Finding Text
Municipality of Maunabo, Puerto Rico SCHEDULE OF FINDINGS AND QUESTIONED COSTS
YEAR ENDED JUNE 30, 2023
SECTION III – Federal Award Finding and Questioned Costs FINDING 2023-006
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
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 subsidiary ledger of the Program was not available for examination.
• The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2022-2023.
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. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (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.
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 Without completion of a regular physical inventory and maintenance of an adequate property subsidiary record, the Program is at increased risk of theft or loss of equipment, it cannot be assured that Federal equipment records were accurately maintained, and it may not be aware of all equipment disposals or losses. In addition, sanctions could be imposed by the Lead Agency State CDBG Program or the federal awarding agency.
RECOMMENDATION Management should prepare the property subsidiary ledger and a physical inventory must be made. 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
PRIOR YEAR Not Applicable
MANAGEMENT RESPONSE We concur with the finding
RESPONSIBLE OFFICIALS Mrs. Sandra Leon, Program Director