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Finding 2024-003 LSC Financial Guide § 3.6.1 Capitalized Assets Grantor: Legal Services Corporation Program Name: Legal Services Corporation Basic Field Grant CFDA No.: 09.952000 Award No.: Basic Field Grant Award Year: 2024 Repeat Finding From Prior Audit? No Finding Type: Significant deficiency Criteria: Per LSC Financial Guide § 3.6.1 Capitalized Assets, recipients must have procedures in place to properly account for and track all of their capitalized real and personal property, such as land, buildings, leasehold improvements, capital improvements, furniture, fixtures, and equipment. LSC requires capitalized property and equipment to be recorded in a property subsidiary ledger that reconciles to the general ledger. The property subsidiary ledger must include: • Description of the property • Date acquired • Check number (if applicable) • Original cost (if purchased) • Fair value (if donated) • Method of valuation (if donated) • Salvage value (if any) • Funding source(s) • Estimated life • Depreciation method • Identification number • Location Recipients are required to report in their financial statements the value of LSC-funded vs. non-LSC funded property and equipment, including accumulated depreciation. Condition: MLSC did not maintain the accounting records to track all fixed assets purchased, including the description, the useful life, the value and the depreciation during the year. We discovered that during the year, fixed assets were not monitored and no lapsing schedule was maintained. We were not provided a listing that segregated the LSC-funded property and equipment from the non-LSC funded property and equipment. Finding 2024-003 LSC Financial Guide § 3.6.1 Capitalized Assets, continued Cause : MLSC did not monitor or to keep a list of the fixed assets on hand to track the value, the existence or the deprecation of the fixed assets during the year. Effect: The absence of a complete and accurate fixed asset subsidiary ledger results in noncompliance with LSC Financial Guide § 3.6.1. Without proper tracking, MLSC cannot reliably determine the value, location, or existence of its assets, nor verify whether depreciation is recorded correctly. This increases the risk of misstated financial statements, inadequate safeguarding of property, and incorrect reporting of LSC-funded versus non–LSC-funded assets. Recommendation: MLSC should follow the LSC Financial Guide § 3.6.1 Capitalized Assets guidance and keep tracking all the fixed assets. Management’s Response and Corrective Action Plan: MLSC management acknowledges the finding and concurs in part. MLSC has an established Fixed Asset and Capitalization Policy in accordance with LSC Financial Guide § 3.6.1, which includes maintaining a detailed subsidiary ledger and lapsing (depreciation) schedule. During the audit, the lapsing schedule was provided to the auditors upon request. However, the master fixed asset record (which includes itemized property details, funding source, and location) was not submitted because it was not requested during the audit process. Responsible person: Chief Fiscal Officer, Jocelyn Mallari Corrective action planned: To further ensure full compliance and to strengthen documentation and transparency, MSLC, with the supervision of the Chief Fiscal Officer, MLSC continues to enforce the existing Fixed Asset and Capitalization Policy and ensures that all property records are maintained in accordance with LSC Financial Guide 3.6.1. MLSC ensures to conduct periodic internal review of fixed assets registry and continues to maintain these records and made them readily available and provided to auditors, even if not specifically requested. Anticipated completion date: Completed.