Finding Text
U.S. Department of Housing and Urban Development #14.251 Economic Development Initiative, Community Project Funding, and Miscellaneous Grants 2024-002 Fixed Assets – Lack of Proper Tracking and Capitalization Criteria: Per 2 CFR §200.313 (Equipment) and §200.302(b)(4), entities must maintain records that accurately describe property purchased with federal funds, including information such as description, serial number, funding source, acquisition cost, and location. Additionally, the organization’s capitalization policy requires assets exceeding the capitalization threshold to be recorded and depreciated over their useful lives rather than expensed when purchased. Condition: During the audit, it was noted that certain fixed assets purchased with government grant funds were expensed rather than capitalized in the Organization’s accounting records. In addition, the Organization does not maintain a complete and up-to-date fixed asset listing identifying assets purchased with grant funds. As a result, assets acquired with federal funds are not being properly tracked or reported in accordance with applicable regulations and Organizational policy. Cause: The Organization’s capitalization procedures were not consistently applied, and controls over review of capital purchases were insufficient. Effect: The lack of accurate tracking and capitalization of grant-funded assets increases the risk of noncompliance with federal property management requirements, inaccurate financial reporting, and difficulty in monitoring and safeguarding assets purchased with government funds. Questioned Costs: None noted. Recommendation: We recommend management review and update procedures to ensure all purchases meeting the capitalization threshold are properly identified and recorded as fixed assets, maintain a detailed fixed asset listing that includes all assets purchased with federal funds, and train accounting staff on capitalization requirements. Views of Responsible Officials and Planned Corrective Actions: Management agrees with this finding. Corrective Action: Fair Haven has internal records with tracking assets but will ensure that all qualifying capital asset purchases are properly capitalized and recorded on the balance sheet in accordance with GAAP and added to the fixed asset register. Management will review significant purchases at acquisitions to confirm proper treatment going forward.