Inventory Management Policies and Procedures

Objective

To establish standardized processes for managing inventory effectively, ensuring accurate tracking, storage, and valuation of materials critical to water utility operations. These procedures also ensure compliance with IPSAS standards for reliable and transparent financial reporting.

1. Scope

This policy applies to all inventory-related activities, including procurement, receiving, storage, issuing, and tracking of materials and equipment required for water utility operations.

2. Roles and Responsibilities

• Inventory Manager: Oversees inventory levels, manages storage, conducts physical counts, and ensures valuation accuracy.
• Warehouse Staff: Receives, stores, and issues inventory per procedures.
• Procurement Officer: Manages the acquisition of inventory items.
• Finance Manager: Verifies inventory valuations and ensures compliance with IPSAS standards.

3. Inventory Management Procedures

​3.1 Inventory Valuation

• • Inventory is valued using the average weighted cost method, which provides a consistent basis for valuation and aligns with IPSAS 12 requirements.
  • This valuation method considers both the cost of goods purchased and the quantity on hand, ensuring accurate cost reflection over time.

​3.2 Inventory Procurement

• • Inventory requests are verified and processed by the Procurement Officer, with approvals documented in Odoo.
  • The Inventory Manager reviews procurement orders to avoid overstocking and shortages.

​3.3 Receiving Inventory

• • Upon delivery, Warehouse Staff inspect inventory against purchase orders and record accepted items in Odoo, capturing quantities and costs.
  • Discrepancies or rejected items are documented, and the Procurement Officer arranges replacements as necessary.

​3.4 Storage and Inventory Control

• • Inventory is stored securely and organized to prevent damage or loss.
  • Items are tracked by location, with sensitive or perishable items stored under appropriate conditions.

​3.5 Physical Counts

• • Quarterly Physical Counts: Conducted to align physical counts with Odoo records, verifying the accuracy of stock levels and valuation.
  • Annual Physical Count: A comprehensive physical count is conducted annually to ensure that recorded quantities and valuations in Odoo accurately reflect actual inventory.
  • Any discrepancies found during counts are investigated, and adjustments are recorded to maintain accurate inventory records.

​3.6 Issuing and Tracking Inventory Usage

• • Inventory is issued upon approved requests and tracked in Odoo to associate usage with projects or departments.
  • Issued materials are logged to monitor consumption and ensure correct allocation of costs.

​3.7 Reconciliation and Adjustments

• • Monthly reconciliation is conducted between physical inventory and Odoo records to detect discrepancies.
  • Adjustments for damaged, expired, or missing inventory are recorded in Odoo, with journal entries reflecting these changes to ensure accurate financial reporting.

4. Compliance with IPSAS Standards

• IPSAS 12 (Inventories): Inventory is recognized as an asset, valued using average weighted cost, and recorded at the lower of cost or net realizable value.
• IPSAS 17 (Property, Plant, and Equipment) may apply to items with significant value and long useful lives, requiring capitalization.

5. Risk Management

​5.1 Inventory Risks

• • Obsolescence: Regular reviews prevent buildup of obsolete items.
  • Stock Shortages: Safety stock levels based on historical data help avoid shortages.
  • Theft/Misplacement: Controlled access and periodic audits secure inventory.
  • Overstocking: Tracking through Odoo prevents overstocking and reduces waste.

​5.2 Financial and Compliance Risks

• • Inaccurate Financial Reporting: Incorrect inventory valuation affects balance sheet accuracy. Average weighted cost valuation and regular counts ensure compliance with IPSAS 12.
  • Supply Chain Disruptions: Vendor diversification mitigates reliance on single suppliers.

Review and Updates

This policy is reviewed annually or as required by changes in IPSAS standards or operational needs.

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