Finding 1221240 (2025-001)

Finding 2025-001 Fixed Asset Reconciliations and Management of Federally Funded Equipment - Significant Deficiency in Financial Reporting and Internal Control over Equipment and Compliance Finding Federal Agency(ies): United States Agency for Global Media Federal Program(s): International Broadcasting Independent Grantee Organizations Assistance Listing Number(s): 90.500 Pass-through Entity (if applicable): N/A Award Identification Number and Year: MN01-25-GO-00001 (2025) Criteria or Specific Requirement: 2 CFR 200.313(d) requires recipients to maintain property records for equipment acquired with Federal funds. Such records should include, among other items, a description of the property, serial number or other identification number, source of funding, acquisition date, cost, location, use and condition, and ultimate disposition data. Additionally, recipients are required to conduct physical inventories of equipment and reconcile the results of those inventories to the property records. Further, 2 CFR 200.303 requires recipients to establish and maintain effective internal controls over Federal awards that provide reasonable assurance of compliance with applicable Federal requirements. Condition: MBN maintains equipment records in its accounting records and in its inventory management system (BarCloud). At the time of testing, MBN was completing a planned transition of those records from physical binder-based files to a centralized BarCloud system; a related inventory review and reconciliation was still in progress. Because the accounting fixed asset schedule consists of a combination of grouped asset additions and individual assets, while the inventory management system maintains records at the individual asset level, and because the inventory management system did not yet contain information necessary to reconcile inventory records to the accounting record (including asset classifications and in-service dates), the records maintained within the two systems are not yet fully reconciled. During audit testing performed while this reconciliation was ongoing, discrepancies were identified between the systems, including assets recorded in one system but not the other. Cause: The discrepancies noted relate primarily to the timing of audit testing in relation to the organization-wide reconciliation effort then already underway. During fiscal year 2025, MBN began a comprehensive reconciliation of equipment records, transitioning from manual, binder-based files maintained at field locations to a centralized BarCloud inventory management system and the fixed asset schedule. At the same time, the company was engaged in a detailed review and reconciliation of its property and equipment records, and had begun implementing more stringent controls over management of Federally funded equipment. This substantial undertaking was conducted during a period of reduced staffing within the finance and accounting function. Given the volume of records, the level of effort required, and the fact that records originating in prior years (especially those overseas where offices had been closed and access was limited) required significant enhancement before they could be reconciled, the reconciliation effort remained in progress at the time of audit testing, and additional time was needed to complete it.Effect or Potential Effect: Because management’s reconciliation effort was still in progress at the time of testing, there was a temporary, transitional risk that Federally funded equipment records maintained in the two systems were not yet fully aligned, and that some discrepancies between accounting and inventory records had not yet been identified and resolved. This risk is inherent to the period during which legacy binder-based records are consolidated into a centralized system and reconciled, and is expected to diminish as management completes its remediation efforts. Questioned Costs: None Context: As part of our testing of equipment management requirements, the Organization reviewed its equipment tracking processes and the records maintained within both the accounting system and the BarCloud inventory management system. Testing was performed during a period in which management was actively reconciling records - including records maintained at closed overseas locations - into BarCloud, while also reconciling the two systems. We noted that the systems maintained different levels of detail which, at the time of testing, had not yet been fully reconciled. Limited testing of vehicle records identified assets recorded in one system that were not reflected in the other, which is consistent with the transitional state of the records. Identification as a Repeat Finding, if Applicable: N/A Recommendation: We recommend that management continue establishing and implementing procedures to maintain equipment records in a manner permitting reconciliation between the accounting records and the inventory management system. The procedures should include the establishment of a common asset identification methodology, the reconciliation of equipment records between systems on a periodic basis, the investigation and resolution of any discrepancies, and the maintenance of documentation supporting the reconciliation process. Additionally, management should continue evaluating whether additional information should be maintained within the inventory management system to facilitate reconciliation and support compliance with Federal equipment management requirements.