Finding Text
Federal Program:
ALN 93.600 Head Start
Category:
Compliance/internal control significant deficiency
Compliance Requirement:
Allowable Costs/Cost Principles
Condition:
BGCPR real and personal property records are not complete and did not follow the program requirements.
Additionally, prior approval from the Head Start program was not requested for some acquisitions.
Criteria:
2 CFR §200.313 (d) establishes that in the management requirements of equipment that regardless of whether
equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage
equipment (including replacement equipment) utilizing procedures that meet the following requirements:
(1) Property records must include a description of the property, a serial number or another identification number, the
source of funding for the property (including the Federal Award Identification Number), the title holder, the acquisition
date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the
location, use and condition of the property, and any disposition data including the date of disposal and sale price of
the property. The recipient and subrecipient are responsible for maintaining and updating property records when
there is a change in the status of the property.
2 CFR §200.1 defines equipment as a tangible personal property (including information technology systems) having
a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the
capitalization level established by the non-Federal entity for financial statement purposes, or $5,000.Under U.S. Generally Accepted Accounting Principles (GAAP), the acquisition cost of capital equipment includes all
expenses necessary to acquire the asset and prepare it for its intended use. This encompasses the purchase price,
import duties, freight and handling charges, installation and assembly costs, site preparation expenses, and
professional fees.
As per established on BGCPR’s policy of Property and Equipment, the BGCPR will capitalize all items that have a
unit cost greater than five thousand dollars ($5,000).
Cause:
BGCPR did not maintain essential details, such as acquisition costs, funding sources, or the Federal Award
Identification Numbers, nor did it obtain the necessary prior approvals from the Head Start program for these
acquisitions.
Effect or potential effect:
Failure to capitalize property and equipment and obtain the necessary approvals to comply with the federal
regulations.
Questioned Costs:
Amount is below the threshold to be considered a questioned cost.
Context:
Upon reviewing 32 instances, two errors were found where BGCPR failed to properly account for equipment
acquisitions exceeding $5,000.
Recommendation:
BGCPR must identify all properties acquired with Federal funds and maintain adequate accounting records in
accordance with Federal regulations. The program must maintain an automated accounting and record keeping
system adequate for effective oversight. Additionally, establish a robust internal control system to ensure all
equipment purchases exceeding $5,000 are properly capitalized and that prior approvals are obtained.
Views of responsible officials:
BGCPR recognizes that it must keep and improve the asset capitalization processes and policies, particularly within
the accounting system of record. It acknowledges the need to strengthen these processes to ensure accurate and
compliant management of equipment acquisitions. To address this, BGCPR will implement a system capable of
recording, classifying, and monitoring all capital assets in alignment with the criteria established under federal
regulation 2 CFR §200. This improvement is essential to ensure that all asset capitalization activities meet regulatory
standards and support greater financial transparency and accountability.
As a corrective measure, BGCPR will take the following actions and will anticipate completing on June 30, 2025:
a. Implement and maintain an automated accounting and financial records system to enable real-time oversight
of the asset capitalization policy.
b. Establish a robust internal control framework including pre-approvals for equipment purchases and
cross-validations of financial data.
c. Periodic internal monitoring’s to ensure compliance and documentation.d. Update BGCPR’s fiscal management guidance to include a formal provision requiring the capitalization policy to
be reviewed every three (3) years in compliance with the ensure compliance with federal regulation 2 CFR
§200 regarding asset capitalization criteria.
e. Conduct a training program for accounting and financial personnel.