The Department of Fire Services (DFS) did not administer its fixed assets in accordance with its policies and state regulations. Specifically, DFS did not add newly purchased assets to its master inventory list, dispose of assets in accordance with Section 3 of Title 802 of the Code of Massachusetts Regulations (CMR), or conduct a complete physical inventory.
a. DFS Did Not Add New Purchases of Assets Costing More Than $1,000 to Its Master Inventory List.
During our test of new asset purchases, we identified assets that were not added to DFS’s master inventory list. Specifically, 8 of 31 assets tested, with a total value of approximately $53,400, had not been tagged and added to the list. This could lead to unknown losses of assets, as well as duplicate purchases.
DFS’s “Fixed Asset Policy and Procedures” document states,
Fixed asset inventory records shall be kept on a perpetual basis utilizing IntelliTrack software, or other future inventory software as may be acquired by DFS. Perpetual inventory means any additions, deletions, or transfers are recorded as they occur and all transaction records shall be retained in the system indefinitely.
Reason for Issue
Currently the responsibility of inventorying new assets falls on the division inventory liaisons at DFS. According to DFS personnel,5 there has been a lack of consistent training regarding the process for completing the inventory card/form and notifying the director of capital asset management to add newly purchased assets to the inventory list.
The Department of Fire Services will deliver improved staff training to emphasize the roles and responsibilities of each division inventory liaison in maintaining and safeguarding the property under their control, as well as their responsibility to expeditiously add new purchases to inventory. Additionally, divisions with custody of significant volumes of property across multiple locations will be required to identify multiple inventory liaisons to manage inventory. The Department of Fire Services will also modify its inventory policies and procedures to incorporate a division inventory liaison attestation on every packing slip as a means to ensure inventory processing has been performed.
Based on the above response, DFS is taking measures to address our concerns about the addition of new purchased assets to its master inventory list.
b. DFS Disposed of Assets Without Prior Approval From the Operational Services Division.
DFS disposed of assets without prior approval by the Operational Services Division (OSD). We reviewed 40 assets whose status in IntelliTrack was “disposed” and determined that DFS had disposed of 22 of them before OSD approved the disposal. This practice could result in disposal of assets that could still be of use to OSD or other state agencies.
The regulation 802 CMR 3.03 states,
The disposal of all surplus, salvage, scrap, and worthless property must be coordinated through the [State Surplus Property Office]. State agencies may not transfer, donate, destroy or otherwise dispose of property without following [State Surplus Property Office] procedures. Agencies must advise [the State Surplus Property Office] of all items which are of no further use to them.
Reasons for Issue
The DFS director of administrative services and director of capital asset management stated that, contrary to DFS policy, the employee assigned to disposal of assets did so without first obtaining OSD approval.
In June, 2019, the Department of Fire Services issued a moratorium on the disposal of assets until such time as revised policy and procedures could be developed. In August, 2019, the Department of Fire Services issued a new policy on the surplus of assets. The new policy segregates duties to ensure inventory disposal approvals are performed in accordance with OSD regulations; establishes a schedule for submitting internal property surplus requests; mandates OSD approval prior to disposal; mandates that the recipient of transferred surplus property shall provide written receipt acknowledgement; and ensures reconciliation of OSD approvals with the DFS internal inventory database. The Department of Fire Services will incorporate additional training on these procedures during its annual inventory training.
Based on the above response, DFS is taking measures to address our concerns about the inventory disposal process.
c. DFS did not verify all assets during physical inventories or complete quarterly inventory checks.
DFS did not verify all assets from its inventory list during its annual physical inventory and did not complete quarterly inventory reconciliations. We identified 91 assets, with a value of approximately $422,000, that DFS did not verify during the 2018 annual physical inventory. In addition, DFS did not send quarterly inventory reports to the inventory liaisons confirming the status of inventory purchases and disposals for the second, third, or fourth quarters of fiscal year 2018. Not verifying all assets from inventory lists could lead to fraud and/or lost assets, and replacing them could cause DFS to incur additional expenses. In addition, a lack of accurate inventory reconciliations could result in inaccurate inventory lists, which may lead to duplicate purchases and improper disposal of assets.
DFS’s “Fixed Asset Policy and Procedures” document states,
The Capital Asset Management Division shall ensure that a physical inventory of ALL DFS assets is taken by June 30th of each year. . . .
The director of Capital Asset Management will issue a quarterly report to each division with a summary of inventory changes that have been reported by division liaisons to the warehouse supervisor. It is the responsibility of the division director to review these quarterly reports and ensure his/her division has properly reported all items to the warehouse supervisor and to reconcile the accuracy of the inventory listing and entries done by the warehouse supervisor. The reconciliation will be reviewed and verified by each division director or liaison.
The Comptroller of the Commonwealth’s “Fixed Assets—Accounting and Management Policy” states,
There shall be an annual inventory taken of fixed assets owned by every Department. This inventory shall include, at a minimum, a verification of the existence and location of fixed assets owned by a Department.
Reasons for Issue
According to the director of capital asset management, DFS did not conduct a complete physical inspection of its inventory asset list for fiscal year 2018 because of recordkeeping issues. Some of the missing assets were found later, during the annual inventory in fiscal year 2019.
In addition, the director of administrative services stated that there was a period when the quarterly inventory reconciliations were not completed, and therefore quarterly reports were not sent, because vacant positions were not filled.
- DFS should provide additional training to the division inventory liaisons regarding procedures for identifying newly purchased assets and adding them to the inventory list.
- DFS should develop and document a plan of action for the disposal process that will ensure compliance with 802 CMR 3.03.
- DFS should conduct a complete physical inspection of its inventory lists annually, verify all its assets, and determine the status of any items it cannot locate.
- DFS should conduct quarterly inventory reconciliations and identify backup employees to conduct this function in case of future vacancies.
While DFS has consistently performed an annual physical inventory, it recognizes that recordkeeping and the reconciliation of the annual physical inventory need improvement. The Director of Capital Asset Management will ensure that a complete physical inventory inspection is performed annually and will allocate the necessary resources to ensure the inventory records are updated accurately and in a timely manner. Additionally, the Director of Capital Asset Management will identify and train additional staff to serve as a back-up to the Warehouse Supervisor to ensure that inventory reports and reconciliations are performed in a timely manner.
Based on the above response, DFS is taking measures to address our concerns about conducting an annual physical inventory and quarterly inventory reconciliations.
|Date published:||May 12, 2020|