Audit 401414

2 CFR § 3474.1 gives regulatory effect to the Office of Budget and Management Guidance in 2 CFR § 200.313(d) for the Department of Education, which states, in part, that a control system must be in place to ensure safeguards to prevent loss, damage, or theft of the equipment. It also requires that the recipient or subrecipient maintain property records that include a description of the asset, a serial number or other source of identification (including the FAIN), the source of funding for the property and other data to identify the equipment. Finally, it requires recipients or subrecipients to perform a physical inventory of property purchased with federal funds and reconcile the inventory results to the recipient or subrecipient’s property records at least once every two years. Due to insufficient knowledge of and controls implemented over the federal requirements related to equipment, the School could not provide evidence that a physical inventory over property purchased with Education Stabilization Funds had been taken and reconciled with property records in the required timeframe. In addition, records related to capital asset purchases with Education Stabilization Funds did not contain serial or identification numbers, source of funding, who holds title, percentage of federal participation in the project costs for the federal award under which the property was acquired, and use and condition of the property, in accordance with the above requirements. Lack of controls over equipment management and failure to complete the required inventory results in a qualified opinion on the School’s Major Federal Program and could lead to misappropriation of School assets and potential questioned costs and non-compliance with federal requirements. The School should establish control procedures over the management of equipment. Controls would include proper tagging and logging of assets and regularly scheduled inventory dates.