Thefts in Detroit Spur Inventory-Control Efforts

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Detroit residents recently had an opportunity to see how their public schools' supplies were delivered--to a convenience store, a gas station, and just about anyone with cash in hand.

A local television station, WXYZ-TV, last month reported that more than $250,000 in property had been stolen from the school district's warehouses since 1990. Most of the thefts, it alleged, appeared to be "inside jobs'' involving district employees.

Following the report, Detroit officials called for a complete overhaul of the way the district buys, stores, moves, and tracks its property and supplies, which they estimated could save more than $4 million a year. The plan, to be considered by the school board next month, would drastically scale back the district's current warehouse operations.

There are no estimates of how much public schools nationally are losing to materials theft and mismanagement. But one auditor who works with schools said he regularly finds districts to be unable to account for up to 20 percent of their movable assets after only a few years.

Responding to problems like those evident in Detroit, many other school systems are starting to rethink how they manage their property.

Looking to the private sector, they are attempting to make their inventory control more efficient and effective by adopting practices that became more widespread in business during the recent recession.

'If We Lose It, We Buy More'

The WXYZ-TV report showed that Detroit school officials had known about thefts from their warehouses for years. Richard Godfrey, the school system's chief security investigator, told the station he finally alerted the media to the problem because he could not "get anybody's attention.''

The list of items that had already been reported stolen included $10,000 worth of calculators, $14,000 worth of crayons, and manila folders valued at $20,000, as well as cleaning machines, photocopiers, cameras, videocassette recorders, and cases of film.

In one case, a district truck was seen pulling up to a convenience store and unloading 42 cases of fluorescent bulbs, which were valued at $1,200 but allegedly sold for $72.

"We're doing business as usual,'' Mr. Godfrey said. "If we lose it, we buy more.''

Superintendent David L. Snead soon released a plan that he said would give the district "the most efficient and effective inventory and warehouse system in any public school system in the country.''

Mr. Snead's plan calls for the district to shut down two of its three warehouse facilities, keep just 20 of its 120 warehouse workers, and substantially reduce its warehouse inventory. Where the district had stocked 11,000 items worth a total of $15 million, he proposed that it stock 2,000 items worth about $2 million.

A Low Priority

But even though such efforts appear promising, districts like Detroit remain a minority, according to experts in the field.

Most districts continue to maintain antiquated systems that hinder their efforts to properly manage or account for property and leave them vulnerable to theft. And they often lack the resources to implement new mechanisms to better safeguard the resources they have.

Inventory management "is one of those areas where, until you have a problem, you don't worry about it,'' observed Clark J. Godshall, an official of a New York regional authority that helps 13 Long Island districts with purchasing.

Improving inventory management tends to be a low priority among business officials who must contend with a broad range of responsibilities and tight budgets, said William J. Fanning, the chairman of a committee of the Association of School Business Officials International that deals with supply management.

But districts that can afford to overhaul their property-management systems are being enticed by the prospect of long-term savings.

"There is a cost of implementing these systems, but there is also a cost of not having these systems,'' said Stephen L. Gurwell, a partner at Deloitte & Touche Management Consulting, which advises districts.

Districts that do a poor job tracking their equipment and supplies not only have more difficulty controlling theft, but also tend to use their property less efficiently, Mr. Gurwell said.

The movement toward site-based management of public schools, remarked Mr. Godshall, also has brought such issues to the fore as principals and teachers have been given more control over and responsibility for district property.

Expensive and Easy To Steal

The Government Accounting Standards Board, an independent panel that sets financial guidelines for school districts and other public agencies, does not ask district auditors to account for or depreciate their assets on a regular basis. But a growing number of states now are requiring them to do so.

To comply, many districts are seeking to improve their asset-tracking systems, according Thomas C. Moore, the director of sales and marketing for Industrial Appraisal Company, a Pittsburgh firm that conducts inventories in more than 200 districts every year.

The Financial Accounting Standards Board, which creates guidelines for the private sector, in 1987 established rules that require private educational institutions to annually account for and depreciate their fixed assets. As a result, many private schools and higher-education institutions have already developed new asset-tracking systems, according to Barbara L. Schulz, the director of business services and purchasing at Lesley College in Cambridge, Mass., and a former president of the National Association of Education Buyers.

Educational institutions also are striving to keep better track of their property because developments in technology have left them with supplies and equipment that are much more expensive and far easier to steal than they were a few decades ago.

"Back in the old days, when you got a computer, it came in on a tractor-trailer,'' Mr. Godshall observed. "Nowadays, you have these laptop computers that are sitting on the loading dock. They are high-cost items, but they are very transportable.''

A software package costing thousands of dollars "is a very small box, but if that walks on you, it hurts,'' he said.

Computer Scanners Spread

When Mr. Moore's company returns to a school system to conduct a second inventory after four or five years, it typically finds that "ghost assets,'' which exist on paper only, account for 10 percent to 20 percent of the district's asset base.

The district has no idea if the assets have been lost, sold, stolen, or taken apart, he said, because it has no records of their departure.

Because of such substantial property losses, the biggest trend in the field appears to be automated inventory-control systems using computers and bar codes like those found in supermarkets.

By allowing school personnel to enter property into a computer by passing a scanner over it, bar-coding systems make it easier for school systems to conduct annual inventories that tell them exactly where their property is. That helps them decide whether the materials are at risk of being stolen, as well as if they are being used as effectively as possible.

By having such a system, districts can cut insurance costs and substantiate their claims when losses do occur. Because such systems can cost up to $100,000, however, they are still beyond the reach of many smaller districts.

Many districts are also working to develop more efficient means of storing and transporting their equipment and supplies, experimenting with both centralized and decentralized systems.

Some, including Detroit, have begun to adopt a practice now commonly used in the private sector, by having their supplies delivered on a "just in time'' basis, often directly to the school site.

Although the practice can increase the cost of supplies, since the districts are no longer buying in bulk, it also can enable them to reduce their storage and personnel costs and losses to theft.

Vol. 13, Issue 27

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