DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES

Amendment and Compilation of Chapter 3-130

Interim

Hawaii Administrative Rules

October 30, 2014

SUNMARY

1. §~3-130-2, 3-130-3, 3-130-5(c), 3-130-6, 3-130-8(d),

3-130-9 (a) , 3-130-10, 3-130-11, and 3-130-12 are

amended.

2. Chapter 130 is compiled.

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§3-130-1

HAWAII ADMINISTRATIVE RULES

TITLE 3

DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES

SUBTITLE 11

PROCUREMENT POLICY BOARD

CHAPTER 130

INVENTORY MANAGEMENT

§3-130-1§3-130-2§3-130-3§3-130-4§3-130-S§3-130-6§3-130-7§3-130-8§3-130-9§3-130-10

§3-130-11§3-130-12

PurposeDefinitionsAccountabilityInternal controlProperty inventory record filePhysical inventoryAnnual inventory reportingLost, stolen, or damaged propertyExcess state propertyDisposal and restrictions relating to

state propertyDisposal applicationExceptions

Historical Note: Chapter 130, Subtitle 11 of Title 3,Hawaii Administrative Rules, is based upon Chapter 61of Title 3, HAR, Rules and Regulations Governing theDisposal of Property Owned by the State of Hawaii ofthe department of accounting and general services.[Eff 6/1/81; R 12/15/95; comp 6/9/01; comp 11/15/01;comp 11/8/02 OCT 312014 1

§3-130-1 Purpose. (a) The purpose of theserules is to implement the requirements of section 103D-1202, HRS, and prescribe procedures governing themanagement, control, and disposal of property owned bythe State, including state property accounted for bythe several counties, and reported to the administratorof the state procurement office.

(b) This chapter 130, subtitle 11 of title 3,Hawaii Administrative Rules, replaces rescinded interim

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§3-130-1

rules previously adopted on 6/9/01 (file no. 2363) and11/15/01 (file no. 2399) . [Eff 12/15/95; comp 6/9/01;comp 11/15/01; am and comp l1/8/021JCT 3 1 ZOl4Auth: HRS§~l03D-202, 103D-1202) (Imp: HRS §103D-1202)

§3-130-2 Definitions. As used in this chapter,unless a different meaning clearly appears in thecontext:

“Accountability” means the responsibility formaintaining continuous records, periodically reportingthe location and condition, ensuring proper usage,safekeeping, and maintenance of all property.

“Controlled items” includes property notclassified as equipment, real property, or weapons, buthaving a useful life of more than a year, andconsidered a theft sensitive item, or determined by theproperty custodian to be critical to the agency’soperation, or important for safekeeping and propertymanagement. Two or more physically or functionallyidentical controlled items located within the sameinventory area may be combined into a single line item.

“Excess property” means any property that has aremaining useful life but which is no longer requiredby the using agency in possession of the property.

“Expendable” means property consumed or whichloses its identity in use.

“Equipment” includes all nonexpendable stateproperty having a unit cost of one thousand dollars ormore, or other amounts that may be applicable to thecounties’ inventory, a useful life of more than oneyear, but excluding real property and weapons.Equipment shall be accounted for individually by make,model, serial number, and decal number.

“Nonexpendable” means property not consumed inuse, retaining its original identity when used for thepurpose for which it was designed.

“Property custodian” means the head of thedepartment, or the head of any board, commission,agency, bureau, or office of the State or any persondesignated by that head, who is responsible for theaccountability of all state property in theirpossession, custody, control, or use.

“State property” means all things, tangible andintangible, owned by the State of Hawaii, excluding theseveral counties, including equipment, weapons, realproperty, controlled items, supplies, works of art,

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§3-130-4

historical treasures, patents, inventions, andcopyrights.

“Real property” includes land, land improvements,buildings, building improvements, and infrastructures.

“Supplies” means all state property not classifiedas equipment, real property, a weapon, or controlleditem.

“Surplus property” means any property that nolonger has any use to the State.

“Tangible” means having a physical existence andcapable of being appraised at an actual or approximatevalue.

“Theft sensitive item” means small and attractiveproperty that is easily converted to personal use oreasily pawned, including personal computer equipment,cameras, television sets, videocassette recorders,video cameras, and communication equipment.

I?Weaponsll mean handguns, rifles, shotguns, grenadelaunchers, and other explosive devices used for lawenforcement or security purposes. These items shall beaccounted for individually by make, model, serialnumber, and decal number, regardless of the cost orexpected life of the item. [Eff 12/15/95; am and comp6/9/01; am and comp 11/15/01; am and comp 11/8/02 1(Auth: HRS §103D-202) (Imp:HRS §103D-1201)

§3-130-3 Accountability. The head of thedepartment, or the head of any board, commission,agency, bureau, or office of the State, shall beresponsible for the accountability of all stateproperty in the possession, custody, control, or use ofthe unit or jurisdiction, including the severalcounties, which the head presides. The head maydesignate specific individuals or positions to bepersonally responsible for the property within theirjurisdiction. The assignment of responsibilities doesnot relieve the head of the overall accountabilityresponsibility. [Eff 12/15/95; comp 6/9/01; comp11/15/01; comp 11/8/02 OCT 3 1 2014] (Auth: HRS §~103D-202, 103D-l202) (Imp: HRS §~103D-l202, 103D-l204)

§3-130-4 Internal control. (a) The designatedproperty custodian shall establish, maintain, andenforce written internal control procedures to ensure

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§3-130-4

accountability for all state property in theirpossession, custody, control, or use.

(b) The purpose of the written internal controlprocedures is to ensure that all employees are aware ofthe proper handling of state property.

(c) ?!Internal control procedures” shall includeand address the following:

(1) Assigning of responsibility which includesproviding the names and positions ofpersonnel responsible for custody of propertyat each location;

(2) Recordkeeping of property which includesaccounting for all acquired state property;conducting of physical inventory; updatingthe master inventory listing; maintaining anaccurate audit trail; and conducting internalaudits;

(3) Proper usage of property which includesassuring property is used by authorizedpersonnel and only for official statepurposes; training personnel on the properuse of vehicles and equipment;

(4) Safekeeping of property which includesaffixing of property identification or decal;documentation for authorized loan, movementfrom location, and transfer to anotheragency; guidelines pertaining to propertydeclared excess, surplus, obsolete, beyondeconomical repair, lost, or stolen;guidelines for sale of property;

(5) Safeguards for property which includesprocedures for security of property duringand after working hours; special care ofitems that are of a sensitive or theft pronenature; investigating and reporting ofthefts, or vandalism; appointment of key orlock custodian; and

(6) Care and maintenance of property whichincludes a preventive maintenance schedule;management of warranty file; repair of brokenproperty; and guidelines for damaged ordestroyed property. [Eff 12/15/95; am andcomp 6/9/01; am and comp 11/15/01; am andcomp 11/8/02 OCT 31 2014 (Auth: HRS §lO3D-202) (Imp: HRS §lO3D-1205)

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§3-130-6

§3-130-5 Property inventory record file. (a)Each chief procurement officer for their respectivejurisdiction shall establish, manage, and maintain acentralized property inventory record file for allequipment, real property, weapon, and controlled itemsof state property in the possession, custody, control,or use of the jurisdiction which the officer presides.

(b) The file shall consist of the followinginformation for each property:

(1) Office or agency having the responsibility ofaccountability of the property;

(2) Physical location of property;(3) Type of property, which includes land, land

improvements, buildings, buildingimprovements, infrastructures, vehicles,equipment, weapons, work of arts, historicaltreasures, and controlled items;

(4) Description of property, which includes landtax map key, and executive order number, andfor vehicle or equipment the manufacture,model, and serial number;

(5) Date of acquisition;(6) Acquisition cost of property; and(7) State identification number.(c) Each state agency shall be accountable for

all acquired supplies. Internal records shall bemaintained for consumable supplies if an agency’sannual expenditure, for such supplies, exceeds fivethousand dollars, and for non-consumable supplies witha unit cost of two hundred fifty dollars but less thanone thousand dollars. These records shall containinformation on purchases for all supplies, usage ornon-consumable supplies, transfers for non-consumablesupplies, and disposals for non-consumable supplies,and are subject to audit. Supplies include.thefollowing:

(1) Consumable supplies are items consumed in thenormal course of an agency operations such asfood, clothing, stationery and other supplieswhich are normally used only once or have auseful life of less than one year;

(2) Non-consumable supplies are items notconsumed in the normal course of an agencyoperations, that have a useful life of morethan one year and a unit cost of two hundredfifty dollars to less than one thousanddollars, but excludes weapons and controlleditems. [Eff 12/15/95; am and comp6/9/01; am and comp 11/15/01; am and comp11/8/02 OCT 3 1 2014 1 (Auth: HRS §103D-202) (Imp: HRS §103D-l205)

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§3-130-S

§3-130-6 Physical inventory. (a) Eachdesignated property custodian or governmentalshall conduct an annual inventory, to be verified byphysical count of all state property in theirpossession, custody, control, or use.

(b) If there is a change in the designatedproperty custodian, the head of the department, or thehead of any board, commission, agency, bureau, oroffice of the State or the custodial department’sfiscal office shall take action to have a physicalinventory taken at that time.

(c) Immediately upon the completion ortermination of any agency or property account, forwhatever reason, a complete physical inventory shall betaken pursuant to the direction of the head of thedepartment, or the head of any board, commission,agency, bureau, or office of the State or the custodialdepartment’s fiscal office. [Eff 12/15/95; comp6/9/01; comp 11/15/01; comp 11/8/02 1 (Auth: HRS§103D-202) (Imp: HRS §lO3D-l205)

§3-130-7 Annual inventory reporting. The chiefprocurement officers, the administrative heads of theexecutive departments, and all other persons, offices,and boards of a public character that are not by lawunder the control and direction of any of the officersspecifically named in this section shall prepare andfile with the administrator of the state procurementoffice an annual inventory return of state property intheir possession, custody, or control. The annualinventory return shall be filed before September 16 ofeach year. The annual inventory return shall containinformation in accordance with section 103D-1206, MRS.[Eff 12/15/95; am and comp 6/9/01; am and comp11/15/01; am and comp 11/8/02 OCT 312014 1 (Auth: HRS§lO3D-202) (Imp: HRS §lO3D-1206)

§3-130-8 Lost, stolen, or damaged property. (a)The theft of state property shall be immediatelyreported to the appropriate law enforcement agency.

(b) All lost, stolen, or damaged equipment shallbe reported by the state governmental unit within tendays after discovery of the loss to the designatedproperty custodian.

(c) The designated property custodian shallconduct an investigation of the incident and initiatethe appropriate action to prevent future loss.

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§3-130-10

(d) The designated property custodian shall submit adisposal application to the head of the department, or thehead of any board, commission, agency, bureau, or office ofthe State in accordance with section 3-130-11(c)

(e) Any such equipment deleted from the inventory that issubsequently located shall be added back to the inventory.

[Eff 12/15/95; comp 6/9/01; comp 11/15/01; comp11/8/02 3 (Auth: HRS §~l03D-202,103D-1202) (Imp: HRS §103D-1202)

§3-130-9 Excess state property. (a) To obtain maximumutilization and to minimize the procurement of new items, eachstate department or agency shall, be responsible for makingexcess state property available and facilitate the transfer ofthe property to other state departments or agencies, excludingweapons, work of arts, historical treasures, patents,inventions, and copyrights, and real property.

(b) Each state department or agency shall to the maximumextent practicable, fulfill its requirements for property byobtaining excess property from other state departments oragencies instead of initiating a new procurement.

(c)Agencies receiving or transferring excess propertyshall establish controls over the processing of transferdocuments and shall establish and maintain an adequate systemof property accountability. [Eff 12/15/95; comp6/9/01; comp 11/15/01; comp 11/8/02 OCT 31 21H4(Auth: HRS§~103D-202, lO3D-1202) (Imp: HRS §103D- 1202)

§3-130-10 Disposal and restrictions relating to stateproperty. (a) No state property shall be sold, traded,destroyed, or otherwise disposed of, except in accordance withthe following rules:

(1) Land and interest in land owned by the State.(A) Approval for disposal shall be obtained from

the department of land and natural resources;and

(B) A copy of the approval, together with thedisposal application, shall be submitted tothe head of the department, or the head ofany board, commission, agency, bureau, oroffice of the State.

(2) Surplus property shall be disposed of using one ofthe following methods:(A) Disposal by trade-in to a vendor for credit on

an acquisition which must receive the head ofthe department, or the head of any board,commission, agency, bureau, or office of theState’s

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§3-130-10

prior approval and determination shallbe based On:Ci) The urgency of need by other state

governmental units; or(ii) Whether the trade-in value is

expected to exceed the valuerealized through the sale of theproperty;

(B) Disposal to the state surplus propertyoffice of the state procurement office,which may, at its discretion, refuse toaccept the property;

(C) Disposal by sale of property throughcompetitive sealed bids, publicauctions, established markets, or postedprices.Ci) Notice of sale by competitive

sealed bid sale and public auctionshall be publicized;

(ii) The following conditions of sale bycompetitive sealed bid and publicauction shall be included in thepublicized notice, in thesolicitations, and in the noticesposted at the site of sale: It isthe buyer’s responsibility toremove the items within astipulated time after purchase; noguarantees or warranties are givenby the State for the items; majordefects, if known, are listed, butthe State makes no claim that alldefects are known; no sale will beinvalid if defects are discoveredin the item after the sale; and theState assumes no responsibility orliability once the items are sold;

(iii) Competitive sealed bidding methodshall be in accordance with thefollowing: Notice of sealed bid saleshall be advertised and madepublicly available from the sellingdepartment or agency at least tendays before the date set for bidopening; the notice shall list thematerials offered for sale, their

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§3-130-10

location, availability forinspection, the terms andconditions of sale. and instructionsto bidders including the place,date, and time set for bid opening;bids shall be opened publicly atthe time and place announced; theaward shall be made in accordancewith the provisions of the noticeof sealed bid sale to the highestresponsive and responsible bidder,provided that the price offered bysuch bidder is acceptable to thedesignated property custodian; ifthe designated property custodiandetermines that the bid is notadvantageous to the State, suchofficer may reject the bids inwhole or in part and may re-solicitbids or such officer may negotiatethe sale, provided that thenegotiated sale price is higherthan the highest responsive andresponsible bidder;

(iv) Public auctions shall be advertisedno less than six days before theauction date and all terms andconditions will be available to thepublic at least twenty-four hoursprior to the auction date. Thesolicitation to bidders shallstipulate all the terms andconditions of any sale. Whenappropriate, an experiencedauctioneer may be used to cry thesale and assist in preparation ofthe sale;

(v) Posted price (pre-establishedprice) may be used for items forwhich there is no regular market,demand is erratic, or for itemsthat received unacceptable pricesthrough competitive bids or publicauction and the items shall beavailable on a first-come basis;

(vi) Only United States postal moneyorders, certified checks, cashiers’checks, or cash shall be accepted

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§3-130-10

for sales of surplus property unlessapproved by the designated propertycustodian or for sales of less thanone hundred dollars;

(D) Sale in accordance to one of themethods and requirementsdescribe on §3-130-10 (a) (2) (C) (i)thru (iv) or dispose to dealersfor recycling, salvaging, orscrap;

(E) Donation to the following organizations,provided the designated property custodianmakes a written justification, approved bythe head of the department, or the headof any board, commission, agency, bureau,or office of the State, that the donationwould be advantageous to the State:(i) City or county agency within the

State; or(ii) “A nonprofit tax-exempt charitable

activity” is defined as aninstitution or organization whoseearnings are used to help the poor orneedy, and no part of the netearnings of which are used or isapplied to the benefit of any privateshareholder or individual and hasbeen held to be tax-exempt under theprovisions of the Federal InternalRevenue Code and the State of Hawaiitax laws;

(F) Cannibalize the usable parts anddestroy, dispose in trash bin,incinerator, or landfill.

(3) Any weapon, if not transferred to anotherstatutorily authorized state agency inaccordance with section 3- 130-9, shall bedisposed of as follows, and the supportingdocuments shall be attached to the disposalapplication or certificate of disposal:

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(A) Traded or sold to a federally licensedfirearm dealer; or

(B) Donated to the local police department.(b) No state property shall be given or loaned to

any individual or non-government organization; however, astate agency may furnish state property to a privatecontractor to facilitate the performance of services forthe State by the contractor, so long as the agency includesa provision for the furnished state property in theprocurement document.

(c) Approval for disposal of controlled items andsupplies shall be obtained from the designated propertycustodian of the items and state agencies shall beresponsible for maintaining adequate records to account forthe disposal of such items.

(d)Whenever any designated property custodian desi~’esto dispose or remove any equipment, weapon, or realproperty from their inventory, other than by transfer toanother state agency, the designated property custodianmust, before the action, submit a written disposalapplication to the head of the department, or the head ofany board, commission, agency, bureau, or office of theState requesting approval of the requested disposition.

[Eff 12/15/95; am and comp 6/9/01; am and comp11/15/01; am and comp 11/8/02 OCT 312014 1 (Auth:

HRS §~l03D-202, lO3D-1202) (Imp: HRS §103D- 1202)

§3-130-11 Disposal application. (a) Disposalapplications shall be submitted to the head of thedepartment, or the head of any board, commission,agency, bureau, or office of the State_for approval,and if the application has been approved:

(1) The original shall be retained by the head ofthe department, or the head of any board,commission, agency, bureau, or office of theState; and

(2) Two copies shall be returned to the applyingdepartment’s fiscal office, which in turn shallkeep one copy and forward the other copy to theapplying agency.

(b) Disposal application shall contain thefollowing information:

(1) Statement and certification: “Application ishereby made for the disposal of governmentproperty under my custody and control. Pursuantto chapter 3-130, HAR, I do solemnly swear andaffirm the accuracy of this application.”;(A) Designated property custodian’s

signature;

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(B) Designated property custodian’s name,official position, and phone number;

(2) Property information: complete information asshown on the current inventory printout;

(3) Present condition and estimated value of theproperty;

(4) Reason for requesting to delete or dispose ofthe property;

(5) Proposed method of disposal:(A) If an item is to be used as a trade-in

for new equipment, the application shallidentify the name of the vendor, theprice of the new item, and the amount ofthe trade-in allowance;

(B) If an item is to be sold by competitivesealed bidding,~public auction, orposted prices, the application shalllist the names and offers frominterested parties, the party purchasingthe property, and if applicable, a copyof the public notice shall be attachedto the disposal application. If theinformation is not available whensubmitting the disposal application, itshall be provided with the submission ofthe certificate of disposal;

(C) If an item is to be donated, theapplication shall provide the name ofthe city or county agency or thenonprofit tax-exempt charitable activityto receive the donation, andjustification for the donation;

(D) If an item is to be sold or disposedfor recycling, salvaging, or scrap, theapplication shall list the name of theparty purchasing or disposing theproperty and the amount offered for theproperty, it applicable;

(E) If an item is to be discarded, theapplication shall state the means ofdisposal; i.e., to be cannibalized forusable parts or destroyed and disposedin trash bin, or sent to localincinerator or landfill.

(c) Lost, stolen, or damaged items shall not be.reported on the same disposal application with otherequipment to be disposed of by choice, but shall bereported separately. A number of items may be listedon the same application provided the incident and

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circumstance surrounding the loss, theft, or damage are thesame. The following information shall be provided in theapplication:

(1) Information as required in subsections (b) (1),(b) (2) , (b) (3) , and (b) (4)

(2) Date and explanation of the circumstancessurrounding the loss, theft, or damage;

(3) Description of internal control procedures andsecurity measures in effect at the time of theloss, theft, or damage;

(4) Applicant’s conclusion or opinion as to the causeof the loss, theft, or damage;

(5) Description of internal control procedures or securityimprovements to be implemented to prevent or minimizefuture losses; and

(6) Statement whether the police or attorneygeneral’s office was notified, and if so, attachany supporting documents to the application.

(d) Upon receipt of the application, the head of thedepartment, or the head of any board, commission, agency,bureau, or office of the State shall:

(1) Evaluate the application, and, if necessary, requestadditional information;

(2) Grant or deny the requested action; or(3) Direct disposition of the property in such other

manner as determined to be in the best interest ofthe State.

(e) State property approved for destruction or discardingmay be disposed at the agency’s location, or may be taken to anincinerator or landfill for disposal. The followingprocedure shall apply:

(1) Any mark or decal indicating State of Hawaiiownership shall be removed or obliterated beforedisposing of the property;

(2) The property shall be destroyed in such a mannerto prevent reuse by other parties.

(f) The certificate of disposal is a certification by theapplying agency that the property listed on the applicabledisposal application was disposed in the manner approved by thehead of the department, or the head of any board, commission,agency, bureau, or office of the State. The following is thedistribution sequence of the certificate of disposal:

(1) Following the head of the department, or the head ofany board, commission, agency, bureau, or office ofthe State’s approval of the disposal application,except for applications for lost or stolen items,the head of the department, or the head of anyboard, commission, agency, bureau, or office of theState shall forward a copy of the approved disposalapplication to the applying custodian’s fiscaloffice. The applying custodian’s fiscal office shallthen forward to the applying agency one copy of the

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§3-130-11disposal application;

(2) Upon completion of the disposal transaction, theapplying agency shall confirm the final dispositionof the property by returning copies of the completedcertificate of disposal as follows:(A) One copy to [thc chicf procurcmcnt

officcr] ‘the head of the department, orthe head of any board, commission,agency, bureau, or office of the State”;and

(B) One copy to the applying agency’s fiscal office.(g) All disposal records such as disposal applications,

certificates of disposal, and actions taken pursuant theretoby an applying agency shall be kept for audit purposes by theapplying agency’s office, the applying department’s fiscaloffice, and the head of the department, or the head of anyboard, commission, agency, bureau, or office of the State.

[Eff 12/15/95; am and comp 6/9/01; am and comp11/15/01; am and comp 11/8/02 OCT 3 1 2014 (Auth: HRS §~l03D-202, 103D- 1202) (Imp: HRS §103D-1202)

§3-130-12 Exceptions. If any requirement of this chapterresults in undue hardship for the agency, the head of thedepartment, or the head of any board, commission, agency,bureau, or office of the State may grant, in writing, anexception to that requirement if the head of the department, orthe head of any board, commission, agency, bureau, or office ofthe State determines such action to be in the best interest ofthe State.Each exception granted by the head of the department, or thehead of any board, commission, agency, bureau, or office of theState shall be by written determination approved by theadministrator of the state procurement office. [Eff 12/15/95;comp 6/9/01; comp 11/15/01; comp 11/8/02 OCT 3 12014I (Auth: HRS §~103D-202, 103D-1202) (Imp: HRS §103D- 1202)

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DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES

Amendments to and compilation of chapter 130,title 3, Hawaii Administrative Rules, on the SummaryPage dated October 30, 2014 were adopted on September29, 2014, pursuant to §103D-202, Hawaii RevisedStatutes, interim rulemaking authority.

This interim rule replaces rules previouslyadopted and effective on 11/08/2002, and shall takeeffect ten days after filing with the Office of theLieutenant Governor.

I certify that the foregoing are copies of the interimrules as amended

~2A~2~JL1 :~ ~GREGO~k L~E KING 3ChairpersonProcurement Policy Bbard

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UELJTENANT GOVERNOR OF HAWAIITHIS IS TO CER11FY ThAT ThE FOREGOING IS ATRUE AND CORRECT COPY OF THE ORIGINAL

WHICH IS ON FILE AND OF RRCORD IN ThIS OFFICE

NOV 0 32014 ____

~KIState Comptroller

Dated:

FILED

APPROVED AS TO FORM:

Deputy Attorney General

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