Finding No. 2023-007 Federal Agency: U.S. Department of Education AL Program: 84.027 Special Education Cluster - Grants to States (IDEA, Part B) Federal Award No.: H027A210106, H027A220106, H027A230106 Area: Equipment and Real Property Management Questioned Costs: Undeterminable Criteria: In accordance with 2 CFR 200.313(b), a state must use, manage, and dispose of equipment acquired under a federal award in accordance with state laws and regulations. In accordance with 2 CFR 200.313(d)(1), property records must 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, the cost of the property, the percentage of the 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. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. Further, in accordance with 2 CFR 200.313 (3), a control system must be developed to ensure adequate safeguards to prevent loss, damage or theft of the property. Additionally, 2 CFR 200.313(d)(4) requires that adequate maintenance procedures must be developed to keep the property in good condition. PSS Policy Subpart C Inventory Management Policy section 60-20-815 (a)(1) states that PSS shall require a physical count of all stock supply and equipment items at least once each year. Lastly, according to PSS Policy Subpart C Inventory Management Policy section 60-20-815 (c)(5), during inventory counts, all custodians must be matched with the appropriate records of assigned fixed assets maintained at the Central Office. Condition: 1. The capital assets listing maintained by PSS is incomplete and does not include all information for equipment and real property required under 2 CFR 200.313(d)(1), such as the federal participation percentage and the condition of the asset. 2. PSS lacks standardized and consistently implemented internal controls over safeguarding and maintenance of equipment across schools and offices. For four (or 80%) of the five locations selected for testing, no maintenance procedures and safeguarding measures for equipment are documented. 3. For one (or 13%) of eight capital assets selected for testing, PSS did not provide approved count sheets signed nor submitted the assigned custodian to support that a physical count was performed in FY2023. Cause: 1. PSS policies and procedures over capital assets management have not been fully updated to align with federal requirements under 2 CFR § 200.313 (d) (1), resulting in incomplete capital asset records. 2. PSS does not have a centralized and standardized system for safeguarding and maintaining equipment across all schools and offices for each type of equipment. 3. PSS’ document retention and record-keeping practices did not operate effectively to ensure that required inventory documentation, such as approved custodian count sheets, is properly maintained, stored and easily retrievable. Effect or potential effect: PSS is in noncompliance with applicable Equipment and Real Property Management requirements. Incomplete asset records, inconsistent safeguarding and maintenance practices, and insufficient inventory documentation increase the risk of loss, misuse, theft, or deterioration of federally funded property. Questioned costs are undetermined as we are unable to quantify the extent of noncompliance. Identification as Repeat Finding: Finding No. 2022-008 Recommendation: 1. PSS should update the structure and contents of their current capital asset listing to ensure all information required by 2 CFR 200.313(d)(1) is fully captured, maintained, and kept current for all equipment and real property acquired with federal funds. 2. PSS should revise and strengthen policies and procedures related to capital asset management to ensure alignment with federal requirements, including recordkeeping, inventory, safeguarding, and maintenance. 3. PSS should establish and implement centralized or standardized safeguarding and maintenance controls which should serve as minimum required procedures for all schools and offices regardless of equipment type. 4. Lastly, PSS should strengthen physical inventory procedures by requiring annual inventories to be properly documented, reviewed, approved, and retained, including ensuring all custodians submit signed inventory count sheets in accordance with its policy. Views of Auditee and Corrective Action Plan: PSS concurs with the findings. Refer to PSS’ Corrective Action Plan for additional information.