SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-006 FEDERAL PROGRAM CORONAVIRUS RELIEF FUND (ASSISTANCE LISTING NUMBER 21.019) PASS-THROUGH PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY U.S. DEPARTMENT OF THE TREASURY AWARD NUMBER TRANSFER AGREEMENTS PHASES I/ II/ III TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION As part of the reporting test, the final accumulated expenditures report submitted to the pass-through entity was examined. I noted that the Municipality reported the amount of $2,069,123 in the final accumulated expenditures report, which is $147,992 less than the amount of expenditures recorded in the accounting records of the Municipality. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, Clause 2.3, Recordkeeping, of the Coronavirus Relief Fund (CRF) Transfer Agreement for the Assistance Program to Municipalities, established that the Transferee will maintain its books and records in a manner that will provide Transferor with sufficient detail to review Transferee?s receipts and expenditures relating to the Transfer. Transferee will make such records available for review by Transferor or its agent or designee upon reasonable notice during the Transfer period and for five (5) years after the termination or expiration of this Agreement. Also, Clause 5.1, Compliance Reporting Requirements, of the Coronavirus Relief Fund (CRF) Transfer Agreement for the Assistance Program to Municipalities, established that the Transferee shall submit reports as the Transferor determines are needed to verify use of the funds and compliance with conditions that are imposed on the Transfer, and such reports shall be in such form, which such content, as specified by the Transferor in the Transfer Plan and future program instructions directed to all Recipients. CAUSE The Municipality?s internal controls and procedures failed to ensure the accuracy and correctness of the reports submitted to the pass-through entity. EFFECT Possible inaccurate financial information could have been submitted to the pass-through entity that can lead the Municipality to be in noncompliance with the reporting requirements established in the transfer agreements. RECOMMENDATION I recommend the Municipality to continue strengthening the internal controls and monitoring procedures to ensure the accuracy and completeness of accounting records and the correct preparation and timely submission of the financial reports. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-005. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION We gave instructions to the finance department accounting staff to strengthening internal procedures and controls to ensure accurate preparation and submission of financial reports.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-006 FEDERAL PROGRAM CORONAVIRUS RELIEF FUND (ASSISTANCE LISTING NUMBER 21.019) PASS-THROUGH PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY U.S. DEPARTMENT OF THE TREASURY AWARD NUMBER TRANSFER AGREEMENTS PHASES I/ II/ III TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION As part of the reporting test, the final accumulated expenditures report submitted to the pass-through entity was examined. I noted that the Municipality reported the amount of $2,069,123 in the final accumulated expenditures report, which is $147,992 less than the amount of expenditures recorded in the accounting records of the Municipality. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, Clause 2.3, Recordkeeping, of the Coronavirus Relief Fund (CRF) Transfer Agreement for the Assistance Program to Municipalities, established that the Transferee will maintain its books and records in a manner that will provide Transferor with sufficient detail to review Transferee?s receipts and expenditures relating to the Transfer. Transferee will make such records available for review by Transferor or its agent or designee upon reasonable notice during the Transfer period and for five (5) years after the termination or expiration of this Agreement. Also, Clause 5.1, Compliance Reporting Requirements, of the Coronavirus Relief Fund (CRF) Transfer Agreement for the Assistance Program to Municipalities, established that the Transferee shall submit reports as the Transferor determines are needed to verify use of the funds and compliance with conditions that are imposed on the Transfer, and such reports shall be in such form, which such content, as specified by the Transferor in the Transfer Plan and future program instructions directed to all Recipients. CAUSE The Municipality?s internal controls and procedures failed to ensure the accuracy and correctness of the reports submitted to the pass-through entity. EFFECT Possible inaccurate financial information could have been submitted to the pass-through entity that can lead the Municipality to be in noncompliance with the reporting requirements established in the transfer agreements. RECOMMENDATION I recommend the Municipality to continue strengthening the internal controls and monitoring procedures to ensure the accuracy and completeness of accounting records and the correct preparation and timely submission of the financial reports. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-005. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION We gave instructions to the finance department accounting staff to strengthening internal procedures and controls to ensure accurate preparation and submission of financial reports.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-007 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT EQUIPMENT AND REAL PROPERTY MANAGEMENT CONDITION During the equipment and real property management test, I noted the following situations: 1) The property subsidiary ledger of the Program was not available for examination. However, the Program?s personnel provided an equipment certification as of February 28, 2022. I selected a sample of six (6) purchases of equipment acquired during the fiscal year 2021-2022 and noted that five (5) of these purchases were not included in the equipment certification; 2) The Program personnel did not provide evidence that a physical inventory was performed during the fiscal year 2021-2022. CRITERIA 2 CFR 200.313, Equipment, (d) Management requirements, establishes the procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place 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 funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) 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 must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. CAUSE The Program?s internal controls and procedures were not followed adequately in order to 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. RECOMMENDATION Management should update the property subsidiary ledger and a physical inventory must be made and properly reconciled. QUESTIONED COSTS None PRIOR YEAR FINDING Not applicable. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION As part of the Head Start program termination by the grantee, the capital assets subsidiary ledger has been updated by the Municipality?s finance department staff. It is important to comment that during the fiscal year 2021-2022, the Program employee in charge of the capital assets administration was removed from his position, as requested by the grantee, and, in an interim basis, another employee was assigned with such functions, in additions to his regular functions.
SECTION III ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS _____________________________________________________________________________________________________________________ FINDING NUMBER 2022-008 FEDERAL PROGRAM HEAD START CLUSTER (ASSISTANCE LISTING NUMBER 93.356/ 93.600) PASS-THROUGH PUERTO RICO ADMINISTRATION FOR THE CHILDHOOD CARE AND INTEGRAL DEVELOPMENT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 241-2022-000653/ 241-2021-000444/ 241-2021-000226/ 241-2020- 000139 TYPE OF FINDING COMPLIANCE AND INTERNAL CONTROL COMPLIANCE REQUIREMENT REPORTING CONDITION During the reporting test, a sample was selected of the monthly disbursement reports, including the Federal Financial Report (SF-425) and the final liquidation reports of the program year 2021-2022 of the Head Start/ Early Head Start grants and found the following situations: 1) For the Head Start/ Early Head Start programs, I selected a sample of the monthly disbursement reports, including the Federal Financial Report (SF-425), of November 2021 and February 2022 and the final liquidation reports of the program year 2021-2022 and noted that; a) for the monthly reports of November 2021 and February 2022, the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences in the revenues and expenditures were noted between the SF-425 and the accounting records of the Programs; c) the Program did not provide evidence of the preparation and submission of the final liquidation report of the program year 2021-2022 to the pass-through entity. 2) For the Head Start Disaster Recovery program, I selected for evaluation the Federal Financial Report (SF-425) of February 2022, related to the final liquidation report of the grant and noted that; 1) the Program did not provide evidence of the date in which the reports were submitted to the pass-through entity; b) certain differences were noted between the final liquidation report submitted to the passthrough entity and the accounting records of the Program; 3) as of June 30, 2022, the bank account of the Program maintain a cash balance of $3,288,516, which has not been return to the pass-through entity. 3) For the Head Start Cares Act program, I selected the Federal Financial Report (SF-425), of August 2021, related to the final liquidation report of the grant and noted that the Program did not provide evidence of the date in which the final liquidation report was submitted to the pass-through entity. 4) The Programs? accounting personnel did not maintain complete and adequate set of accounting records of the financial transactions of the Programs, that permits the tracing to the monthly and closing reports submitted to the pass-through entity. CRITERIA As established in the Uniform Guidance, 2 CFR Section 200.302, Financial Management, (a) the non-Federal entity?s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, clause Eight of the grant agreement between the passthrough entity and the Municipality establish that the Municipality should submit the monthly disbursements report on or before the first ten (10) days of the next month. Also, clause Eight states that after the closing of the program year, the Municipality should submit the following documents and reports: 1) a trial balance and a statement of revenues and expenditures on or before the first fifteen (15) days after the closing of the program; 2) a Federal Financial Report (SF-425) on or before the first fifteen (15) days after the closing of the program; and 3) a liquidation funds report at the closing of the fiscal operations must be submitted on or before the first fifteen (15) days after the closing of the program year and at the end of the term of the ninety (90) days to liquidate the outstanding obligations. CAUSE Adequate internal controls and monitoring procedures do not exist to ensure the timely submission and correctness of the monthly reports and the Federal Financial Reports (SF-425) submitted to the pass-through entity. EFFECT The Municipality and the Programs? accountants has not kept proper accounting records of the financial transactions of the Programs as required by Federal regulations and the grant agreements. Also, the Municipality was not in compliance with the accounting and reporting requirements and reporting deadlines established in the grant agreements with the pass-through entity. RECOMMENDATION I recommend that technical training must be provided to the accounting staff to improve the recordkeeping of the financial transactions of the Programs in order to maintain complete and accurate accounting records. QUESTIONED COSTS None PRIOR YEAR FINDING This finding is a prior year audit finding identified as 2021-004. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION On May 3, 2021, the Grantee inform the Municipality about the determination to temporarily submit to a partial protective intervention the programmatic and administrative function of the delegated agency of Pe?uelas. As a direct consequence of such a determination, since May 3, 2021, up to July 31, 2022 (grant termination date), two employees of the Grantee had interference in all fiscal and programmatic transactions of the delegated agency, requiring their authorization for fiscal or programmatic transactions to be carried out. During this timeframe, key personnel of the delegated agency, such as the Program Director, the Program Accountant, the Property Manager, among others, resigned or were required to be replaced by the Grantee?s representatives, altering the programmatic and fiscal operations of the delegated agency. About the program year 2021-2022 closing, the Municipality of Pe?uelas return the funds surplus after the end of the period of liquidation of obligations, including the $3,288,516 related to Head Start Disaster Recovery program retained in the Program restricted cash account as instructed by a Grantee?s representative. Related to the program year prematurely terminated by the Grantee (program year 2022-2023), the Municipality?s Finance Department staff reconciled the program fiscal transactions registered in the Municipality?s computerized accounting system, with the grant awards, as amended, and prepare a liquidation report of each grant award. Such reports will be submitted to the Grantee to discuss the steps for liquidation of obligations with third parties, and the reimbursement of payroll and other expenditures financed by the Municipality?s General Fund.