A005 Atch 1b RCM Inventory Controls.xlsx

Dist Physical Inventory

Process(as)/Sub-Process(as) Key Risk of Material Misstatement (ROMM) Control Activity Description Control Frequency Test Objective/Procedures Sample Size # of Samples Conforming CAP Surveillance Report # USER ID of Non-conforming

Management will ensure completion of haphazard storage area directed inventories of all assigned warehouse locations counted “blind” within the directed time-frame and compared to the Quantity By Location (QBL) within DSS. Counts are directed by Distribution HQ J3 and executed by each Distribution Center (DC). Each count involves removing the material from location to verify and validate material in location is accurately identified.

b. Management will ensure that all locations in volume are completed IAW plan to achieve the targeted coverage for completeness. This is achieved by accomplishing a quantity of blind counts per month/year which are assessed by post count verifying the system of record quantity by location (QBL) balance and if match, move to next count, if no match, conduct research and schedule a NSN/NIIN inventory for B2F IAW defined policies and procedures when discrepancies are identified.

c. Management will ensure F2B count discrepancies are forwarded to Inventory for a TPIC M Inventory to be scheduled within one business day of F2B count completion where the discrepancy was identified.

Perform physical count inventories in line with annual DLA inventory plan to achieve a 100% physical inventory during the fiscal year for items in DLA custody on October 1st (opening balances). Physical count inventories are performed each fiscal year in line with the DLA annual inventory plan on National Stock Numbers (NSN) existing within the Inventory Management system as of October 1st. NSNs receipted into the Inventory Management system after October 1st and through August 15th are inventoried as part of the current fiscal year 100% annual count. New NSNs receipted into storage/custody on and after August 16th are planned for physical counts in the following fiscal year if the NSNs remain within custody and are reflected in the Inventory Management System for opening balance records which are documented each October 1st.

Annually Ensure that inventory recorded in inventory management system exists.

Annually in mid September – DLA Distribution J3 OC will provide each site their current population of NIINs. For volume and specialized item inventory planning. ILW the SOP for development of the annual inventory plan the Accountable Officer will submit their Annual Inventory plan in volume per month to DLA Distribution J3-OC and J4-BB Sub Process Owner for Inventory. A template inventory schedule will be provided for this submission. Plan will outline the following:

• Controlled Inventory schedule (Classified/Sensitive/Radioactive/L1 Sub Safe)

• Provide HQ DLA Distribution J4-BB Inventory Team with a list of ALL inventory counters, and update the list throughout the FY as required (a new

• Identify difficult, hard to handle, high counts or high risk areas to be completed and which month they are intended to be counted (AREA scheduling approach can be used to direct resources to these areas)

• Identify how many NIINs can be completed per month beginning in October and ending in July; Final plan is refined and signed by the Dist Center AO, Deputy and Director/Commander for submission to DLA Distribution J3OC for review and approval by J3 Financial Audi and J4 Inventory SPO, with ultimate approval by the DLA Distribution Deputy Commander and submitted to DLA HQs nlt 5th business day in Oct.

Annually by the 5th Business day in October – HQ DLA Distribution J3-OC will submit the following to DLA HQs J345:

• The by month, by site allocation plan and 1st quarter by NIIN selections will be provided to DLA HQ for approval

Obtain DSS screen (PIED) to verify the 1st, 2nd, and 3rd counts are performed by three different user IDs. Verify gains, loss, or matching inventory results are record in the inventory management system owner transaction history.

DLA Distribution J3 request proof from DLA Distribution J4 Inventory team of their annual table review for P-118 or proof via systemic documentation that table was reviewed.

See ITGC

Every month, the Accountable Officer (AO) reviews the Inventory Management system CAV Report and generates the 'CAV trend analysis' QMF and converts non-mandatory adjustment on the CAV to a mandatory Inventory Adjustment Voucher for the following:

• NSN(s) averaging more than one inventory adjustment per quarter for the past 365 days.

• Hazardous items

• Any offsetting gain/loss for same condition code

• More than one adjustment on CAV for same owner and condition code Upon completing the review and associated actions generated from the analysis, the Accountable Officer signs and dates the CAV. DLA Distribution retains the signed CAV. Monthly To Determine whether management performs a monthly review of all Consolidated Adjustment Vouchers (CAV) inventory adjustments to ensure that all existing assets, as of the reporting date, including property in the custody of third parties, are included in the general ledger and to ensure all appropriate outlays and adjustments are not recorded. Invalid inventory adjustments may not be reviewed and properly reversed which may result in a misstatement of the inventory and related property balance on the financial statement.

1. For the sample of 45; obtain the previous three month CAV Detail Listing Reports from the months ending during the current fiscal year.

2. Inspect the report and determine if the following attributes are present:

2a. Evidence of review/analysis has been performed on the CAV Inventory Adjustments.

2b. Appropriate and timely review and approval of the report was performed by each approver.

2c. Appropriate and timely approval was performed within DSS.

3. Determine if the management review process was performed in accordance with the documented process.

Each Inventory Adjustment Voucher (IAV) is required to have an accompanying Causative Research Package. The package will include the IAV Research Checklist and all associated research documentation related to the adjustment researched. The completed package is signed and dated by the inventory personnel completing the package.

IAV Causative Research Packages are retained by DLA Distribution. Recurring To determine that the causative research process is an appropriately designed control to ensure that all existing assets, as of the reporting date, including property in the custody of third parties, are included in the general ledger and recorded transactions represent economic events that actually occurred and are properly classified.

1. Obtain one completed Causative Research Package for each sample.

2. Inspect the package and determine if the following attributes are present:

2.a. The "IAV Research Checklist" or similar document is present and complete.

2.b. There is supporting documentation to evidence that the research was performed.

2.c. The IAV was approved by the correct designated authority.

2.d. The IAV was approved and accepted in DSS.

2.e. The Error Classification Code (ECC) aligns with the research package comments within the IAV.

3. If the research resulted in a reversal adjustment, obtain supporting documentation from DSS as evidence to support the transaction was recorded in the Owner Transaction History Record.

Physical Inventory Assets of the entity exist but may be omitted from the inventory management system IAV Packages Reviewed and Approved by Designated Authority Every IAV Causative Research Package is reviewed, signed, and dated by the designated approval authority (cannot be the same as the inventory personnel who created the IAV package) who accepts the IAV in the Inventory Management system within 45 days of original adjustment in accordance with MILSTRAP thresholds.

Each approved IAV Causative Research Package must include a completed DLA Distribution Reviewing Authority IAV/CAV Check Sheet.

DLA Distribution retains IAV Causative Research Packages. Recurring To determine whether management performs a monthly review of all Inventory Adjustment Vouchers (IAV) inventory adjustments to ensure that all existing assets, as of the reporting date, including property in the custody of third parties, are included in the general ledger (FAM 395B: 8) and to ensure all appropriate outlays and adjustments are not recorded

1. Select a sample of one IAV month end report from the current fiscal year.

2. Inspect the report and determine if the following attributes are present:

2a. Evidence of review/analysis has been performed on the IAV Inventory Adjustments.

2b. Appropriate and timely review and approval of the report was performed by each approver.

2c. Appropriate and timely approval was performed by each approver within DSS.

3. Determine if the management review process was performed in accordance with the documented process. This control is tested for adherence by checking the P8BC and the P8BG DSS reports for two signatures and dates, one from the Reviewing Authority and one from the AO.

Physical Inventory Assets of the entity exist but may be omitted from the inventory management system Review of Open IAVs Every month, the Accountable Officer reviews the Inventory Management system report P8BG (“Mandatory Causative Research Report- Open Vouchers”) to identify IAVs not accepted within the required 45 days from original adjustment, then signs and dates.

DLA Distribution retains the P8BG reports.

Monthly Ensure P8BG reports are reviewed in a timely manner.

Review P8BG reports to ensure the AO performed the review IAW established procedures and policies.

On a daily basis, the Inventory Management system internal batch job P8BM reconciles QBL with QBO in the Inventory Management system, for any inventory that had quantity balance affecting transactions that day.

If there are any mismatches between QBL and QBO, they are listed on the Inventory Management system report P8BK. The following actions are required as part of the Book-to-Book review:

• P8BK is printed, signed and dated each working day.

• Each potential adjustment completed on the P8BK will have a research package printed, signed and dated by the researcher.

• Each P8BK package must include a completed Potential Book-to-Book Research Checklist DLA Distribution retains P8BK Research Packages.

(Documentation required to be implemented in January 2019). Daily Ensure that inventory recorded in inventory management system exists.

Obtain P8BK reports. Verify the reports were reviewed, researched, and signed by the appropriate personnel.

Physical Inventory Assets of the entity exist but may be omitted from the inventory management system Reversal Processing of Inventory Adjustments to the Inventory Management System Reversals of inventory adjustments are processed to maintain the accuracy of the Inventory Management system only when applicable inventory research processes have been completed and provide a direct linkage to the original transaction that substantiates the reversal being entered.

Inventory adjustments being reversed must have occurred within the current fiscal year but only within the last 60 calendar days or back to the last formal inventory (whichever is sooner) of the date the original transaction was processed.

Recurring Ensure reversals are not performed outside of established timeframes.

Obtain a population of reversals and determine if reversals were performed outside of established timeframes.

CDRL A006 Attachment 1B

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