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Reader task: a lab manager, clinic supply lead or grants administrator who has found a gap between what the inventory record says and what is on the shelf, and needs to know what to compare, when the gap stops being a bookkeeping adjustment, and what to keep. This page is general information, not legal or compliance advice.
Short answer
Inventory reconciliation is comparing the inventory record with a physical count, explaining each difference, and correcting the record only through a documented adjustment. For most consumables the work is internal bookkeeping. For two kinds of stock it is regulated: equipment bought with federal awards (2 CFR 200.313) and DEA-controlled substances (21 CFR Part 1304 and 1301.76). In both, a loss is not simply written off.
Definition and scope
Reconciliation compares two independent views of the same stock: the record (ledger, system or property list) and the count (what a person physically finds). It is the step that follows a count. How and how often to count is covered in cycle counting versus a physical count, and how the running ledger is kept in the perpetual inventory system guide. This page covers what happens after the two disagree.
Inventory discrepancy
A discrepancy is the gap itself as first found: the record shows 40 boxes, the shelf holds 37, or an asset listed in a room is not there. It is an observation, not yet a conclusion about cause.
Inventory variance
A variance is the discrepancy once it is quantified: the count minus the record, in units or in value. Reporting the variance by item and location is what lets the later steps be reviewed.
How a reconciliation runs
The sequence below is an editorial summary of the order the work follows, not a regulatory text. Only the regulatory triggers in the later sections come from cited sources.
- Compare record to count. Count against a record that has not been changed since the count began, so receipts and issues posted in between are not mistaken for losses. Receiving records such as the goods receipt note and the three-way match are the usual places to check whether a receipt was never posted.
- Classify the variance. Decide whether it is a record problem (unposted receipt, wrong unit of measure, wrong location) or a stock problem (missing, damaged, expired). Do not adjust anything until this is answered.
- Investigate. Trace the item through its receipts, issues and transfers. The investigation is mandatory, not optional, for equipment under 2 CFR 200.313(d)(3) and for controlled substances once a loss is suspected.
- Adjust with a record. Correct the ledger through a dated adjustment that names who approved it and why, so the original figure is never overwritten. Loss patterns that recur belong in shrinkage review.
- Escalate if a rule applies. Check the table below before treating the adjustment as final.
Which rule applies to which stock
Two federal rules set a two-year interval for inventory work, but they apply to different objects and different records. They are not interchangeable.
| Stock | Reconciliation or count rule | What a loss triggers |
|---|---|---|
| Equipment under a federal award | A physical inventory must be conducted and reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). Records include description, serial or ID number, funding source, title holder, acquisition date, cost, federal share, location, use and condition, and disposition data (200.313(d)(1)). | A control system must safeguard against loss, damage or theft, and any loss, damage or theft must be investigated (200.313(d)(3)). |
| Controlled substances held by a DEA registrant | An inventory of all stock on hand, new at least every two years (21 CFR 1304.11). Inventories and records are kept available for inspection for at least two years (21 CFR 1304.04(a)), subject to that section’s exceptions. | Written notice to the DEA Field Division Office within one business day of discovering a theft or significant loss, and DEA Form 106 within 45 days of discovery (21 CFR 1301.76(b)). |
| Other consumables and supplies | Neither federal rule above sets a numeric variance tolerance or a counting interval for ordinary consumables. Any threshold in use is an internal policy choice. | Internal policy governs. |
Because the intervals match, a team can mistake a completed equipment reconciliation for a controlled-substance inventory, or the reverse. Each needs its own count and its own records. For the DEA side in detail, see controlled substance inventory for research labs; for the equipment side, property management under 2 CFR 200.313.
When a variance must be escalated
Equipment variance
A missing item on the equipment list is not just a record error. Under 2 CFR 200.313(d)(3) the loss, damage or theft must be investigated, so the reconciliation file should hold the investigation, not only the adjusted figure.
Controlled-substance shortfall
Under 21 CFR 1301.76(b), the registrant decides whether a loss is significant by considering factors the regulation lists: the quantity lost relative to the type of business; the specific substances involved; whether the loss can be associated with access by specific individuals or unique activities; the pattern of losses over time and the results of efforts to resolve them; whether the substances are likely candidates for diversion; and local trends. If the loss is theft or significant, the one-business-day notice and 45-day Form 106 clocks run from discovery, so the discovery date should be recorded.
For the internal review structure around diversion, see the controlled substance diversion prevention program guide.
Common misunderstandings
- “Reconciling means adjusting the record to match the count.” The adjustment is the last step. For equipment and controlled substances the unexplained gap is itself an investigable or reportable event.
- “A two-year equipment inventory covers our controlled substances.” The two rules share an interval only. They cover different objects and are kept in different records.
- “There is a standard tolerance, such as 2 percent.” The two federal rules cited here set none for ordinary supplies. Figures quoted in vendor guides are illustrations, not rules.
- “A discrepancy and a variance are the same word.” A discrepancy is the gap found; a variance is the same gap measured, which is what gets approved and reviewed.
FAQ
What is inventory reconciliation?
It is comparing the inventory record with a physical count, explaining each difference and correcting the record through a documented adjustment.
What is the difference between an inventory discrepancy and an inventory variance?
A discrepancy is the mismatch as first observed. A variance is that mismatch quantified in units or value, counted minus recorded.
How often must federally funded equipment be reconciled?
At least once every two years, with the results reconciled to the property records, under 2 CFR 200.313(d)(2).
When does a stock loss have to be reported to the DEA?
When it is a theft or significant loss of controlled substances: written notice within one business day of discovery and Form 106 within 45 days, under 21 CFR 1301.76(b).
How long are inventory records kept for controlled substances?
At least two years from the date of the inventory or record, subject to the exceptions in 21 CFR 1304.04(a).
Sources
- 2 CFR 200.313, Equipment, law.cornell.edu/cfr/text/2/200.313, checked 2026-11-03.
- 21 CFR 1301.76, Other security controls for practitioners, law.cornell.edu/cfr/text/21/1301.76, checked 2026-11-03.
- 21 CFR 1304.11, Inventory requirements, law.cornell.edu/cfr/text/21/1304.11, checked 2026-11-03.
- 21 CFR 1304.04, Maintenance of records and inventories, law.cornell.edu/cfr/text/21/1304.04, checked 2026-11-03.
