Finding Text
FINDING 2022-004 FEDERAL PROGRAM COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) (CFDA NO. 14.228) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PASS THROUGH STATE HOUSING DEPARTMENT 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 Community Development Block Grant Program (CDBG) 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. ? The CDBG Program did not count with a general ledger or a property subsidiary ledger where all property and equipment transactions are registered. For such reason, we could not ascertain that all capital outlays and property dispositions were recorded. In addition, related annual depreciation is not being calculated and accounted for. CRITERIA 24 CFR 85.32(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. MUNICIPALITY OF CULEBRA, PUERTO RICO 24 CFR 85.20 (b)(3), establishes that effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgratees must adequately safeguard all such property and must assure that it is used solely for authorized purposes. CAUSE The CDBG 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. In addition, sanctions could be imposed by the Lead Agency State CDBG Program or the federal awarding agency. RECOMMENDATION The Property Division must require each office, department and federal program that acquires property and equipment to submit a report including a full description of the assets, location, use, responsible person, cost, and any other pertinent data. In addition, the CDBG Program and the Accounting Department should establish a property control account and a subsidiary ledger to provide for the reconciliation of property. QUESTIONED COST: None