Finding Text
2023-004 Update Federal Equipment/Real Property Listings Federal Agency: U.S. Department of Education Award Name: COVID-19 – Education Stabilization Fund AL Number(s): 84.425 Award Year: 2021, 2022, 2023 Compliance Requirement: Equipment/Real Property Management Type of Finding Compliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement Title to equipment acquired by a non-federal entity with federal awards vests with the non-federal entity. Equipment means tangible nonexpendable property, including exempt prop¬erty, charged directly to the award having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. However, consistent with a non-federal entity’s policy, lower limits may be established. Subrecipients of states who are local governments or Indian tribes shall use state laws and procedures for equipment acquired under a subgrant from a state. Local governments and Indian tribes shall follow the A-102 Common Rule for equipment acquired under federal awards received directly from a federal awarding agency. The A-102 Common Rule and OMB Circular A-110 require that equipment be used in the program for which it was acquired or, when appropriate, other federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every 2 years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment, and equipment shall be adequately maintained. When equipment with a current per unit fair market value of $5,000 or more is no longer needed for a federal pro¬gram, it may be retained or sold with the federal agency having a right to a proportionate (percent of federal participation in the cost of the original project) amount of the current fair market value. Proper sales procedures shall be used that provide for competition to the extent practicable and result in the highest possible return. Management is also responsible for establishing and maintaining effective internal controls over compliance with federal requirements that have a direct and material effect on a federal program. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition and Context Property records for equipment/real property purchased with federal funds have not been maintained. Cause Weaknesses in the design and implementation of internal controls. Effect or Potential Effect Due to the weaknesses in internal control noted above, the City is not in compliance with federal guidelines. No questioned costs are reported as it is not quantifiable. Recommendation The City should address the weaknesses in internal controls noted above in order to provide reasonable assurance that equipment/real property purchased with federal awards is properly managed and accounted for in compliance with federal guidelines. Views of Responsible Official and Planned Corrective Action Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.