Finding 1223240 (2023-005)

Major Federal Programs Finding - MATERIAL WEAKNESS IN INTERNAL CONTROL OVER COMPLIANCE – EQUIPMENT MANAGEMENT Criteria: Uniform Guidance (2 CFR 200.313(d)) requires non federal entities to maintain detailed property records for equipment acquired with federal funds, including: • Description of the property • Serial number or other identification number • Source of funding • Acquisition date and cost • Location, use, and condition • Disposition data Condition: The auditee does not maintain a fixed asset listing for equipment purchased with federal grant funds. No formal register or inventory exists to document asset descriptions, acquisition dates, serial numbers, locations, or condition. Management was unable to provide evidence that required equipment records are maintained or that a physical inventory. Cause: The absence of a fixed asset listing appears to result from a lack of established internal controls and oversight related to equipment management. No formal process exists to track federally funded equipment or ensure compliance with Uniform Guidance requirements. Effect Because no equipment records are maintained, the organization is unable to demonstrate compliance with federal equipment management requirements. This deficiency creates a heightened risk of: • Loss, theft, or misappropriation of federally funded assets • Inaccurate financial reporting of capital assets • Inability to support the existence, condition, or location of equipment • Noncompliance that could impact future federal funding The lack of controls and documentation represents a material weakness in internal control over compliance and resulted in material noncompliance with federal grant requirements. Recommendation Management should establish and maintain a complete fixed asset listing that includes all federally funded equipment and required data elements. A full physical inventory should be conducted to establish an initial baseline. Policies and procedures should be implemented to ensure: • Timely recording of new acquisitions • Tracking of asset locations and condition • Documentation of disposals • Physical inventory at least every two years • Ongoing monitoring for compliance with Uniform Guidance Views of Responsible Officials and Planned Corrective Actions Management concurs with this finding. They acknowledge that the organization did not maintain a fixed asset listing for equipment purchased with federal grant funds, resulting in noncompliance with the equipment management requirements of 2 CFR 200.313. They recognize the importance of maintaining accurate property records to ensure proper stewardship of federally funded assets and to support compliance with Uniform Guidance. Management has begun developing a formal fixed asset register that will include all required data elements, such as asset descriptions, serial numbers, acquisition dates, funding sources, locations, and condition. They have also established written procedures to ensure that all future acquisitions, disposals, and transfers are recorded timely and accurately. A physical inventory will be conducted to establish a complete baseline of federally funded equipment.