Finding Text
Finding No.: 2023-014 Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Compact of Free Association, As Amended Questioned Costs: $ Undeterminable Federal Agency: U.S. Department of Health and Human Services AL Program: 93.323 Epidemiology and Laboratory Capacity for Infectious Diseases Federal Award No.: NU50CK000558 Questioned Costs: $ Undeterminable Area: Equipment and Real Property Management Criteria: Section 200.313(d) of the Uniform Guidance and Article VI, Section 1(f)(4) of the Fiscal Procedures Agreement states that procedures for managing equipment, whether acquired in whole or in part with grant funds, will follow state laws and procedures. The following requirements are applicable: a. Property records must be maintained that include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date and cost of the property, the percentage of Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property; b. A physical inventory of the property must be conducted and the results must be reconciled with the property records at least once every two years; c. A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal Agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program; d. Regular maintenance procedures must be in place to ensure the property is in proper working condition; and e. If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. Additionally, the carrying amount of long-lived assets and the estimated useful lives of assets should be periodically re-assessed and adjusted, as appropriate, based on actual experience and relevant factors and circumstances. Furthermore, 2 CFR 200.303(a) states that a recipient of a Federal award must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). Condition: Capital asset records do not meet the criteria above and are not effectively maintained since updates to the records occur only once a year. Specifically, we noted the following deficiencies: • An inventory of capital assets has not been performed in the recent past in accordance with the above criteria; therefore, a reconciliation of capital asset records and physical inventory has not occurred at least once in the past two years. • Capital asset records are not effectively maintained. It does not appear that RepMar has implemented an effective control system to adequately safeguard capital assets from loss, damage or theft, or to reasonably investigate such occurrences. • RepMar has not established policies and procedures governing property maintenance and has not effectively implemented an entity-wide maintenance plan. • RepMar has not established policies and procedures to routinely assess whether impairment indicators are present and to test long-lived capital assets with impairment indicators for impairment. Cause: RepMar lacks adequate internal control policies and procedures to satisfy compliance with federal property rules and regulations and lacks effective procedures governing property maintenance, as well as periodic assessment of asset impairment conditions and useful lives. Moreover, internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts are not effectively implemented. Effect: RepMar is in noncompliance with applicable equipment and real property management requirements, and possible misstatement of capital assets and related accounts exists. Questioned costs, if any, which may result from inadequate property records, maintenance procedures, and the absence of timely reconciliations are not determinable. Identification as a Repeat Finding: Finding No. 2022-004 Recommendation: The Ministry of Finance, Banking and Postal Services (MOFBPS) should perform an inventory of RepMar’s capital assets as a basis for recording all assets in the financial statements, should complete such inventory in accordance with applicable property rules and regulations, and should develop adequate maintenance procedures in order to keep property in good condition. Furthermore, RepMar should implement internal control policies and procedures requiring periodic and timely performance and independent review of capital asset reconciliations and related general ledger accounts. Views of Responsible Officials: RepMar’s Corrective Action Plan does not indicate disagreement and provides planned corrective action.