City recreation centers have not been following procedures for inventorying and many items purchased by the city are missing, City Internal Auditor Stan Sewell said in a report prepared for Councilman Larry Grohn.
The report says a 2013 inventory list provided to the finance department by the parks and recreation department included 930 items. A review by the auditor's office of recreation’s purchase card statements (dated January 2011 through May 2013) identified 345 items valued at $38,600 not included on the 2013 annual inventory listing.
The report says, "Of the total 1,275 inventory items, we were unable to locate 347 items (27.2%). During our site visits, staff explanations for missing items included surplus, disposal or stolen. Police reports were provided for several stolen items. However, the majority of missing items lacked any documentation of disposal."
Andrew Kean, city chief operating officer, said the Berke administration is putting in tight new procedures for regular property inventories.
Lacie Stone, communications director for Mayor Berke, said, "After taking office in April, we began an exhaustive review of all functions of city government. In mid June, we put into place an improved Inventory Management Process that will ensure increased accountability. Our process was communicated to internal audit before it was communicated to department leaders but unfortunately it was not cited in their study. Our process entails the completion of quarterly inventory counts. Departments will perform their quarterly audits in concert with the finance and budget team and will provide supporting documentation for increased accountability."
Here is the report of Mr. Sewell:
At your request, we have performed an analysis and physical inventory of sensitive minor
equipment (SME) used at the City recreation centers. During our review, we removed all
furnishings from the inventory listings and concentrated on items more susceptible to theft.
This memorandum contains a summary of the relevant policies, observed practices and
noted deficiencies. To provide further detail, I have attached an inventory analysis summary
(see Attachment 1) and a listing of inventory items we did not locate during the review (see
The Internal Control and Compliance Manual for Tennessee Municipalities requires “a record
of moveable, high-risk, sensitive property, such as TVs, cameras, chainsaws, tools, lawn
mowers, and small office machines, as well as furnishings and works of art, be established
and maintained. An annual physical inventory should be performed and documented in the
municipality’s records. All such items should be tagged or marked to identify them as municipal
property immediately following the purchase of such items.” The inventory records should be
retained a minimum of 5 years.
City Code Section 2-5 states, “Each department and agency of the city shall, under the
supervision of the city finance officer, keep a perpetual inventory of the city property under
its control, and shall furnish such reports in relation thereto as the city finance officer may
While conducting physical inventories at the 15 recreation centers and the Prevention and
Youth Development Center, the audit team added an additional 697 inventory items (present
but not included on inventory list provided to Finance). In addition, we found 74% of these
were not tagged.
Based on discussions with recreation staff and our review, we noted the following compliance
and procedural issues:
• Physical inventory was not conducted at the recreation centers prior to the March 2013
submission to the Finance Department;
• SME inventory is not tagged immediately upon purchase;
• The inventory list is not continuously updated for acquisitions and removals;
• Transfers of equipment between centers are not documented and recorded in the
• Disposal and surplus of sensitive minor equipment were not always documented and
recorded in the inventory list;
• City policies and procedures for transfer, disposal and surplus property were not
• Recreation staff are not properly informed or trained regarding responsibility of tagging,
documenting surplus/transfers/disposals, and performing physical inventories;
• Tags used to identify SME property included on the list were not on the specified items;
• Tag numbers on the item did not correspond to tag numbers in the inventory list;
• Required information (e.g. serial numbers, acquisition cost) was not always documented
in the inventory list;
• The annual physical inventory was not signed and certified; and,
• The annual inventory control sheet recommended by Finance was not used.
Given its environment of purchasing items highly susceptible to theft (e.g. cameras, video
games, game systems), the department should exercise extreme diligence in administering the
SME inventory policies and procedures. It is evident to date the inventory system has not been
properly maintained. To assist the recreation department going forward, we have provided, in
a separate transmittal, the SME inventory list compiled by our audit team (see attached memo).
In November 2009, the Internal Audit Division released an audit on the Sensitive Equipment
Policy (Audit Report 09-13). The audit found Citywide policies and procedures were needed
to ensure proper safeguarding of sensitive minor equipment. In response to our audit findings
and recommendations, the City Finance department issued policies and procedures in late
December 2009 requiring a physical inventory be performed in January of each year. Updated
inventory listings are due to Finance annually by February 1
The Finance department policy also requires each City department to designate an individual
with responsibility for compliance and regular maintenance of all SME information, including:
establishing a list of SME, continuously updating the listing for acquisitions/removals, and
performing physical inventories (noting additions and deletions). The annual physical inventory
is to be signed and certified as accurate by the applicable director or administrator.
The initial SME inventory list from Parks and Recreation department was provided to Finance
department in June 2010. The current year recreation inventory list (2013) was submitted via
email from Adrian Hayes on March 22, 2013.
The 2013 SME inventory list provided to Finance by the Parks and Recreation Department
included 930 items. As shown in Exhibit 1, our review of recreation’s purchase card statements
(dated January 2011 through May 2013) identified 345 items valued at $38,600 not included
on the 2013 annual inventory listing. Of the total 1,275 inventory items, we were unable to
locate 347 items (27.2%). During our site visits, staff explanations for missing items included
surplus, disposal or stolen. Police reports were provided for several stolen items. However, the
majority of missing items lacked any documentation of disposal.
Exhibit 1: Inventory Analysis Summary
Number items on original SME (1) 930
Number items added via P-Card review 345
Total items expected to locate 1,275
Number items missing 347
Percentage of items missing 27.2%
Number items added during site visits 697
(1) Items labeled as furnishings were removed from the listing
The issues discussed in this memorandum are not the result of an audit performed in
accordance with generally accepted government auditing standards. Had we performed such
an audit, additional issues might have been reported. The purpose of this memorandum is to
provide City Council with information it may deem useful.