2025-001 – Federal Equipment Inventory Cluster: Research and development Sponsoring Agency: Various Award Name: All awards for 3 campuses with federal equipment expenditures in the Schedules of Expenditures of Federal Awards (SEFA) Award Number: Various Assistance Listing Title: All awards for 3 cam...
2025-001 – Federal Equipment Inventory Cluster: Research and development Sponsoring Agency: Various Award Name: All awards for 3 campuses with federal equipment expenditures in the Schedules of Expenditures of Federal Awards (SEFA) Award Number: Various Assistance Listing Title: All awards for 3 campuses with federal equipment expenditures in the SEFA Assistance Listing Number: All awards for 3 campuses with federal equipment expenditures in the SEFA Award Year: 2024-2025 Pass-through entity: All pass-through awards for 3 campuses with equipment expenditures in the SEFA Campus One The campus acknowledges the audit finding that the requirement under 2 CFR 200.313(d) to conduct a physical inventory of federally funded equipment at least once every two years and reconcile the results with property records was not met. The campus is committed to maintaining accurate equipment records and ensuring sustained compliance with federal equipment management requirements. The delay in completing the required inventory cycle occurred in two phases: • Post-COVID Inventory Cycle (2021–2022): We received a federal exception for the inventory due June 30, 2021, with the expectation that the cycle would resume and be completed by June 30, 2022. Although partial inventory activity occurred in July 2022, covering a portion of campus assets, a full campus-wide validation was not completed by the required deadline. Continued operational recovery challenges, including limited access to research spaces and staffing constraints until campus fully reopened in May 2023, contributed to the delay in restoring the full two-year cycle. • Staffing Disruption (2024–Mid 2025): From early 2024 through mid-2025, the campus’s sole dedicated equipment administrator was on extended leave. While Accounting Services staff maintained essential functions such as new equipment tagging and property record maintenance, the department did not have sufficient specialized capacity to complete the full physical inventory validation process during that period. We are pleased to report that the equipment inventory process was successfully restarted in July 2025. Following the return of dedicated staff and the department's stabilization in mid-2025, we prioritized the backlog of equipment validations. As of the date of this response, we have made significant progress in bringing our physical inventory records into compliance with federal standards. We anticipate completing the full physical inventory and reconciliation of all federally funded equipment by June 30, 2026, thereby restoring full compliance with the required two-year cycle. To ensure that such delays do not recur, the campus has, as of January 2026, implemented a strategic realignment of the teams responsible for equipment and property management. Key improvements include: • Cross-Training and Redundancy. We have implemented a cross-training program in which multiple members of the Accounting team are now trained on the physical inventory validation protocols. This ensures that the process is no longer dependent on a single individual and can continue uninterrupted during future personnel absences. • Enhanced Oversight: We have integrated equipment inventory status into our regular financial control reviews to provide management with earlier visibility into potential reporting or timing gaps. • Team Realignment: The team structure has been adjusted to provide better coverage of federal equipment and real property management, enabling more consistent rolling inventory cycles as required by federal guidelines. The campus remains dedicated to meeting all federal compliance requirements and believes these structural changes will provide the necessary resilience for our equipment management program. Since July 2025, the equipment validation has resumed on a structured schedule, and backlogged activities have been resolved. Physical verification and reconciliation are progressing toward full completion. Oversight mechanisms and staffing redundancies are operational. These measures significantly reduce the risk of future noncompliance. For inquiries regarding this finding, please contact Biju Kamaleswaran at biju@ucsc.edu. Campus Two The root causes for equipment certifications not being completed or being completed late were that departments overlooked the deadline and that some department staff were not familiar with the certification process. To address these issues, we will implement several corrective actions: • Include the Dean’s and Vice Chancellor’s offices in equipment certification notifications to alert senior management of the requirement and keep them apprised of progress toward completion. • Increase the frequency of communications with departments prior to the certification deadline and will include certification status in those communications. • Notify the campus of the requirement to provide justification for equipment certifications submitted after the deadline and will include this requirement in the initial annual notifications, reminder emails, and the Equipment Certification form. • For equipment certifications not received by the deadline, Accounting will notify the applicable Dean’s and Vice Chancellor’s offices and inform them of the department’s Care and Control of Equipment policy. This campus’ inventory is split into two cycles. Cycle 1 is notified of their inventory certifications being due in odd years, and Cycle 2 in even years. Implementation will begin with the initial annual equipment certification notification in August 2026, with reminder notifications sent periodically from August through the October certification deadline. Departments may complete their equipment certifications at any time and do not need to wait for notification emails, as instructions and information are available on the campus Finance website. Accounting will monitor compliance by tracking progress toward completion through the certification deadline, comparing completion and delinquency rates with prior years, validating that certifications previously submitted late are submitted on time in subsequent years, and notifying the relevant Dean’s and Vice Chancellor’s offices of repeat violations. For inquiries regarding this finding, please contact Taylor Urban at turban@ucdavis.edu. Campus Three Based on the campus’s internal review, both assets reached the end of their operational utility and were handled in a manner consistent with university policy and reasonable effort. The NSF-funded research equipment purchased on September 29, 2006, was fully depreciated by 2011 and physically validated in 2024 as non-operational. During the 2026 inventory cycle, the department confirmed the unit had been cannibalized for parts to maintain active laboratory equipment. The university-titled physics equipment purchased on October 23, 2002, remained in service for over two decades and was fully depreciated prior to disposal. Its tracking was affected by the administrative split of the Department of Physics and Astrophysics and the retirement of the Principal Investigator, after which the office contents were sent to Surplus following standard university procedures. Both assets exceeded their expected service lives and have now been retired. The campus will implement mandatory targeted training for departmental equipment custodians to ensure policy alignment and will establish a rolling custodial training schedule, with completion required prior to gaining access to the asset system. Training completion will be tracked through metrics provided by UC Learning. The campus will also launch recurring campus-wide communications providing guidance on equipment inventory best practices and compliance requirements and will formalize an enhanced workflow with Surplus Sales to verify and scan inventorial assets upon pickup or arrival at the warehouse to improve the timeliness of inventory record updates. Campus communications and departmental training will begin prior to May 1, 2026 and continue on an ongoing basis through June 30, 2028, with training prioritized by risk. The Surplus Sales Alignment will also begin prior to May 1, 2026, with protocol finalization by the third quarter of 2026. As immediate remediation, the assets identified in the finding have been reconciled and updated in the system, and the campus is consulting with departments that previously bypassed standard procedures to establish more robust internal controls. For inquiries regarding this finding, please contact Daniel Clipson at dclipson@ucsd.edu.