Procedure AG6001 - University Creamery Inventory Control and Accounting Procedures Manual
College of Agriculture
Policy Steward facilitating procedure: Dean, College of Agriculture
Table of Contents:
- MATERIALS HANDLING
- SALESROOM ACTIVITIES
- Method of Conducting a Physical Inventory
- FINANCIAL RECONCILIATION/AUDITING/SECURITY/BACKUP
- PROCESSING RETURNED CHECKS
- AUDIT COORDINATION - FINANCIAL AND PROCEDURAL
- RECORD RETENTION, DISPOSITION AND DESTRUCTION
- CONTACT INFORMATION
- CROSS REFERENCES
Depending on the time of the year, the University Creamery processes between 40 and 50 thousand gallons of milk per month into different dairy products. These products are sold to the University's Housing and Food Service operation and to the public (through the Creamery Salesroom). Sales to University departments or organizations (in which settlement is made by Interdepartmental Charges and Credits [ IDCC ]) and to external organizations are termed "wholesale" transactions. All other sales are considered to be retail sales. The Creamery is authorized to issue its own invoices and maintain its own accounts receivable for sales made to external organizations.
The production (plant) area is divided into three distinct processing departments. The first area, the market milk room , is the storage area for raw milk, the processing area for separating raw milk into skim and cream, and the packaging area for chocolate, skim, 2%, and homogenized. This area also bottles or packages Dr. Pete's Recovery drink, orange juice, ice tea's, green tea, and lemonade. The second area, the cheese room , is the processing area for cottage cheese, cream cheese, cheddar cheese, and cheese spreads. The third area, the ice cream room , is the processing area for ice cream, sherbet, soft serve mix, and frozen yogurt.
Each area has its own supervisor. The supervisor of the market milk room is referred to as the Milk Processor, the supervisor of the ice cream room is the Ice Cream Maker, and the supervisor of the cheese room is the Cheese Maker/ Processor. A fourth supervisor is the Lead Dairy Products Processor. (Whenever the four supervisors are referred to collectively in this manual, they will be referred to as Production Supervisors.)
In addition to these processing departments, the Creamery Salesroom is also a department, with a Manager and four (4) supervisors.
These four areas are treated as cost centers of the Creamery, and much of the reporting available from the computer and from manual means reflects this cost center breakdown.
All inventory movements, and the related documentation of such, are the responsibility of the supervisor for each respective department.
Various manufacturing ingredients purchased from outside vendors are added in the production processing of Creamery products. Finished dairy and other food products are also purchased for resale as a supplement to the type of items produced and sold by the Creamery, as well as being purchased to augment the Creamery's own product supply when customer demand exceeds the Creamery's ability to produce sufficient quantities. The inventory control of these ingredients, products purchased for resale, and products produced by the Creamery, is set up in a shared folder on the Z: drive of all computers.
It should be noted that, although exhibits of preferred computer-generated reports are referenced in this manual, these reports do not represent the total reporting that would be available from a software package. Only those reports of particular interest from a control aspect are presented in this discussion.
Although not specifically addressed in this manual, the Creamery maintains its own general ledger and subsidiary ledgers. Information from this internal bookkeeping system interfaces with the University's budgetary accounting system. For the sake of brevity, whenever a bookkeeping action which involves the University system is mentioned in this document, it is implied that a related action is to be taken in the Creamery's internal system.
Should significant changes occur in the methods and controls observed by the Creamery (as set forth in this manual), or if the need for such changes arises, the modifications must be reviewed by Systems and Procedures for approval and documentation.
This manual will first examine the inventory system in general, followed by an examination of the manufacturing activities and the Creamery salesroom. This will be followed by a discussion of physical inventory counts, financial reconciliation, auditing practices and data backup.
All items retained by the Creamery for resale or use in production processes are to be a part of the inventory records maintained in the shared folder on the Z: drive on all computers. Although there is one can be broken down into the market milk room, the cheese room, the ice cream room, and the salesroom. Inventory movements between these areas are considered to be transfers and not sales.
Non-inventoried items (office supplies, aprons, etc.) are ordered as-needed and are brought to the attention of the Accounting Clerk by those responsible for the items.
The inventory is located in Erickson Food Science Building, and is physically organized as previously discussed. Labels indicating the description for each stored item are to be permanently placed on the item or storage medium in such a manner as to provide clear identification. No inventory should be left unattended in public areas such as loading docks, hallways, etc.
Access to the salesroom, storage room, and coolers and freezers shall be restricted to those persons assigned to receive, manage, manufacture, or sell (transfer) from each particular area of the inventory, and, during physical inventory counts, restricted to those involved with that process. In accordance with Policy AD68 , the Creamery Manager functions as the Access Coordinator and is responsible for the assignment of salesroom, storage room, and cooler/freezer keys, and for maintaining a record of outstanding keys.
Inventory Master File - An Excel spreadsheet ( Exhibit "A" ) is maintained on the computer to store certain information concerning each item in inventory. This Inventory Master File includes, but is not limited to, such facts as item numbers, descriptions, quantities-on-hand, and costs. Some of this information is updated via daily invoices, and the rest is updated as necessary by the Creamery Office Manager or the Accounting Clerk.
The Creamery Manager has the responsibility for the determination of items to be stocked and inventoried.
Adding a New Item to Inventory - After the decision has been made by the Creamery Manager to begin stocking a new item, he/she furnishes the Accounting Clerk with the necessary information so that the Accounting Clerk can create a record for the item in the Inventory Master File. The Accounting Clerk notifies all persons concerned of the addition to inventory.
Obsolete Items - Items which become unusable due to damage spoilage while stocked are to be reported by the Production Supervisors to the Accounting Clerk. Changes, such as in the required needs for an item which may obsolete that item, should be brought to the attention of the Creamery Manager.
Deletions from Inventory - If an item no longer needs to be stocked due to lack of demand or obsolescence, the Creamery Manager or Production Supervisor notifies the Accounting Clerk. The inventory records for that item may not be deleted until after a physical inventory has been taken and the item in question has been found to be totally depleted.
The reorder point for each inventory item is established by the Accounting Clerk so as to provide an optimum number of inventory "turn-overs" per year. The Creamery Manager's internal guidelines govern how the reorder point is determined based on lead times, etc.
The following discussion concerns the activities involved with the purchasing of both inventory and non-inventory goods. However, raw milk is excluded from the purchasing activities due to the specialized routine nature of delivery inherent with a dairy processor/raw milk supplier relationship. Raw milk acquisition is covered on page 9.
Purchasing activities for the Creamery are coordinated by the Accounting Clerk. He/she orders materials using standard procedures involving eBuy+ and/or University Purchase Orders (standing orders or Purchase Orders created from eBuy+ transactions), and issues Interdepartmental Charges and Credits (IDCC) ( Exhibit "B" ) to suppliers within the University.
Non-inventoried items are ordered on an as-needed basis and are brought to the attention of the Accounting Clerk by those responsible for the items.
Purchasing cards or Purchase Orders are used for purchasing inventory items. Purchases for inventory items should be charged to Budget 08-004-37 UP (University Creamery), Fund 10010 (General), Object Class 0303 (Laboratory Supplies), 0309 (Miscellaneous Supplies) or 0310 (Materials for Resale) or 03-004-37 UP (Plant), Fund 10010 (General), Object Class 0303 (Laboratory Supplies), 0309 (Miscellaneous Supplies) or 0310 (Materials for Resale).
Purchasing Card - Policy BS14 establishes that the Penn State Purchasing Card is the only credit card authorized to be used for the purchase of goods and services chargeable directly to the University. Issuance of a Purchasing Card to an individual grants that cardholder the authority to make purchases using the Purchasing Card for valid and reasonable University business purposes. Maximum transaction limits are set forth in Procedure PC2009 - Penn State Purchasing Card , but may be set lower for any cardholder. Material items and authorized services up to and including $2,000 (including delivery, shipping, or special handling, and excluding several specific classes of items) may be charged on the Penn State Purchasing Card. The authorized individuals to whom cards are issued for goods & services transactions are responsible for receiving the material and services, and forwarding purchase documentation evidencing the transaction to the reconciler (designated by the Financial Officer). The reconcilers are responsible for assuring that suitable documentation of the transaction has been obtained and are responsible for reconciling the documentation against the transaction data provided to the University from the card-issuing bank.
Purchase Order - Per Policy BS07 a properly executed eBuy+ Requisition is the prime valid method of committing the University for the purchase of equipment, materials, goods or services. The resulting Purchase Order must be approved by the Director of Procurement or his/her delegate.
Vendors requiring contracts, equipment leases, or agreements in addition to or in place of a University Purchase Order, must have these documents approved by the Director of Procurement or other duly authorized Officer of the University.
A variation of the Purchase Order is the Standing Purchase Order, where Purchase Orders are issued to vendors for a specific period of time and a stated amount of money. Purchases made against such an order are limited to supplies of a repetitive nature, or are such that the Department of Purchasing Services has determined that it is the most efficient way to purchase such items. Purchasing may, at is discretion, elect to establish a contract for prices for items on standing orders. Equipment is not to be purchased on standing orders.
The establishment of a standing order requires the same approval and procedure as any other Purchase Order. Purchases made against such an order are limited by the conditions stated in the standing order and thus do not require Accounting or Purchasing approval for each transaction. The Department of Purchases monitors standing orders to determine that such purchases are proper. According to Policy BS10 , vendors are requested to invoice on a monthly basis, sending invoices to the Department of Purchasing Services where they are entered into the eBuy+ invoice confirmation system for the department to confirm the invoice for payment.
Interdepartmental Transfer - Materials or services may be bought or sold directly between University departments without involving the Department of Purchasing Services. These purchases are made with the Interdepartmental Charges and Credits ( IDCC ) form ( Exhibit "B" ). Sound business practice dictates that transactions between a department making a purchase and the supplying department must be documented either in writing or electronically through IBIS. Such documentation provides increased control and accuracy in processing a transaction. See Policy FN18 regarding approval of IDCC's.
Decision Matrix - A Payment Decision Matrix is available on GURU to aid the process as to the appropriate method for making purchases (Purchasing Card or Purchase Order).
Special Request for Check - Although not considered to be an acquisition document, a Special Request for Check ( SRFC ) is sometimes used in the acquisition process for certain goods and services, and particularly for requesting that payment be made to the raw milk suppliers for the milk received by the Creamery.
Due to the unique methods through which raw milk is acquired, the receipt of raw milk shall first be discussed, followed by a discussion of the receipt of all other items.
Raw milk is supplied to the Creamery by a Milk Cooperative. This allows the University to purchase only what is needed by the Creamery. Although a contract forms the basis for transactions between the Milk Cooperative and the Creamery, a Standing Purchase Order (see above) is issued to the Milk Cooperative on an annual basis to facilitate the processing of related paperwork (by Accounting Operations) pertaining to the receipt of the raw milk and subsequent payment thereof. Upon arrival at the Creamery, the milk is transferred from the hauler's vehicle to the Creamery bulk storage tank using a metered pumping system. The amount measured is recorded on the Milk Delivery Ticket ( Exhibit "C" ). The Milk Delivery Ticket is initialed by the milk truck driver and a copy is given to the hauler as a receipt for the milk. A Copy is given to lab director.
The Lab Director posts the information indicated on the Milk Delivery Tickets to the Monthly Summary of Milk Received ( Exhibit "D" ). This report is part of the basis for making up the Monthly Summary for Milk Market Board Report ( Exhibit "E" ) which is required by state law. The Milk Market Board Report is used by the Milk Market Board when determining the value of the raw milk. This value, in turn, is used by the Creamery to determine the amount each raw milk supplier is to be paid.
The Lab Director also uses the Milk Delivery Ticket as the source document for updating the inventory control files. The Milk Delivery Ticket is then filed in chronological order.
Information pertaining to the associated cost of the raw milk is available from the Milk Marketing Board website . Cost data for the raw milk is entered into the computer as it becomes available. The "weighted average" method of inventory valuation is observed. (See the more detailed discussion of this method on page 15.)
Location - All items ordered by the Creamery must be delivered to the Creamery's receiving area, or must be picked up locally by a Creamery Delivery Driver. The Creamery Delivery Driver will be responsible for signing vendor delivery documents whenever acknowledgment for receipt of goods is required by the vendor upon pickup.
A Creamery employee shall be chosen by the Creamery Manager to act as a designated Receiving Clerk. The Receiving Clerk is responsible for signing vendor delivery documents, if required by the vendor or shipper, whenever the goods are delivered to the Creamery. Materials are to be isolated in a specified area until inspected and received in, to avoid intermingling with materials already processed.
NOTE: The withdrawal of items from a shipment of materials not yet inspected and received in is not permitted.
Inspection - The inspection of all incoming materials (including those acquired by the Creamery Delivery Driver) is performed by an available tech service person. The identity and quantity of each item is checked back to the receiving copy of the acquisition document. The condition of the material is examined to ascertain whether there were any damages sustained during shipping. If any problems exist, they are to be noted on the vendor's packing list and the copy of the acquisition document. The document is dated and the paperwork is forwarded to the Accounting Clerk as notification of the problem.
It is the responsibility of the Accounting Clerk to contact the supplier and/or shipper in an attempt to resolve the problem, or to contact Purchasing Services for assistance in resolving the problem.
Stocking Inspected Material - Upon completion of inspection, items are then placed in their respective storage locations by the Production Supervisors and Salesroom Clerk Group Leader.
Documentation of Receipt of Materials from Supplier - Once it has been determined that the materials are satisfactory, the acceptance of the materials must be further documented. The Receiving Clerk does this by signing and dating the receiving area copy of the acquisition document.
Invoices less than $5,000 - If the invoice is UNDER $5,000, the eBuy+ system will generate an email notification to the ordering department that an invoice is available. This email is known as a shipping confirmation. Unless the Ordering Department notifies Purchasing Services otherwise, the invoice is processed for payment according to the terms of the invoice.
Invoices $5,000 or greater - If the invoice is for $5,000 or more (face amount, ignoring discounts and freight), normal processing takes place in Purchasing Services. The ordering department must declare confirmation of receipt of goods and authorize payment of the invoice. Email notifications will continue to generate until confirmation and authorization is received.
All receiving paperwork, including packing lists, are forwarded to the Accounting Clerk for retention and/or further processing.
Cost Determination and Updates - Costs of inventory items are not to be updated from the purchasing or receiving documents, but are only to be made by the Accounting Clerk based on a vendor's invoice, and shall include shipping charges.
All invoices are retained in the eBuy system.
As used in this manual, "production" shall refer to all processes which take one or more items from inventory and transform those items in such a manner as to produce one or more different inventoriable items.
NOTE: The repackaging of a product shall constitute a production process. For example, bulk homogenized milk would be taken from inventory under one inventory label to be put into variously sized containers. Each size of packaged milk then placed into inventory would have its own associated label. Thus the bulk milk was transformed into one or more different inventoriable items.
Plant Sales involve wholesale sales to customers on a recurring basis. Wholesale sales are sales made to University dining halls where settlement is made by an Interdepartmental Charges and Credits (IDCC) or on an open account basis. (Retail sales to the general public are discussed in the section "Salesroom Activities".)
Orders are received via email from Housing and Food Services. Upon receipt, the Accounting Clerk creates an invoice (in triplicate) plus a picking slip, and passes on to Delivery Driver who fills all orders. When the order is filled, the Delivery Driver delivers the items to the proper destination.
Upon arrival at the customer, the Delivery Driver off-loads the order and has a representative of the customer sign the Creamery copy of the invoice in acknowledgment of the receipt of the goods. The customer representative is given two copies. The Delivery Driver returns the signed copy to the Accounting Clerk.
On a monthly basis, invoices from all dining commons are totaled for that month. Upon verification of the totals, Housing and Food Services initiates an Interdepartmental Charges and Credits (IDCC) transaction by debiting their budget, fund, and object code. The IDCC is then forwarded to the Creamery for completion. The Accounting Clerk enters the Creamery budget information (Budget 08-004-037 UP (Creamery), Fund 10010, Object Class 0030 (Sales) as the credit portion of the IDCC. IDCC's are to be filed by status as to whether they are open or closed.
Creamery products may be sold for cash or on credit to organizations such as the Nittany Lion Inn and The Penn Stater Hotel & Conference Center.
An organization may phone or email the order to the Accounting Clerk who in turn prepares an invoice.
Two copies of the invoice are created and given to the Delivery Driver. The Delivery Driver processes the order in the same manner as for IDCC Wholesale Sales if the order is to be delivered to the customer .
If the customer will pick up the order at the Creamery , the Accounting Clerk gives the picking slip to the Delivery Driver responsible for filling orders and delivery, pending the arrival of the customer. The customer signs the invoice and takes two copies of invoice with them. The signed copy is kept in the office.
Billings - If the customer is to be billed , the Billing Source is used by the Accounting Clerk to prepare a pre-numbered Creamery Invoice ( Exhibit "F" ).
This document is prepared in triplicate, with the customer receiving two (2) copies. One page of the Invoice ( Exhibit "F" ) is attached to the customer's copies of the Creamery Invoices while the other page is attached to the Creamery's copy of the Creamery Invoice. The customer copies are mailed and the Creamery copy is used to post to the Creamery accounts receivable records, debiting Account 02180 (Creamery Accounts Receivable).
Creamery Invoices are to be filed by status as to whether they are open or closed. If payment has not been received within 30 days from the date of the invoice, the Accounting Clerk issues a written reminder to the customer. When an open invoice becomes 45 days old the Accounting Clerk calls the customer to remind them of the past due invoice. When the open invoice is 60 days old, the Accounting Clerk refers the matter to the Creamery Manager who in turn contacts the customer. (All written and verbal contact with the customer is to be documented.)
All payments for invoices are to be made directly to the Creamery Office. In accordance with Policy FN01 - all checks, money orders, and traveler's checks must be restrictively endorsed when received. Upon receipt of payment, a Report of Cash Receipts ( ROCR ) is completed by the Accounting Clerk, and Account 02180 is credited. The Creamery accounts receivable records are also appropriately updated.
If payment has not been received within 90 days from the date of the invoice, all the related paperwork is to be turned over to the Financial Officer who will pursue collection of the debt. The Financial Officer shall determine if and when attempts at collection should be abandoned and the debt written off.
Cash Payments - All cash wholesale payments are to be made directly to the Creamery Office. Monies from cash wholesale sales are rung into the cash registers located within the Creamery producing a paper receipt. This receipt must be given to any customer who pays for goods received at the time the goods are picked up from the Creamery location.
NOTE: Cash sales are only permitted when the customer picks up the order at the Creamery. The Delivery Driver is not to accept cash payments when he/she makes a delivery to the customer's location. (Only an IDCC or accounts receivable billing are acceptable means of settlement in that situation.) "Cash Sales" include payment by check or currency.
Monies from cash wholesale sales are to be deposited in accordance with Procedure CR2005 - Depositing Cash Revenues . A Report of Cash Receipts (ROCR) is prepared for the deposit by the Accounting Clerk. The deposit is credited to Budget 08-004-37 UP (University Creamery), Fund 10010 (General Fund), Object Class 0030 (Sales). Any overages or shortages must be reported on the ROCR.
A copy of the validated ROCR is routed to the Financial Officer and one is retained by the Accounting Clerk.
Further information regarding the reporting and depositing of creamery revenues can be found in the "Daily Close-Out" sub- section of Section 4, "Salesroom Activities."
See the Procedure CR2002 "Processing Returned Checks" for a discussion of how to handle checks returned from the bank due to insufficient funds.
The line of finished products stored in the plant inventory is available to the General Public (along with items from outside suppliers such as crackers, mushrooms, etc.) through the Creamery Salesroom. Operated in the fashion of any similar retailer, the Salesroom provides direct customer access to, and selection of, items being marketed.
The Salesroom observes the guidelines set forth in the "Inventory" and "Purchasing" sections. However, the following discussion entails further details necessary for the control of salesroom inventory handling.
All items sold in the Salesroom are inventory goods and are acquired either from the plant processing area or from external sources. Acquisitions from external sources are made as discussed in the previous "Inventory" and "Purchasing" sections. Such goods are forwarded to the salesroom. Items from the plant processing areas are acquired as outlined next.
Acquisition of Externally Supplied Items - Externally-supplied items for sale by the salesroom are acquired per the instructions outlined in the section "Purchasing".
Storage of Salesroom Inventory - The majority of the salesroom portion of the Creamery inventory is displayed in the salesroom. The remainder is stored under the display cases in the Salesroom, as well as being stored in the Creamery Warehouse. The salesroom inventory is kept separate from the portions of the inventory of the three plant areas. The Salesroom Attendants are primarily responsible for the stocking of display cases, etc.
All Salesroom sales are recorded through the salesroom cash registers.
After making their selection, a customer takes the items to the check-out counter where the Salesroom Clerk processes the transaction through a cash register. The customer is given a cash register receipt for the purchase.
Acceptable forms of payment include cash, credit cards (Visa, MasterCard, or American Express) travelers checks, or checks drawn for the exact amount of the sale are acceptable.
If a check is tendered, the Salesroom Clerk must verify that the check has been completed properly, signed, and identification verified. The check must be made payable to "The Pennsylvania State University". All checks will be restrictively endorsed by the Accounting Clerk.
Sales tax is to be collected on those taxable items (as specified in the Pennsylvania Sales Tax Codes) when purchased by the general public.
The salesroom is open seven days a week. Either the Salesroom Clerk Group Leader or his/her designated backup are on duty at all times. (Whenever "Salesroom Clerk Group Leader" is referred to in this discussion, it also implies his/her designated backup.)
Up to four (4) cash registers are used to record salesroom sales depending on the volume of customers. With the exception of change funds, the four cash registers are operated as if they were one common register, i.e., any Salesroom Clerk has access to all operating registers and uses whichever is most convenient at that particular time.
Change Funds - Cash Advances for Change Funds may be issued to sub-custodians in accordance with instructions contained in Policies FN04 and FN05 . Sub-custodians will be responsible for any funds assigned to them by the Financial Officer.
The Accounting Clerk prepares a change fund for each register. After preparation, the change funds are placed in a small safe designated solely for use by the salesroom. This safe is located in the cheese cutting area and its contents are accessible by only the Accounting Clerk, the Creamery Store Supervisors (4), and staff. (During weekends and any other periods where the Accounting Clerk will not be available, more than one day's change fund may be placed in the safe to provide for the needs of each sales day. If this is done, the designated change funds for each day are to be maintained separately, as are the eventual cash register tapes discussed later.)
During the operation of the registers, each register's change fund and income must be kept intact; any change required in one register must be "bought" from another.
At the beginning of each sales day, the Salesroom Clerk Group Leader takes the change from the small safe and places it in each register.
Cash Register Controls - A detailed discussion of the cash register features, operations and controls is available in the cash register operating manual on file in the Creamery office. Specific highlights are provided as follows:
Categorization of Sales - Sales are recorded by three methods. If an item is very repetitive in demand, e.g., ice cream cones, the item is assigned a "preset key" on the cash register. This key is programmed with the unit price of the item. When a sale is made of an item with a preset key, a Salesroom Clerk needs only to enter the quantity and press the preset key; the price look-up and extensions are made and recorded automatically.
Registers are set up to scan UPC codes/bar codes of products. If not available, it is assigned a key. This number is programmed into the cash register along with the unit price of the item and also appears on the price label on the product. When a sale is made of an item which has been assigned a PLU number, a Salesroom Clerk needs only to enter the PLU number followed by the quantity; the price look-up and extensions are made and recorded automatically.
Sales data are stored in the cash register by category and can be accessed by Micros Software Program.
Sales tax must be charged and collected for those items subject to the Pennsylvania state sales tax
The initial determination of whether an item should be assigned a preset key, or just recorded into an open department is determined by the Store Manager when the item is first added to the line of items the salesroom handles.
Register Tapes - The cash registers produce both a customer receipt tape as well as an "End of Day" summary. The "End of Day" summary reflects a total of all transactions performed on the cash register including, but not limited to, sales, voids, refunds, no sales, and resets.
At the completion of the day's sales activities, the Store Supervisor is responsible for obtaining the necessary reports from each cash register, clearing and resetting the registers in preparation of the next sales day, and collecting and submitting the monies and register tapes to the Creamery office. The total of the change fund will be deducted from the total cash on hand to arrive at the cash for deposit.
All signed credit/debit receipts, the "End of Day" summary, and all cash from that register are placed in the properly labeled cash bag.
The cash bag is placed in a special depository which is accessible only from the inside of the Creamery office vault room where it remains until accessed by the Accounting Clerk the next business day.
Where weekends are involved, the same daily close-out takes place and separate cash bags are deposited for each day.
On the next business day, the Accounting Clerk obtains the cash bag(s) from the depository within the vault and counts the contents. Using this amount and the information from the "End of Day" summaries, the Accounting Clerk completes a Daily Reconciliation of Salesroom Revenues ( Exhibit "G" ).
The cash, checks, money orders, and credit card reports will be secured until deposited in accordance with University Policy FN01. In preparing a deposit for the bank, the individual must prepare a deposit ticket. The deposit ticket must be completed in full, with coin, cash, and a summary of checks/money orders/traveler's checks being listed (see Procedure CR2005 "Depositing Cash Revenues" for specific details on preparing deposits). The individual making the deposit must identify the department name and the bag number of the deposit bag being used. Additionally, the deposit ticket should indicate a department name.
Complete the barcoded deposit bag supplied by Auxiliary & Business Services (ABS). Place the prepared deposit into the bank bag along with the completed deposit slip. Begin the tracking process by logging onto the bag tracking system and complete the steps as described in full in Procedure CR2007 - Bank Deposit Bag Tracking .
Salesroom revenues and revenues from wholesale activities are deposited with a Corporate Controller's Office approved depository. A Report of Cash Receipts (ROCR) is prepared in accordance with IBIS documentation (The Creamery is not required to make the daily deposit called for in Policy FN01 on weekends as long as the weekend Salesroom receipts are stored in the Creamery vault depository.) Information is transferred from the Daily Reconciliation of Creamery Operations Revenue to the Report of Cash Receipts (ROCR). Salesroom sales are to be credited to Budget 08-004-37 UP (University Creamery), Fund 10010 (General Fund), Object Class 0030 (Sales). Sales tax is to be credited to Account 0678 (State Sales Tax). Payments made to open accounts are to be credited to Account 02180 (Creamery Accounts Receivable). Payments of returned check fees resulting from salesroom sales are to be credited to Budget 08-004-37 UP, Fund 10010, Object Class 0499 (Miscellaneous-Other). Payments of returned check fees resulting from wholesale sales are to be credited to Account 02180 (assuming that the customer was invoiced for the returned check fee). Overages (and shortages) are to be credited (or debited) to Account 0752 (Cash Over/Short).
Revenues are also posted to the Creamery Accounting Software Adagio
Checks returned due to insufficient funds are discussed in greater detail in the Procedure CR2002 - Processing Returned Checks .
A count is made of all inventory items on hand on a monthly basis. The quantities that are found to exist have two primary uses; they are used to compare against the purported quantities-on-hand as contained within the inventory records in order to detect any deviations, and secondly, they are used to "reset" those quantity-on-hand figures to reflect the actual physical quantity. The former usage helps to detect any shortcomings with the associated methods of record keeping, or may reflect the occurrence of any other improprieties. The latter usage not only provides a means for maintaining accurate on-hand quantities, but the actual physical quantities are also used to compute the dollar value of the inventory at a desired point in time.
A complete count of all inventory belonging to the Creamery is to be taken on a monthly basis, as well as at the end of the fiscal year.
For regular physical inventories, the goal is for counts to be taken in such a manner as to represent a "picture" of the inventory at a certain point in time. This necessitates that attention be given to what is or is not considered to be part of the Creamery inventory. Most problems in this area involve items being received or shipped. To avoid confusion, the Production Supervisors and Salesroom Clerk Group Leader are responsible for segregating such items, using the following guidelines:
- Items which have been "pulled" for shipment to a customer, but are awaiting the arrival of additional back-ordered items from a vendor in order to complete the order, ARE considered a part of the inventory, since the shipping documents will not have been processed.
- Generally, if the proper paperwork has been (or will be) processed such that the inventory records indicate (or will indicate) an item has been added to the inventory by the cutoff date, then IT IS considered a part of the inventory.
- Any items NOT considered a part of the Creamery inventory should be sorted apart from the inventory.
Often the case is encountered where material is received from a vendor well before the related invoice is received. Since all material received in inventory must have a corresponding cost associated with it in order to have a proper valuation, and in order to be entered into the computer, problems may develop when an invoice does not arrive in time for use in the valuation process. This does not apply to raw milk which must be assigned an estimated value by the Creamery Manager for valuation purposes.
Any uncertainties are to be resolved by the Creamery Manager.
The responsibility for coordinating the physical inventory lies with the Creamery Manager. The Production Supervisors and Salesroom Clerk Group Leader should prepare the items for counting by organizing, segregating, and labeling. The Production Supervisors, Salesroom Clerk Group Leader and their subordinates participate in the actual counting and process the information with the aid of the Accounting Clerk.
"Preparing the Inventory Data Base - Of prime importance is the timeliness of on-hand quantities and unit costs. The accuracy of these figures depends upon the proper processing of any documents (e.g., receivers, shipping records, invoices from vendors, etc.) involving the addition to, or removal from, inventory of an item up to the time of the cutoff.
The Accounting Clerk is responsible for assuring that the computer inventory records are current so as to be able to process the physical inventory data (once it is available) in an expedient manner.
A separate complete listing by area of all inventory items is to be printed before the physical inventory begins. Each production supervisor is provided with an inventory sheets indicating the items assigned to their area. This report shall be retained by the Accounting Clerk for later reference.
Monthly, the Creamery Office Manager distributes the inventory sheets to each appropriate production area supervisor. Each production area supervisor performs the monthly count for their area.
All completed Excel sheets are to be returned to the Office Manager who records them and assures that all items have been accounted for and have been properly completed. Any missing forms or other problems are immediately resolved
Any corrections, adjustments, deletions, etc., appearing on the Excel sheet after the completed forms have been returned must be accompanied by an explanation, must be initialed and dated by the person making such changes.
Five (5) items are to be selected randomly and spot-checked for counting accuracy. Several large-volume and large-dollar-value items are specifically to be included in these spot checks. A separate count sheet specifically for these spot-checks is attached to the inventory sheet. The Office Manager verifies the inventory and spot-check numbers and notifies the Creamery Manager of large discrepancies.
Records such as receiving reports, shipping orders, and other documents which reflect pre-inventory and post-inventory transactions are to be so labeled and maintained by the Accounting Clerk or Lab Director for ready access in case of a problem encountered during the further stages of processing the physical inventory information. These records are also used by the University Auditing Department during their periodic audits of the Creamery.
Review - It is the responsibility of the Office Manager to review this report for any irregularities. Any variance should be examined in detail in an attempt to provide a reason for the variance. The Office Manager will take the necessary steps to improve upon the matter.
Description of Valuation Report - The Physical Inventory Excel sheet provides a record of actual count quantities, unit costs, and extended values. Grouped by area, the listing not only provides the total value of each item in inventory, but also gives the value of each major grouping of inventory as well as the total value of the entire Creamery inventory.
At least two listings of the Physical Inventory Excel sheet are to be generated; one copy is to be retained by the Creamery (only at the end of fiscal counts), the other is forwarded to the University Auditing Department (after being reviewed by the Office Manager for the June 30th inventory). All copies should be clearly labeled with the established cutoff date for the physical inventory, and the date that the reports were produced.
Considerations for Accuracy - The valuation is by each item and is the actual quantity of an item times the "Last Unit Cost" for that item. The accuracy of valuation depends upon the accuracy of those two factors (as was previously discussed), and must be given major attention by the Accounting Clerk who is responsible for insuring that the computer records are current and valid.
After the Physical Inventory Valuation Report Excel sheet has been finalized, the actual count quantities on the computer become the basis for inventory transactions that will transpire between this physical inventory and the next.
Periodic reconciliations are to be performed by the Accounting Clerk to help ensure that related sets of financial documents balance and thus test the integrity of the bookkeeping system.
Although reconciliations of all documents are to be routine, some of the reconciliations of major merit are outlined below.
On a monthly basis, University Monthly Budget Reports are to be compared to Interdepartmental Charges and Credits (IDCC) Transfers, Creamery Invoices ( Exhibit "D" ), and Reports of Cash Receipts to ascertain that the proper Creamery accounts were credited with the income. Likewise, comparisons should be made to determine that purchases to stock are accurately reflected on both the University's budgetary accounting records and the Creamery's internal books.
After each physical inventory is taken and the valuation figure has been determined (see section 5, "Physical Inventory"), this value is reconciled to the budget records as follows:
Beginning Inventory (audited value of inventory as of last fiscal year-end physical inventory)
+ Purchases (current fiscal year-to-date) as reflected in budget 08-004-37 UP, fund 10010 (General), object code 0310 (Materials for Resale)
- Withdrawals from inventory (current fiscal year-to-date sales less mark-on, etc.).
= Ending Inventory Book Value
The physical inventory value is compared to this ending inventory book value as discussed in the "Physical Inventory" section. Any significant deviations are to be reported as discussed in the "Physical Inventory" section.
The Financial Officer is responsible for ensuring that procedures pertaining to the accountability and safeguarding of all cash receipts, cash funds, and other assets are established and followed in accordance with approved University policies and procedures. Regular audits relating to advances, cash, travel, equipment accountability, and other expenditures provide a means to protect University assets. The Financial Officer is responsible for working with Internal Audit when audits are being performed in the administrative area.
Record retention must be managed in accordance with Policy AD35 - University Archives and Records Management , and records schedules approved by the Records Management Advisory Committee, Office of General Counsel, and Office of the President. These retention requirements are the University's retention criteria, either derived or based upon federal, state, and local statute or regulations, industry standards, and business needs. Retention beyond recommended time periods require justifiable reasons and warrant review by the Records Management Officer or designee. All documents must be maintained in such a manner so as to provide ease of access for review, and to provide a suitable audit trail for all transactions.
- Documents subject to a Legal Hold (see AD35, Legal Hold). A legal hold will remain in effect until it is released in writing by the Office of General Counsel.
- Documents under audit or review, either internally or externally. The retention period extends until released by the Corporate Controller's Office. The Financial Officer will be notified regarding any accounts which are under audit; the Financial Officer will be responsible for contacting the department.
Additional questions may be directed to the University Archivist or the Records Management Officer.
- Exhibit A - Inventory Master Files
- Exhibit B - Interdepartmental Charges and Credits (IDCC)
- Exhibit C - Milk Delivery Ticket
- Exhibit D - Monthly Summary of Milk Received
- Exhibit E - Monthly Summary for the Milk Market Board Report
- Exhibit F - Pre-Numbered Creamery Invoice
- Exhibit G - Daily Reconciliation of Salesroom Revenues
- Exhibit H - Report of Cash Receipts
For questions, additional detail, or to request changes to this procedure, please contact the Manager of the Berkey Creamery.
- AD22 - Health Insurance Portability and Accountability Act
- Policy AD35 - University Archives and Records Management
- Policy AD68 - University Access Policy
- Policy BS07 - Authority and Procurement
- Policy BS10 - Blanket or Standing Order
- Policy BS14 - Penn State Purchasing Card
- Policy FN01 - Processing Cash Revenues
- Policy FN04 - Petty Cash and Change Funds
- Policy FN05 - Operating Cash Funds
- Policy FN18 - University Approval Authorization Policy
- Procedure CR2002 Processing Returned Checks
- Procedure CR2005 - Depositing Cash Revenues
- Procedure CR2007 - Bank Deposit Bag Tracking
- Procedure PC2009 - Penn State Purchasing Card
- Blue/White Shredding Program
- Milk Marketing Board website
- Payment Decision Matrix
Date Approved: 7/31/2017
Most recent changes:
- Revision 3 - dated 1/18/2017 (entire procedure rewritten to reflect current operations)
Revision History (and effective dates:)
- Revision 2 - dated 2/10/86
- Revision 1 - dated unknown
- Original - date unknown