Audit 361031

Criteria and Condition: Title to real property acquired or improved by non-federal entities under grants and cooperative agreements vests in the non-federal entity subject to the obligations and conditions specified in 2 CFR section 200.311 (2 CFR section 200.311(a)). Real property will be used for the originally authorized purpose as long as needed for that purpose, during which time the non-federal entity must not dispose of or encumber title to or other interests in the real property (2 CFR section 200.311(b)). When real property is no longer needed for the originally authorized purpose, the non-federal entity must obtain disposition instructions from the federal awarding agency or the pass-through entity, as applicable. When real property is sold, sales procedures must be followed that provide for competition to the extent practicable and result in the highest possible return. If sold, non- federal entities must compensate the federal awarding agency for the portion of the net sales proceeds that represents the federal agency’s interest in the real property, which is the amount calculated by multiplying the current market value or sale proceeds by the federal agency’s participation in total project costs. If the property is retained, the non-federal entity must compensate the federal awarding agency for the federal portion of the current fair market value of the property. Disposition instructions may also provide for transfer of title to the federal awarding agency or a designated third party, in which case the non-federal entity is entitled to the non-federal interest in the property, which is calculated by multiplying the current market value or sale proceeds by the non-federal entity’s share in total project costs (2 CFR section 200.311(c)(3)). Context: A foreign office indicated that assets purchased with federal funds were disposed of, but were still included on the inventory listing. Cause: The federal awarding agency was not notified of the disposal of assets purchased with federal funds. Questioned Cost: No questioned costs. Effect: Assets no longer in service are included on the federal fixed asset listing. Recommendation: Fixed assets purchased with federal funds should be subject to regular inventory, with dispositions communicated to the federal agency. Classification: Compliance finding and control deficiency in internal controls.

Criteria and Condition: Title to real property acquired or improved by non-federal entities under grants and cooperative agreements vests in the non-federal entity subject to the obligations and conditions specified in 2 CFR section 200.311 (2 CFR section 200.311(a)). Real property will be used for the originally authorized purpose as long as needed for that purpose, during which time the non-federal entity must not dispose of or encumber title to or other interests in the real property (2 CFR section 200.311(b)). When real property is no longer needed for the originally authorized purpose, the non-federal entity must obtain disposition instructions from the federal awarding agency or the pass-through entity, as applicable. When real property is sold, sales procedures must be followed that provide for competition to the extent practicable and result in the highest possible return. If sold, non- federal entities must compensate the federal awarding agency for the portion of the net sales proceeds that represents the federal agency’s interest in the real property, which is the amount calculated by multiplying the current market value or sale proceeds by the federal agency’s participation in total project costs. If the property is retained, the non-federal entity must compensate the federal awarding agency for the federal portion of the current fair market value of the property. Disposition instructions may also provide for transfer of title to the federal awarding agency or a designated third party, in which case the non-federal entity is entitled to the non-federal interest in the property, which is calculated by multiplying the current market value or sale proceeds by the non-federal entity’s share in total project costs (2 CFR section 200.311(c)(3)). Context: A foreign office indicated that assets purchased with federal funds were disposed of, but were still included on the inventory listing. Cause: The federal awarding agency was not notified of the disposal of assets purchased with federal funds. Questioned Cost: No questioned costs. Effect: Assets no longer in service are included on the federal fixed asset listing. Recommendation: Fixed assets purchased with federal funds should be subject to regular inventory, with dispositions communicated to the federal agency. Classification: Compliance finding and control deficiency in internal controls.