Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-077: Various Federal Agencies* ALN #Various*, Research & Development Cluster Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.”. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure the University of Montana – Missoula (UM Missoula, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Additionally, UM Missoula could not provide information or documentation on the disposition of assets purchased with federal Research and Development funds once they were no longer needed. Questioned Costs: No questioned costs identified. Context: UM Missoula routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, UM Missoula spent approximately $4.88 million on these purchases. The assets purchased with these funds are added to a central listing at the university. Our testing found UM Missoula only completed a physical inventory at 91 of the 200 locations with assets during the audit period and at an additional 27 locations after the audit period ended. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We sampled 8 of the 106 equipment purchases over the capitalization threshold of $5,000 during the audit period. This was not a statistically valid sample. We identified four items that were untagged. The cost of these items ranged from $13,678 to $154,470. These items were primarily scientific equipment, for example, a chromatography system. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. UM Missoula also logged 32 assets acquired with federal funds as no longer needed and ready for disposal during the audit period. We selected a sample of four of these items to determine whether they had been disposed of appropriately in accordance with university policy and the terms and conditions of each grant award. While these items were fully depreciated on the accounting records, the assets were initially valued at $69,531 in total. This was not a statistically valid sample. University staff could not provide documentation related to the disposal or what the final disposition of the equipment was for any of the items selected. Additionally, attempts to locate the items during testing were unsuccessful. As a result, we cannot determine whether the university truly disposed of the assets, and followed federal regulations while doing so, or if the assets are still in service at an unknown location. Repeat Finding: Montana’s Single Audit report for the two fiscal years ended June 30, 2021, included a recommendation (#2021-034) to UM Missoula regarding tagging equipment. Effect: By not performing physical inventories or tagging capital assets, UM Missoula is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Additionally, the university is at risk of not following federal regulations related to asset disposal. Collectively, these issues could result in UM Missoula failing in their responsibilities as a steward of public resources. Cause: UM Missoula personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. UM Missoula staff also attributed the disposal issue to employee turnover. They had a staff member dedicated to performing and accounting for asset disposals. When that employee left the position, other employees stepped in, but asset disposals were not adequately tracked and accounted for without a staff member dedicated to overseeing the process. Recommendation: We recommend the University of Montana – Missoula: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-076: Various Federal Agencies* ALN #Various*, Research & Development Cluster (COVID-19) Grant #Not Applicable Criteria: Federal regulation, 2 CFR 200.302(b)(4), requires the non-federal entity’s financial management system to provide effective control over and accountability for all funds, property, and other assets. The non-federal entity must also adequately safeguard all assets and assure that they are used solely for authorized purposes. Federal regulation, 2 CFR 200.313(b), requires a state to use, manage, and dispose of equipment acquired under a Federal award by the state in accordance with state laws and procedures. Section 335(XIV), Montana Operations Manual (MOM policy) requires agencies to perform a complete physical inventory of all capital assets no less than every two years. MOM policy 335(V)(A)(3) requires agencies to identify all major equipment in a manner that promotes easy identification and requires property tags to be placed in plain sight on the equipment. While state policy does allow some discretion based on the physical nature of some equipment for situations where property tags may not be feasible, it does require that “whenever possible, the tag number will still be identified on the item by some means such as etching, decal, indelible ink, etc.” Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: Internal controls were not sufficient to ensure Montana State University – Bozeman (MSU Bozeman, university) performed a complete physical inventory of equipment every two-year period or that equipment purchased with federal Research and Development funds were tagged as required by federal regulations and state policy during fiscal years 2022 and 2023. Questioned Costs: No questioned costs identified. Context: MSU Bozeman routinely purchases capital assets with federal Research and Development grant funds. During fiscal years 2022 and 2023, MSU Bozeman spent approximately $12.74 million on these purchases. The assets purchased with these funds are added to a central inventory listing at the university. Our testing found MSU Bozeman only inventoried 1,055 of their 4,551 assets during the audit period. We examined equipment purchases at the university to determine whether the assets were tagged and easily identifiable, as required by state policy. We selected 18 high dollar items from the asset listing. We identified four items that were untagged. The cost of these items ranged from $584,579 to $1,344,023. All of these items were scientific equipment, for example a mass spectrometer. For each of the untagged items identified, there were no property tags or other permanent identification affixed to the assets that corresponded to university property records. Additionally, the asset listing does not consistently have other identifiable information, such as serial numbers, for the items. As such, the assets were not easily identifiable as required by state policy, and we were unable to confirm the assets we observed were those purchased by the federal grant funds. For all items, we believe it was feasible to tag or label the assets. Effect: By not performing physical inventories or tagging capital assets, MSU Bozeman is not in compliance with federal requirements to use and manage equipment acquired under federal awards in accordance with state laws and policies. Cause: MSU Bozeman personnel cite staff turnover as the reason physical inventories could not be completed. The university attempted alternative procedures, but without dedicated staff overseeing the process, complete physical inventories and asset tagging could not be performed. While we agree staffing contributed to the noncompliance, even if there were adequate staff, the untagged items would make it difficult to complete a full inventory. Recommendation: We recommend Montana State University – Bozeman: A. Enhance internal controls to ensure compliance with the federal and state requirements governing equipment for the Research and Development Program, B. Perform a complete physical inventory of capital assets at least every two years, and C. Tag all capital assets when feasible. Views of Responsible Officials: The university concurs with this recommendation. For additional information regarding the university’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
Finding 2023-013: U.S. Department of Transportation ALN #20.509, Formula Grants for Rural Areas (COVID-19) Grant #MT-2022-022-00 and MT-2023-011-00 Criteria: Federal regulation, 2 CFR 200.317, requires the Montana Department of Transportation (department) to follow state procurement policy when procuring property and services with federal funds. Federal regulation, 2 CFR 200.403, indicates costs must meet certain criteria to be allowable, such as being consistent with policies and procedures that apply uniformly to both federally and state financed activities of the department. Federal regulation, 2 CFR 200.332(d), requires the state to perform monitoring of subrecipients sufficient to ensure subrecipients have complied with federal requirements. Federal regulation, 2 CFR 200.313(d), requires the department to maintain accurate property records and have adequate internal controls to safeguard equipment purchased with federal funds. State policy in the Montana Operations Manual (MOM) policy requires all procurements either have a purchase order or contract. The purchase order or contract must include all elements negotiated and required for the purchase. Department policy and procedures require an inspection on each received vehicle be documented by a post-delivery certification. Federal regulation, 2 CFR 200.303, requires non-Federal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The department’s internal controls did not ensure vehicle procurement, funded by federal funds, followed state policy and procedures. Further, the department did not adequately review and monitor vehicle records to ensure compliance with federal requirements. Questioned Costs: We question $37,990 of costs charged to the program related to the vehicle purchase made without a contract. Context: In administering the Formula Grants for Rural Areas program, the department provides capital grants to subrecipients for purchase of equipment. The department utilizes a data processing system to obtain and store information from the subrecipients to assist in monitoring compliance with various requirements of the program. We reviewed the system information regarding equipment records, procurements, and subrecipient monitoring for the subrecipient’s equipment and procurement federal requirements. We sampled five of the department’s 15 vehicle purchases as part of our audit. This sample was not statistically valid. Our review identified: • Three purchases did not contain evidence of post-delivery certifications. • One purchase with inaccurate vehicle information in the system. • One purchase without a contract, totaling $37,990. The information maintained in the system is necessary to demonstrate compliance with federal procurement and equipment requirements. We analyzed the population of 127 vehicle records in the system and identified the records did not contain all the elements necessary to track and monitor vehicles purchased with federal funds properly. We conducted a sample of 23 vehicle records. The sample was not statistically valid. Our sample identified: • 11 vehicle records did not contain complete and accurate system information, including inaccurate VIN numbers and the condition of vehicle at time of inspection. • Three vehicles did not contain mileage reported. This information is used during the department’s biennial inspections of subrecipient fleet vehicles to determine reasonableness of mileage reimbursements. Repeat Finding: This is a repeat finding and was reported as Single Audit finding #2021-003 in the audit for the two fiscal years ended June 30, 2021. Effect: The department is not in compliance with state procurement policies and procedures. Additionally, the vehicle purchased without a contract resulted in questioned costs which the department may be required to repay to the federal government. Failure to complete post-delivery certifications may mean vehicles do not meet program specifications. Cause: The post-delivery certifications were overlooked by staff who completed the vehicle inspections at the time of delivery. Further, staff turnover and lack of necessary training contributed to the internal control deficiencies and noncompliance. Recommendation: We recommend the Montana Department of Transportation: A. Enhance internal controls and provide training to staff to ensure vehicle procurements follow state policy to comply with federal requirements. B. Enhance internal controls and provide training to staff to ensure information maintained in the system is complete and accurate. C. Comply with state procurement policy by using a contract agreement for all vehicle purchases. D. Complete and submit the post-delivery certifications, as required by department policy. E. Review and update the system vehicle records to ensure they are complete and accurate. Views of Responsible Officials: The department concurs with this recommendation. For additional information regarding the department’s planned corrective action see the Corrective Action Plan starting on page D-1.
U.S. DEPARTMENT OF EDUCATION PASSED THROUGH THE ARKANSAS DEPARTMENT OF EDUCATION COVID-19 - AMERICAN RESCUE PLAN - ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND - AL NUMBER 84.425U PASS-THROUGH NUMBER 7009 AUDIT PERIOD - YEAR ENDED JUNE 30, 2023 2023-001.Equipment and Real Property Management and Special Tests and Provisions Criteria or specific requirement: Property records should be maintained for equipment acquired with federal awards as specified in 2 CFR Section 200.313. In addition, 29 CFR 5.5 (Wage Rate Requirements) requires all contractors and subcontractors performing construction contracts in excess of $2,000, financed by federal assistance funds, to pay laborers and mechanics employed by the contractor or subcontractor not less than the prevailing wage rates established by the Department of Labor for the locality of the project. Non-federal entities shall include in the applicable construction contracts a provision that the contractor or subcontractor comply with those requirements. Such requirements include the submission of weekly certified payrolls for each week in which any contract work is performed, to the non-federal entities. Additionally, 2 CFR 200.326 and Ark. Code Ann. § 18-44-503 require a non-federal entity to obtain a performance bond for the public construction contract. Condition: The District paid $54,427 for installation of a security camera system from the Education Stabilization Fund without obtaining a written contract that included the prevailing wage rate provision, and weekly certified payrolls were not submitted to the District. Additionally, the District did not obtain a performance bond from the contractor, as required by Ark. Code Ann. § 18-44-503, and the system was not recorded in the District's equipment subsidiary ledger. Cause: Lack of Internal controls and management oversight. Effect or potential effect: The District did not comply with Wage Rate Requirements or Bonding Requirements. Additionally, the District's equipment subsidiary records were not accurate. Context: Examined all payments/contracts for facility repairs and improvements, four in total. Identification as a repeat finding: Yes Recommendation: The District should contact the Arkansas Division of Elementary and Secondary Education (DESE) for guidance regarding this matter and implement proper controls over program expenditures. Views of responsible officials: The District will conduct a training for all supervisors indicating and sharing what forms are required for each item purchased or purchased service prior to releasing any funds. Links to required Work Force forms(Davis Bacon Forms; Bond Contractor Form, etc. ) will be shared with all supervisors to use during collaboration with contractors and subcontractors. We are currently working with the company to determine how best to obtain these records from past services.
2023‐001 – Equipment and Real Property Management – Material Weakness in Internal Controls over Compliance (Repeat Finding) Federal Program Information: Funding Agency: U. S. Department of Health and Human Services Title: Head Start CFDA Number: 93.600 Federal Award Identification number: N/A Pass Through Entity: N/A Award Year: 2023 Condition: The Organization did not conduct a physical inventory in current year or prior year. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non‐federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Questioned costs: None Effect: The Organization could dispose of, lose, or encumber federally funded equipment without following Federal guidelines. Cause: The Organization does not have policies and procedures to ensure that a physical inventory of equipment is performed at a minimum frequency of every two years.
2023‐001 – Equipment and Real Property Management – Material Weakness in Internal Controls over Compliance (Repeat Finding) Federal Program Information: Funding Agency: U. S. Department of Health and Human Services Title: Head Start CFDA Number: 93.600 Federal Award Identification number: N/A Pass Through Entity: N/A Award Year: 2023 Condition: The Organization did not conduct a physical inventory in current year or prior year. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non‐federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Questioned costs: None Effect: The Organization could dispose of, lose, or encumber federally funded equipment without following Federal guidelines. Cause: The Organization does not have policies and procedures to ensure that a physical inventory of equipment is performed at a minimum frequency of every two years.
2023‐001 – Equipment and Real Property Management – Material Weakness in Internal Controls over Compliance (Repeat Finding) Federal Program Information: Funding Agency: U. S. Department of Health and Human Services Title: Head Start CFDA Number: 93.600 Federal Award Identification number: N/A Pass Through Entity: N/A Award Year: 2023 Condition: The Organization did not conduct a physical inventory in current year or prior year. Criteria: Per Title 2 US Code of Federal Regulations Part 200.303a, non‐federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non‐Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Questioned costs: None Effect: The Organization could dispose of, lose, or encumber federally funded equipment without following Federal guidelines. Cause: The Organization does not have policies and procedures to ensure that a physical inventory of equipment is performed at a minimum frequency of every two years.
2023-018 EQUIPMENT AND REAL PROPERTY MANAGEMENT - ESSER Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425D and 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52110 and 52160 Pass-through Agency: WV Department of Education CONDITION: The Monroe County Board of Education (the "Board") did not follow the federal requirements for equipment and real property management under the COVID-19 American Rescue Plan ESSER program. The Board maintained photographic evidence of the inventoried items but failed to maintain a detailed listing of the equipment and real property, as required by federal regulations. CONTEXT: During the audit period, the Board was responsible for managing equipment and real property acquired under the COVID-19 American Rescue Plan ESSER program. However, the documentation reviewed during the audit revealed that the Board had not maintained a formal inventory listing. Instead, the Board relied on photographic records and a project manual to document the existence and condition of the equipment and real property, which is not sufficient to meet the federal requirements. CRITERIA: In accordance with 2 CFR § 200.313(d), non-Federal entities must maintain accurate records for equipment acquired with federal funds, including a detailed listing that identifies each item, its location, its condition, and other pertinent details. This listing must be updated as needed and must be verified by a physical inventory at least once every two years. QUESTIONED COSTS: None CAUSE: The noncompliance appears to have been by a lack of awareness or understanding of the specific federal requirements for maintaining a detailed inventory listing for equipment and real property. The Board relied on photographic records without recognizing the necessity of a formal, detailed listing as mandated by federal regulations. EFFECT: Failure to maintain a detailed inventory listing as required by federal regulations increases the risk of mismanagement or loss of equipment and real property and could impact the Board's ability to receive future federal funding. REPEAT FINDING: No RECOMMENDATION: We recommend that the Board establish and maintain a detailed inventory listing for all equipment and real property acquired with federal funds. This listing should include all information required by federal regulations and should be verified through a physical inventory at least once every two years. Additionally, the Board should provide training to staff responsible for equipment and real property management to ensure compliance with federal requirements. VIEWS OF RESPONSIBLE OFFICIALS: The Board acknowledges the finding and agrees with the recommendation.
2023-018 EQUIPMENT AND REAL PROPERTY MANAGEMENT - ESSER Grant Title: COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund - Education Stabilization Fund (ESSER) Federal Award Number and Year: 2023 Assistance Listing #: 84.425D and 84.425U Federal Agency: US Department of Education Pass-through Entity number: 52110 and 52160 Pass-through Agency: WV Department of Education CONDITION: The Monroe County Board of Education (the "Board") did not follow the federal requirements for equipment and real property management under the COVID-19 American Rescue Plan ESSER program. The Board maintained photographic evidence of the inventoried items but failed to maintain a detailed listing of the equipment and real property, as required by federal regulations. CONTEXT: During the audit period, the Board was responsible for managing equipment and real property acquired under the COVID-19 American Rescue Plan ESSER program. However, the documentation reviewed during the audit revealed that the Board had not maintained a formal inventory listing. Instead, the Board relied on photographic records and a project manual to document the existence and condition of the equipment and real property, which is not sufficient to meet the federal requirements. CRITERIA: In accordance with 2 CFR § 200.313(d), non-Federal entities must maintain accurate records for equipment acquired with federal funds, including a detailed listing that identifies each item, its location, its condition, and other pertinent details. This listing must be updated as needed and must be verified by a physical inventory at least once every two years. QUESTIONED COSTS: None CAUSE: The noncompliance appears to have been by a lack of awareness or understanding of the specific federal requirements for maintaining a detailed inventory listing for equipment and real property. The Board relied on photographic records without recognizing the necessity of a formal, detailed listing as mandated by federal regulations. EFFECT: Failure to maintain a detailed inventory listing as required by federal regulations increases the risk of mismanagement or loss of equipment and real property and could impact the Board's ability to receive future federal funding. REPEAT FINDING: No RECOMMENDATION: We recommend that the Board establish and maintain a detailed inventory listing for all equipment and real property acquired with federal funds. This listing should include all information required by federal regulations and should be verified through a physical inventory at least once every two years. Additionally, the Board should provide training to staff responsible for equipment and real property management to ensure compliance with federal requirements. VIEWS OF RESPONSIBLE OFFICIALS: The Board acknowledges the finding and agrees with the recommendation.
MATERIAL WEAKNESS IN INTERNAL CONTROL OVER COMPLIANCE AND MATERIAL NONCOMPLIANCE – U.S. DEPARTMENT OF EDUCATION – PASSED THROUGH MINNESOTA DEPARTMENT OF EDUCATION, COVID-19 – EDUCATION STABILIZATION FUND, FEDERAL ALN 84.425 2023-002 Internal Control Over Compliance and Material Noncompliance With Equipment and Real Property Management Requirements Criteria – 2 CFR § 200.313 (c)(1) and (d)(1) requires that Aurora Charter School (the School) obtain approval from the federal funding agency or pass-through agency prior to the purchase of equipment with federal funding. Condition – During our audit, we noted the School did not have sufficient controls in place within the Education Stabilization Fund federal program to assure compliance with federal equipment and real property management requirements, resulting in material noncompliance. Questioned Costs – None. Context – The School did not obtain approval from the federal funding agency or pass through agency prior to purchasing equipment with a total value of $44,005 using federal funds. Repeat Finding – This is a current year and prior year finding. Cause – This condition was due to a misunderstanding of the individual item value for which federally funded equipment purchases were required to be preapproved and tracked. Effect – Noncompliance with the equipment and real property management could be viewed as a violation of the award agreement and result in loss of funds. Recommendation – We recommend that the School review its internal control procedures to ensure future compliance with the federal compliance requirements specific to equipment and real property management for the COVID-19 – Education Stabilization Fund federal program. View of Responsible Official and Planned Corrective Actions – The School agrees with the finding. The School intends to revise its internal capitalization threshold to align with the federal threshold, and to review its other control procedures relating to equipment and real property management requirements to ensure compliance for future federal awards expenditures. The School has separately issued a Corrective Action Plan related to this finding.
MATERIAL WEAKNESS IN INTERNAL CONTROL OVER COMPLIANCE AND MATERIAL NONCOMPLIANCE – U.S. DEPARTMENT OF EDUCATION – PASSED THROUGH MINNESOTA DEPARTMENT OF EDUCATION, COVID-19 – EDUCATION STABILIZATION FUND, FEDERAL ALN 84.425 2023-002 Internal Control Over Compliance and Material Noncompliance With Equipment and Real Property Management Requirements Criteria – 2 CFR § 200.313 (c)(1) and (d)(1) requires that Aurora Charter School (the School) obtain approval from the federal funding agency or pass-through agency prior to the purchase of equipment with federal funding. Condition – During our audit, we noted the School did not have sufficient controls in place within the Education Stabilization Fund federal program to assure compliance with federal equipment and real property management requirements, resulting in material noncompliance. Questioned Costs – None. Context – The School did not obtain approval from the federal funding agency or pass through agency prior to purchasing equipment with a total value of $44,005 using federal funds. Repeat Finding – This is a current year and prior year finding. Cause – This condition was due to a misunderstanding of the individual item value for which federally funded equipment purchases were required to be preapproved and tracked. Effect – Noncompliance with the equipment and real property management could be viewed as a violation of the award agreement and result in loss of funds. Recommendation – We recommend that the School review its internal control procedures to ensure future compliance with the federal compliance requirements specific to equipment and real property management for the COVID-19 – Education Stabilization Fund federal program. View of Responsible Official and Planned Corrective Actions – The School agrees with the finding. The School intends to revise its internal capitalization threshold to align with the federal threshold, and to review its other control procedures relating to equipment and real property management requirements to ensure compliance for future federal awards expenditures. The School has separately issued a Corrective Action Plan related to this finding.
FA 2023-001 Improve Controls over Equipment Compliance Requirement: Equipment and Real Property Management Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Health and Human Services Pass-Through Entity: Direct AL Number and Title: 93.600 – Head Start Federal Award Number: 04CH01123704 (Year: 2023) Questioned Costs: None Identified Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over equipment and real property management as it relates to the Head Start program. Background Information: The Head Start program promotes school readiness by enhancing the cognitive, physical, behavioral, and social-emotional development of children through the provision of educational, health, nutritional, social, and other services to low-income children and families. The program is designed to involve parents in their child’s learning and development, and to help parents make progress toward their educational, literacy, and employment goals. Head Start funding was granted directly to the Emanuel County Board of Education by the U.S. Department of Health and Human Services (HHS). Head Start funds totaling $965,983.77 were expended and reported on the School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.313(d)(1) state, “Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.” In addition, the Uniform Guidance, Section 200.313(d)(2) states, “A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years.” Condition: The following deficiencies were noted when reviewing the Head Start program equipment listing: • Property records did not include the following required components for all items: (1) Who holds title, (2) percentage of Federal participation in the project costs for the Federal award under which the property was acquired, and (3) use and condition of the property. • There was no evidence that a physical inventory had been performed in either the current year or the previous year. Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to conduct an inventory. Additionally, missing components on the inventory listing were an oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance. Failure to maintain a complete and accurate equipment listing and reconcile results of a physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or federal funds. Recommendation: The School District should develop and maintain an equipment listing that reflects all required information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. In addition, management should implement controls to ensure that a complete physical inventory of equipment is performed, and the results are reconciled back to the equipment listing at least once every two years. Views of Responsible Officials: We concur with this finding.
Finding 2023-004 Significant Deficiency – Internal Controls – EQUIPMENT INVENTORY U.S. Department of Education Passed-through State of Louisiana Department of Education Education Stabilization Fund (COVID-19) Assistance Listing Number 84.425D Program Year 2023 Criteria: In accordance with 2 CFR Part 200.313(d), the School must maintain property records and take physical inventory of property purchased with federal funds. Condition: While the School does maintain property records and perform physical inventory of property annually, 2 of 2 equipment items tested that were purchased with federal funds were not included on Cause: The School did not include all equipment purchased with federal funds on its existing inventory listing. Effect: Equipment purchased with federal funds is not being tracked and appropriately monitored for safeguarding and maintenance as required by federal regulations. Questioned costs: None Recommendation: We recommend that the School review all equipment purchases with federal funds and ensure that all items are included on the inventory listing and, thus, included as part of the annual inventory of property.
2023-012 Equipment and Real Property Management (Material Noncompliance, Material Weakness in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Formula Grants for Rural Areas and Tribal Transit Program, 20.509 Federal Awarding Agency: U.S. Department of the Transportation Pass-Through Entity: New Mexico Department of Transportation Federal Award ID Number: N/A Federal Award Year: 2023 Condition - The County was not able to provide a complete and accurate equipment listing tracking items purchased with federal funding nor did the County conduct a physical inventory. Criteria - Per 2 CFR 200.303(a), the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.313(d)(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Cause - The County is not following policy and procedures to ensure that equipment purchased with federal funds is maintained and tracked and the County performing a physical inventory at a minimum of every two years. Effect - The County could dispose of or lose federally funded equipment without following federal guidelines. Auditor’s Recommendation - The auditor recommends the County enhance the design of its control activities and policies and procedures should be developed to ensure physical inventories are taken at least once every two years and that they create a tool to assist in tracking and maintaining equipment purchased with federal funds. Views of Responsible Officials and Planned Corrective Action - The County will enhance the control activities and procedures to ensure physical inventories are taken at least every two years and will track and maintain equipment purchased with federal funds. Responsible Official – Andrea Montoya, Deputy County Manager and Robert Placencio, Finance Director Timeline and Estimated Completion Date –This will be a documented procedure by August 31, 2024. The County will have a physical inventory completed by December 31, 2024.
2023-012 Equipment and Real Property Management (Material Noncompliance, Material Weakness in Internal Controls over Compliance) Federal Program Information Federal Award Title and ALN: Formula Grants for Rural Areas and Tribal Transit Program, 20.509 Federal Awarding Agency: U.S. Department of the Transportation Pass-Through Entity: New Mexico Department of Transportation Federal Award ID Number: N/A Federal Award Year: 2023 Condition - The County was not able to provide a complete and accurate equipment listing tracking items purchased with federal funding nor did the County conduct a physical inventory. Criteria - Per 2 CFR 200.303(a), the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR 200.313(d)(1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(2), a physical inventory of program property must be taken and the results reconciled with the property records at least once every 2 years. Cause - The County is not following policy and procedures to ensure that equipment purchased with federal funds is maintained and tracked and the County performing a physical inventory at a minimum of every two years. Effect - The County could dispose of or lose federally funded equipment without following federal guidelines. Auditor’s Recommendation - The auditor recommends the County enhance the design of its control activities and policies and procedures should be developed to ensure physical inventories are taken at least once every two years and that they create a tool to assist in tracking and maintaining equipment purchased with federal funds. Views of Responsible Officials and Planned Corrective Action - The County will enhance the control activities and procedures to ensure physical inventories are taken at least every two years and will track and maintain equipment purchased with federal funds. Responsible Official – Andrea Montoya, Deputy County Manager and Robert Placencio, Finance Director Timeline and Estimated Completion Date –This will be a documented procedure by August 31, 2024. The County will have a physical inventory completed by December 31, 2024.
Equipment/Real Property Management Federal Award Identification Assistance Listing Program Title: Formula Grants for Rural Areas Assistance Listing Program Number: 20.509 Federal Award ID Number and Year: Various Federal Agency: U.S. Department of Transportation Pass-Through Entity: Nebraska Department of Transportation Criteria Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property (2 CFR 200.313(d)(1)). A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years (2 CFR 200.313(d)(2)). A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property (2 CFR 200.313(d)(3)). Condition The Organization lacked certain required elements on its vehicle listing. The Organization failed to adequately document the performance of the required physical inventory. The Organization’s vehicles were taken for personal, non-business usage. Repeat Finding Yes: 2022-006. Cause Procedures within the Organization were inadequate to ensure that required elements are regularly updated on its vehicle listing; that the physical inventory count and reconciliation is documented; and that vehicles are only used for allowable activities. Effect or Potential Effect Federal interests in property are lost or inadequately tracked. Questioned Costs No. Statistical Sample No. Context Nebraska Department of Transportation provides its subrecipients with an online portal through which, among other things, a vehicle listing is kept. The auditor obtained this vehicle listing, noting that most of the elements required by 2 CFR 200.313(d)(1) were present, however, out of the seven federally-funded vehicles on the listing: - Two were missing the FAIN (VINs *8494 and *2891). - One had a total purchase price of $63,670, whereas source documentation suggested a total purchase price of $103,475 (VIN *2891). - One was missing a purchase price. Source documentation suggested a total purchase price of $36,231 (VIN *2472). - One had an acquisition date of 9/30/2019, whereas source documentation suggested an acquisition date of 2/25/2020 (VIN *2891). Management indicates that a physical inventory is performed nightly with all vehicles, however, no documentation exists to prove that this was performed during the audit period. As is reported in a letter from the APA to the Organization and grantors dated August 7, 2023 (previously discussed above in Finding 2023-002), the former Executive Director of the Organization is known to have taken Organizational vehicles for non-business usage. Recommendation We recommend the Organization establish a system of internal control consisting of policies and procedures whereby the individual maintaining vehicle listings is different from the individual updating the Nebraska Department of Transportation online portal. Additionally, we recommend the Organization track all Federally-required elements along with its own internal data points (such as bus number and depreciation system number) in one consolidated listing. Further, we recommend that a policy be instituted whereby a physical inventory and related reconciliation is performed annually on June 30, with the results being documented, reviewed, and approved by appropriate personnel. Views of Responsible Officials See Corrective Action Plan, below.
FINDING 2023-007 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation maintained a detailed listing of capital assets; however, the asset records provided for audit did not include three of the six assets paid for with federal funds. The School Corporation utilized COVID-19 - Education Stabilization Fund awards, totaling $153,484, to purchase an air handler unit, a generator, planter equipment, auto pilot software, a carpet cleaner, and a floor cleaner. The software, carpet cleaner, and floor cleaner were not included in the capital asset records. Additionally, the capital asset listing provided did not identify which assets were purchased with federal dollars, a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased in whole or in part with federal dollars were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset and did not include a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation maintained a detailed listing of capital assets; however, the asset records provided for audit did not include three of the six assets paid for with federal funds. The School Corporation utilized COVID-19 - Education Stabilization Fund awards, totaling $153,484, to purchase an air handler unit, a generator, planter equipment, auto pilot software, a carpet cleaner, and a floor cleaner. The software, carpet cleaner, and floor cleaner were not included in the capital asset records. Additionally, the capital asset listing provided did not identify which assets were purchased with federal dollars, a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased in whole or in part with federal dollars were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset and did not include a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation maintained a detailed listing of capital assets; however, the asset records provided for audit did not include three of the six assets paid for with federal funds. The School Corporation utilized COVID-19 - Education Stabilization Fund awards, totaling $153,484, to purchase an air handler unit, a generator, planter equipment, auto pilot software, a carpet cleaner, and a floor cleaner. The software, carpet cleaner, and floor cleaner were not included in the capital asset records. Additionally, the capital asset listing provided did not identify which assets were purchased with federal dollars, a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased in whole or in part with federal dollars were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset and did not include a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation maintained a detailed listing of capital assets; however, the asset records provided for audit did not include three of the six assets paid for with federal funds. The School Corporation utilized COVID-19 - Education Stabilization Fund awards, totaling $153,484, to purchase an air handler unit, a generator, planter equipment, auto pilot software, a carpet cleaner, and a floor cleaner. The software, carpet cleaner, and floor cleaner were not included in the capital asset records. Additionally, the capital asset listing provided did not identify which assets were purchased with federal dollars, a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased in whole or in part with federal dollars were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset and did not include a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-007 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing which would include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. The School Corporation maintained a detailed listing of capital assets; however, the asset records provided for audit did not include three of the six assets paid for with federal funds. The School Corporation utilized COVID-19 - Education Stabilization Fund awards, totaling $153,484, to purchase an air handler unit, a generator, planter equipment, auto pilot software, a carpet cleaner, and a floor cleaner. The software, carpet cleaner, and floor cleaner were not included in the capital asset records. Additionally, the capital asset listing provided did not identify which assets were purchased with federal dollars, a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property (including the FAIN), who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased in whole or in part with federal dollars were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire the asset and did not include a serial number or other identification number, who holds title, the location of the asset, nor the use and condition of the property. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information and new assets are added. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425 Federal Award Number and Year (or Other Identifying Number): S425V200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation hired a consultant to compile and provide to them a fixed asset report that contained all inventory and assets purchased that exceeded the School Corporation's capitalization threshold through June 30, 2023. The consultant prepared the report; however, the School Corporation did not have any policies or procedures in place to ensure the listing was complete, nor was there any documentation that differences between the compiled asset report and the School Corporation's equipment records were reviewed and resolved. INDIANA STATE BOARD OF ACCOUNTS 31 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, a property record or capital asset listing would include the following for each asset: a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. During the audit period, the School Corporation completed an improvement project totaling $1,738,356 with ESSER funds. This improvement project was not included on the asset listing or physical inventory prepared by the consultant. In addition, the School Corporation was unable to provide the capital asset deletions during the audit period. Therefore, we could not determine if the disposition of any equipment or real property acquired under federal awards were properly reflected in the property records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: ". . . (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated." 2 CFR 200.313(e) states in part: "When original or replacement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in Federal statutes, regulations, or Federal awarding agency disposition instructions, the non-Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. . . ." INDIANA STATE BOARD OF ACCOUNTS 32 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased with federal dollars, ESSER funds, were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire or dispose the asset, nor were any discrepancies in the records reconciled. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information, new assets are properly added, and any discrepancies are reconciled. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-006 Subject: COVID-19 - Education Stabilization Fund - Equipment and Real Property Management Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425 Federal Award Number and Year (or Other Identifying Number): S425V200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation hired a consultant to compile and provide to them a fixed asset report that contained all inventory and assets purchased that exceeded the School Corporation's capitalization threshold through June 30, 2023. The consultant prepared the report; however, the School Corporation did not have any policies or procedures in place to ensure the listing was complete, nor was there any documentation that differences between the compiled asset report and the School Corporation's equipment records were reviewed and resolved. INDIANA STATE BOARD OF ACCOUNTS 31 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, a property record or capital asset listing would include the following for each asset: a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property is to be maintained for assets purchased that exceed the School Corporation's capitalization threshold. During the audit period, the School Corporation completed an improvement project totaling $1,738,356 with ESSER funds. This improvement project was not included on the asset listing or physical inventory prepared by the consultant. In addition, the School Corporation was unable to provide the capital asset deletions during the audit period. Therefore, we could not determine if the disposition of any equipment or real property acquired under federal awards were properly reflected in the property records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: ". . . (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated." 2 CFR 200.313(e) states in part: "When original or replacement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in Federal statutes, regulations, or Federal awarding agency disposition instructions, the non-Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. . . ." INDIANA STATE BOARD OF ACCOUNTS 32 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased with federal dollars, ESSER funds, were not properly added to the School Corporation's asset listing. In addition, assets on the listing did not denote whether federal funds were used to acquire or dispose the asset, nor were any discrepancies in the records reconciled. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information, new assets are properly added, and any discrepancies are reconciled. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FA 2023-001 Improve Controls over Equipment Compliance Requirement: Equipment and Real Property Management Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID – 19 - 84.425D –Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425D210012 (Year: 2021) Questioned Costs: None Identified Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over equipment and real property management as it relates to the Education Stabilization Fund. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,767,384.12 were expended and reported on the Lamar County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal controls over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.313(d)(1) state, “Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.” In addition, the Uniform Guidance, Section 200.313(d)(2) states, “A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years.” Condition: The following deficiencies were noted when reviewing the Education Stabilization Fund program equipment listing and physically locating equipment items: • The School District did not adequately maintain a listing of equipment purchased. • There was no evidence that a physical inventory had been performed in either the current year or the previous year. • Though the School District compiled an equipment listing after requested by auditors, the School District did not tag equipment purchased with an identifying number. Cause: In discussing this deficiency with the School District, they stated that the cause was a direct result of the lack of time and resources to conduct an inventory and maintain a listing. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to maintain a complete and accurate equipment listing and reconcile results of a physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or federal funds. Recommendation: The School District should develop and maintain an equipment listing that reflects all required information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. In addition, management should implement controls to ensure that a complete physical inventory of equipment is performed, and the results are reconciled back to the equipment listing at least once every two years. Views of Responsible Officials: We concur with this finding.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.
Finding 2023-002 – Inaccurate Property Management Records Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Commerce (USDOC) U.S. Department of Defense (USDOD) U.S. Department of Education (USDE) U.S. Department of Energy (USDOE) U.S. Department of Health and Human Services (USDHHS) U.S. Department of Housing and Urban Development (USHUD) U.S. Department of Interior (USDOI) U.S. Department of Justice (USDOJ) U.S. Department of State (USDOS) U.S. Department of Transportation (USDOT) U.S. Director of National Intelligence (USDNI) U.S. Environmental Protection Agency (USEPA) National Aeronautics and Space Administration (NASA) National Endowment for the Humanities (NEH) National Science Foundation (NSF) U.S. Department of Veteran Affairs (USDVA) All Pass-Through Entities Program Name: Research and Development Cluster ALN # and Program Expenditures: Various ($508,850,558) Federal Award Numbers: Various – See schedule of award numbers Federal Award Year: Various – See schedule of award numbers Questioned Costs: None Compliance Requirement: Equipment Type of Finding: Noncompliance and material weakness Condition Found The University did not consistently follow its property management policies and procedures related to maintaining accurate property management records for equipment purchased with federal R&D Cluster program awards. The University conducts research at multiple locations throughout its campus where equipment purchased with federal awards is utilized and maintained. The University identifies all equipment in its property management records with individually assigned asset numbers and each individual asset record includes the specific location of the asset, the federal award general ledger account number which funded the purchase of the asset, and other required information. An asset tag with the assigned asset number is affixed to each asset in accordance with University policy. The University is required to safeguard equipment purchased with federal awards, maintain current property records, and to perform a physical inventory of equipment purchased with federal awards on a biennial basis. During our physical observation of 60 pieces of equipment (with a net book value (NBV) of $224,269) purchased with federal R&D Cluster awards, we noted eight items (with a NBV totaling $0) selected for physical observation were not able to be located for our testing. In response to the exceptions identified in our audit procedures, the University performed a physical inventory of all of its federally funded equipment in January 2024, which identified an additional 1,006 equipment items (with a NBV of $1,726,897) that could not be located, of which 839 were fully depreciated. University management believes these items were disposed of but not appropriately removed from the property records and federal equipment listing. As of June 30, 2023, the University’s federal equipment listing included 6,270 assets (with a NBV of $61,390,724) purchased with R&D Cluster program awards. We also noted the University’s controls for equipment dispositions are not operating at an appropriate level of precision to ensure equipment dispositions are properly authorized and property management records are updated on a timely basis. Criteria According to 2 CFR 200.313(d)(1), property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Per 2 CFR 200.313(d)(3) and (4), a control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of property and adequate maintenance procedures must be developed to keep the property in good condition. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure that accurate property records are maintained and equipment items are properly tagged. Cause In discussing these conditions with University officials, they stated the decentralized nature of the equipment recordkeeping process can result in delayed reporting of asset disposals. Possible Asserted Effect Failure to maintain accurate property records may prohibit the University from properly safeguarding and maintaining equipment and may result in federal programs not receiving the appropriate share of proceeds from the disposals of equipment purchased with federal funds. Repeat Finding A similar finding was reported in the prior year audit as finding number 2022-002. Statistical Sampling The sample was not intended to be, and was not, a statistically valid sample. Recommendation We recommend the University review its procedures for updating property records to ensure they accurately reflect equipment information. Views of University Officials The University concurs with the finding and has begun to address these concerns. As noted in the finding, the University conducted a full federal equipment inventory in January 2024 and updated property records to ensure accuracy of federally funded equipment.