STORES AND SPARES ISSUED TO PLANT BUT NOT CONSUMED – INVENTORISE SUCH ITEMS

Case study

We have been appointed to conduct stores and spares inventory verification on perpetual basis. Stores and spares inventory includes some of the critical parts used for plant and machinery and other stores and spares inventory items.

 

When we started work in the year 2011 there were 33000 items valuing around 100 crores.

 

Working by Team

We have deployed audit team for conducting inventory verification on day to day basis. I was used to visit the client place regularly every two or three months.

 

Our major observation

At the time of my visit I was used to visit Main Store, Mechanical Department, Repairing Yard and Plant Area. During our visit I observed that there were many critical parts lying on the floor near the main plant including some of the high value cables were lying in the plant area. Some of the high value inventory items but not critical were also found in the yard and near walkway or some of the isolated places in the plant.

 

We have listed all such items and taken pictures of these items. During our meeting with the plant head and storehead, we have discussed the usability and purpose of keeping these items in plant area or lying unused in the yard. After discussing, we have come to know that these are the inventory items which have been replaced with the new item but the replaced items are still in usable condition or those items can be used further more in case of emergencies. Also sum of the items were purchased and issued for consumption by the plant however they are not used in the plant and kept idle.

 

We had a meeting with the accounts team and discuss the accounting policies followed for stores and spares inventories like valuation method, consumption method used for such items.

 

With the help of our team, we have listed out all such inventory items which were lying in the plant area and also lying in some of the areas outside the plant. These were the items which were not there in the inventory of the company and already charged to the revenue at time of issue from stores. We have listed out the reason for lying unused and also trail time of issue of all such items.

 

Some of the important observations

1. Cables valuing rupees 1.20 crores were replaced with new cables, however, the retired cables were usable in parts.
2. Some of the critical items were order by the plant personal considering the emergency needs. However, due to unknown reasons were not used in the plant. As plant personnel had ordered these inventory items, stores personnel had forced them to issue for consumption from store inventory.
3. Some of the stores and spares inventories were replaced with the new items. However, the old item where reusable in nature and can be a natural replacement to the existing part.

We have given our findings to the accounts team, plant incharge and stores head, the company had their internal review of these items and decided to inventorised all of these items.

Value Addition to the Client:

Stores and spares worth approx 4.00 crores were restored to the books of accounts and working capital was improved.