Finding Text
FINDING 2025-003 Subject: Water and Waste Disposal Systems for Rural Communities - Equipment and Real Property Management Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 15-048-349178652 Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF FRANKTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The Town had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. A capital asset listing was presented for audit but did not include all required details. Required details include a description of the property, a serial number or other identification number, the source of funding for the property (including the federal award identification number (FAIN)), who holds the title, the acquisition date, cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, and use and condition of the property. The Town purchased one asset totaling $477,750, which exceeded the Town's capitalization threshold. The equipment was included in the capital asset listing; however, it did not include the proper identifying information below: • Description (including serial number or other identification number). • Source of funding for the property (including the federal award identification number [the FAIN]). • The percentage of federal participation in the project costs for the federal award under which the property was acquired. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states in part: ". . . (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF FRANKTON SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." Cause A proper system of internal controls was not designed and implemented by management of the Town to ensure that assets purchased using federal dollars were added to the Town's capital asset listing with all required information. The Town was not aware of the requirement to have all the information on the asset listing for assets acquired with federal funds. Effect The lack of an effective system of internal controls placed the Town in noncompliance with the grant agreement and the Equipment and Real Property Management compliance requirement. The Town's capital asset listing did not include all information required for assets acquired with federal funds. Noncompliance with the grant agreement and the compliance requirement could result in the repayment or loss of federal funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town establish internal controls to ensure that equipment acquired with federal funds are added to the inventory listing with the required information necessary for compliance with requirements as outlined in the grant agreements and the federal guidelines. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.