Finding Text
2022-001 Significant Control Deficiency: Capital Assets Controls CFDA 14.228 ? Community Development Block Grants/State Program and Non-Entitlement Grants in Hawaii Federal Agency: U.S. Department of Housing and Urban Development Passed Through: Texas General Land Office Award Number: 19-076-051-B704 Award Years: January 10, 2020 to December 31, 2022 Funding Type: Indirect Compliance Requirement: F. Equipment and Real Property Management See details of finding on page 76. 2022-001 Significant Control Deficiency: Capital Assets Controls (see also, Prior Audit Finding 2021-001) Condition. The City lacks written policies and procedures to track and control capital assets. Historically, the City?s external auditors have maintained a detailed listing of assets, recorded additions and disposals, and calculated depreciation annually. During the course of the audit, it was determined that a written capital asset management policy does not exist. Additionally, a physical count to verify the accuracy of the capital asset listing did not take place during the year. Criteria or Specific Requirements. Capital assets represent the City?s single largest asset. Grant management standards and proper accounting for capital assets require the maintenance of an accurate, detailed listing of all capital assets that meet the City Council?s approved criteria for capitalization, tracking, and disposal. An essential factor in achieving this detailed listing is the implementation of a City-wide capital asset management policy. Possible Effect. The inability to rely on this listing could lead to improper tracking and control of capital asset additions and disposals, as well as potential errors in computing depreciation expense. The risk of misappropriation and adequate insurance coverage are of particular concern. Failure to maintain proper tracking of capital assets and implement written policies could affect grant funding. Recommendation. The following recommendations should be considered: ? Conduct a physical inventory of all City assets (by department/location). The listing compiled during this process should be reconciled to the existing listing and the results should be communicated to the Mayor and Council for review. ? Approve and implement a written capital assets policy and procedures manual for the City. The policy should establish definitions, asset valuation methods, capitalization thresholds, useful lives, and depreciation methods to be used relating to capital assets. Procedures should be written to establish guidelines for appropriate management, safeguarding, recording and monitoring all of the City?s capital assets. The manual should require, at a minimum, a yearly physical count of all City assets to be performed on or around the City?s fiscal year end. Views of Responsible Officials and Corrective Action. See Management?s Responses to Findings and Corrective Action Plan on pages 81-82.