Finding Text
Finding 2023 – 007: Equipment and Real Property Management (Compliance; Internal Controls Over Compliance) Material Weakness Criteria: Non-federal entities that acquire, manage, or dispose of equipment and real property purchased with federal funds are required to establish and maintain effective internal controls and inventory procedures to ensure proper management, safeguarding, and accountability of such assets. According to 2 CFR § 200.310–200.314, non-federal entities must adequately safeguard all assets and assure that they are used solely for authorized purposes. Specifically, 2 CFR § 200.313(d) requires that property records be maintained for equipment, a physical inventory be taken at least once every two years and reconciled to the property records, and that adequate maintenance procedures be implemented to keep the property in good condition. Additionally, 2 CFR § 200.407, 200.439, 200.313, and 200.311 require non-federal entities to obtain prior written approval from the federal awarding agency or pass-through entity before using federal funds to purchase or lease equipment (with a per-unit cost of $10,000 or more), land, or buildings. Condition: During our review of the Organization’s internal controls over compliance related to the Title V major program, we noted that the Organization did not obtain prior written approval from the funding agency for the purchase of land and a building with Title V funds, with the purchase exceeding the $20,000 threshold included in the Title V contract. Additionally, the Organization did not have an approved budget that included these capital expenditures. The Organization also does not have an adequate system of controls established to identify, mark, record, or maintain equipment and real property purchased with federal funds, and no periodic physical inventory of such assets is being performed. Questioned Costs: None. Cause: The Organization does not have sufficiently established control policies and procedures to ensure that prior written approval is obtained for capital expenditures as required by federal regulations and the grant contract. The Organization also lacks established control policies for identifying, marking, recording, or maintaining equipment and real property, as well as for conducting periodic inventories. Effect: The Organization is not in compliance with federal requirements for prior written approval of capital expenditures and for equipment and real property management. As a result, there is an increased risk that federal funds may be used for unallowable purposes, and the Organization may be unable to distinguish federally funded property from other property or detect if such property is misplaced or stolen. Recommendation: We recommend that the Organization becomes familiar with the requirements of 2 CFR Part 200 and establishes appropriate internal control policies and procedures to ensure that prior written approval is obtained for all capital expenditures with federal funds. We further recommend that the Organization implement procedures for maintaining property records, conducting periodic physical inventories, and ensuring all staff are trained on these requirements. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.