BOP Program Statement 8331.03 § 6

Accurate inventory records are integral to a good material requirements planning system and

ensure the correct valuation of physical inventories and their presentation on the Corporation’s

financial statements. It is FPI’s goal to have a 95 percent accuracy rate or greater in its raw

materials, work in process, sub-assembly, and finished goods inventories.

Due to the nature of shop stock inventory, the requirement for 95 percent accuracy is not

applicable; however, every effort must be made to ensure that inventory differences are

investigated to maximize the accuracy of shop stock inventory.

To achieve and maintain at least 95 percent accuracy in raw materials, sub-assemblies, and

finished goods inventories, the AW/SOI at each location first develops and approves an annual

Inventory Accuracy Plan, including:

■ Classification of inventory.

■ Assignment of accountability.

■ Determination of initial inventory accuracy rate.

■ Procedures for obtaining and maintaining 95 percent accuracy.

■ Annual Inventory Schedule

P8331.03 03/19/2015 3

P8331.03 03/19/2015 4

The AW/SOI forwards a copy of the plan to the Field Financial Administrator (FFA) by October

31 each year.

a. Classification of Raw Material, Finished Goods, and Sub-Assembly Inventories. The

AW/SOI ensures that inventory items are classified according to the importance and feasibility of

controlling each item’s quantity and movement. Each identified class of inventory items is

assigned a deviation tolerance level. Physical inventory count differences of items that fall within

specified tolerance levels are considered 100 percent accurate. However, inventory records are

adjusted for any of these differences, even though they are considered 100 percent accurate for

accuracy plan purposes.

The classes and tolerance levels used when classifying inventory:

Class I. Large Part, Easily Controlled 0%

These are large in individual size, issued infrequently, and easily controlled. A 55 -gallon drum of

glue, where the unit of issue is “drum,” is an example.

Class II. Hand Count 0-1%

Quantities are maintained by hand count. Plywood or metal sheets are examples.

Class III. Small Part, Scale Counted 0-2%

High volumes are regularly received and issued based upon package weights or scale count.

Rivets, crimps, or buttons are examples. Note: Some small parts may be of such high dollar

value that a 0% tolerance level is required.

b. Accountability. The AW/SOI delegate s responsibility and authority for inventory accuracy

to one or more of the following staff: prime business manager, operational accountant, and the

remote accountant, based on the supervisory structure used by the business group and at the

factory location. The prime business manager and the operational accountant are responsible for

the inventory accuracy of raw material, sub-assembly, and finished goods inventories maintained

in the warehouse. The factory manager is responsible for the inventory accuracy of shop stock

(raw material), work in process, and sub-assembly inventories on the factory floor.

c. Accuracy Rate. The annual initial baseline inventory accuracy rate is set through an analysis

of the last two completed “cycle” counts (see Section 9). The accuracy level is determined by

dividing the number of correct counts by the total number of item counts conducted for each class

of inventory.

P8331.03 03/19/2015 5

Example: 29 raw material items with correct counts

30 raw material items, with other than zero stock, counted

29/30 = 97% accuracy rate for raw materials.

The purpose of the initial inventory accuracy rate is to determine whether a 95 percent accuracy

rate exists. If less than a 95 percent rate exists, locations begin control group counts per Section

13 of this Program Statement. If no historical data to support cycle counts exist, staff randomly

select 10 percent of items with quantities on hand for a test count. Upon completing the test

count, the location compares test counts of actual inventory with inventory records in the financial

information system.

d. Inventory Schedule. The AW/SOI submit s to the FFA an inventory schedule no later than

October 31 each fiscal year. The schedule list s the type of inventory and the month/week/year

(e.g. week of March 18, 20XX) in which the physical inventory is scheduled. Changes to the

schedule will require notification to the FFA. A copy of the inventory schedule is kept on file.

Types of inventories to be scheduled are:

■ Raw materials and supplies.

■ Work in process.

■ Sub assemblies.

■ Finished goods.

■ Fixed Assets.

Work in process inventories are done during August each fiscal year. Ideally, the inventory

should be conducted in the middle of the month to avoid conflict with the monthly close-out.