Audit 412835

Federal Agency - U.S. Department of Agriculture Federal Program - 10.760 Water and Waste Disposal Systems for Rural Communities Federal Award Year - 2025 Reference - 2025-002 Inadequate Controls of Capital Assets - Equipment and Real Property Management Criteria: All capital assets that meet the municipality’s capitalization threshold should be accounted for in a capital asset subsidiary ledger (or equivalent) in the financial accounting system for financial reporting purposes. A capital asset subsidiary ledger or property record provides a listing of noncurrent government capital assets and related information such as historical cost (unless acquired through gift or in a service concession arrangement), acquisition date, useful life, accumulated depreciation, a serial number or other identification number, source of the funding (including federal awards identification number), location and condition. not have a listing of property records and does not have a process in place to ensure that a physical inventory is taken and the results are reconciled at least every two years. Cause: The Town does not have a capitalization threshold established and has not performed an inventory of all capital assets. Effect of Condition: The Town maintains an inventory of assets for insurance purposes with asset descriptions, identification numbers, and values for insurance; however, it did not maintain a capital asset subsidiary ledger that detailed a listing of capital assets that met or exceeded a certain minimum dollar amount (i.e. a capitalization threshold) with related information such as historical cost (unless acquired through gift or in a service concession arrangement), acquisition date, useful life, accumulated depreciation, a serial number or other identification number, source of the funding (including federal awards identification number), location and condition. Statistical Samples: The sample was not intended to be, and was not, a statistically valid sample. Questioned Costs: None Perspective: Management does not maintain a schedule of capital records, and has therefore been unable to take a physical inventory of those records to ensure that capital assets obtained with federal funds were maintained and are in good condition. Recommendation: We recommend that Town personnel take an initial inventory of its capital assets that meet or exceed the threshold for the purposes of creating a capital asset subsidiary ledger or property record for accounting and financial reporting purposes. This recommendation can be implemented with existing resources, and will improve the internal controls over the accounting function and financial reporting. Views of Responsible Officials and Planned Corrective Action: Management’s Response: Management will establish a capitalization threshold and take an initial inventory of its capital assets for the purpose of creating a capital asset subsidiary ledger for accounting and financial reporting purposes. Person Responsible for Corrective Action: Marty Miller, Town Supervisor Anticipated Completion Date: December 31, 2026