Finding Text
FINDING 2024-003 Subject: Highway Planning and Construction - Equipment and Real Property Management Federal Agency: Department of Transportation Federal Program: Highway Planning and Construction Assistance Listings Number: 20.205 Federal Award Number and Year (or Other Identifying Number): DES #9981680 Pass-Through Entity: Indiana Department of Transportation Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion Condition and Context A property record or capital asset listing is required to be maintained for all equipment, property improvements, and property purchased with the Highway Planning and Construction grant awards to ensure adequate safeguards are in place to prevent loss or damage of items. In addition, a complete physical inventory of the property must be taken every two years and reconciled with the detailed listing. The capital asset listing is to include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number), who holds title, the acquisition date, 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 sales price of the property. The County purchased $734,389 of right-of-way for the Veterans Memorial Trail project. The project had a 20 percent local match; thus, the Highway Planning and Construction grant portion was $587,511. The right-of-way purchase should have been recorded as capital assets purchased with 80 percent federal funding. However, the County did not include the right-of-way purchased in the capital asset listing. The lack of internal controls and noncompliance were isolated to DES #9981680. 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). . . ." 2 CFR 200.313(d) states in part: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of dunking for the property (including the federal award identification number), who holds title, the acquisition date, 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 sales 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 Effective internal controls were not in place to ensure that all capital assets purchased with federal funds, including rights-of-ways, were added to the County's capital asset listing. Effect 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 County's management establish a proper system of internal controls that would ensure compliance with the Equipment and Real Property Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.