SOP Amendment / Addendum

Date : 11/14/2007

SOP Amedment / Addendum No. : GM-WH12.A
Title : Amendment to the Revised SOP on Semi-Annual Physical Inventory Counting of NFA Inventory Items for Sale, By-Products, and Empty Sacks
Digest :

For the information, guidance and compliance of all concerned, published hereunder is the Amendment to SOP No. GM-WH12 entitled Revised SOP on Semi-Semi-annual Physical Inventory Counting of NFA Inventory Items for Sale, By-Products, and Empty Sacks (MTS) which took effect on March 07, 2002:

II. IMPLEMENTING GUIDELINES

A. General Policies

1. xxx

COA’s participation as observer/witness in the Provincial Inventory Committees shall be optional and not mandatory in conformance with COA’s exclusive authority to define the scope of its audit and examination and establish the techniques and methods required therefore. However, NFA should inform COA in advance of the scheduled date of physical count per warehouse to enable them to witness the count if they so desire. Thus, NFA management can conduct inventory taking even without the presence of a COA representative, provided they are properly notified. Corollary to this, the signature of the “COA Representative” in the inventory count sheets and any other inventory reports shall be discretionary and will not in any manner affect the reliability of the document.

Likewise, the participation of Internal Audit Department in inventory committees shall be limited to being an observer/witness to maintain its independence in accordance with the international standards of internal auditing.
2. Physical inventory count of grains stocks and its by-products and MTS in all NFA warehouses shall be conducted semi-semi-annually, specifically from May 16-31 and from November 16-30 of each year, to ascertain physical existence of inventory as reflected in the financial statements. The actual quantity of stocks per physical count shall be compared with the stock balance per stock report as of actual count date. The variance between the two, if any, shall be the basis of the accounting unit in setting up the allowance for inventory variance.
3. An inventory of used and unused accountable forms under the accountability of the Warehouse Supervisor shall also be included in the semi-annual physical inventory taking.
4. There shall be no transaction in the warehouse while actual counting of stocks is being conducted. The Provincial Managers shall be responsible for the proper scheduling of physical inventory counts to be conducted in all warehouses in their area to ensure that marketing operations in the province will not be disrupted. NFA clients should be informed accordingly of the schedule of closure of the warehouses due to inventory taking.
5. As a general rule, a bag to bag count with 100% weighing shall be conducted during the semi-annual physical inventory counting. However, volumetric count may be adopted if the aggregate inventory level for all stocks inside one warehouse is above 5,000 bags.
In case the bag to bag count with 100% weighing was employed during the semi-annual physical inventory counting, liquidation of accountability of stocks and MTS of the concerned accountable officer shall be immediately undertaken.
B. Specific Policies

1. Team Composition of Inventory Committees

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a. Central Office Inventory Committee:

Chairman - Department Manager, DMO
Member - Department Manager, DAS
Department Manager, TRDD

Responsibilities:

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4. Submits to the Administrator the National Physical Inventory Report not later than the 15th working day of June and December of each year.

b. Regional Office Inventory Committee:

Chairman - Regional Manager
Co-Chairman - Asst. Regional Manager
Members - Regional Accountant
- Regional Operations Officer
- Regional SQAO
Responsibilities:
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2. Assigns regional office representatives to witness the physical inventory count conducted by the different Provincial Office Inventory Committees.

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4. Submits to the Central Office Inventory Committee the Regional Physical Inventory Report not later than the 10th working day of June and December every year.

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c. Provincial Office Inventory Committee:

Chairman - ProvincialManager/Officer-in-Charge
Co-Chairman - Asst. Prov’l Manager/Prov’l. Opns. Officer
Members - Provincial Accountant
Prov’l. SQAO
Warehouse Supervisor II
Observer/Witness- Regional Office Representative
COA Representative (optional)
IAD Representative (optional)

Responsibilities:

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3. Ensures the timely preparation of the required reports pertaining to the conduct of the semi-annual physical inventory count. For this purpose, assigns the Provincial Marketing Operations Section to undertake consolidation of the necessary data and preparation of reports.
4. Submits the Provincial Inventory Reports to the Regional Office Inventory Committee not later than the 5th working day of June and December every year.

2. Method of Counting

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3. Actual Count vs Inventory Balance per Stock Report

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b. The inventory balance in the warehouse per stock report shall be determined before actual counting of stocks is conducted.
b.1. For provinces using the FOAM program, the inventory balance per stock report as of actual count date which can be generated by the computer shall be used. The stock report shall be duly signed by the authorized signatories.
b.2. For provinces without FOAM programs and where stock reports are prepared manually, the stock balance as of actual count date shall be determined using as basis the latest weekly stock reports submitted to the Accounting Unit (weekly stock reports are prepared covering the period from 1st to 7th, 8th to 15th, 16th to 22nd, and 23rd to 30th days of the month). Receipts/Issues made after the weekly report’s cut-off date until actual count date shall be added/deducted to the latest weekly stock report to determine the stock balance as of count date. To illustrate:
Ÿ If actual count date is Nov. 16 or Nov. 23 which are immediately after the cut-off date of the 2nd and 3rd weekly stock reports, respectively;
Stock Balance as of Actual Count Date = the stock balance reflected in the latest weekly stock report
Ÿ If actual count is conducted within the period Nov. 17-22:
Stock Balance as of Actual Count Date = the stock balance reflected in the weekly stock report for the period Nov. 8-15 + Receipts from Nov. 16 to actual count date - Issues from Nov. 16 to actual count date
Ÿ If actual count is conducted within the period Nov. 24-30:
Stock Balance as of Actual Count Date = the stock balance reflected in the weekly stock report for the period Nov. 16-22 + Receipts from Nov. 23 to actual count date - Issues from Nov. 23 to actual count date
c. The stock balance as of actual count date shall be compared with the actual quantity of stocks per physical count and the difference, if any, between the determined stock balance and the actual count shall be the basis of the accounting unit in setting up the allowance for inventory variance.
4. Physical Inventory Count Procedures

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d. Transactions in the warehouse shall be suspended while actual counting of stocks is being conducted.

e. The conduct of the count xxxxxx shall be in accordance with the following procedures:

1) Grains Stocks and its By-Products/MTS stored in the warehouse

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e) Volumetric counting

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In case of piles with staircase, the procedures enumerated above shall still be applied, however, the number of bags to be considered in determining the length and width of the pile for the volumetric count shall only be up to the portion of the pile that is not part of the staircase. The number of bags used as staircase shall be counted and added to the result of the volumetric count made on the pile to obtain the total quantity of that particular pile

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5. Inventory Variances

Only one inventory variance shall be recorded in the books and this shall be the inventory count variance established during the actual physical count conducted in November.
The inventory count variance refers to the difference (shortage or overage) between the actual count and the stock balance per stock report as of actual count date. However, if volumetric counting was used, only shortages shall be recorded. xxx

6. Inventory Reports

a. Provincial Reports

a.1. Warehouse Semi-annual Physical Inventory Report (as of Actual Count Date) - Grains Stocks and its By-Products (Exhibit 1A) and Warehouse Semi-annual Inventory Count Report as of Actual Count Date - MTS (Exhibit 1B). This shall be prepared by the Provincial Marketing Operations Section based on the following documents/reports:
i) Inventory Count Sheet - Grains Stocks and its By-Products (Exhibit 2A and its Exhibit 2A-Annex for volumetric count and Exhibit 2B for bag to bag count ) and Inventory Count Sheet - MTS (Exhibit 2C) - these indicate the results of the count conducted for grain stocks, by-products, and MTS. The count sheets shall be prepared to show the actual stock balance per cereal type/condition/variety of grains, by-products, and MTS as counted by the Provincial Inventory Team.
ii) Inventory of Accountable Forms (Exhibit 3) - this is an inventory of used and unused accountable forms under the accountability of the WSII.
iii) Monthly Reconciliation of the Stock Report VS Stock Book/Trial Balance Grains Stocks and its By-Products and MTS (Exhibit 4A and Exhibit 4B) - this is the report prepared by the Provincial Accountant reconciling the stock balance per Stock Report and stock balance per Accounting Books/Trial Balance.
The duplicate copies of the journal vouchers for the adjustments taken up as indicated in Inventory Reconciliation Reports shall be submitted to the Regional Office Inventory Committee.
a.2. Provincial Physical Inventory Report - Grains Stocks and By-products and MTS (Exhibit 5A and Exhibit 5B) - this is a consolidation of the results of the semi-annual inventory count conducted on the warehouses within the province. This shall be submitted by the Provincial Office Inventory Committee to the Regional Office Inventory Committee not later than the 5th working day of June and December of each year.
a.3. Provincial Physical Inventory Report - Warehouses with Variances (Exhibit 6)- this is a listing of warehouses found to have inventory variance after the count. The report shall also indicate the accountable officer of the warehouse and the corresponding shortage/overage. This shall also be submitted by the Provincial Office Inventory Committee to the Regional Office Inventory Committee not later than the 5th working day of June and December of each year.
b. Regional Physical Inventory Reports - these shall be submitted by the Regional Office Inventory Committees to the Central Office Inventory Committee not later than the 10th working day of June and December of each year.
b.1. Regional Physical Inventory Report - Grains Stocks and its By-products and MTS (Exhibit 7) - this is a consolidation of the Provincial Physical Inventory Reports showing the inventory variances (per cereal type/variety and MTS) in the warehouses in each province within the region.
b.2. Regional Physical Inventory Report - Warehouses with Significant Variances (Exhibit 8) - this report contains the list of warehouses per province with significant inventory variance. This shall include the names of the accountable officers and the corresponding shortages/overages incurred.
c. National Physical Inventory Reports - these reports are a consolidation of the Regional Physical Inventory Reports. These shall be prepared by the Central Office Inventory Committee and submitted to the NFA Administrator not later than the 15th working day of June and December of each year
c.1. National Physical Inventory Report - Grain Stocks and its By-Products and MTS (Exhibit 9) - this report shows the inventory variances (per cereal type and MTS) in the provinces in each region.
c.2. National Physical Inventory Report - Warehouses with Significant Variances (Exhibit 10) - this report presents a listing of warehouses in the region with significant inventory variance including the names of the accountable officers and the corresponding shortages/overages.
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All rulings, policies, and/or issuances inconsistent herewith are hereby superseded.

This amendment shall take effect upon approval of the Administrator.

Date Approved: November 14, 2007.