STOCK VERIFICATIONS

MEANING : Stock verifications

means keeping a check over

physical stock held by any

factory, with the quantity recorded

in Bin-cards.

NEED FOR PHYSICAL VERIFICATIONS

Stock verifications is a very important function in a factory. Any manufacture plant/factory can not be run without inventories. Control over inventory is done through a series of reports and records. Records provide information on receipt, usages and balance quantity. Inventories are procured, received, stored, issued to run a plant. It’s records must be accurate.

It is also necessary to ensure about the

spoilage, damage, obsolescence stores

and errors in posting of stores/material.

Therefore inventories must be physically

verified with records/stock. But

sometimes, due to human error or by

mistake, discrepancies can be arised

between physical stock and Bin-card.

FUNCTION OF S.V. GRUOP

1. It support the value of stock, shown in balance sheet by physical verification.

2. It disclose the possibility the fraud, theft or loss.

3. It reveal any weakness in the system for the custody and control of stock.

4. It verify the accuracy of the stock records.

5. It verify all direct/indirect materials as

well as furniture, operating inventories

and other inventories.

6. It highlight the problem of shortage/

overage.

7. It maintain the accurate, accountability

for proper ‘inventory-control’.

• DISCREPANCIES IN STOCK

• There are four types of balances:

• Stock ledger balance - This is the balance shown in the ledger.

Ground balance - This is the balance found on physical verification.• Bin card balance - This is the balance shown on the bin card.

• Unorthodox balance.

• It is necessary that:

• These balances on stock ledger, physical and bin card are in

agreement.

• There is no unorthodox balance i.e. there should not be any balance

physically available other than the ledger balance.

• Any discrepancy in the above balances should normally be corrected

within a period of three days of detection.

• Detection of Discrepancies

• The discrepancies come to notice as a result of the following:

• Departmental stock verification group.

• Internal stock verification by factory staff.

• Posting of full invoiced qty.as per procedure in vogue though there is a short receipt.

• Finding of an unorthodox balance in the stock ledger.

• The discrepancies are dealt with by making out the discrepancy voucher portion of IAF (Fac) 144 or IAF (Fac) 145.

• IFA (Fac) 498 is prepared in the following cases of discrepancies:

• due to change of condition posting in stock ledger is not required to make the balance show the facts.

• The documents are numbered as a regular Stock Receipt Voucher or a Regular Stock Issue Voucher as the case may be.

• The documents are signed by the officer for authentication.• The documents are sent to Accounts for pricing and posting in the

priced ledger in the normal way after the original receipt voucher to show the discrepant quantity being passed on to them.

• These documents arc treated as "Suspense transaction" till settlement.

• Above vouchers will be kept in a register till it is cleared by LAO.• Clearance of vouchers- The voucher will be cleared in the following

manners: By the sanction of loss/ surplus statement by competent authority.

• OR• No loss/surplus statement is involved.

• Settlement of Discrepancies • The discrepancies arc settled in the following Submission of

sanctioned loss statement manners:

• Submission of sanctioned surplus statement.

• Finding of old document of transaction to regularise the discrepancy.

• Payment by supplier for discrepancies in transit for which supplier is responsible. Supply of short/discrepant material by the supplier.

• At the time of final posting there is posting of identical amount simultaneously on receipt and issue sides of the lodger by Accounts so that there is no effect on balance facility.

• Discrepancies noticed in stock should be finalized with in the same year,

 

 

REASONS (FOR DISCREPANCY)

Discrepancies may be arised due to following:

1.In coming material, have been taken on charge. But storekeeper forgates to enter in Bin-card.

2.Materials is issued but it is not posted in Bin-card.

3.Issue of incorrect quantity i.e. more or less to what was indented.

4. Error in quantity posting. Example – 15

Nos. is posted as 51 Nos, or 25 Nos is

posted as 25 Kgs in the Bin-card.

5. Posted done on wrong/another Bin-card.

6. Error in addition or subtraction while posting on Bin-card.

7. Due to excess evaporation of fuels etc.

8. Missing of Bin-card etc.

TYPES OF VERIFICATION

Generally three types of stock verification are done in Ordnance Factories:•Annual stock taking of UIP, FG & Non-consumable inventory items.•Internal stock verification by Factory staff & Officers. •In addition. Security may also verify the stock as surprise check.•Perpetual stock verification by DGOF/SV group. •The DGOF Stock Verification Group is administratively controlled by DGOF but functionally under Sr. GM/GM.

•SV group is responsible for the following:

•Drawing programme of Stock Verification. •Allocation of work to stock verifiers.•Maintaining progress details.•Intimating OFB regarding progress, discrepancies etc.

• Procedure

• Scope - This group carries out physical verification

of stock, deposit stock item, inventory articles,

machinery building, electrical installations and

medical stores borne on factory's books.

• All items arc verified at least once in a financial year.

• Stocks of valuable items are verified at more

frequent intervals with the approval of 0FB. For this

purpose, a list of such items is jointly prepared by

the factory and OFB Stock Verification Group.

• Methods of verification• Verification is carried out by the following

methods :• Actual Counting. • Weighment.• Measurement.• Other methods like assessment etc.• Loose and bulk items - Loose bulk items like

coal, coke, rubber etc. are required to be stored in bins or stock of sufficient size to facilitate measurement by cubical content.

• Normally stock verification of an item is carried on when it is at the minimum level.

continuous verification:Ordnance Factory adopting this methods only. This system is also called rotational system of stock checking. In this methods continuous stock taking is done during the whole year. A limited Nos. of items may be selected at random or on a pre-planned basis for verification. For this purpose OFB has setup a stock verification group is responsible for verification of all stock items including deposit stock and all indirect/direct inventory

Items such as instruments, gauges, furniture, special fittings, tools, accessory, machinery, building, electrical materials, medical stores, books etc.

In this systems all inventories are being checked in each financial year. Special attention is being for ‘A’ and ‘H’ cat. Of items. Advantages of this system is that we can easily deduct the deteriorated and obsolete items. The discrepancy can reconcile our records to avoid further difficulties.

INTERNAL STOCK VERIFICATION

In this systems atleast 10% of the total items (selected transition items which requires greater vigilance)are verified separately by factory management / SK concerned godown. Stock taking sheets are prepared and discrepancies are required to be settled as per procedure.

. Annual progress reports is submitted to DGOF in April of each year, showing Nos. of items verified in the last year ending 31st March.

PERIODICAL VERIFICATION (Annual stock taking)

Recording of inventories may be manually posted or fully computerized but there is possibility of error in the posting always. This verification is done in the end of the financial year once or on a half yearly basis by taking annual stock, WIP, FGs and Non-consumable items for verification. Therefore this methods is not satisfactory hence not suitable for Ordnance Factories.

ADMINISTRATION

Stock verification group is under the control of GM of factory concerned for all administrative work. Necessary assistance of labours, equipments required for verification, is provided by factory administration. Verification should be carried out in normal working hours of store section. However, S.V. group is directly responsible to OFB and is independent of the directly responsible to the Sr. stock verifier posted by OFB in the factory. Stock verification is done in presence of factory management’s representative always.

IMPORTANT POINTS FOR VERIFICATION

(1) All LFs. Are verified for every current financial year.

(2) ‘A’ & ‘H’ of items should be verified twice a year.

(3) Items are adhoc nature and lesser importance, should be verified once in 2/3 year.

(4) Approval should be obtained from OFB for any deviation (if reqd.) for left-over items during verification.

(5) Verification report should be forwarded quarterly to OFB.

(6) SV Group is not responsible for the verification of WIP & FGs.

(7) Verification may be carried out by actual counting, weigh, and measurement etc.

(8) Assessment method of verification is adopted for bulky stores. It is done in the presence of a board of officers & representative of LAO. This board is formed by the Fy. Administration with the approval of DGOF.

(9) Verified items are recorded on a ‘Stock Taking Sheet’ every day and forwarded to store section for their signature.

(10) Discrepancy if any, is recorded on last page of the stock taking sheet.

(11) List of items, found not in transaction during 2 years, is forwarded to MCO and LAO for removal of their LFs. From /material master record/PSL.

(12) Store section should submit the list of ‘A’ & ‘H’ cat. and stockpile, heavy/bulky, SM, NM items to Sr. Principal Director.V. group for verification of the same.

(13) No advance intimation is given for verification of an particular item.

(14) Verifier maintains a

“Daily work register” for the work done and monthly progress report is submitted on the basis of this register to Sr. Principal Director.V. group of OFB.