Finding 514620 (2024-001)

Criteria: Per 2 CFR § 200.313 (Uniform Guidance) for managing federally funded property, recipients must: maintain records of capital assets purchased with federal funds including detailed descriptions, serial numbers, acquisition dates, and funding sources. The recipients must also perform physical inventories at least every two years to ensure assets are accounted for, and establish internal controls to safeguard assets from loss, damage, or unauthorized use. Condition: During the audit, we noted that the Town did not segregate capital assets acquired utilizing federal funds in its capital asset software, including records of asset locations and condition. Since federally funded capital assets were not separately tracked in the capital asset system, we were unable to determine which disposals during the current year, if any were federally purchased assets. Lastly, the Town did not maintain records of any federally purchased asset inventory counts completed during the last two years. Cause: The Town lacked sufficient internal controls and formalized procedures to track federally funded assets. Effect or Potential Effect: Inadequate records increase the risk of asset misappropriation, misuse or loss. Failure to account for disposals could lead to questioned costs during federal audits. Sale of federally purchased assets could result in a gain and the requirement for the Town to perform program income procedures with the pass-through entity or the related federal agency. Recommendation: We recommend the Town update their capital asset tracking schedule to include information on which assets are purchased using federal funds. Furthermore, we suggest the Town begin to keep records of any inventory count taken and begin scheduling inventory counts to be completed at least once every two years. Management's Response: Management concurs with the finding and has already begun taking steps to address the issue. They plan on updating their capital asset tracking module to include documentation of federally purchased assets. Additionally, the Town is in the process of scheduling inventory counts to be completed at least once every two years, and to maintain documentation of any inventory count completed.