MSINGA MUNICIPALITY

STORES MANAGEMENT POLICY

 INDEX

Page No.

1. Definitions 3

2. Objective 5

3. Scope 5

4. Legal Framework 5

5. Inventory Procedure 7

6. Inventory Record 11

7. Reporting 12

8. Policy Adoption 12

ANNEXURES

Annexure A: Handing Over Certificate 13

Annexure B: Inventory Count Certificate 14

Annexure C: Purchasing Requisition Form 16

1. DEFINITIONS

1.1 In this Policy, unless the context indicates otherwise, the following definitions are
applied:-
“Accounting Officer” means the Municipal Manager for the Municipality as
contemplated in section 60 of the Local Government:
Municipal Finance Management Act, 56 of 2003

“CFO” means the Chief Financial Officer designated in terms of

section 80(2)(a) of the Local Government: Municipal
Finance Management Act,56 of 2003

“Delegated authority” means the official who is given the authority for relevant
functions in terms of the municipality’s written delegations;

“Inventories” are assets:

In the form of material or supplies to be consumed in the
production process,
In the form of materials or supplies to be consumed or
distributed in the rendering or services
Held for sale or distribution in the ordinary course of
operations, or
In the process of production for sale or distribution

“Obsolete inventory” means items that have expired, are redundant or

damaged;

“Re-order level” means the level of inventory at which inventory is re-

ordered;

“Requisition form” means a written request to the Inventory Supervisor to

supply specified inventory;
“Responsible manager” means the official responsible for the Stores of SCM Unit in
the municipality, directorate or institution;

“Store” means a place where inventory is stored and reserved for

future use, or a source from which supplies may be drawn;

“Stores Assistant means the official responsible for the requisition, receipt,
issue, recording and safeguarding of inventory; and

“SCM Officer” means the official responsible for the cost-effective and
efficient management of inventory.
2. OBJECTIVE OF THE POLICY
2.1 The policy aims to achieve the following objectives which are to:-
a) Provide guidelines that employees of the Municipality must follow in the
management and control of inventory, including safeguarding and disposal of
inventory.
b) Procure inventory in line with the established procurement principles contained in
the Municipality’s Supply Chain Management Policy.
c) Eliminate any potential misuse of inventory and possible theft.

3. SCOPE
3.1 This policy applies to Msinga Municipality’s inventory received by the Store Officer and
issued to users.

3.2 This policy specifically excludes:

a) Pharmaceutical inventory, livestock and
b) Equipment and other assets not defined as inventory;

4. LEGAL FRAMEWORK
4.1 In terms of the MFMA, the Accounting Officer for a municipality must:
a) Be responsible for the effective, efficient, economical and transparent use of the
resources of the municipality as per section 62 (1) (a);
b) Take all reasonable steps to prevent unauthorized, irregular and fruitless and
wasteful expenditure and other losses as per section 62(1)(d);
c) Be responsible for the management, including the safeguarding and the
maintenance of the assets, and for the management of the liabilities, of
the municipality as per section 63 (1)(a) and (b).

4.2 In terms of the following paragraph of GRAP 12:

.14 Inventories shall be recognized as an asset if, and only if,
a) it is probable that future economic benefits or service potential associated with
the item will flow to the entity ,and
b) the cost of the inventories can be measured reliably
 MEASUREMENT AT RECOGNITION
.15 Inventories that qualify for recognition as assets shall initially be measured at cost
.16 Where inventories are acquired at no cost, or for nominal consideration, their costs shall
be their fair value as at the date of acquisition

MEASUREMENT AFTER RECOGNITION

.17 Inventories shall be measured at the lower of cost and net realization value, except
where paragraph .18 applies
.18 Inventories shall be measures at the lower of cost and current replacement cost where
they are held for:
a) Distribution at no charge or for a nominal charge, or
b) Consumption in the production process of goods to be distributed at no charge or
for a nominal charge.

RECOGNITION AS AN EXPENSE
.43 When inventories are sold, exchanged or distributed the carrying amount of those
inventories shall be recognized as an expense in the period in which the related revenue
is recognized. If there is no related revenue, the expense is recognized when the goods
are distributed, or related service is rendered. The amount of any write-down of
inventories to net realizable value and all losses of inventories shall be recognized as an
expense in the period the write-down or loss occurs. The amount of any reversal of any
write –down of inventories ,arising from an increase in net realizable value, shall be
recognized as a reduction in the amount of inventories recognized as an expense in the
period in which the reversal occurs.
.44 Some inventories may be allocated to other assets accounts, for example, inventory
used as a component of self-constructed property, plant or equipment. Inventories
allocated to other assets in this way are recognized as an expense during the useful life
of that asset.
5 INVENTORY PROCEDURES
5.1 The procedures for inventory must be followed to ensure that:
a) Inventory is safeguarded at all times;
b) There are accurate records of quantities on hand at all times;
c) Optimum inventory levels are maintained to meet the needs of users;
d) Only authorised issues of inventory are made to users; and
e) Items placed in store are secured and only used for the purpose for which they
were purchased.

5.2 Appointment of Responsible Officials

5.2.1 The CFO must appoint, in writing, officials to perform the duties of Stores Officer in
terms of this Policy.
5.2.2 Adequate segregation of duties between the requisition, receipt, recording, storage and
safekeeping of inventory and the management and control thereof must be maintained
to avoid the potential occurrence of errors and fraud.

5.3 Ordering of Inventory

5.3.1 Each department must send its own requisition for all items they need in stores
5.3.2 Due diligence and care shall be exercised in identifying low value and high value items
of inventory.
5.3.3 Minimum inventory level of high value items shall be ordered, any maximum order shall
be based on specific requirement/need in order to avoid large amount of cash tied up on
inventory.
5.3.4 A reorder listing should be printed daily and reviewed by the Assistant SCM Officer
5.3.5 The Stores Officermust use the listing as a primary source of information to complete the
purchasing requisition form, attached hereto as Annexure C.
5.3.6 The purchasing requisition form must be completed in duplicate, with one copy kept in
the requisition book and an original copy forwarded to the procurement section.
5.3.7 A copy of the purchase order form will then be forwarded by the procurement
department to the inventory department.
5.3.8 Orders must thereafter be filed in date sequence.
5.3.9 This file must form the basis for follow up of orders and for matching goods that are
delivered to inventory department.
5.3.10 The orders file should be reviewed daily by the Stores Officer and any orders, which
have not been delivered as per the agreement with the buyer, must be followed up
immediately.

5.4 Receipt of Inventory

5.4.1 The quantity and quality of the inventory received from suppliers must be according to
specifications.
5.4.2 The Stores Officer must compare the delivery note to the purchase order before
accepting the goods.
5.4.3 The invoice must match the supplier name and order number.
5.4.4 Stores Officer Supervisor must ensure that:
a) All delivery notes are signed
b) All incorrect delivery items are rejected and clearly identified on both copies of
the delivery note; and
c) The supplier signs all amendments
5.4.5 The inventory received must be transferred to the secured store by the Inventory
Supervisor and the inventories must be stored in their respective sections as detailed in
5.5.
5.4.6 The inventory record/register/database must be updated.

5.5 Storage of Inventory

5.5.1 Inventory must be stored in a secured, exclusive use area, under lock and key,
furthermore the inventory must be insured in terms of the Risk Management Policy of the
municipality.
5.5.2 The area must be used exclusively for the storage of inventory, with limited authorized
access only.
5.5.3 Inventory must be positioned to facilitate efficient handling and checking.
5.5.4 All items must be stored separately, with proper segregation.
5.5.5 Inventory must be clearly labeled for easy identification. Inventory tag/bin cards or
inventory labels may be used to identify each item and to aid in the physical verification
of the items.

Details should include the following:

a) Order number;
 b) Quantity received;
c) Date of receipt;
d) Quantity issued;
e) Date of issue;
f) Maximum stock level;
g) Re-order level;
h) Re-order quantity;
i) Closing stock; and
j) Any other relevant information.
5.5.6 Where possible, all items of the same type and reference must be stored together as per
the description on the inventory records.
5.5.7 Items with limited shelf life must be rotated on a first in first out basis, in accordance with
paragraph .35 of GRAP, to reduce the occurrence of expired or obsolete stocks.
5.5.8 Due diligence and care must be exercised to prevent damage of, or deterioration of
inventory.
5.5.9 Due regard must be given to any safety standards which may apply to the storage of
certain inventories.
5.5.10 Steps must be taken to ensure safe custody of items, including precautions against loss
or theft.
5.5.11 The Stores Officer or Delegated Official responsible for the custody and care of
inventory must ensure that in his/her absence, such items, where applicable, are
securely stored.
5.5.12 The responsibility for the custody of the storeroom keys must be allocated by the
delegated authority to an official who is accountable for its use.
5.5.13 No unauthorized persons/officials shall obtain entry to premises, buildings or containers
where inventory is kept, unless accompanied by the responsible official.
5.5.14 whenever a change in the Stores Officer or SCM Officer occurs, an inventory count must
be conducted.
5.5.15 An independent official shall be nominated in writing by the delegated authority to assist
the official handing and taking over with the checking of the inventory and any
discrepancies.
5.5.16 Should the above not be complied with, the official taking over shall be liable for any
discrepancies.
5.5.17 A handing-over certificate, attached here to as Annexure A, must be completed by the
handing and taking over officials and a copy retained for record purposes.
5.5.18 The following fire protection precautions must be adhered to:
a) Inventories of an inflammable or dangerous nature shall be stored and handled in
such a manner that persons or property are not endangered and in compliance
with the requirements of any local authority;
b) The area must be clearly signposted; and
c) Fire extinguishing equipment must be placed in the area where inventories are
held and must be serviced regularly.

5.6 Issue of Inventory

5.6.1 Only the Stores Officer is authorized to issue inventory from the storeroom.
5.6.2 Inventory must only be issued in terms of the approved requisition form of the
Municipality.
5.6.3 All requisition forms must be ruled off immediately below the last item to prevent items
being added once the requisition is authorized by the responsibility manager.
5.6.4 The Stores Officer must verify that items ordered match items reflected on the requisition
form.
5.6.5 The official receiving the inventory must acknowledge in writing, the receipt of inventory.
5.6.6 Inventories must be issued and used for official purposes only.

5.7 Obsolete inventory

5.7.1 The preparatory work for the disposal of obsolete inventory must be undertaken by the
Stores Officer and verified by the Inventory Supervisor.
5.7.2 The Accounting Officer or delegated authority must convene a Disposal Committee for
the disposal of obsolete inventory.
5.7.3 The Disposal Committee should consist of at least three officials, one of whom must act
as the chairperson.
5.7.4 The delegated authority may approve the write-off of inventory, if satisfied that: -
a) The inventory has expired and is redundant;
b) The inventory is of a specialized nature and has become outdated due to the
introduction of upgraded and more effective products;
c) The inventory cannot be used for the purpose for which it was originally intended;
or
 d) The inventory has been damaged and is rendered useless.
5.7.5 All disposed of items must be updated in the inventory records/register/database for the
purposes of proper management and control.

5.8 Inventory count

5.8.1 Items may be subject to an inventory count on a monthly basis.
5.8.2 Where the quantity of inventory is too large for the count to be completed on a single
occasion, inventory counts may be carried out on a rotational basis with a full inventory
count at the end of each financial year.
5.8.3 All approved Municipal procedures and processes must be complied with during the
inventory count.
5.8.4 The SCM Officer must document in Annexure B and report to the CFO after investigating
any discrepancies between the inventory records/register/database, bin/tag cards or
inventory labels and the physical inventory.
5.8.5 The CFO must submit a report with the findings to the Accounting Officer, in order to
have the matter reported to the Executive Committee of the Municipality for the write-off
of any inventories losses, or the write –up of surpluses.
5.8.6 The appropriate disciplinary action must be instituted when applicable.
5.8.7 The inventory record/register/database must be updated accordingly.

6 INVENTORY RECORDS
6.1. An inventory record/register/database must be maintained for all inventory items, either
manually and / or electronically.
6.2 All relevant information must be included for the proper management and control of all
inventory items. It is recommended that details include but are not limited to:
a) Order number/date;
b) Item description;
c) Quantity and value of stock on hand;
d) Quantity and value of stock received;
e) Quantity and value of stock issued;
f) Re-order level;
g) Optimum inventory level;
h) Quantity and value of obsolete stock; and
 i) Opening/closing balance.
6.3 An inventory register/database must be printed monthly and the hard copy filed in a
chronological order to maintain a proper audit trail.

7. REPORTING
7.1 A report must be submitted at least quarterly to the Chief Financial Officer and/or the
Responsible Manager detailing the following:
a) Any inventory shortages or surpluses and the reasons for such;
b) Any inventory deficits proposed to be written-off; and
c) Any obsolete inventory items.

7.2 Inventories purchased during the financial year must be disclosed at cost in the
disclosure notes of the Annual Financial Statements of the Municipality.
7.3 In terms of GRAP the financial statements shall disclose:
a) the accounting policies adopted in measuring inventories, including the cost
formula used,
b) the total carrying amount of inventories and the carrying amount in classifications
appropriate to the entity,
c) the carrying amount of inventories carried at fair value less costs to sell,
d) the amount of inventories recognized as an expense during the period,
e) the amount of any write-down of inventories recognized as an expense in the
period in accordance with paragraph .43,
f) the amount of any reversal of any write-down that is recognized as a reduction in
the amount of inventories recognized as an expense in the period in accordance
with paragraph .43,
g) the circumstances or events that led to the reversal of a write-down of inventories
in accordance with paragraph .43,and
h) the carrying amount of inventories pledged as security for liabilities.

8 POLICY ADOPTION
This policy has been considered and approved by the Council of Msinga Municipality
on this day………… of …………………… 2017.
 ANNEXURE A:

PROCEDURES FOR ORDERING, RECEIPT, MAINTENANCE, ISSUING AND

DISPOSAL OF STOCK

NO. PROCEDURE FREQUENCY

1. Ordering of Stores:

1.1 Stores reorder levels must be set for all items by the On-going
Storeman which will be as follows:

• Reorder Level
• Maximum Level
• Minimum Level
• Emergency Level

A reorder listing should be printed weekly and On-going

1.2 reviewed by the SCM Manager before the requisition is
filled in.

1.3 The Storeman: On-going

• Must use the listing as a primary source of

information to complete the purchase requisition;
and
• Physical inspection of stock on shelves shall be
conducted before the requisition is filled in On going
• Should also consult the Technical Departments
about inventory required for planned maintenance.
1.4 The purchase requisition must be completed in On going
duplicate, with one copy kept in the requisition book
and an original copy forwarded to the buying section.
On going
1.5 A copy of the purchase order form will then be
forwarded by the Procurement section to the stores
section. On going
1.6
The order must be matched to the requisition copy to
verify that the correct quantities and correct items have On going
been ordered.
1.7
Orders must thereafter be filed in date sequence. On going
NO. PROCEDURE FREQUENCY
1.8

This file must form the basis for follow up of orders and
1.9 for matching goods that are delivered to stores

The orders file should be reviewed weekly by the

Logistics & Materials Manager and any orders, which
have not been delivered as per the agreement with the
buyer, must be followed up immediately.

2. Receipt of Stock:
On going
2.1 Goods will be delivered to the receiving area
(Storeroom) where the documentation will be recorded
and then forwarded to the Creditors Section.
On going
2.2 The receiving official must match the delivery note to
the purchase order, and fill out a pre-numbered goods
received slip. On going
2.3
The Stores Controller / Store-man must compare the
delivery note to the relevant order before accepting the On going
2.4 goods.

The goods received Slip must be signed by the Stores On going

2.5 Controller / Store-man as proof of acceptance of the
goods.

A computerised Goods Received Note or Stores Issue

Requisition which reflects full particulars of receipts Periodically
2.6 and issues must be maintained by the Stores
Controller / Store-man and updated immediately when
goods are received or issued.

2.7 Goods that are unused after the completion of the work Periodically
or the fulfillment of the purpose for which they were
issued, must be returned to the store and must be
included in stock.
Periodically
2.8 Goods Returned Note shall be filled in if stock is
returned by the department to the warehouse. The
Goods Returned Note shall be prepared by the
Responsible Official and signed by the Responsible
Manager
NO. PROCEDURE FREQUENCY
The Storeman shall acknowledge the receipt of goods
from the department by signing the Goods Returned
Note

3. Maintenance of Stores:
On going
3.1. Inventory and equipment belonging to the Council must
be clearly marked/ bar-coded as such, to indicate
ownership.
3.2 On going
Inventory belonging to the Council shall be kept in a
place approved of by the CFO, subject to the
conditions he or she determines.
On going
3.3
No section shall carry inventory in excess of its normal
requirements, as may be determined by the CFO.
3.4 Annually
The CFO shall ensure that at least once every financial
year, stock-taking of all stores of the Council takes
3.4.1 place as follows:

The financial year-end stock take will take place on the

3.4.2 last day of the financial year or as close to that date as Annually
possible.

3.4.3 All Heads of Sections and the Council’s external Annually

auditors must be notified of the date of the annual year
end stock take.
Annually
3.4.4 Stores must be closed at noon the day before stock
take. A notice to this effect must be prominently
displayed on the stores notice board.

3.4.5 In the case of an emergency, stock items may only be Annually

issued on the explicit authority of the Logistics &
Materials Manager.

Prior to stock take, the Logistics & Materials Manager

3.4.6 must ensure that all transactions up to the date of Annually
stock take, have been recorded. All goods received
notes, requisition issues and goods returned notes
should be captured onto the stores computer system.
NO. PROCEDURE FREQUENCY
3.4.7 Annually
An official delegated the responsibility, shall make
available stock take listing sheets to auditors for
recording the physical count figures.
3.4.8 Annually
Stock items must be counted in an orderly fashion from
one end to the other, using the two count method by a
store-man and by persons not dealing with stock on a Annually
3.4.9 regular basis.

Stock that has been drawn for use at a later date

3.4.10 should be included in the stock-count and not Annually
expensed. Consumables should also be included in the
stock-count and not expensed.
Annually
3.4.11 After each item is counted, they must be marked with a
sticker to indicate that they have been counted. Annually
3.4.12
After each item is counted, the total must be entered
onto the stock sheets. Annually
3.4.13

Stock sheets must be signed by counters and

checkers. Annually
3.4.14
On completion of the count, all stock sheets must be
handed to the Logistics & Materials Manager. Annually
3.4.15
Physical count figures will be verified to the
computerised listing. The Stock Controller should not Annually
3.5.16 be involved in any aspect of this verification.

Should any discrepancies arise, a recount of the

product is done, and the requisition entries are re-
checked. Annually
3.5.17
All write-offs of obsolete or damaged stock should be
authorised by the CFO.
Annually
3.6 The Logistics & Materials Manager shall submit a
report stating the quantity and value of any surplus or
shortage of stores revealed by the stock-take, together
with the possible reasons for this.

The CFO shall then report such surpluses and

NO. PROCEDURE FREQUENCY
shortfalls to the Council for further steps to be taken, if
necessary.

A thorough internal control system must be established

by the CFO to ensure that when a change of officials
responsible for stores and equipment takes place,
accountability with regard to losses and deficits can be
clearly established.

4. Issue of Stock:
On going
4.1 Only the Store men are authorized to issue goods from
the General stores.
On going
4.2 Goods should only be issued in terms of a properly
authorised requisition form.
On going
4.3 Specimen signatures of all persons authorized to sign
requisitions shall be supplied to the Logistics &
Materials Manager.
On going
4.4 If the signature is not of an authorised official, the
requisition should be sent back to the respective
section. On going

4.5 The Responsible Manager must verify that the correct

vote is entered on the requisition for the type of goods
requested and that there is sufficient budget provision On going
4.6 against the vote.

A Stock Issue Note must then be completed in

duplicate. Control of the issue book is the responsibility On going
4.7 of the Storeman

The Storeman and recipient of goods must agree that

the goods requisitioned, agree to the goods drawn On going
4.8 from stores, which is consistent with the Stock Issue
Note.
On going
4.9 The recipient must sign the issues note/book as
evidence that the goods stated on the issue note, have
been received. On going
4.10
Once the stores have been issued, the requisition is
NO. PROCEDURE FREQUENCY
captured into the computer system and updated by the
data capture clerk.

The issue note and the requisition must be filed in

sequential order.

5. Disposal of Goods:
Periodically
5.1 The CFO must furnish the Council with a list of goods
to be disposed of, together with the reasons for their
disposal. Periodically
5.2
The goods disposed of in the instance referred to
above may only be handed over to the purchaser on
full payment of the purchase price, or when other
satisfactory arrangements for payment have been
made with the CFO.

5.3 Stores may be disposed of by public auction provided Periodically

that the approval of Council is obtained.
 ANNEXURE B

HANDING-OVER CERTIFICATE

I certify that this is a true statement of inventory as per stock report attached hereto
and that inventory has been duly accounted for.

Signature of official handing over inventory: _________________________

Designation : _________________________
Date : _________________________

I certify that this is a true statement of inventory as per stock report attached hereto
and that inventory has been duly accounted for

Signature of official taking over inventory: ________________________

Designation : _________________________
Date : _________________________
 ANNEXURE C

Reference: ____________________
Enquiries: ____________________
Date: _________________________

FINANCIAL DEPARTMENT
Attention: Chief Financial Officer

QUARTERLY INVENTORY COUNT FOR THE PERIOD: _____________________________

This is to certify that the quarterly inventory count has been undertaken for all items.
The under-mentioned discrepancies were found:

1. SURPLUS INVENTORY

DESCRIPTION OF ITEM QUANTITY VALUE

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

The following factors gave rise to the surplus items:

_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
________________________________
 ANNEXURE C (CONT.)

2. DEFICIT INVENTORY

DESCRIPTION OF ITEM QUANTITY VALUE

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

Total value of issues for the period under review R ________________________

The following factors gave rise to the deficit items:
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
_______________________________________________________________________________________
We certify that an inventory count of items was undertaken by:

1. Name: ___________________ Rank:___________________ Signature: ______________________

2. Name: ___________________ Rank:___________________ Signature: ______________________
3. Name: ___________________ Rank:___________________ Signature: ______________________

_________________________________________ _______________________
HEAD OF DEPARTMENT DATE
VOTE NO___________ ANNEXURE D
PURCHASING REQUISITION FORM
CONTACT PERSON:___________ CONTACT NO: _____________ DATE:____________

REQUEST ISSUED
ITEM DESCRIPTION UNIT PRICE PER TOTAL UNIT TOTAL
UNIT ISSUED COST

TOTAL BALANCE CARRIED DOWN 0.00

0
TOTAL VALUE OF STOCK ISSUED

APPROVED BY
RESPONSIBLE MANAGER : _________________________ RECEIVED BY : ______________________
ISSUED BY : _________________________ DATE : ______________________
DATE : ________________________