Finding 1223238 (2023-003)

Material Weakness Repeat Finding
Requirement
P
Questioned Costs
-
Year
2023
Accepted
2026-07-08

AI Summary

  • Core Issue: The Company lacks detailed capital asset records, which are essential for accurate financial reporting and asset management.
  • Impacted Requirements: Inadequate records increase the risk of misstatements in financial statements and hinder compliance with internal control standards.
  • Recommended Follow-Up: Management should create a centralized capital asset register, establish formal policies, assign responsibilities, and conduct regular reconciliations and physical inventories.

Finding Text

Financial Statement Finding - LACK OF DETAILED CAPITAL ASSET RECORDS Criteria: Effective internal control requires organizations to maintain complete and accurate capital asset records to support balances recorded in the general ledger. Detailed property records should include key information such as acquisition date, cost, location, asset description, estimated useful life, depreciation method, accumulated depreciation, and disposition details. These records are necessary to ensure proper capitalization, depreciation, safeguarding of assets, and compliance with applicable financial reporting standards. Condition: The Company does not maintain sufficiently detailed records for its capital assets. Specifically, there is no complete and centralized property record system to track key asset information. Cause: Management has not established formal policies or procedures requiring the maintenance of detailed capital asset records, nor implemented a system or assigned responsibility for tracking and updating fixed asset information. Effect: As a result, there is an increased risk that capital assets may be inaccurately recorded, improperly depreciated, or not recorded at all. These conditions may lead to material misstatements in the financial statements and limit management’s ability to effectively manage and safeguard Company assets. Recommendation: We recommend that management establish and maintain a detailed capital asset register for all significant fixed assets. The register should include relevant identifying and financial information and be periodically reconciled to the general ledger. Management should also implement formal policies governing asset capitalization, depreciation, physical inventories, and disposals. Views of Responsible Officials and Planned Corrective Actions: Management acknowledges the importance of maintaining accurate and complete capital asset records and plans to enhance internal controls in this area by taking the following actions: (1) Establish formal policies and procedures to develop and implement a centralized capital asset register that governs capitalization, depreciation, tracking, and disposal of assets. (2) Assign responsibility for maintaining and updating capital asset records. (3) Perform periodic reconciliations of the asset register to the general ledger. (4) Conduct periodic physical inventories and inspections of capital assets to verify existence and condition. (5) Monitor compliance with established procedures and refine processes as necessary to improve effectiveness.

Corrective Action Plan

Management agrees with this finding. Management acknowledges that the Fund’s existing property records have not been sufficiently centralized or detailed to support strong control over capital assets, depreciation, and asset lifecycle monitoring. The Fund will create a centralized fixed asset register that includes, at a minimum, asset description, asset tag or identifier, acquisition date, placed-in-service date, cost, funding source where applicable, depreciation method, useful life, physical location, condition, custodian or department, and disposal information. Management will also reconcile the register to the general ledger on a periodic basis and formalize policies governing capitalization thresholds, depreciation, transfers, retirements, and write-offs. Corrective action plan: • Develop and populate a centralized fixed asset register for all significant capital assets. • Perform a baseline review of existing capital asset balances and supporting invoices, contracts, and prior schedules to establish completeness. • Reconcile the fixed asset register to the general ledger and investigate differences. • Adopt a written capital asset policy addressing capitalization thresholds, useful lives, depreciation conventions, disposals, and approval requirements. • Perform a physical inventory of capital assets and update records for location, condition, and disposition status. Responsible party/role: Staff Accountant in coordination with the Business Office Manager and oversight from the General Manager. Implementation timeline: The centralized fixed asset register will be established within 120 days of issuance of the audit report. The initial reconciliation to the general ledger and baseline physical inventory will be completed by June 30, 2026, with periodic reconciliations performed thereafter at least quarterly for additions and disposals and annually for full rollforward validation.

Categories

Reporting Equipment & Real Property Management Internal Control / Segregation of Duties

Other Findings in this Audit

  • 1223236 2023-001
    Material Weakness Repeat
  • 1223237 2023-002
    Material Weakness Repeat
  • 1223239 2023-004
    Material Weakness Repeat
  • 1223240 2023-005
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
11.029 TRIBAL BROADBAND CONNECTIVITY PROGRAM $3.43M
21.029 CORONAVIRUS CAPITAL PROJECTS FUND $205,201
21.027 CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS $167,504