Finding 560053 (2023-003)

Material Weakness Repeat Finding

Requirement

F

Questioned Costs

-

Year

2023

Accepted

2025-05-11

Audit: 355992

Organization: Commonwealth Ports Authority (MP)

Auditor: Ernst & Young (cnmi) INC

AI Summary

Core Issue: CPA is not complying with federal requirements for managing equipment and real property, leading to inaccuracies in asset records.
Impacted Requirements: Annual physical inventory reconciliation and maintenance documentation are lacking, violating 2 CFR section 200.313 and SOPs 216.1, 216.6, 215.1, and 215.2.
Recommended Follow-Up: CPA should reconcile inventory results with property records, maintain logs for asset upkeep, and enforce proper asset capitalization procedures.

Finding Text

Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Criteria: In accordance with 2 CFR section 200.313(b), a State must use, manage and dispose of equipment acquired under a Federal award by the State in accordance with State laws and procedures. SOP 216.1 and 216.6: • A physical inventory of the property must be taken and the results reconciled with the property records annually. SOP 215.1 and 215.2: • Adequate maintenance procedures must be developed to keep the property in good condition. Condition: Tests of equipment and real property noted the following: 1. CPA performed a capital assets inventory during fiscal year 2023. Based on controls testing, the worksheet of the count was approved by the Comptroller; however, it was not dated. 2. A reconciliation was not performed for FAA only assets which should be compared with accounting records. As such, the completeness and accuracy of program assets could not be determined. Total fixed asset additions capitalized and related to CPA’s major program, is as follows: Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: 3. Of fifteen items (or 17%) tested of a total population of eighty-eight FAA-funded capital assets, we noted deficiencies, as follows: a. One item (or 7%) has been unidentified, and management was not able to substantiate the existence of the actual fixed asset. This asset was cited in the prior year as a finding but was not corrected. As such, it is a repeat finding for FY2023. b. Seven items (or 47%) did not have any record or log of maintenance conducted during FY2023. No questioned costs are noted as we are unable to quantify the extent of the noncompliance. c. One item (or 7%) was improperly included on the fixed asset listing (asset number 000004). This asset was the original Crash, Fire, and Rescue (CFR) building constructed in 1970. The CFR building was demolished upon the construction of the Aircraft Rescue and Fire Fighting (ARFF) building in 1996. As such, this asset should have been noted as a disposal for FY2023. We present $0 questioned costs as no net book value was noted. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Condition, continued: d. One item (or 7%) was improperly capitalized and included in the fixed asset listing (asset number 001504). This asset is the Master Plan Update for the Rota Airport. As this is a document pertaining to project deliverables and survey on airport assets, the Master Plan Update is not considered to be an actual fixed asset. We present $0 questioned costs for this asset as this is a matter of improper capitalization, and not an instance of an unallowable activity in the context of compliance. Cause: CPA lacks oversight responsibility and monitoring controls over compliance with equipment and real property management requirements. Effect: CPA is in noncompliance with applicable equipment and real property management requirements. No questioned costs are presented as we are unable to quantify the extent of noncompliance. Identification as a Repeat Finding: Finding 2022-003. Finding No.: 2023-003, continued Federal Agency: U.S. Department of Transportation AL Program: 20.106 Airport Improvement Program Federal Award Nos.: All AIP Grants Area: Equipment and Real Property Management Questioned Costs: $-0- Recommendation: CPA should reconcile the results of the annual physical inventory of the program’s assets to the property records and ascertain that the costs of the individual assets also agree to the records of accounting in terms of assets identified as additions or disposals for the year. Additionally, CPA should retain maintenance logs or equivalent documentation to show evidence of maintenance done on fixed assets and equipment. Lastly, CPA should implement and enforce proper procedures and criteria for capitalization of assets, based on the capitalization policy set by management to prevent improper capitalization. Views of Responsible Officials: Management states agreement with the finding. Refer to separate Corrective Action Plan.

Corrective Action Plan

Finding No 2023-003 “ALN #20.106 Equipment and Real Property Management” Name of Contact Person(s): Sheryl Sizemore, Comptroller Ida S. De Brum, Accounting Manager Zack A. Diaz, Internal Auditor Alex Tudela, Procurement Officer Corrective Action: CPA agrees with this finding. CPA has implemented Equipment Management Standard Operating Procedures (SOPs) in June 2022 and trained staff involved in Equipment Management in August 2022. Because trainings on the newly developed SOPs were first conducted in August 2022, CPA noted and FAA acknowledged that repeat findings may be found in this audit report. CPA emphasizes that SOP trainings are continuing and mandatory for all of CPA Management, and CPA expects that the SOPs and related training will resolve this issue moving forward. Equipment SOP trainings occur twice per year and will continue indefinitely. In July 2023, CPA issued the inventory and property records to all CPA Department Heads to review, verify and confirm details of each fixed asset and provide additional identifying information for entry. These updates will be submitted to the Procurement Division in August 2023 for verification and entry into the Equipment Management System. Condition 1: CPA will ensure that count sheets are dated to reflect timing of the approval of fixed asset inventory performed. Condition 2: The fixed asset schedule provided to the auditors included a column that listed all contributed fixed assets as funded by the Federal Aviation Administration (FAA). The FAA column was mistakenly entered into the schedule. CPA Accounting verified that the details of all assets that were identified as non-FAA assets indicate funding through other federal or local programs. The fixed asset schedule will go through verification by the Accounting Manager and Comptroller to ensure that only the program assets requested are listed. Condition 3a: CPA will write off the asset from its fixed asset system. Condition 3b: CPA will write off assets 000015, 000040, 000047 as they have been already replaced with an existing asset. For assets 000091, 000589, and 000791: we will create maintenance logs for these assets as well as all assets that require maintenance in the fixed asset system. Condition 3c: CPA will write off the asset from its fixed asset system. Condition 3d: CPA will write off the asset from its fixed asset system and adjust and reclassify for any remaining depreciation still left on the books. CPA has developed the following corrective action plan for this finding: 1. Establish Standard Operating Procedures (SOP) for Equipment Management CPA has established Equipment Management SOPs that were implemented and effective on June 30, 2022. The SOPs detail the equipment management requirements, details, and responsibilities. In addition, the SOPs include an annual mandatory schedule for inventory, disposals, and reconciliation. The Department Heads are reviewing their equipment listings to verify the accuracy of equipment details, provide additional identifying information and confirm existence of all assets listed. The Department Heads will be providing monthly updates to the Procurement Department for entry into the Equipment Management System. 2. Implement Standard Equipment Management Forms Standard procurement forms have been developed to establish additional controls and reviews for all equipment. These standard forms include requirements such as identifying details for all fixed assets. 3. Develop a Training Plan for Equipment Management Procedures CPA developed an Equipment Management training plan that was implemented on June 17, 2022. The training plan includes annual requirements for training on equipment management and compliance requirements. The training is based on the established SOPs and best practices and is mandatory for all staff involved in equipment management. 4. Internal Auditor Position An internal auditor position was created on May 16, 2022 and hired on August 29, 2022. Part of the internal auditor’s responsibilities include reviewing inventory records and equipment management files for compliance. The internal auditor reports directly to the CPA Board of Director and provides monthly reports. The internal auditor monthly reports are used as a tool to identify areas of equipment management non-compliance for immediate correction. Proposed Completion Date: June 30, 2025

Programs in Audit

ALN	Program Name	Expenditures
20.106	Airport Improvement Program, Covid-19 Airports Programs, and Infrastructure Investment and Jobs Act Programs	$7.59M
97.U01	Electronic Baggage Screening Program	$4.80M
21.027	Coronavirus State and Local Fiscal Recovery Funds	$940,923
15.875	Economic, Social, and Political Development of the Territories	$181,291
97.072	National Explosives Detection Canine Team Program	$159,257
97.U02	Law Enforcement Officer Reimbursement Program	$55,850

Finding 560053 (2023-003)

AI Summary

Finding Text

Corrective Action Plan

Categories

Other Findings in this Audit

Programs in Audit