Finding 398988 (2023-002)

2 CFR 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.313 (d) which states procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (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. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return The School District used federal Education Stabilization Funds for capital outlay expenditures for a restroom upgrade of $222,512. Due to lack of policies and procedures, the School District failed to record the upgrade in their capital asset system. Furthermore, the School District also failed to perform a physical inventory and reconcile the property records for fiscal year 2023. Noncompliance with the requirements of Federal grants may result in the loss of current or future federal funding and possible questioned costs in future audits. Also, failure to include equipment and capital assets purchases on the School District asset listing could result in misappropriation of the equipment. The School District should establish and implement policies and procedures over equipment and real property paid for from Federal grants to ensure that such assets with an acquisition cost which equals or exceeds the lesser of the School District’s capitalization threshold or $5,000, are added and maintained in the capital asset records until disposition. Additionally, the School District should implement procedures to verify that all equipment is recorded, and the required physical inventory is completed at least once every two years.