FAC Explorer

Audit 297192

FY End
2023-06-30
Total Expended
$1.43M
Findings
2
Programs
2
Organization: Municipality of Naguabo-Los Hucares I (PR)
Year: 2023 Accepted: 2024-03-25
Auditor: Roman Toro & CO Contadores Publicos Autorizados C S P

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
384079 2023-001 Significant Deficiency Yes N
960521 2023-001 Significant Deficiency Yes N

Programs

ALN Program Spent Major Findings
10.415 Rural Rental Housing Loans $1.03M Yes 0
14.195 Section 8 Housing Assistance Payments Program $400,302 Yes 1

Contacts

Name Title Type
MFV5M444Z7C6 Jaime Zayas Auditee
7877603030 Janice Roman Auditor
No contacts on file

Notes to SEFA

Title: BASIS OF PRESENTATION Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Los Húcares I Project has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. The accompanying schedule of expenditures of federal awards includes the federal award activity of the Project and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Los Húcares I Project, it is not intended to and does not present the financial position, changes in the net assets, or cash flows of Los Húcares I Project.
Title: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Los Húcares I Project has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Los Húcares I Project has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.
Title: USDA RURAL DEVELOPMENT AND SECTION 515 LOAN PROGRAM Accounting Policies: Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. De Minimis Rate Used: N Rate Explanation: Los Húcares I Project has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. Los Húcares I Project has received a direct loan under Section 515 of USDA Rural Development Housing of the National Housing Act. The loan balance outstanding at the beginning of the year is included in the federal expenditures presented in the Schedule. Los Húcares I Project received no additional loans during the year. The balance of the loan outstanding at June 30, 2023 consists of: Assistance Listing Number Program Name Outstanding Balance June 30, 2023 10.415 USDA RD Section 515 Direct Loan $1,034,340

Finding Details

Finding 2023-001
Condition: Project management did not complete repairs needed to ensure that units meet housing quality standards. Project management did not complete periodic inspections at least annually. Context: As part of our audit procedure, we selected 9 units to evaluate housing quality standards. Seven selections resulted in HQS Unit Inspections. Work orders related to the seven HQS unit inspections were still opened and required repairs ,as documented on the work orders requests, were not completed as of June 30, 2023. One HQS Unit Inspection was not completed on an annual basis. Criteria: 24 CRF 886.323(a) states that the owner shall maintain and operate the project so as to provide decent, safe, and sanitary housing and the owner shall provide all the services, maintenance, and utilities which he or she agrees to provide under the contract and the lease. Failure to do so shall be considered a material default under the contract and Regulatory Agreement, if any. 24 CRF 884.217 states that the PHA will inspect each contract unit and related facilities at least annually and at such other times as the PHA may determine to be necessary to assure that the Owner is meeting his obligation to maintain the units in Decent, Safe, and Sanitary condition and to provide the agreed upon utilities and other services. Cause: Project employees targeted their efforts on completing emergency repairs on current year inspections. Effect: 24 CRF 886.323 ( e) states that if HUD notifies the owner that he has failed to maintain a dwelling unit in decent, safe, and sanitary condition, and the owner fails to take corrective action within the time prescribed in the notice, HUD may exercise any of its rights or remedies under the contract, or Regulatory Agreement, if any, including abatement of housing assistance payments (even if the family continues to occupy the unit) and rescission of the sale. Auditor’s recommendation: The project management should implement internal control procedures to assure that all units under contract are in a decent, safe and sanitary condition. Required repairs should be completed in a timely manner and properly documented on the work order request. Views of Responsible officials and corrective actions: The inspections of Los Húcares I, could not be completed annually, as required, due to staffing limitations. Work orders were not completed because many of the repairs are extraordinary, and personnel take more time to complete them. The maintenance staff is not sufficient for all necessary repairs, and the project requires additional funds to address all needs. We prioritized emergency repairs in both occupied and vacant units. This situation has been communicated to the owner; however, we have not received a response regarding the process to obtain additional funds to cover these needs. Therefore, we request the termination of our management contract effective August 14, 2023. Audit Status: Unresolved.
Finding 2023-001
Condition: Project management did not complete repairs needed to ensure that units meet housing quality standards. Project management did not complete periodic inspections at least annually. Context: As part of our audit procedure, we selected 9 units to evaluate housing quality standards. Seven selections resulted in HQS Unit Inspections. Work orders related to the seven HQS unit inspections were still opened and required repairs ,as documented on the work orders requests, were not completed as of June 30, 2023. One HQS Unit Inspection was not completed on an annual basis. Criteria: 24 CRF 886.323(a) states that the owner shall maintain and operate the project so as to provide decent, safe, and sanitary housing and the owner shall provide all the services, maintenance, and utilities which he or she agrees to provide under the contract and the lease. Failure to do so shall be considered a material default under the contract and Regulatory Agreement, if any. 24 CRF 884.217 states that the PHA will inspect each contract unit and related facilities at least annually and at such other times as the PHA may determine to be necessary to assure that the Owner is meeting his obligation to maintain the units in Decent, Safe, and Sanitary condition and to provide the agreed upon utilities and other services. Cause: Project employees targeted their efforts on completing emergency repairs on current year inspections. Effect: 24 CRF 886.323 ( e) states that if HUD notifies the owner that he has failed to maintain a dwelling unit in decent, safe, and sanitary condition, and the owner fails to take corrective action within the time prescribed in the notice, HUD may exercise any of its rights or remedies under the contract, or Regulatory Agreement, if any, including abatement of housing assistance payments (even if the family continues to occupy the unit) and rescission of the sale. Auditor’s recommendation: The project management should implement internal control procedures to assure that all units under contract are in a decent, safe and sanitary condition. Required repairs should be completed in a timely manner and properly documented on the work order request. Views of Responsible officials and corrective actions: The inspections of Los Húcares I, could not be completed annually, as required, due to staffing limitations. Work orders were not completed because many of the repairs are extraordinary, and personnel take more time to complete them. The maintenance staff is not sufficient for all necessary repairs, and the project requires additional funds to address all needs. We prioritized emergency repairs in both occupied and vacant units. This situation has been communicated to the owner; however, we have not received a response regarding the process to obtain additional funds to cover these needs. Therefore, we request the termination of our management contract effective August 14, 2023. Audit Status: Unresolved.