTROL, ASSET AND STORES MANAGEMENT AND DISTRIBUTION
Objectives of inventory control, asset and stores management and distribution.
The accounting officer manages a procuring entity’s inventory, assets and stores for the purpose of preventing wastage and loss, and continuing utilization of supplies. To avoid unprofitable lock-up of funds, stocks should be kept to the minimum necessary for the efficient conduct of the procuring entities. The accounting officer may employ inventory management and control software to assist the entity to meet the objectives of sound supply chain management.
The accounting officer ensures proper management and distribution of inventory, stores and assets by ensuring that—
a. they are received and taken on charge;
b. they are consumed in the course of public business and a record of the same is maintained;
c. any inventory, stores and assets worn out in the course of public business are removed from the stores records through a disposal process;
d. items lost, stolen, destroyed, damaged or rendered unserviceable other than by fair, wear and tear have been removed from the stores record through a loss adjustment report.
Receipt and recording of goods, works and services.
The accounting officer only receipts goods, works and services which have been certified based on a purchase order, service order or signed contract.
The accounting officer of a procuring entity records goods, works and services received under in an inventory of the procuring entity and ensure that:
a. preventive measures are put in place to eliminate theft, security and safety threats, losses, wastage and misuse;
b. the movement and condition of assets can be tracked;
c. stock levels are at optimum and economical level;
d. systems, processes and procedures both in electronic and manual form are in place. In managing assets and inventory, the accounting officer of a procuring entity—
a. ensures that funds are not tied up in inventory, stores and assets by procuring excessive items beyond the procuring entity’s consumption capacity to avoid storage costs;
b. is responsible for custody, care, control and use of government inventories under him or her;
c. ensures that there is adequate, safe and secure storage space and facilities commensurate with the needs of a procuring entity;
d. is responsible for the management of inventory, stores and assets in compliance with the guidelines issued by the PPRA and the National Treasury;
e. in the event of any loss of stores, conducts an investigation to establish the cause of the losses and take appropriate action in line with the prevailing Government Regulations and any written law.
Inventory, stores and asset management system.
The accounting officer sets up an inventory management system which is managed by the head of the procurement function, for the purpose of control and managing its inventory, stores and assets.
In managing assets and inventory, the accounting officer of a procuring entity—
a. ensures that funds are not tied up in inventory, stores and assets by procuring excessive items beyond the procuring entity’s consumption capacity to avoid storage costs;
b. is responsible for custody, care, control and use of government inventories under him or her;
c. ensures that there is adequate, safe and secure storage space and facilities commensurate with the needs of a procuring entity;
d. is responsible for the management of inventory, stores and assets in compliance with the guidelines issued by the PPRA and the National Treasury;
e. in the event of any loss of stores, he/she conducts an investigation to establish the cause of the losses and take appropriate action in line with the prevailing Government Regulations and any written law.
Management of inventory, stores and assets.
The accounting officer ensures that all inventory, stores and assets purchased are received, but not used until taken on charge. This is done to ensure that all procured items are properly accounted for and put in proper use as intended by the procuring entity.
The head of procurement function inspects the stores, at least quarterly (after 3 months) in each year, and conducts quarterly and annual inventory and stock taking in order to ensure compliance with the law and submits the report to the accounting officer.
Stores, inventory and assets procured are not allowed to suffer deterioration from any preventable cause and overstocking of any particular item is avoided.
All procured items assigned for use by a public or state officer are requisitioned from and issued by the head of the procurement.
The accounting officer follows policy set out by the Cabinet Secretary specifying the life span of each category of items before boarding for disposal.
Disposal procedure and methods. Disposal procedure
1. The employee in charge of the unserviceable, obsolescent, obsolete or surplus asset, brings the matter to the attention of the disposal committee through the head of procurement function within a reasonable time.
2. Where appropriate, a relevant expert in the subject items for disposal should write a technical report that sets up a reserve price which will be the minimum acceptable price of the boarded items.
3. The disposal committee meets within the prescribed period to conduct a survey and reviews the items, while considering the technical report and recommends the best method of disposal.
4. The accounting officer discloses the reserve price to the prospective tenderers based on the technical report.
5. Where there is no responsive bidder, the accounting officer on recommendation of the disposal committee revises the reserve price to ensure expeditious disposal of assets.
6. After receiving the recommendations of the disposal committee, the accounting officer may approve or reject the recommendation of the committee.
7. If the accounting officer approves the recommendations of the disposal committee, the assets that became unserviceable, obsolete or surplus are disposed-off.
8. If the accounting officer rejects the recommendations of the disposal committee, he or she gives further direction.
Methods
The disposal method has to be approved by the accounting officer and should be as per the Act or gazetted by the cabinet secretary.
1. Transfer to another public entity.
On the recommendation and justification of the disposal committee, the accounting officer can transfer assets, equipment or stores to another public entity with or without financial adjustments.
The accounting officer may transfer assets, stores and equipment on request from the receiving procurement entity based on the recommendation of the disposal committee.
It may result from a request from the receiving procuring entity or the procuring entity itself may make a proposal by the receiving procuring entity on its own volition.
The accounting officer of a procuring entity that is receiving the items may pay an agreed amount of money to the transferring procuring entity or may receive the items free of charge. Both procuring entities should maintain records of the items transferred.
2. Sale by public tender.
The accounting officer may dispose off items that have become unserviceable, obsolete, or surplus by public tender. Where the accounting officer has advertised for disposal through an open tender method and failed to attract successful bidders, the items can be disposed of within six months through a public auction.
The procuring entity uses standard asset disposal documents issued by the PPRA with sufficient information to allow fair competition among those who may wish to submit tenders.
The procuring entity may charge a fee for the disposal documents not exceeding Ksh. 1,000 only where physical copies are provided.
Bid deposit/security may be paid by the bidder and forms part of the sale price of the winning bidder.
The disposal document sets out the following—
a. a statement of any key technical requirements;
b. qualification requirements and evaluation criteria;
c. assets or equipment with implication on public health and safety, and environmental protection;
d. application of a margin of preference and reservations;
e. instructions on obtaining the disposal bidding document, including any price payable and the language of the document;
f. instructions on any pre-bid conference, site visits, access to stores, assets and equipment for potential bidders to assess the conditions, specifications and value;
g. instructions on the location;
h. deadline for submission of bids.
A procuring entity organizes a site visit to enable bidders to gain access to the unserviceable stores or surplus or obsolete assets or equipment to make their own assessment of the items.
3. Sale by public auction.
The accounting officer of a procuring entity ensures the procurement of services of a registered auctioneer through a competitive process. Only registered auctioneers having valid licenses conduct public auctions.
A procuring entity publishes an announcement of auction sale, inviting all potential bidders to participate in the sale.
An auction notice includes the following—
a. the name, address and contact details of a procuring entity;
b. the nature of the disposal requirement, including the description and quantity of stores, assets and equipment;
c. the location and timetable for disposing of the stores, assets and equipment;
d. a statement of any key eligibility requirements to participate in the auction sale, such as official identification paper for individuals, company registration, cash or bank draft,
b. evidence of qualification to dispose of the stores, assets or equipment in the context of public health and safety and environmental protection;
a. instructions on the location and time of the auction;
b. name and address of the auctioneer contracted.
The notice period for sale by public auction method is a minimum of fourteen days.
Bidders who provided auction deposits are given auction bidding numbers which they will be stating when announcing their bids.
The public auction is conducted professionally with all the participating bidders being given fair chances to bid up to the time the highest bidder is determined.
The participating bidders are availed copies of the public auction list.
The auction deposit (not exceeding 10% of the total cost of the estimated value) is placed for each item or lot of the auction.
The procuring entity staff and auctioneer staff keep the record of the winning bidders and registers the second highest bidder per item or lot.
At the end of the public auction the two lists of winners are tallied and signed by the representatives of the auctioneer and the procuring entity.
The successful bidder in the public auction is given a period of at least fourteen days from the date of the public auction to pay for the items and take possession of them and remove them from the procuring entity’s premises.
Where the successful bidder fails to do so, they forfeit the bid deposit and the items may be offered to the second highest bidder.
4. Waste disposal management.
The documents, procedures and approvals required for waste disposal management are obtained from the relevant public agencies allowing a procuring entity to dispose those items that are harmful and unfriendly to the environment.
The user department conducts an assessment to determine if a procuring entity is capable of disposing off the stores, assets or equipment itself or if it should seek the assistance of competent agencies.
Subject to the approval of the PPRA, the accounting officer may transfer an asset disposal proceeding to another procuring entity with necessary competence and capacity to carry out the disposal process on its behalf where—
a. it demonstrates lack of internal capacity
b. there exists another public entity with that capacity.
Where the accounting officer has transferred the disposal proceedings to another procuring entity, the other procuring entity is required to provide evidence that the disposal was done in accordance with the relevant laws and the Act.
Where the accounting officer has transferred the disposal responsibility to another accounting officer, the two accounting officers sign an agreement spelling out each entity’s responsibilities.
The disposal committee gives justification and recommendations to dispose of the stores, assets or equipment or the use of the waste disposal management method to the accounting officer of a procuring entity.
Upon execution of waste disposal management, the accounting officer obtains a certificate duly signed and issued by the disposing public entity or disposal agent.
5. Trade In.
The accounting officer may use trade-in as a method of disposal of unserviceable, obsolete or obsolescence or surplus stores, assets and equipment.
The user department justifies the use of the trade-in disposal procedure and submits its recommendations to the accounting officer for approval through the head of procurement function.
Any justification for the use of trade-in method arises from a combination of the need to procure and the need to dispose the stores, assets and equipment.
The disposal of stores, assets and equipment is a means of a procuring entity of obtaining a discount as part of a disposal requirement.
A cost-benefit analysis is used to demonstrate the transfer advantage compared to other methods of disposal.
A disposal requirement executed using the trade-in method is linked directly to a procurement requirement as reflected in the procurement plan of a procuring entity.
Procedure
A trade-in may be initiated and negotiated with a selected bidder of a procurement requirement through a direct procurement subject to justification and approval by the accounting officer.
Where direct procurement is used by a procuring entity, the value of the item to be traded-in is negotiated by the parties.
A procuring entity may also open a trade-in procedure to all bidders participating in the procurement in which case the bidders quote the value of the items to be traded-in.
Upon receipt of bids, a disposal committee conducts an assessment on the cost and benefits of the trade-in method to establish the following—
a. costs of trade-in if different from procurement requirement transaction costs
b. transaction costs without trade-in, such as sales or destruction;
c. comparison of the estimated sale value of the stores, assets or equipment with the estimated discount as part of the procurement requirement;
d. any other considerations that may inform the decision of the disposal committee to ensure value for money.
The disposal committee prepares an evaluation report for submission to the accounting officer through the head of the procurement function that includes:
a. a summary of the cost benefit analysis;
b. the results of the evaluation;
c. a recommendation on the trade-in or other disposal method to be used;
d. the current condition of the asset;
e. reserve price to be applied as part of the procurement process; and
f. any other relevant information
The disposal committee of a procuring entity establishes a reserve price in the case of trade-in below which the stores, assets or equipment may not be disposed of.
The reserve price is disclosed to the bidders.
6. Disposal to employees.
The procuring entity may dispose off unserviceable, obsolete stores, assets and equipment to an employee of a procuring entity, or a member of a board or committee of a public entity where—
a. the time and cost required to dispose to any other person is disproportionate to the value of the unserviceable, obsolete, obsolescence stores and equipment to be disposed;
b. the employee is in possession of the stores item or equipment to be disposed and may be given the first priority to purchase the same;
c. assets, stores and equipment are to be disposed of by taking into consideration the net book value or minimum acceptable price set by the technical expert, where applicable, at the time of disposal based on government policy.
The disposal committee of a procuring entity sets the reserve price for each item to be disposed. Employees of a public entity are allowed to participate in disposal processes through public tender and auction provided the employee is not directly involved in the disposal proceeding. Every disposal made by a procuring entity is reported by the accounting officer of a procuring entity to the PPRA within 30 days of the disposal.