General Services Commission
1994 Statewide Financial and Compliance Audit
Report Number 95-104
Overall Conclusion
The number and complexity of the problems identified, ineffective communication of policies and procedures within the program, and a net loss in operations indicates that a material weakness exists in the control environment over the Donation of Federal Surplus Personal Property program. The program received approximately $34 million of federal property valued at original acquisition cost. The problems identified resulted in total questioned costs of $10,343,533 (OAC). The operating loss may indicate that the program may not be able to continue operations.
While the Commission has resolved 7 of the 14 outstanding prior year issues, inadequate inventory controls, ineligible donees obtaining property, and nonadherence to policies for monitoring the use of property donated to donees still remain unresolved. As a result, material weaknesses and material noncompliance with federal regulations continue to exist in the program.
A "material weakness" is a lack of procedures which could allow large errors or fraud to occur and not be detected during the normal course of operations. "Material noncompliance" is a failure to follow federal program requirements in a significant number of instances.
Key Findings
The Donation of Federal Surplus Personal Property program experienced an operating loss of $759,483 for fiscal year 1994. While the program had sufficient reserves to cover excess expenditures, a continuation of the current trend could jeopardize the State's ability to continue offering this program.
The Commission did not ensure only eligible donees participated in the Donation of Federal Surplus Personal Property program. Fifty-eight percent of the donees receiving property were ineligible to receive property. This resulted in questioned costs of $669,461 (OAC) and represents material noncompliance.
The Commission did not have adequate controls in place to properly account for and store federal surplus property. The largest district had inventory overages of $362,000 (OAC) and shortages of $166,000 (OAC), which represents 10 percent of their total inventory. Also, property to be auctioned was lost or stolen, resulting in questioned costs of $26,070 (OAC). These conditions indicate that a material weakness exists in inventory controls.
The Fort Worth district did not follow the Commission's established system for monitoring the use of federal surplus property donated to donees. Fifty percent of the donated property was not monitored, which resulted in questioned costs of $50,273 (OAC). This represents material noncompliance.
Employees of the Donation of Federal Surplus Personal Property program do not receive timely and reliable information from management, which has contributed to the numerous issues identified in this report.
On September 1, 1993, the General Services Commission assumed responsibility for administering the Donation of Federal Surplus Personal Property Program (CFDA 39.003). This program was previously administered by the Texas Surplus Property Agency.
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