Finding Text
Item 2023-002 – Equipment and Real Property Management Education Stabilization Fund (ESF) ALN# 84.425 U.S. Department of Education Passed through the State Department of Education Grant period – Year ended September 30, 2023 (84.425U) (84.425D) Criteria – Grantees should have controls in place to ensure that all capital equipment or improvements to land, building, or equipment that were purchased with grant funds received prior approval prior to encumbrance of the expenditure. 2 CFR 200.303 requires the non-Federal entity to “(a) establish and maintain effective internal controls over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in accordance with all applicable statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR 200.313 and 2 CFR 200.439 requires that the following rules of allow ability must apply to equipment and other capital expenditures “Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity.” 2 CFR 200.439(d)(1) requires that property records must be maintained for equipment acquired under a federal award 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. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Condition – There is a systemic lack of controls in place to ensure that prior approval for capital expenditures for equipment acquisition or improvements to land, buildings, or equipment was obtained prior to incurring the expenditure. Additionally, controls were not in place to ensure that a physical inventory was taken at least once every two years. Cause – Certain capital equipment and improvements to building expenditures were not included in the approved budget to grantor. There was a lack of sufficient controls over the review of capital expenditures to ensure that they were included in the approved budget and that a physical inventory observation was made. Effect – Lack of approval over equipment and capital improvements could lead to disallowed costs. We noted that certain equipment and improvement projects were not included in approved budget for ESSER Funds. Failure to perform a physical inventory observation results in noncompliance with the grant agreement and could result in a misappropriation of assets. Questioned Costs – $57,438. Recommendation – We recommend the strengthening of controls to ensure that proper approval is received prior to the acquisition of improvements to land, building or equipment and that a physical inventory observation is conducted at least once every two years to ensure compliance with grant agreement. Management’s Response – The Board will strengthen the controls in place to provide assurance that proper approval is obtained from grantor agency prior to the purchase of equipment and real property and that a physical inventory observation is conducted at least once every two years.