Internal Controls Overview

Equipment

This information applies if an individual or a department buys or disposes equipment, or manages equipment records and inventory.

Segregation of Duties - Separate equipment management duties so that on one person has control over the entire equipment management process.

Suggested Practices - Have Different Individuals

• Purchase items
• Approve invoices for payment
• Classify equipment and record changes
• Perform periodic/annual physical inventory
• Maintain custody and dispose of property
• Reconcile equipment purchases to financial records

Potential Consequences of Not Segregating Duties

• Inaccurate equipment location recorded
• Lost, stolen, or destroyed property
• Misstated financial records
• Inaccurate asset values recorded

Accountability, Authorization and Approval - Accountability exists when the right person authorizes equipment purchases, properly classifies equipment, and correctly records new purchases and changes in asset location.

Suggested Practices

• Approve invoice based on purchasing documents
• Inspect equipment to determine condition and valuation
• Adjust inventory records periodically to record changes in equipment status
• Prior approval of physical removal, transfer or sale of equipment items
• Report equipment theft to appropriate parties

Potential Consequences If Accountability Does Not Exist

• Unsuitable or unauthorized equipment items purchased
• Improper transfer of items to unauthorized location
• Assets acquired for personal use
• Incorrect valuation of assets in financial records
• Lost or stolen equipment items
• Misstated financial statements and information sent to reporting agencies

Security of Assets - Keep equipment items physically secured; this applies to equipment used off-campus. Maintain accurate equipment records.

Suggested Practices

• Proper individual approved off-site use of equipment
• Proper individual/organization approves relocations of off-site equipment transfers
• Restrict keys/combinations of secured locations to authorized personnel
• Restrict access to equipment assets to those who have a business need
• Follow reasonable physical layout design practices

Potential Consequences If Assets Are Not Adequately Secured

• Lost or stolen equipment items
• Inaccurate equipment records and financial statements
• Liability for off-site accidents

Review and Reconciliation - Ensures that proper classification, recording and documentation of equipment. Periodic reviews ensure the accuracy of equipment records and recorded asset balances.

Suggested Practices

• Perform periodic equipment reviews to determine value and proper usage and/or disposal
• Count physical inventory at least annually
• Compare property records to physical inventory status
• Properly classify equipment
• Place ID tags on equipment
• Document and report changes on inventory records

Potential Consequences If No Review And Reconciliation

• Lost, stolen, or temporarily diverted assets
• Incorrect asset values
• Inaccurate equipment records and financial statements
• Inability to provide funding agencies with accurate data