Every object defined in Active Directory contains attributes for 'lastLogonTimestamp'.
When Active Administrator is installed, the user selects a value representing the number of inactive days which will determine if the User or Computer is to be considered 'Inactive'.
The daily Active Administrator 'Inactive users & Computers' task compares the value in this screen with the Active Directory attribute explained above to determine if the user/computer is considered 'active', or 'inactive'.
The value configured in Active Administrator may be verified by selecting Active Administrator Console | Security & Delegation | Users & Computers. In this screen, the value for Users and Computers can be entered, and the daily report can be configured to either merely list the Users and Computers that fail within the range in a summary report, or whether to "manage" the object by moving them to a specified OU.