2017-01 Performance Audit Report: Inventory Management at County of Hawai'i's Department of Public Works Highway Maintenace Division

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What items does the County considers inventory? There are three distinct categories of inventory: 1) fixed assets 2) controlled assets 3) materials, tools, and supplies (MTS) Fixed assets are purchased for long-term use, depreciable, and are not likely to be converted quickly into cash (e.g., land, buildings, equipment, and improvements that add permanent value to the asset) . Controlled assets, also known as "small and attractive", are items costing more than $250 but less than $1,000 that are inventoried because they are sensitive, portable, and prone to theft (e.g., mowers, weedeaters, portable saws, etc.). Materials, Tools, and Supplies are also known as "consumables" and used within 12 months or less. • Materials are items used in the repair, alteration, construction of machinery or equipment, or in the replacement of component parts of equipment. • A tool is a device or implement used for repair and maintenance of equipment. Not categorized as a controlled asset (e.g., hand sickles, cane knives, trash picker and grabber sticks, etc.). • Supplies are consumable commodities necessary to carry out the activities of county agencies. Equipment must meet the following criteria to be added to the inventory records: • Estimated useful life is greater than one year. • The item must belong to a general class of property including: o motor vehicles 0 office equipment and furnishings o educational, scientific and recreational equipment o construction and repair equipment o engineering instruments and equipment o street lighting or traffic control equipment 0 other equipment • The item is capable of being permanently identified as an individual item. It cannot be consumed, show a material change, or be altered from its first use. • The item's original cost is greater than $1,000. What is an inventory management system? An inventory management system is a set of policies, procedures, and methods for accurately recording and using property. The purpose of an adequate inventory management system is to provide guidance to assist department heads, property custodians, and inventory personnel in establishing, maintaining, and enforcing internal controls and written policies and procedures. The inventory management system ensures accountability and safeguarding for County -owned or controlled property in their possession, custody, control or use. DPW Highway Maintenance Division Inventory Management: Background 13