Finding Text
2025-001 Equipment and Real Property Management Prior Year Finding Number: N/A Year of Finding Origination: 2025 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Housing and Urban Development Program: 14.218 Community Development Block Grants/Entitlement Grants Award Number and Year: B-25-MC-27-0002, 2025 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations § 200.313 (d) states that regardless of whether the equipment is acquired in part or its entirety under the federal award, the recipient or subrecipient must manage equipment (including replacement equipment). Specifically, Title 2 U.S. Code of Federal Regulations § 200.313 (d)(1) states that 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 federal award identification number (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. Condition: The City of Duluth maintains a listing of equipment acquired with Community Development Block Grants/Entitlement Grant (CDBG) funds; however, the listing does not include all information required by Title 2 U.S. Code of Federal Regulations § 200.313 (d)(1). In the sample of six items tested from the CDBG equipment listing, one of the items tested was no longer in use. A review of the City’s governmental capital asset listing disclosed $142,000 of City park improvements partially funded from the 2016, 2017, and 2018 CDBG projects that were not listed on the CDBG equipment listing. Questioned Costs: Undetermined. Elements of the missing information, such as serial number and location, are not quantifiable as costs. Context: The City of Duluth maintains a listing of equipment; however, the listing does not include the serial number or other identification number, the FAIN, who holds title (City or subrecipient), acquisition date, the percentage of federal award participation, or the disposition data, including the date of disposal and sales price of the property, nor is the City’s CDBG equipment listing complete. The City’s CDBG equipment listing included 19 items totaling $518,355; a sample of six items totaling $178,885 was tested. The sample size was based on the guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The City of Duluth is not in compliance with Title 2 U.S. Code of Federal Regulations §§ 200.313 (d) and (d)(1). Cause: Oversight by City staff. Recommendation: We recommend the City of Duluth implement procedures to ensure the equipment and real property listing includes all the required information. The City should also implement procedures to identify asset additions and disposals to ensure that they are properly identified, recorded, maintained, and safeguarded. View of Responsible Official: Concur