Audit 410923

Department of Housing and Urban Development Passed through Governor’s Office of Economic Development and Moody County Federal Financial Assistance Listing #14.228; 2324-102, 2323-108 Community Development Block Grant Equipment & Real Property Management Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The non-Federal entity must conform with Equipment and Real Property Management procedures identified in 2 CFR 200.313. 2 CFR 200.313(d) states that the auditee must manage equipment utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. Condition: The property records listing had no formal review or approval in place. Additionally, there was no formally documented physical inventory of property that was purchased with federal award monies within the last two years. Cause: Management did not review or approve of the property record listing. Additionally, management was unaware of the requirement to incorporate an inventory observation every two years. Effect: Without established controls over Equipment and Real Property Management, this increases the risk equipment could be misappropriated, unallowable equipment purchases could be charged to the federal award and increased risk federal agency wouldn’t be reimbursed if federal-funded equipment was disposed of. Questioned Costs: None noted Context: All equipment and real property were tested under the compliance requirement. Repeat Finding from Prior Year: No Recommendation: We recommend management incorporate a formally documented review and approval process over the property record listing. Additionally, we recommend that management incorporate a property inventory observation process and document the observation when performed. Views of Responsible Officials: Management is in agreement.