UNDP inventory policy requires qualified inventories to be recognized as assets until consumed or distributed. The balance of such inventories have to be physically counted, valued, recognized and reported as assets at the end of each reporting quarter. The determination of items to be included in inventory is based on ownership and control of the inventories. The physical location or custody of the inventories are factors to be considered in determining control (i.e. whether they are stored on UNDP premises or managed by UNDP personnel). UNDP must recognize the inventories if UNDP undertakes any of the following responsibilities:
- Controls access to and distribution of the inventory items;
- Administers a programme requiring distribution of the inventory items (as opposed to situations where the inventory items are purchased solely for immediate shipment to a local government/implementing partner; or
- Bears the risks of loss, theft, damage, spoilage, etc.
Undistributed inventory over which UNDP has direct control and access, administers distribution or bears the risk of loss, theft, damage, etc. is reportable in UNDP’s financial statements. To satisfy the reporting requirement, Country Offices (COs) are required to count inventory and supplies at the end of each quarter and submit a certification of this to the UNDP Office of Financial Resource Management (OFRM) by the prescribed deadline. Detailed guidance for the physical count of inventory end is communicated quarterly by OFRM. OFRM then posts accounting adjustments for crediting expenses and debiting inventory account 14602 at the end of the reporting period (to capture the closing balances). These adjustments (as opening balances) are reversed at the start of the next quarter.
- UNDP Programme and Operations Policies and Procedures (POPP) on Inventory Management
- SharePoint Closure Site – physical count guidance and templates
Property, Plant and Equipment (PP&E) items, which are capitalized in UNDP books, are not to be considered inventory. As indicated under Asset Management (above), assets that are delivered to and are to be used and controlled by Sub-recipients (SRs)/Government are expensed. The only exception would be those assets procured using non-UNDP catalogue (i.e., to be expensed) but are temporarily held by UNDP as of the reporting date, waiting to be distributed to the SRs/Government. Such asset-like items must be included/reported as inventory items.