Federal Agency: U.S. Department of the Interior AL Program: 15.875 Economic, Social, and Political Development of the Territories Federal Award No.: Unknown Area: Equipment and Real Property Management Questioned Costs: $0 Criteria: In accordance with 2 CFR 200.303(a), recipients must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA) states that Property records shall be maintained which include: (1) a description of the property, (2) a serial number or identification number; (3) the source of property; (4) who holds title; (5) the acquisition date and cost of the property; (6) the percentage of Grants used in the purchase; (7) the location, use, and condition of the property; and (8) any ultimate disposition data including the date of disposal and sale price. Further, Article VI Section(f)(vi)(c) states that a control system shall be developed to ensure adequate safeguards against property loss, damage, or theft. Any loss, damage, or theft shall be investigated. Lastly, Article VI Section(f)(vi)(d) states that adequate maintenance procedures shall be developed to keep the property in good condition. Condition: 1. FSMNG’s capital asset listing does not contain all required information identified in Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement. The current listing does not include the source of property, the percentage of Grants used in the purchase, the use and condition of the property. 2. For twenty-seven (or 93%) of twenty-nine equipment selected for physical inspection testing, FSMNG did not properly safeguard and maintain the federal capital assets to ensure that the property exists and is in proper working condition. Based on the physical inspection, the following capital assets were either not located or found to be in a broken state, with no evidence indicating that they are currently under repair. Cause: 1. FSMNG’s current policy and procedure for capital asset listing management and maintenance is not in accordance with the requirements of Article VI Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA). 2. FSMNG does not have established maintenance and security procedures to ensure that all federal capital assets are properly maintained and secured in the assigned premises. 3. There was a lack of proper transitioning of responsibilities to the newly assigned personnel designated to manage, maintain and safeguard the federal capital assets. Effect or potential effect: FSMNG is in noncompliance with applicable equipment and real property management requirements and a total questioned costs is $0 which is based on the total net book value of the assets. Identification as a Repeat Finding: Finding No. 2023-007 Recommendation: 1. FSMNG should update the structure and contents of their current capital asset listing to include all the information required by Article VI Section 1(f)(vi)(a) of the FPA. Additionally, the FSMNG should improve their policies and procedures on management and maintenance of their capital asset listing. 2. FSMNG should establish safeguarding and maintenance procedures that ensure performance of periodic inspections, timely repairs, and adequate security in each location of all capital assets of the program. 3. FSMNG could consider training additional personnel for equipment management, safeguarding and maintenance, to ensure that during the period of transitioning of responsibilities, capable individuals can still perform the procedures on behalf of the main responsible individual. Views of Responsible Officials: Management agrees with the finding. As set out in the response to Finding 2024-006, management recognizes that the current Fixed Asset Register (FAR) needs to be rebuilt, with proper recording aligned to the Fiscal Management Regulations and to the property record requirements of Article VI, Section 1(f)(vi)(a) of the Fiscal Procedures Agreement (FPA). The rebuilt register will capture the required data elements — including the description, serial or identification number, source of the property, title holder, acquisition date and cost, the percentage of grant funds used in the purchase, and the location, use, and condition of each asset — so that capital assets procured with federal funding under the program can be clearly identified, and a schedule of disposals, including disposal dates and sale prices, can be maintained and produced for audit. The rebuild must be completed well ahead of the FY2025 audit, as the FAR will then be migrated into the new integrated FMIS (FreeBalance), which maintains a fixed asset register module of its own within the system. Establishing a clean, accurate register prior to migration — with the funding source of each asset identified — will ensure the system-based FAR carries correct and complete records from the outset and can readily support sample selection and audit procedures in future periods. Proper advice and guidance have now been provided to the Supply Team on the recording, tracking, and reconciliation of capital assets, including the FPA property record requirements. Once the rebuild of the FAR is completed, the Supply Team will conduct physical checks and counts of assets so that adjustments — including deletions and other corrections — can be made for FY2025, ensuring the right schedule is carried and used moving forward. Summary Schedule — Remarks (2024-011): Repeat 2023-007. Finding agreed. Addressed together with 2024-006 — FAR to be rebuilt aligned to the regulations and FPA Article VI, Section 1(f)(vi)(a) property record elements, identifying assets procured with federal funding and maintaining a disposals schedule. Rebuild ahead of the FY2025 audit and migration into the new FMIS (FreeBalance) FAR module. Guidance provided to the Supply Team; physical checks and counts to follow the rebuild.