FAC Explorer

Finding 41630 (2022-004)

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Requirement
F
Questioned Costs
-
Year
2022
Accepted
2023-03-30
Audit: 39448
Organization: Municipality of Patillas (PR)
Auditor: Torres Fred & CO

AI Summary

  • Core Issue: The Head Start Program lacks proper controls over property and equipment purchased with Federal Funds.
  • Impacted Requirements: Failure to maintain complete property records as required by 2 CFR 200.313 and 45 CFR 75.320, including details like acquisition date, cost, and condition.
  • Recommended Follow-Up: Create a comprehensive asset report and establish a property control account with a subsidiary ledger for better tracking and reconciliation.

Finding Text

FINDING 2022-004 FEDERAL PROGRAM HEAD START (CFDA NO. 93.600) DEPARTMENT OF HEALTH AND HUMAN SERVICES CATEGORY INTERNAL CONTROL/COMPLIANCE NONCOMPLIANCE EQUIPMENT AND REAL PROPERTY MANAGEMENT TOPIC SENTENCE Lack of controls over property and equipment acquired with Federal Funds. CONDITIONS The Municipality and the Head Start Program are not maintaining adequate internal controls over property and equipment items acquired with Federal Funds. In testing property and equipment, we noted the following: ? The property records do not indicate, among other things the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, use and condition of the property, and any ultimate disposition data including the date of disposal. CRITERIA 2 CFR 200.313 (d) and the 45 CFR 75.320 (d) establishes that procedures for managing equipment 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 property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (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 shall be investigated. CAUSE The Head Start Program has inadequate internal control procedures that guarantee adequate records, registering and safeguarding of property and equipment. EFFECT Due to the lack of internal controls and property accounting records, we could not validate the accuracy and completeness of the annual physical inventory report and any other related report against an accounting general ledger accounts. The Municipality is exposed to the risk of possible unauthorized use and disposition of equipment due to the lack of internal controls and property records. RECOMMENDATION The Head Start Program must prepare a report including a full description of the assets, location, use, responsible person, cost, and any other pertinent data. In addition, the Program should establish a property control account and a subsidiary ledger to provide for the reconciliation of property. QUESTIONED COST: None

Corrective Action Plan

2022-001- We will give instructions to the Property Division to continue with the physical inventory of the machinery, equipment and vehicle of the Municipality in order to update the capital assets subsidiary and the property module in our accounting system. Also, we are considering engaging with an external consultant to support the Property Division in the process of gathering the necessary information to support the cost, completeness and ownership of its capital assets, necessary to comply with the requirement of the GASB Statement 34. Implementation Date: June 30, 2023 Responsible Person: Mrs. Irma M. Vargas Aguirre, Finance Department Director. 2022-002- On January 17, 2023 the State Employees Retirement System Administration (ERS), issued the Financial Reporting Valuation Report for the GASB 73 and 75m for the reporting year July 1, 2021 to June 30, 2022. However, this report was not audited. In the meanwhile, we proceeded to adjust the pension and OPEB liabilities and the deferred outflow/inflows of resources as of June 30, 2022, using the most recent Financial Reporting Valuation Report issued by the ERS. Implementation Date: Partially Implemented Responsible Person: Mrs. Irma M. Vargas Aguirre, Finance Department Director. 2022-003- During the fiscal year 2021-2022 the General Fund closed its operation with a positive net change of $865,178 which help reduced the accumulated deficit to $2,233,578. We have the commitment to continue reducing the accumulated deficit of the General Fund, by taking expenditure control measures that allow actual expenditures does not exceed the revenue collected, improving the budget control process, maximizing the use of the non-recurrent resources that have been allocated to the Municipality, implementing plan to increase the collection efforts over the municipal license taxes, the property taxes, and the sales and uses taxes among others. Implementation Date: July 31, 2023 Responsible Person: Mrs. Irma M. Vargas Aguirre, Finance Department Director. 2022-004- We will give instructions to the Head Start Program to prepare immediately, a report including a full description of the capital assets. This report must include the location, use, responsible person, cost, and any other pertinent data. In addition the Program should establish a property control account and a subsidiary ledger to provide for the reconciliation of the property. Implementation Date: June 30, 2023 Responsible Person: Mrs. Irma M. Vargas Aguirre, Finance Department Director, and Mr. Heriberto Rivera, Head Start Program Director

Categories

Equipment & Real Property Management

Other Findings in this Audit

Programs in Audit

ALN Program Name Expenditures
21.027 Coronavirus State and Local Fiscal Recovery Funds $1.69M
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $1.46M
21.019 Coronavirus Relief Fund $1.26M
93.600 Head Start $1.11M
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $696,444
14.871 Section 8 Housing Choice Vouchers $345,505
93.356 Head Start Disaster Recovery $154,747
93.575 Child Care and Development Block Grant $149,386
10.558 Child and Adult Care Food Program $34,532
93.569 Community Services Block Grant $8,023
10.766 Community Facilities Loans and Grants $2,711