Finding 962603 (2023-004)

MUNICIPALITY OF PATILLAS, PUERTO RICO SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED JUNE 30, 2023 SECTION III – Federal Award Finding and Questioned Costs FINDING 2023-004 FEDERAL PROGRAM HEAD START (ASSISTANCE LISTING NO. 93.600) DEPARTMENT OF HEALTH AND HUMAN SERVICES CATEGORY INTERNAL CONTROL/COMPLIANCE NONCOMPLIANCE EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITIONS The Municipality and the Head Start Program 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. CRITERIA 2 CFR 200.313 (d) and the 45 CFR 75.320 (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. CAUSE The Head Start 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. RECOMMENDATION The Head Start Program must prepare a report including a full description of the assets, location, use, responsible person, cost, and any other pertinent data. In addition, the Program should establish a property control account and a subsidiary ledger to provide for the reconciliation of property. QUESTIONED COST: None PRIOR YEAR 2022-004