Finding Text
Finding No.: 2021-007
Pass-Through Entity: Republic of the Marshall Islands
Federal Agency: U.S. Department of the Interior
AL Program: 15.875 Economic, Social and Political Development of the Territories
Federal Award No.: Compact of Free Association Program, As Amended
Area: Equipment and Real Property Management
Questioned Costs: $ Undeterminable
Criteria: Non-federal entities other than states must follow Sections 200.313(c) through (e) of the Uniform Guidance. Section 200.313(d) states that procedures for managing equipment, whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements:
a. 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;
b. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years;
c. 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;
d. Adequate maintenance procedures must be developed to keep the property in good condition; and
e. If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return.
Condition: Capital assets records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies:
1. Certain information in the capital assets records are either incomplete or missing, such as the source of funding for the property (including the FAIN), who holds title, 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. An inventory of capital assets has been performed on an annual basis, however, the result of the physical inventory was not completely reflected/ reconciled with the property records.
3. As capital assets records are not effectively maintained, it does not appear that the College has effectively developed means to adequately safeguard capital assets from loss, damage, or theft, or to reasonably investigate such occurrences.
4. Long-lived assets are not routinely evaluated for possible impairment.
Cause: The College lacks adequate internal control policies and procedures over compliance with applicable federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital assets reconciliations and related general ledger accounts are not effectively implemented.
Effect: The College is in noncompliance with applicable equipment and real property management requirements. Questioned costs, if any, that may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable.
Capital outlays within the program for fiscal years are summarized as follows:
Recommendation: College management should establish and strengthen internal control policies and procedures over compliance with applicable federal regulations on equipment and real property management.
Views of Auditee and Corrective Action Plan: The College agrees with the finding and provides details in its Corrective Action Plan.