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INTRODUCTION1. This chapter outlines: a. The minimum requirements for stocktaking of merchandise inventories; b. The preparatory requirements for stocktaking; c. The procedures to be followed for stocktaking; and d. The responsibilities of the Chairman of the Stocktaking Board, B Admin O, CANEX RM and the BCompt regarding supervised stocktakings. 2. For additional information regarding CANEX stocktakings, see the CANEX Policy and Procedures Manual, Accounting 203. GENERAL 3. Stocktakings provide the following: a. Verification of actual inventory to bookkeeping records; b. Financial information on the status of inventory investment; c. A measure of the effectiveness of inventory control procedures; d. A method of assessing the individual managers in managing assets placed at their disposal; e. A record of inventory holdings by age groups; and f. An adjustment to the accounting records in order to complete the financial statements. 4. Supervised stocktakings are performed in the following entities: a. Messes and Base Fund outlets. The supervised stocktaking is controlled by the Chairman of the Stocktaking Board. The handover of responsibility for stock between persons employed in mess or entity bars constitutes a supervised stocktaking, but does not eliminate the requirement for a monthly surprise supervised stocktaking; and b. CANEX. The supervised stock-taking is controlled by the Outlet Manager. 5. When Base Fund operates an activity which is normally a CANEX operation (eg. Retail Store), CANEX inventory valuation and stocktaking frequencies will apply unless indicated otherwise. 6. The Chairman of the Stocktaking Board shall be an officer appointed by the BComd. While the B Admin O is responsible for the appointment of personnel to serve on the stocktaking board, the BCompt must brief the Chairman to ensure that he is fully aware of the policy and procedures on stocktakings. The organization of the stocktaking board and members' terms of references are presented at Annex D. MINIMUM STOCKTAKING REQUIREMENTS 7. The minimum frequency of stocktakings shall be as follows: a. Bars - on handovers, monthly on a surprise basis and at year-end; b. NPF Food Services Account - at every month-end; c. Miscellaneous - on handovers and at every month-end; and d. CANEX - in accordance with the CANEX Policy and Procedures Manual, Accounting 203.
8. The requirements for a monthly surprise check during the month
following the end of the yearly accounting period in messes and bars may
be waived provided that the period between the surprise checks before
and after the end of the accounting period does not exceed 60 days.
9. Where deemed necessary, BComds may direct that stocktakings be
conducted more frequently.
VALUATION METHODS FOR STOCKTAKING
10. Retail Accountability Control. All outlets and departments
controlled by the retail accountability method shall be counted at
retail price.
11. Cost Control. Stocktakings for outlets and departments controlled
by the Cost Control Method shall be valued as indicated hereunder:
a. Grocery Stores
(1) Grocery and Non-food Departments - counted at retail
price and the total reduced to cost by the normal gross
profit percentage;
(2) Meat and Produce Departments
(a) Counter Stock - counted at
retail price and the total
reduced to cost by the normal
gross profit percentage,
(b) Cooler and Backroom Stock -
counted at cost.
b. Others. All other cost controlled outlets or departments
shall be counted at cost.
NOTE
The retail value excludes any GST and PST which may be included in the
posted selling price.
GENERAL RESPONSIBILITIES
12. The general responsibilities are as follows:
a. The B Admin O must ensure:
(1) That the Manager has prepared for a scheduled
stocktaking by taking all the necessary steps to ensure
stock is arranged neatly and in such a way as to
facilitate accurate counting,
(2) That all relevant documents have been actioned and
submitted to the NPFAO,
(3) That the stocktaking is complete,
(4) That resources are made available, and
(5) That all participants have been informed;
b. The Chairman of the Stocktaking Board must control all
supervised stocktakings of messes and Base Fund outlets and
to ensure that all members have been properly briefed on
their duties and responsibilities;
c. The BCompt must:
(1) Ensure that accounting records have been updated, cut-
off procedures have been followed and that both
personnel and equipment are available to complete the
extension of values, and
(2) Act as, or appoint, a stocktaking monitor where
required; and
d. The CANEX Regional Manager must:
(1) Determine if stocktaking board members are required for
CANEX stocktakings and, if required, forward a request
to the B Admin O, and
(2) Act as Stocktaking Monitor as required.
13. While the accuracy of the physical count is important, the need to
verify that all outstanding documentation has been accounted for and
recorded in the appropriate accounting period cannot be overemphasized.
14. All change funds, petty cash funds, gift certificates and other
funds that could affect the inventory accountability must be verified
but are not to be included as part of the inventory. Copies of the
verifications are to be attached to the stocktaking report.
STOCKTAKING PROCEDURES
15. Except as outlined in paragraphs 20 and 21, all supervised
stocktakings of Messes, and Base Fund and CANEX outlets (other than
Retail Stores), shall be recorded on form CF 614. Stocktaking in Retail
Stores shall be recorded on form CF 1023. Forms CF 614 and CF 1023 shall
be serially numbered, by the NPFAO prior to issue with a numbering
machine/stamp or typewriter. All stocktaking form numbers shall be
recorded on issue in the Accountable Document Control Register in
accordance with Chapter 6. All form CF 614 or form CF 1023 numbers shall
be checked off on completion of the stocktaking and the NPFAO shall
investigate all lost pages.
16. Prior to commencement of a supervised stocktaking, the Manager
shall ensure that:
a. All merchandise on the selling floor, reserve stock room,
and warehouse is sorted and consolidated to facilitate
counting and listing;
b. All merchandise in the receiving room, including inventory
for which the invoices have not been received, is properly
marked at retail and where necessary by department and/or
age code;
c. All empty boxes, containers, etc, are removed from the
selling floor, reserve stock room, and warehouse stock to
prevent excess counts;
d. Cases and containers from which units have been removed will
be clearly marked to ensure that they are not counted as
being full;
e. Containers and cases of merchandise located in reserve stock
will be marked with the current retail selling price and
where necessary by department and/or age code;
f. Goods on consignment are clearly marked and verified on
separate stocktaking sheets during the count;
g. All layaways are clearly marked by department and included
in the count;
h. All slow moving, damaged, and obsolete stock is marked down
and properly recorded on a Retail Price Change (RPC) form CF
1343 to the retail price at which it is expected to be sold;
j. A stocktaking plan is prepared, including a floor plan, and
all staff members, participating in the stocktaking are
instructed in their responsibilities and duties; and
k. All rental equipment is segregated and clearly marked so as
to prevent inclusion in the count.
17. The manager, prior to a scheduled supervised stocktaking shall
provide the BCompt with formal advice confirming that action as outlined
in paragraph 15 has been completed. Where supervised stocktakings are
carried out on a surprise basis the BCompt shall obtain confirmation
from the stocktaking supervisor that all merchandise, cash, and credit
documents have been included in the count and that all merchandise is
either in a saleable condition or has been recorded on an RPC.
18. The Chairman of the Stocktaking Board shall verify that
stocktakings are conducted in an organized manner and in accordance with
the prepared plan. Detailed procedures for the physical count are at
Annex A
19. On completion of the physical count, all stocktaking sheets shall
be turned over to the supervising member of the stocktaking team. All
stock sheets shall be accounted for. Under no circumstances is a sheet
to be destroyed and voided sheets will be clearly marked. The
stocktaking sheets shall then be delivered to the NPFAO under cover of a
Certificate of Stocktaking (Annex E).
20. Where a base makes use of professional stocktaking teams they
shall be hired and controlled by the BCompt. Results of professional
stocktakers shall be delivered to the BCompt. Professional stocktakers
shall not be required to record the results of their count on
stocktaking forms. It is normal practice that only a gross count by
department is recorded.
21. To enable the auditor performing the Annual Audit to express an
opinion concerning the fairness of stated inventory levels, the BCompt
shall arrange for a random sample check (red check) of merchandise by
base personnel. This check is to be carried out while the professional
teams are performing their count.
EXTENSION OF THE COUNT
22. Stocktaking forms shall be extended and totalled as quickly as
possible. Accuracy and speed in completing the inventory are important
therefore BCompt should utilize all available resources for this task
and, if deemed necessary, employ outside comptometer services to
complete the extensions or, hire extra part time help.
COST OF STOCKTAKING
23. All costs related to stocktaking shall be charged to the outlet
counted. Where costs relate to a major stocktaking of several outlets or
departments, the Manager shall determine the most reasonable
distribution of costs among the outlets involved.
CUT-OFF PROCEDURES
24. Sales Cut-off. The NPFAO shall verify that all sales receipts up
to the exact time of the physical count have been received, deposited,
and properly recorded in the RAR and the CRJ. (For stocktakings of
retail outlets, the time of physical count is the time of the
Comptroller's spot check.) On the date of the stocktaking, the NPFAO
shall:
a. By reference to the Accountable Document Usage Register,
record the last NPF Receipt number received and the last
number issued; and
b. Reconcile all outstanding NPF receipts and ensure that all
completed vouchers have been processed.
25. Purchase Order Cut-off. One week prior to the date of stocktaking
the NPFAO shall ensure that all POs (forms CF 601 and DND 1353) are
issued only on a limited, as required, basis. On the date of the
stocktaking, the NPFAO shall:
a. Confirm that all POs received have been processed;
b. By reference to the Accountable Document Usage Register,
determine the serial number of the last PO issued; and
c. Complete the reconciliation form (Annex B) to reflect -
(1) All outstanding POs,
(2) The department, the cost and the selling price of
merchandise on hand covered by a PO for which the
invoice has not been received (this information is
determined jointly by the Manager and the NPFAO),
(3) A PO raised and/or issued but the merchandise has not
been received,
(4) A PO issued to the Manager but not used (ie. all copies
held), and
(5) A PO covering merchandise received for which an invoice
has been received but which cannot be processed due to
an outstanding Request for Credit.
26. Transfers Cut-off. One week prior to stocktaking, the NPFAO shall
ask the Manager to instruct all outlets to limit transfers of
merchandise to only those transactions deemed essential. On the date of
stocktaking (for stocktakings of retail outlets the date of stocktaking
is the date of the Comptroller's spot check) the NPFAO shall:
a. By reference to the Accountable Document Usage Register,
record the last form CF 603 number received (ensuring that
all received numbers have been processed) and the last
number issued;
b. Record all outstanding numbers for the outlet;
c. By reference to the outlet's form CF 603 book, check to see
if any issues have been made on numbers after the last
number received by the NPFAO. If so, record the effect of
the issue and the name of the receiving outlet;
d. Verify, at the receiving outlet, that merchandise has been
received, actioned in the RAR, and included in the
stocktaking; and
e. Action transfers included in the stocktaking but not
previously actioned in an RAR by completing Annex C.
27. Retail Price Change Cut-off. One week prior to stocktaking, the
NPFAO shall ask the Manager to instruct all outlets to minimize and, if
possible, stop the use of RPCs. On the date of the stocktaking (for
stocktakings of retail outlets the date of stocktaking is the date of
the Comptroller's spot check) the NPFAO shall:
a. By reference to the Accountable Document Usage Register,
record the last RPC number received and the last number
issued; and
b. By reference to the outlet's books of RPCs held, reconcile
all outstanding numbers and ensure that all completed
vouchers have been processed.
28. Request for Credit. On the date of stocktaking (for stocktakings
of retail outlets the date of stocktaking is the date of the
Comptroller's spot check) the NPFAO shall:
a. By reference to the Accountable Document Usage Register,
record the serial numbers of the last Request for Credit
(form CF 1333) issued and the last number received;
b. By reference to the outlet's outstanding Request for Credit
file, reconcile all outstanding numbers and ensure that all
completed forms have been processed;
c. Record the cost and retail value of the merchandise
received, as shown on supplier's invoices and PO less the
amount of the request for credit for inclusion in Annex B;
d. Record the cost and retail value of other outstanding
Requests for Credit and include in Annex B; and
e. Check off the serial numbers of unused forms and verify that
all forms issued have been accounted for.
29. Repairs. The NPFAO shall record the selling price and department
of all outstanding repair tags covering accountable merchandise returned
for repair as per Chapter 24.
CUT-OFF ADJUSTMENTS
30. After the NPFAO has received and extended the stocktaking count
sheets, it will be necessary to adjust the accounting records to action
adjustments revealed by the cut-off procedures. The procedure for such
adjustments is as outlined below:
a. Purchase Order
(1) Merchandise Received But Not Invoiced - The NPFAO shall
prepare a Stocktaking Reconciliation Report (Annex C)
for the outlet to reflect the responsibility for items
included in the stocktaking but not previously actioned
to RAR,
(2) Merchandise Not Received and PO Not Used - No action
required, and
(3) Merchandise Received but a Request for Credit is
Outstanding - Action in the same manner as item (1)
above;
b. Merchandise Requisitions, (form CF 603). Record the details
on the stocktaking cut-off procedures form (Annex B) and
include in the reconciliation report (Annex C);
c. RPC (form CF 1343). As all merchandise has been valued at
the current price and all vouchers have been processed, no
adjusting action is required;
d. Request for Credit (form CF 1333). Action as a PO
adjustment; and
e. Repairs. Record the retail value on the Stocktaking
Reconciliation Report (Annex C) for purposes of measuring
actual discrepancy.
POST STOCKTAKING REVIEW
31. One month after a supervised stocktaking, the BCompt shall review
the results of the close off:
a. By reference to the outstanding Requests for Credit, confirm
that credit or replacement has been received. Contact
suppliers for all Requests for Credit which are still
outstanding and confirm the validity of the request; and
b. By reference to the outstanding repair file -
(1) Verify that outstanding customer repairs have been
returned or are still valid customer repairs, and
(2) Verify that outstanding accountable merchandise sent for
repair has either been received or, by contact with the
supplier, ensure that these repairs are valid.
REPORT OF STOCKTAKING - MESSES AND BASE FUND
32. The BCompt shall advise the B Admin O of the results of all
supervised stocktakings (including details of accounting action taken to
record discrepancies) as quickly as is practicable. The report is to
include the following information:
a. Outlet;
b. The retail value of inventory per the stocktaking;;
c. The value of inventory per the RAR;
d. The shortage/overage at retail and at cost;
e. The total sales since the last stocktaking;
f. Any shrinkage recorded since the last stocktaking;
g. The results of the last two stocktakings; and
h. A statement from the BCompt that:
(1) He is satisfied with the stocktaking results and
recommends acceptance,
(2) He is not satisfied with certain components and
recommends that those portions be recounted, or
(3) He has no confidence in the stocktaking and requires
another stocktaking before he can endorse the financial
statements as to the fairness and accuracy of stated
values.
NOTE
For retail outlet stocktakings, the BCompt may determine his
satisfaction or nonsatisfaction with the stocktaking results based on
the error rate discovered during his spot check.
33. The BComd is responsible for providing direction, through the B
Admin O to the BCompt, as to the action to take for overages and
shortages.
34. The B Admin O shall initiate such action as may be necessary
(including formal investigation where warranted) to identify and correct
weaknesses.
35. When satisfied that appropriate corrective action has been
effected, the B Admin O shall submit the report to the BComd for
approval, and, upon approval, inform CHQ of the loss, the probable
causes and the corrective/preventive actions taken to prevent
recurrence. In instances where the shortage exceeds the BComds powers of
write-off, the BAdmO shall submit the report to CHQ for review.
NOTE
A BComd must be very cautious in accepting stocktaking results
indicating overages. Overages are as serious as shortages if not more
so. Overages at retail in excess of 0.5% of sales are considered
abnormal.
36. Submissions to CHQ in writing must be forwarded within 30 days of
discovery of the shortage and are to include the following information,
in addition to that indicated at paragraphe 32:
a. The amount by which the shortage (at cost) exceeds the
write-off authority of the BComd; and
b. The details of any investigation and corrective action
taken.
37. A copy of all submissions to CHQ and replies thereto are to be
passed to the BCompt to support the entries recorded in accounting
records.
38. This action is supplementary to, and does not replace, QR&O or
CFAOs dealing specifically with the requirement to report and/or
investigate losses of Non-Public Funds.
CANEX
39. The following information is specific to CANEX stocktakings and is
taken from the CANEX Policy and Procedures Manual, Accounting 203.
RETAIL STORE
40.
a. Method of stocktaking. Stock will be counted once vice a
double blind count;
b. Aging of merchandise. All stock will be aged, however, any
stock having a retail value of $ 2.00 or less will be
considered current. Also, all greeting cards, magazines and
pocket novels will be considered current;
c. Frequency. One stocktaking per year is required. Additional
stocktakings will be conducted only when necessary. In any
case, the VP of Operations must approve all approved retail
stocktakings including dates and method of stocktaking; and
d. Stocktaking monitor. The BCompt will act as stocktaking
monitor.
GROCERY STORES - GROCERY DEPARTMENTS
41.
a. Method of stocktaking. The stocktaking is conducted by
outlet managers;
b. Frequency. The minimum is twice a year. Once at mid-year and
then at year-end. It is the discretion of the RM to conduct
more stocktakings if necessary to adjust the cost multiplier
in Supermarkets; and
c. Stocktaking monitor. Monitored by the BCompt only for the
established minimum number of stocktakings.
GROCERY STORES - OTHER DEPARTMENTS
42.
a. Method of stocktaking. Counting will be done by the
Department Manager and submitted to the Store Manager for
review and approval;
b. Frequency. Every month-end; and
c. Stocktaking monitor. The BCompt acts as the monitor only
when the Grocery department is counted (ie. twice annually).
FOOD SERVICES OUTLETS (INCLUDING BARS)
43.
a. Method of stocktaking. Conducted by outlet managers;
b. Frequency. Every month-end; and
c. Stocktaking monitor. The RM or his representative.
PETROLEUM OUTLETS - GASOLINE
44.
a. Method of stocktaking. Conducted by the outlet manager;
b. Frequency. Every month-end; and
c. Stocktaking monitor. The RM or his representative.
PETROLEUM OUTLETS - AUTOMOTIVE PARTS AND ACCESSORIES
45.
a. Method of stocktaking. Conducted by the outlet manager;
b. Frequency. Minimum twice a year, once at mid-year and then
again at year-end; and
c. Stocktaking monitor. The RM or his representative.
COMBINATION STORES
46.
a. Method of stocktaking. Conducted by the outlet manager.
Where a Food Service department or Petroleum department are
part of the Combination Store, the method and frequency of
stocktaking will be consistent with Food Service or
Petroleum outlets; and
b. Frequency. Minimum twice a year, once at mid-year and then
again at year-end.
WAREHOUSES
47.
a. Method of stocktaking. Conducted by the outlet manager;
b. Frequency. At least quarterly or more frequently at the
discretion of the RM; and
c. Stocktaking monitor. The RM or his representative.
VENDING
48.
a. Method of stocktaking. Conducted by the outlet manager;
b. Frequency. Quarterly. More frequently at the discretion of
the RM; and
c. Stocktaking monitor. The RM or his representative.
REPORT OF STOCKTAKING - CANEX
49. Based on the error rate discovered by the random red check, the
BCompt should determine his satisfaction or non-satisfaction with the
stocktaking results. If the BCompt is not satisfied with the planning
for or conduct of the stocktaking, he should communicate his concerns
immediately to the outlet manager and RM.
50. The stocktaking results are to be communicated to the outlet
manager, RM and CANEX VP of Operations and will include the information
at paragraph 32..
51. Any major discrepancy must be analyzed by the outlet manager and
the NPFAO as soon as possible.
52. If there is disagreement between the BCompt and CANEX management
concerning the results of the stocktaking, the BCompt should contact
DNPFS 4 for resolution.
INVENTORY SHORTAGE
53. In circumstances where there is an inventory shortage, the
following course of action should be implemented:
a. BCompt should advise the RM and the VP of Operations by FAX
of the shortage. Once advised, the RM will be responsible to
assess the accuracy of the stocktaking and forward findings
and recommendations to the VP of Operations; and
b. Depending on the severity of the shortage, CANEX HQ will
advise the appropriate command and request assistance in
conducting a Board of Inquiry or Summary Investigation.
OLD MERCHANDISE RATIO REPORT
54. The completion and analysis of the Old Merchandise Ratio Report is
a CANEX responsibility.