Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 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, 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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Criteria: • 2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which 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) (3) establishes that 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. Condition: While examined the property report for the year ended as of June 30, 2020, from a sample of 30 units, the following observations were identified: • • One (1) unit was replaced, and the replacement was no recorded in the property report. • • Description for one (1) unit does not match with information included in the property report. • • The serial numbers for six (6) units do not match with serial numbers per property report. • • Two (2) units do not have assets ID and/or tag number in the property report. • • The tag number for two (2) units do not match with tag number per property report. • • Two (2) units were damaged, and not in in use, however, property report was not updated to reflect it. • • Two (2) units appear assigned to incorrect custody. • • The property report does not include the percentage of federal participation on cost of units. Cause: Lack of supervision to keep the property report updated. Effects: Conditions may result in noncompliance with the requirements for equipment and real property management and with internal controls of COR3. Questioned Costs: None. Recommendation: We recommended management to increase supervision to maintain an updated property report.
Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 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, 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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 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, 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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 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, 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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Information on the federal program: Subject: Head Start Cluster – Equipment Federal Agency: Department of Health and Human Services Federal Program: Head Start Cluster Assistance Listing Number: 93.600 Compliance Requirement: Equipment Audit Finding: Material Weakness, Modified Opinion, Noncompliance Criteria: 45 CFR 75.308(c)(1) states in part: "For non-construction Federal awards, recipients must request prior approval from HHS awarding agencies for one or more of the following program or budget-related reasons: . . . (xi) The recipient wishes to dispose of, replace, or encumber title to real property, equipment, or intangible property that are acquired or improved with a Federal award. . . ." 45 CFR 75.323 states: "Real property, equipment, and intangible property, that are acquired or improved with a Federal award must be held in trust by the non-Federal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the non-Federal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a Federal award and that use and disposition conditions apply to the property." 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, 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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." ELKHART AND ST. JOSEPH COUNTIES HEAD START CONSORTIUM SCHEDULE OF FINDINGS AND QUESTIONED COSTS June 30, 2020 20. Section III – Federal Award Findings and Questioned Costs (Continued) Condition: An effective internal control system was not in place at the Unit to ensure compliance with requirements related to the grant agreement and the equipment compliance requirements. Cause: The Unit's management had not developed a system of internal controls to ensure compliance with the equipment requirements. Effect: The failure to establish an effective internal control system allowed noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: None. Context: During testing, we noted the Unit purchased eight buses in FY20 that each exceeded the $5,000 federal equipment threshold. However, the Unit did not perform any of the required federal compliance steps for equipment in FY20 (getting approval before making the purchase, adding the buses to the capital asset listing, and performing an inventory of the buses). The total cost of the buses, excluding interest costs on the loan, was approximately $649,000. The total annual payments, including interest from the loans, on the buses is approximately $177,000. The Unit initially believed the bus purchases were rental agreements which would not fall under federal compliance requirement. However, the purchases were loan agreements to purchases the buses. The Unit will own the buses after the final payment is made. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that the Unit perform the required steps to maintain compliance with the federal equipment compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Criteria: • 2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which 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) (3) establishes that 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. Condition: While examined the property report for the year ended as of June 30, 2020, from a sample of 30 units, the following observations were identified: • • One (1) unit was replaced, and the replacement was no recorded in the property report. • • Description for one (1) unit does not match with information included in the property report. • • The serial numbers for six (6) units do not match with serial numbers per property report. • • Two (2) units do not have assets ID and/or tag number in the property report. • • The tag number for two (2) units do not match with tag number per property report. • • Two (2) units were damaged, and not in in use, however, property report was not updated to reflect it. • • Two (2) units appear assigned to incorrect custody. • • The property report does not include the percentage of federal participation on cost of units. Cause: Lack of supervision to keep the property report updated. Effects: Conditions may result in noncompliance with the requirements for equipment and real property management and with internal controls of COR3. Questioned Costs: None. Recommendation: We recommended management to increase supervision to maintain an updated property report.
Finding Number: 2019-007 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – The Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the physical inventory count requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The internal controls established for the physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to performing physical inventory counts of equipment. There should be timely coordination and communication amongst all departments that are responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Authority’s Corrective Action Plan which is attached as Appendix B.
Finding No.: 2019-004 Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR Section 200.313(b), a State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. The CNMI Property Management Policies states that equipment, whether acquired in whole or in part with grant funds, until disposition takes place will, at a minimum, meet the following requirements: • Description of the property. • Manufacturer’s serial and model numbers, federal stock number, national stock number, or other identification. • Acquisition source of the property, including grant or agreement number and method of procurement. • Whether title is vested with the CNMI or U.S. Government. • Acquisition date and cost. • Percentage (at the end of the budget year) of U.S. participation in the project or program for which the property was acquired. • Location, use, condition, and the date the information was reported. • Unit Acquisition Cost. • Date of disposal and sale price method used to determine fair market value where the CNMI compensates the agency for its share. Further, the Materials Supply Office (MSO) will conduct an annual inventory of property held by each Accountable Person as reflected in the master inventory control record. Further, MSO shall perform random audits of property held by each Accountable Person to validate the integrity of the property control process. Finding No.: 2019-004, continued Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Condition: Tests of program expenditures noted the following: 1. MSO did not perform a fixed asset physical inventory for fiscal year 2019. No physical inventory was performed in fiscal years 2018 and 2017. 2. Property records maintained by MSO were not provided. 3. Total fixed assets schedule per the Program did not agree to the general ledger details, resulting in a variance of $39,995. 4. A reconciliation was not performed between the Program and MSO. 5. The Program’s fixed assets schedule did not include required information such as whether title is vested with the CNMI or U.S. Government and the use of the assets. 6. Of five fixed assets tested for existence verification, aggregating $121,553 of a total population of $249,070, for one (or 20%), the vehicle with Property Tag Number FA-00375-US that was traded-in for another vehicle, for which was surveyed on 10/04/18, is still included in the Program’s fixed assets schedule as of 09/30/19. Cause: CHCC did not enforce compliance with applicable Equipment and Real Property Management requirements. Effect: CHCC is in noncompliance with applicable Equipment and Real Property Management requirements. No questioned cost is presented as we are unable to quantify the extent of the noncompliance. A summary of the program’s total capital outlays for FY 2019 was $39,995. Finding No.: 2019-004, continued Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Identification as a Repeat Finding: Finding No. 2018-008. Recommendation: CHCC should consider identifying a fixed asset team and provide training on applicable Equipment and Real Property Management requirements, including documentation requirements. The responsible personnel should coordinate and conduct the required annual physical inventories and should reconcile results to the property records in accordance with applicable Equipment and Real Property Management requirements. Views of Responsible Officials: CHCC’s Corrective Action Plan provides a detailed rationale of what resulted to the finding described in Condition 3; however, management did not provide comments for Conditions 1, 2 and 4 to 6.
Finding Number: 2019-007 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Information on Federal Program(s) - U.S. Department of Transportation: Direct Program: Federal Aviation Administration Airport Improvement Program CFDA Number: 20.106 Criteria or Specific Requirement – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – The Authority did not conduct a physical inventory count of equipment in the last two years. The most recent physical inventory count was performed during fiscal year 2017. Further, it does not appear that internal controls over compliance are operating at a level of precision to ensure compliance with the physical inventory count requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of the Authority’s compliance with the specified requirements. Effect – There is a risk that inadequate monitoring of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The internal controls established for the physical inventory count did not fully operate as designed causing the Authority to fall out of compliance with the required timing of such physical inventory count. Recommendation – We recommend that the Authority improve internal controls to ensure adherence to Federal regulations related to performing physical inventory counts of equipment. There should be timely coordination and communication amongst all departments that are responsible for handling and managing such assets. Views of Responsible Officials - The Authority concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Authority’s Corrective Action Plan which is attached as Appendix B.
Finding No.: 2019-004 Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR Section 200.313(b), a State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. The CNMI Property Management Policies states that equipment, whether acquired in whole or in part with grant funds, until disposition takes place will, at a minimum, meet the following requirements: • Description of the property. • Manufacturer’s serial and model numbers, federal stock number, national stock number, or other identification. • Acquisition source of the property, including grant or agreement number and method of procurement. • Whether title is vested with the CNMI or U.S. Government. • Acquisition date and cost. • Percentage (at the end of the budget year) of U.S. participation in the project or program for which the property was acquired. • Location, use, condition, and the date the information was reported. • Unit Acquisition Cost. • Date of disposal and sale price method used to determine fair market value where the CNMI compensates the agency for its share. Further, the Materials Supply Office (MSO) will conduct an annual inventory of property held by each Accountable Person as reflected in the master inventory control record. Further, MSO shall perform random audits of property held by each Accountable Person to validate the integrity of the property control process. Finding No.: 2019-004, continued Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Condition: Tests of program expenditures noted the following: 1. MSO did not perform a fixed asset physical inventory for fiscal year 2019. No physical inventory was performed in fiscal years 2018 and 2017. 2. Property records maintained by MSO were not provided. 3. Total fixed assets schedule per the Program did not agree to the general ledger details, resulting in a variance of $39,995. 4. A reconciliation was not performed between the Program and MSO. 5. The Program’s fixed assets schedule did not include required information such as whether title is vested with the CNMI or U.S. Government and the use of the assets. 6. Of five fixed assets tested for existence verification, aggregating $121,553 of a total population of $249,070, for one (or 20%), the vehicle with Property Tag Number FA-00375-US that was traded-in for another vehicle, for which was surveyed on 10/04/18, is still included in the Program’s fixed assets schedule as of 09/30/19. Cause: CHCC did not enforce compliance with applicable Equipment and Real Property Management requirements. Effect: CHCC is in noncompliance with applicable Equipment and Real Property Management requirements. No questioned cost is presented as we are unable to quantify the extent of the noncompliance. A summary of the program’s total capital outlays for FY 2019 was $39,995. Finding No.: 2019-004, continued Federal Agency: U.S. Department of Agriculture CFDA Program: 10.557 Special Supplemental Nutrition Program for Women, Infants and Children (WIC) Award Number: 7NM700NM5 Area: Equipment and Real Property Management Questioned Costs: $-0- Identification as a Repeat Finding: Finding No. 2018-008. Recommendation: CHCC should consider identifying a fixed asset team and provide training on applicable Equipment and Real Property Management requirements, including documentation requirements. The responsible personnel should coordinate and conduct the required annual physical inventories and should reconcile results to the property records in accordance with applicable Equipment and Real Property Management requirements. Views of Responsible Officials: CHCC’s Corrective Action Plan provides a detailed rationale of what resulted to the finding described in Condition 3; however, management did not provide comments for Conditions 1, 2 and 4 to 6.
Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement 2017, section 3.2-F-1 states: "Non-Federal entities other than States must follow 2 CFR sections 200.313(c) through (e) which require that: 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 Federal award identification number), 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 (2 CFR section 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 2 years (2 CFR section 200.313(d)(2)). 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 section 200.313(d)(3)). Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR section 200.313(d)(4))." Condition: The City does not maintain property records of all equipment and real property acquired or improved through Federal funds. The City has not performed a physical inventory of property acquired with federal funds within the past two years. We were therefore unable to test items from these records to ascertain that physical inspections of equipment were conducted, equipment is appropriately safeguarded, property records are maintained, and dispositions were properly handled per Federal awarding agency disposition instructions. Cause: Lack of internal controls over recording and maintaining of capital assets. Effect or Potential Effect: The City is exposed to possible grantor sanctions and inaccuracies in the maintenance of its capital assets. Questioned Cost: None Context: The City was not able to provide evidence of a detailed listing for property records in relation to equipment purchased with Federal funds. A fire engine was indicated to have been purchased in the current year in relation to the Public Facilities Improvements Project as noted in the IDIS CDBG Activity Summary Report. Equipment acquisitions were also reported in prior years. Repeat of a Prior-Year Finding: 2015-002, 2014-007, 2013-007
Criteria: The Office of Management and Budget (OMB) 2 CFR Part 200, Appendix XI, Compliance Supplement 2017, section 3.2-F-1 states: "Non-Federal entities other than States must follow 2 CFR sections 200.313(c) through (e) which require that: 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 Federal award identification number), 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 (2 CFR section 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 2 years (2 CFR section 200.313(d)(2)). 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 section 200.313(d)(3)). Adequate maintenance procedures must be developed to keep the property in good condition (2 CFR section 200.313(d)(4))." Condition: The City does not maintain property records of all equipment and real property acquired or improved through Federal funds. The City has not performed a physical inventory of property acquired with federal funds within the past two years. We were therefore unable to test items from these records to ascertain that physical inspections of equipment were conducted, equipment is appropriately safeguarded, property records are maintained, and dispositions were properly handled per Federal awarding agency disposition instructions. Cause: Lack of internal controls over recording and maintaining of capital assets. Effect or Potential Effect: The City is exposed to possible grantor sanctions and inaccuracies in the maintenance of its capital assets. Questioned Cost: None Context: The City was not able to provide evidence of a detailed listing for property records in relation to equipment purchased with Federal funds. A fire engine was indicated to have been purchased in the current year in relation to the Public Facilities Improvements Project as noted in the IDIS CDBG Activity Summary Report. Equipment acquisitions were also reported in prior years. Repeat of a Prior-Year Finding: 2015-002, 2014-007, 2013-007