Audit 322679

Finding 2023-002 – Equipment and real property management Program Name (ALN): Public Transportation Emergency Relief Program (ALN 20.527) Federal Agency: U.S. Department of Transportation Federal Grant Numbers and Years: NJ-44-X004 (April 1, 2014 – November 5, 2023) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample Prior Year Finding: Not applicable Finding Type: Material weakness and material noncompliance Criteria: Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property (2 CFR Section 200.313(d)(1)). A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years as required by 2 CFR Section 200.313(d)(2). In addition, under 2 CFR section 200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The Port Authority of New York and New Jersey (the Port Authority) used the Public Transportation Emergency Relief Program to purchase equipment to perform maintenance and inspection of the track damaged by Superstorm Sandy, repair the damage, and allow the Port Authority to be more resilient in future events. We noted the Port Authority did not perform a physical inventory of the equipment within the required two-year period. Further, during our physical observation of fifteen pieces of equipment, we noted for four items, the serial numbers included on the equipment’s tag did not match the serial number included in the Port Authority’s property records. Cause: In discussing these conditions with the Port Authority’s management, they stated inadequate staffing resources due to staff turnover contributed to the finding. Effect: Failure to perform an inventory at least once every two years and maintaining accurate property records may prohibit the Port Authority from properly safeguarding and maintaining equipment in accordance with federal requirements. Questioned Costs: None. Recommendation: We recommend that the Port Authority strengthen its processes to ensure a physical inventory of equipment acquired with federal funds is performed at least once during each two-year period. Views of Responsible Officials: The Port Authority acknowledges an internal control deficiency in performing a physical equipment inventory of equipment as required under CFR 200 for the Public Transportation Emergency Relief Program 2013 49 U.S.C. 5324 (Grant award NJ-44-X004 PATH-H.) PATH successfully performed a physical inventory of equipment in 2018, the first year it was required. In 2020, the performance of a physical inventory coincided with the COVID-19 pandemic which facilitated the retirement of key personnel in PATH who were responsible for performing the physical inventory of the equipment that was federally funded. This staff transition led to a loss of PATH system expertise necessary to pick up the process previously developed, resulting in the inadvertent lapse in performing the physical inventory in 2020 and 2022. To mitigate this deficiency PATH has performed a physical inventory in 2024 and updated its procedures as they relate to performing the physical inventory of equipment and to have staffing redundancies in place to account for staff turnover. In addition, PATH updated its equipment inventory log to reflect the correct serial numbers on the four pieces of equipment that KPMG identified.

Finding 2023-002 – Equipment and real property management Program Name (ALN): Public Transportation Emergency Relief Program (ALN 20.527) Federal Agency: U.S. Department of Transportation Federal Grant Numbers and Years: NJ-44-X004 (April 1, 2014 – November 5, 2023) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample Prior Year Finding: Not applicable Finding Type: Material weakness and material noncompliance Criteria: Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the Federal award identification number), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property (2 CFR Section 200.313(d)(1)). A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years as required by 2 CFR Section 200.313(d)(2). In addition, under 2 CFR section 200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The Port Authority of New York and New Jersey (the Port Authority) used the Public Transportation Emergency Relief Program to purchase equipment to perform maintenance and inspection of the track damaged by Superstorm Sandy, repair the damage, and allow the Port Authority to be more resilient in future events. We noted the Port Authority did not perform a physical inventory of the equipment within the required two-year period. Further, during our physical observation of fifteen pieces of equipment, we noted for four items, the serial numbers included on the equipment’s tag did not match the serial number included in the Port Authority’s property records. Cause: In discussing these conditions with the Port Authority’s management, they stated inadequate staffing resources due to staff turnover contributed to the finding. Effect: Failure to perform an inventory at least once every two years and maintaining accurate property records may prohibit the Port Authority from properly safeguarding and maintaining equipment in accordance with federal requirements. Questioned Costs: None. Recommendation: We recommend that the Port Authority strengthen its processes to ensure a physical inventory of equipment acquired with federal funds is performed at least once during each two-year period. Views of Responsible Officials: The Port Authority acknowledges an internal control deficiency in performing a physical equipment inventory of equipment as required under CFR 200 for the Public Transportation Emergency Relief Program 2013 49 U.S.C. 5324 (Grant award NJ-44-X004 PATH-H.) PATH successfully performed a physical inventory of equipment in 2018, the first year it was required. In 2020, the performance of a physical inventory coincided with the COVID-19 pandemic which facilitated the retirement of key personnel in PATH who were responsible for performing the physical inventory of the equipment that was federally funded. This staff transition led to a loss of PATH system expertise necessary to pick up the process previously developed, resulting in the inadvertent lapse in performing the physical inventory in 2020 and 2022. To mitigate this deficiency PATH has performed a physical inventory in 2024 and updated its procedures as they relate to performing the physical inventory of equipment and to have staffing redundancies in place to account for staff turnover. In addition, PATH updated its equipment inventory log to reflect the correct serial numbers on the four pieces of equipment that KPMG identified.