Finding Text
FINDING 2022-002
Information on the federal program:
Subject: Water and Waste Disposal Systems for Rural Communities – Equipment and Real Property
Management
Federal Agency: U.S. Department of Agriculture
Assistance Listing Number: 10.760
Federal Award Number: 92-02 92-03
Pass-Through Entity: N/A
Compliance Requirements: Equipment and Real Property Management
Audit Finding: Significant Deficiency
Criteria: 2 CFR 200.303 states in part:
"The non-Federal entity must:
(a) Establish and maintain effective internal control over Federal award that provides reasonable assurance
that the non-Federal entity is managing the Federal awards 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)(1) states in part:
"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"
Condition: An effective internal control system was not in place at the City to ensure compliance with
requirements related to the grant agreement and the Equipment and Real Property Management
compliance requirement.
Cause: Management had not established a system of internal control that would have ensured proper
procedures are followed to comply with the Equipment and Real Property Management compliance
requirements.
Effect: The failure to establish an effective internal control system enabled noncompliance to go undetected
and the proper tracking of assets acquired with federal funds was not taking place. Noncompliance with the
grant agreement and the Equipment and Real Property Management compliance requirement could have
resulted in the loss of federal funds to the City.
Questioned Costs: There were no questioned costs identified.
Context: The City did not maintain an updated asset listing that reflects the construction in process balance
related to the project funded with federal funds.
Identification as a repeat finding, if applicable: No
Recommendation: We recommend that the City’s management establish controls related to the grant
agreement and the Equipment and Real Property compliance requirement to ensure that assets being
purchased with federal funds are added to the capital asset listing and all required information is maintained
on the capital asset listing.
Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding
and has prepared a corrective action plan.