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DEPARTMENT OF ACCOUNTING AND GENERAL SERVICES

DEPARTMENT OF ACCOUNTING AND GENERAL SERVICESAmendment and Compilation of Chapter 3-130Hawaii Administrative RulesSeptember 27, 2002SUMMARY1.§3-130-1 and §3-130-2 are amended.2.§3-130-4 and §3-130-5 are amended.
4.§3-130-7 is amended.
5.§3-130-10 and §3-130-11 are amended.6.Chapter 130 is compiled.§3-130-1HAWAII ADMINISTRATIVE RULESTITLE 3DEPARTMENT OF ACCOUNTING AND GENERAL SERVICESSUBTITLE 11PROCUREMENT POLICY BOARDCHAPTER 130INVENTORY MANAGEMENT
§3-130-1Purpose§3-130-2Definitions§3-130-3Accountability§3-130-4Internal control§3-130-5Property inventory record file§3-130-6Physicalinventory§3-130-7Annual inventory reporting§3-130-8Lost, stolen, or damaged property§3-130-9Excess state property§3-130-10Disposal and restrictions relating to state property
§3-130-11Disposal application§3-130-12Exceptions
Historical Note: Chapter 130, Subtitle 11 of Title 3,
Hawaii Administrative Rules, is based upon Chapter 61
of Title 3, HAR, Rules and Regulations Governing the
Disposal of Property Owned by the State of Hawaii of
the 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 ]§3-130-1 Purpose. (a) The purpose of theserules is to implement the requirements of section 103D-
1202, HRS, and prescribe procedures governing the
management, control, and disposal of property owned by
the State, including state property accounted for by
the several counties, and reported to the administrator
of the state procurement office.(b) This chapter 130, subtitle 11 of title 3,Hawaii Administrative Rules, replaces rescinded interim130-1§3-130-1rules previously adopted on 6/9/01 (file no. 2363) and
11/15/01 (file no. 2399). [Eff 12/15/95; comp 6/9/01;
comp 11/15/01; am and comp 11/8/02 ] (Auth: HRS
§§103D-202, 103D-1202) (Imp: HRS §103D-1202)§3-130-2 Definitions. As used in this chapter,unless a different meaning clearly appears in the
context:"Accountability" means the responsibility formaintaining continuous records, periodically reporting
the location and condition, ensuring proper usage,
safekeeping, and maintenance of all property."Controlled items" includes property notclassified as equipment, real property, or weapons, but
having a useful life of more than a year, and
considered a theft sensitive item, or determined by the
property custodian to be critical to the agency's
operation, or important for safekeeping and property
management. Two or more physically or functionally
identical controlled items located within the same
inventory area may be combined into a single line item."Excess property" means any property that has aremaining useful life but which is no longer required
by 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 or
more, or other amounts that may be applicable to the
counties' inventory, a useful life of more than one
year, 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 the
purpose for which it was designed."Property custodian" means the chief procurementofficer, or the head of any state governmental unit
that is not by law under the control of a chief
procurement officer, or any person designated by that
officer or head, who is responsible for the
accountability of all state property in their
possession, custody, control, or use."State property" means all things, tangible andintangible, owned by the State of Hawaii, excluding the
several counties, including equipment, weapons, real
property, controlled items, supplies, works of art,130-2§3-130-4historical treasures, patents, inventions, and
copyrights."Real property" includes land, land improvements,buildings, building improvements, and infrastructures."Supplies" means all state property not classifiedas equipment, real property, a weapon, or controlled
item."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 approximate
value."Theft sensitive item" means small and attractiveproperty that is easily converted to personal use or
easily pawned, including personal computer equipment,
cameras, television sets, videocassette recorders,
video cameras, and communication equipment."Weapons" mean handguns, rifles, shotguns, grenadelaunchers, and other explosive devices used for law
enforcement or security purposes. These items shall be
accounted for individually by make, model, serial
number, and decal number, regardless of the cost or
expected life of the item. [Eff 12/15/95; am and comp
6/9/01; am and comp 11/15/01; am and comp 11/8/02 ]
(Auth: HRS §103D-202) (Imp: HRS §103D-1201)§3-130-3 Accountability. The chief procurementofficer, or the head of any state governmental unit
that is not by law under the control of a chief
procurement officer, shall be responsible for the
accountability of all state property in the possession,
custody, control, or use of the unit or jurisdiction,
including the several counties, which the officer or
head presides. The officer or head may designate
specific individuals or positions to be personally
responsible for the property within their jurisdiction.
The assignment of responsibilities does not relieve the
officer or head of the overall accountability
responsibility. [Eff 12/15/95; comp 6/9/01; comp
11/15/01; comp 11/8/02 ] (Auth: HRS §§103D-
202, 103D-1202) (Imp: HRS §§103D-1202, 103D-1204)§3-130-4 Internal control. (a) The designatedproperty custodian shall establish, maintain, and
enforce written internal control procedures to ensure130-3§3-130-4accountability for all state property in their
possession, custody, control, or use.(b) The purpose of the written internal controlprocedures is to ensure that all employees are aware of
the proper handling of state property.(c) "Internal control procedures" shall includeand address the following:(1) Assigning of responsibility which includesproviding the names and positions of
personnel responsible for custody of property
at each location;(2) Recordkeeping of property which includesaccounting for all acquired state property;
conducting of physical inventory; updating
the master inventory listing; maintaining an
accurate audit trail; and conducting internal
audits;(3) Proper usage of property which includesassuring property is used by authorized
personnel and only for official state
purposes; training personnel on the proper
use of vehicles and equipment;(4) Safekeeping of property which includesaffixing of property identification or decal;
documentation for authorized loan, movement
from location, and transfer to another
agency; guidelines pertaining to property
declared excess, surplus, obsolete, beyond
economical repair, lost, or stolen;
guidelines for sale of property;(5) Safeguards for property which includesprocedures for security of property during
and after working hours; special care of
items that are of a sensitive or theft prone
nature; investigating and reporting of
thefts, or vandalism; appointment of key or
lock custodian; and(6) Care and maintenance of property whichincludes a preventive maintenance schedule;
management of warranty file; repair of broken
property; and guidelines for damaged or
destroyed property. [Eff 12/15/95; am and
comp 6/9/01; am and comp 11/15/01; am and
comp 11/8/02 ] (Auth: HRS §103D-
202) (Imp: HRS §103D-1205)130-4§3-130-5§3-130-5 Property inventory record file. (a)Each chief procurement officer for their respective
jurisdiction shall establish, manage, and maintain a
centralized property inventory record file for all
equipment, real property, weapon, and controlled items
of 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, landimprovements, buildings, building
improvements, infrastructures, vehicles,
equipment, weapons, work of arts, historical
treasures, and controlled items;(4) Description of property, which includes landtax map key, and executive order number, and
for 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 forall acquired supplies. Internal records shall be
maintained for consumable supplies if an agency's
annual expenditure, for such supplies, exceeds five
thousand dollars, and for non-consumable supplies with
a unit cost of two hundred fifty dollars but less than
one thousand dollars. These records shall contain
information on purchases, usage, transfers, and
disposals, and are subject to audit. Supplies include
the following:(1) Consumable supplies are items consumed in thenormal course of an agency operations such as
food, clothing, stationery and other supplies
which are normally used only once or have a
useful life of less than one year;(2) Non-consumable supplies are items notconsumed in the normal course of an agency
operations, that have a useful life of more
than one year and a unit cost less than one
thousand dollars, but excludes weapons and
controlled items. [Eff 12/15/95; am and comp
6/9/01; am and comp 11/15/01; am and comp
11/8/02 ] (Auth: HRS §103D-
202) (Imp: HRS §103D-1205)130-5§3-130-6§3-130-6 Physical inventory. (a) Eachdesignated property custodian or governmental unit
shall conduct an annual inventory, to be verified by
physical count of all state property in their
possession, custody, control, or use.§3-130-8(b) If there is a change in the designatedproperty custodian, the chief procurement officer or
the custodial department's fiscal office shall take
action to have a physical inventory taken at that time.(c) Immediately upon the completion ortermination of any agency or property account, for
whatever reason, a complete physical inventory shall be
taken pursuant to the direction of the chief
procurement officer or the custodial department's
fiscal office. [Eff 12/15/95; comp 6/9/01; comp
11/15/01; comp 11/8/02 ] (Auth: HRS
§103D-202) (Imp: HRS §103D-1205)§3-130-7 Annual inventory reporting. The chiefprocurement officers, the administrative heads of the
executive departments, and all other persons, offices,
and boards of a public character that are not by law
under the control and direction of any of the officers
specifically named in this section shall prepare and
file with the administrator of the state procurement
office an annual inventory return of state property in
their possession, custody, or control. The annual
inventory return shall be filed before September 16 of
each year. The annual inventory return shall contain
information in accordance with section 103D-1206, HRS.
[Eff 12/15/95; am and comp 6/9/01; am and comp
11/15/01; am and comp 11/8/02 ] (Auth: HRS
§103D-202) (Imp: HRS §103D-1206)§3-130-8 Lost, stolen, or damaged property. (a)The theft of state property shall be immediately
reported to the appropriate law enforcement agency.(b) All lost, stolen, or damaged equipment shallbe reported by the state governmental unit within ten
days after discovery of the loss to the designated
property custodian.(c) The designated property custodian shallconduct an investigation of the incident and initiate
the appropriate action to prevent future loss.130-6§3-130-10(d) The designated property custodian shallsubmit a disposal application to the chief procurement
officer in accordance with section 3-130-11(c).(e) Any such equipment deleted from the inventorythat is subsequently located shall be added back to the
inventory. [Eff 12/15/95; comp 6/9/01; comp 11/15/01;
comp 11/8/02 ] (Auth: HRS §§103D-202,
103D-1202) (Imp: HRS §103D-1202)§3-130-9 Excess state property. (a) To obtainmaximum utilization and to minimize the procurement of
new items, each state department or agency shall, be
responsible for making excess state property available
and facilitate the transfer of the property to other
state departments or agencies.(b) Each state department or agency shall to themaximum extent practicable, fulfill its requirements
for property by obtaining excess property from other
state departments or agencies instead of initiating a
new procurement.(c) Agencies receiving or transferring excessproperty shall establish controls over the processing
of transfer documents and shall establish and maintain
an adequate system of property accountability. [Eff
12/15/95; comp 6/9/01; comp 11/15/01; comp 11/8/02 ]
(Auth: HRS §§103D-202, 103D-1202) (Imp: HRS §103D-
1202)§3-130-10 Disposal and restrictions relating tostate property. (a) No state property shall be sold,
traded, destroyed, or otherwise disposed of, except in
accordance with the following rules:(1) Land and interest in land owned by the State.(A) Approval for disposal shall be obtainedfrom the department of land and natural
resources; and(B) A copy of the approval, together withthe disposal application, shall be
submitted to the chief procurement
officer.(2) Surplus property shall be disposed of usingone of the following methods:
(A) Disposal by trade-in to a vendor forcredit on an acquisition which must
receive the chief procurement officer's130-7§3-130-10prior approval and determination shall
be based on:
(i) The urgency of need by other stategovernmental units; or(ii) Whether the trade-in value isexpected to exceed the value
realized through the sale of the
property;(B) Disposal to the state surplus propertyoffice of the state procurement office,
which may, at its discretion, refuse to
accept the property;(C) Disposal by sale of property throughcompetitive sealed bids, public
auctions, established markets, or posted
prices.
(i) Notice of sale by competitivesealed bid sale and public auction
shall be publicized in accordance
with the provisions of section 3-
122-24(c);(ii) The following conditions of sale bycompetitive sealed bid and public
auction shall be included in the
publicized notice, in the
solicitations, and in the notices
posted at the site of sale: It is
the buyer's responsibility to
remove the items within a
stipulated time after purchase; no
guarantees or warranties are given
by the State for the items; major
defects, if known, are listed, but
the State makes no claim that all
defects are known; no sale will be
invalid if defects are discovered
in the item after the sale; and the
State assumes no responsibility or
liability once the items are sold;(iii) Competitive sealed bidding methodshall be in accordance with the
following: Notice of sealed bid
sale shall be advertised and made
publicly available from the selling
department or agency at least ten
days before the date set for bid
opening; the notice shall list the
materials offered for sale, their130-8§3-130-10location, availability for
inspection, the terms and
conditions of sale and instructions
to bidders including the place,
date, and time set for bid opening;
bids shall be opened publicly at
the time and place announced; the
award shall be made in accordance
with the provisions of the notice
of sealed bid sale to the highest
responsive and responsible bidder,
provided that the price offered by
such bidder is acceptable to the
designated property custodian; if
the designated property custodian
determines that the bid is not
advantageous to the State, such
officer may reject the bids in
whole or in part and may re-solicit
bids or such officer may negotiate
the sale, provided that the
negotiated sale price is higher
than the highest responsive and
responsible bidder;(iv) Public auctions shall be advertisedno less than six days before the
auction date and all terms and
conditions will be available to the
public at least twenty-four hours
prior to the auction date. The
solicitation to bidders shall
stipulate all the terms and
conditions of any sale. When
appropriate, an experienced
auctioneer may be used to cry the
sale and assist in preparation of
the sale;(v) Posted price (pre-establishedprice) may be used for items for
which there is no regular market,
demand is erratic, or for items
that received unacceptable prices
through competitive bids or public
auction and the items shall be
available on a first-come basis;(vi) Only United States postal moneyorders, certified checks, cashiers'
checks, or cash shall be accepted130-9§3-130-10for sales of surplus property
unless approved by the designated
property custodian or for sales of
less than one hundred dollars;(D) Sale to dealers for recycling,salvaging, or scrap;(E) Sale to employees, provided that anemployee of the owning or disposing
state governmental unit shall not
directly or indirectly purchase or agree
with another person to purchase surplus
property;(F) Other disposition methods, including,but not limited to, solicitation by
phone, appraisal, or barter, provided
such officer makes a written
determination, approved by the chief
procurement officer, that such procedure
is advantageous to the State;(G) Donation to the following organizations,provided the designated property
custodian makes a written justification,
approved by the chief procurement
officer, that the donation would be
advantageous to the State:(i) City or county agency within theState; or(ii) "A nonprofit tax-exempt charitableactivity" is defined as an
institution or organization whose
earnings are used to help the poor
or needy, and no part of the net
earnings of which are used or is
applied to the benefit of any
private shareholder or individual
and has been held to be tax-exempt
under the provisions of the Federal
Internal Revenue Code and the State
of Hawaii tax laws;(H) Cannibalize the usable parts anddestroy, dispose in trash bin,
incinerator, or landfill.(3) Any weapon, if not transferred to anotherstate agency in accordance with section 3-
130-9, shall be disposed of as follows, and
the supporting documents shall be attached to
the disposal application or certificate of
disposal:130-10§3-130-11(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 toany individual or non-government organization; however,
a state agency may furnish state property to a private
contractor to facilitate the performance of services
for the State by the contractor, so long as the agency
includes a provision for the furnished state property
in the procurement document.(c) Approval for disposal of controlled items andsupplies shall be obtained from the designated property
custodian of the items and state agencies shall be
responsible for maintaining adequate records to account
for the disposal of such items.(d) Whenever any designated property custodiandesires to dispose or remove any equipment, weapon, or
real property from their inventory, other than by
transfer to another state agency, the designated
property custodian must, before the action, submit a
written disposal application to the chief procurement
officer requesting approval of the requested
disposition. [Eff 12/15/95; am and comp 6/9/01; am and
comp 11/15/01; am and comp 11/8/02 ]
(Auth: HRS §§103D-202, 103D-1202) (Imp: HRS §103D-
1202)§3-130-11 Disposal application. (a) Disposalapplications shall be submitted in triplicate to the
chief procurement officer for approval, and if the
application has been approved:(1) The original shall be retained by the chiefprocurement officer; and(2) Two copies shall be returned to the applyingdepartment's fiscal office, which in turn
shall keep one copy and forward the other
copy to the applying agency.(b) Disposal application shall contain thefollowing information:(1) Statement and certification: "Application ishereby made for the disposal of government
property under my custody and control.
Pursuant to chapter 3-130, HAR, I do solemnly
swear and affirm the accuracy of this
application.";
(A) Designated property custodian'ssignature;130-11§3-130-11(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-infor new equipment, the application shall
identify the name of the vendor, the
price of the new item, and the amount of
the trade-in allowance;(B) If an item is to be sold by competitivesealed bidding, public auction, or
posted prices, the application shall
list the names and offers from
interested parties, the party purchasing
the property, and if applicable, a copy
of the public notice shall be attached
to the disposal application. If the
information is not available when
submitting the disposal application, it
shall be provided with the submission of
the certificate of disposal;(C) If an item is to be donated, theapplication shall provide the name of
the city or county agency or the
nonprofit tax-exempt charitable activity
to receive the donation, and
justification for the donation;(D) If an item is to be sold for recycling,salvaging, or scrap, the application
shall list the name of the party
purchasing the property and the amount
offered for the property;(E) If an item is to be discarded, theapplication shall state the means of
disposal; i.e., to be cannibalized for
usable parts or destroyed and disposed
in trash bin, or sent to local
incinerator or landfill.(c) Lost, stolen, or damaged items shall not bereported on the same disposal application with other
equipment to be disposed of by choice, but shall be
reported separately. A number of items may be listed
on the same application provided the incident and130-12§3-130-11circumstance surrounding the loss, theft, or damage are
the same. The following information shall be provided
in the application:(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 proceduresand security measures in effect at the time
of the loss, theft, or damage;(4) Applicant's conclusion or opinion as to thecause of the loss, theft, or damage;(5) Description of internal control procedures orsecurity improvements to be implemented to
prevent or minimize future losses; and(6) Statement whether the police or attorneygeneral's office was notified, and if so,
attach any supporting documents to the
application.(d) Upon receipt of the application, the chiefprocurement officer shall:(1) Evaluate the application, and, if necessary,request additional information;(2) Grant or deny the requested action; or
(3) Direct disposition of the property in suchother manner as determined to be in the best
interest of the State.(e) State property approved for destruction ordiscarding may be disposed at the agency's location, or
may be taken to an incinerator or landfill for
disposal. The following procedure shall apply:(1) Any mark or decal indicating State of Hawaiiownership shall be removed or obliterated
before disposing of the property;(2) The property shall be destroyed in such amanner to prevent reuse by other parties.(f) The certificate of disposal is acertification by the applying agency that the property
listed on the applicable disposal application was
disposed in the manner approved by the chief
procurement officer. The following is the distribution
sequence of the certificate of disposal:(1) Following the chief procurement officer'sapproval of the disposal application, except
for applications for lost or stolen items,
the chief procurement officer shall forward
two copies of the approved disposal
application and three copies of the130-13§3-130-11certificate of disposal to the applying
custodian's fiscal office. The applying
custodian's fiscal office shall then forward
to the applying agency one copy of the
disposal application and three copies of the
certificate of disposal;(2) Upon completion of the disposal transaction,the applying agency shall confirm the final
disposition of the property by returning
copies of the completed certificate of
disposal as follows:
(A) One copy to the chief procurementofficer; and(B) One copy to the applying agency's fiscaloffice.(g) All disposal records such as disposalapplications, certificates of disposal, and actions
taken pursuant thereto by an applying agency shall be
kept for audit purposes by the applying agency's
office, the applying department's fiscal office, and
the chief procurement officer. [Eff 12/15/95; am and
comp 6/9/01; am and comp 11/15/01; am and comp
11/8/02 ] (Auth: HRS §§103D-202, 103D-
1202) (Imp: HRS §103D-1202)§3-130-12 Exceptions. If any requirement of thischapter results in undue hardship for the agency, the
chief procurement officer may, upon written request
from the head of the agency, grant an exception to that
requirement if the chief procurement officer determines
such action to be in the best interest of the State.
Each exception granted by the chief procurement officer
shall be by written determination approved by the
administrator of the state procurement office. [Eff
12/15/95; comp 6/9/01; comp 11/15/01; comp 11/8/02
] (Auth: HRS §§103D-202, 103D-1202) (Imp: HRS §103D-
1202)130-14DEPARTMENT OF ACCOUNTING AND GENERAL SERVICESAmendments to and compilation of chapter 130,title 3, Hawaii Administrative Rules, on the Summary
Page dated September 27, 2002 were adopted on September
27, 2002 following a public hearing held on September
17, 2002 in Honolulu, Hawaii; and via video conference
from Honolulu, Hawaii on September 17, 2002 to Hilo,
Hawaii; Wailuku, Maui; and Lihue, Kauai; after public
notice was given in the Honolulu Star Bulletin, Hawaii
Tribune-Herald, West Hawaii Today, The Maui News and
The Garden Island on August 17, 2002.They replace interim rules dated 06/09/01 and11/15/01 and shall take effect ten days after filing
with the Office of the Lieutenant Governor.PHYLLIS M. KOIKE Chairperson ProcurementPolicyBoard MARYALICEEVANS State Comptroller BENJAMIN J. CAYETANO GovernorState of Hawaii Dated:Filed130-15APPROVED AS TO FORM: Deputy Attorney General130-16

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