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FINDING 2025-003 Subject: Head Start Cluster - Equipment and Real Property Management Federal Agency: Department of Health and Human Services Federal Program: Head Start Assistance Listings Number: 93.600 Federal Award Numbers and Years (or Other Identifying Numbers): 05CH012250-01a, 05CH012250-02 Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation designed a system of internal controls; however, it was not properly implemented to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. A property record or capital asset listing is required to be maintained for all equipment purchased with the Head Start grant award to ensure adequate safeguards are in place to prevent loss or damage of items. The School Corporation used federal funds in the amount of $224,077 to purchase two buses. The equipment was included in the capital asset listing of the School Corporation; however, it did not include the proper identifying information. The School Corporation's capital asset listing did not include the following required information: The use and condition of the property. The percentage of federal participation in the project costs for the federal award under which the property was acquired. Source of funding for the property (including the federal award identification number (the FAIN)). The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). . . ." INDIANA STATE BOARD OF ACCOUNTS 20 FAYETTE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.313(d) states in part: ". . . (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation to ensure that assets purchased using federal dollars were added to the School Corporation's capital asset listing with all required information. Effect The failure to establish an effective system of internal controls placed the School Corporation in noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement. The School Corporation's capital asset listing did not include all information required for assets acquired with federal funds. Noncompliance with the grant agreement and the compliance requirement could result in the repayment of federal funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish internal controls to ensure that equipment purchased with federal funds are added to the inventory listing with the required information necessary for compliance with requirements as outlined in the grant agreements and Compliance Supplement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.