Audit 327082

We compared the amount of grants awarded as per the Administrative and Performance Reports submitted to the PRDOH with the amount reported in the Schedule of Expenditures and Federal Awards and noted a difference of $14,966,519 that was not reconciled.

We performed different audit testing to validate compliance with the Terms and Conditions that the Bank as Subrecipient shall comply with applicable Puerto Rico Department of Housing’s policies and guidelines. From a total of 1,600 SBF Program Recovery Grants (the grants) awarded to business applicants during the year ended June 30, 2023, in the amount of $80,195,314, we performed a grant award test to validate various compliance requirements for the grant. We selected a sample of sixty-one (61) grants awarded as follows: eighteen (18) awarded for working capital purposes, thirty-four (34) awarded for working capital and equipment and nine (9) grants awarded for the purchase of equipment, in the total amount of $2,896,504. In addition, we performed a closeout test to validate procedures surrounding expenditure review and closeout of the grant. We selected a sample of sixty-one (61) cases, in the total amount of $2,942,184 from a total of 317 grants awarded amounting to $15,294,128 for which closeout procedures were completed during the year ended June 30, 2023. We noted the following: Amount Awarded Computed Incorrectly, Duplicated Grant Disbursements and Incorrect Data in Grant Management System of Record for the Grants. Management has not consistently applied procedures as described in the Bank’s policies for underwriting, duplication of benefits, expenditure review and closeout.

We performed different audit testing to validate compliance with the Terms and Conditions that the Bank as Subrecipient shall comply with applicable Puerto Rico Department of Housing’s policies and guidelines. We noted the following instances where the amount of the award was computed incorrectly: - We recomputed the amount of the grant awarded and noted that in one (1) case, representing 2% of the total sample, the amount of the award was computed incorrectly. The amount of over payment to the Business Applicant amounted to $308. - In one (1) case, representing 2% of the total sample, the amount of award was computed incorrectly. The amount of over payment to the Business Applicant amounted to $3,283. We noted the following instances where documents were missing in the Grant Management System of Record for the Grants (Canopy) or the document had missing information. - For the grants awarded for equipment, we reviewed the supporting documentation for required quotes and noted that in fourteen (14) cases, or 23%, the quotes provided by the Business Applicants did not have a date. - For three (3) cases, representing 5% of total sample, the grant award agreement in the documents presented in Canopy was not dully signed. Total awarded grants to these business applicants amounted to $150,000. As a result of our observation, management uploaded to Canopy the signed grant award agreements. - For one (1) case, representing 3% of total sample, the grant award agreement was not located on file. The document was found in the grant award extension file. - For two (2) cases, representing 6% of the total sample, certain documentation related to the benefits received was not located in the file. Documents were found in the grant award extension file. We noted two duplicated grant disbursements made by the Bank as follows: - On June 14, 2023, the Bank identified a duplicated grant disbursement made for $50,000 to one Business Applicant. The grant was disbursed by the Bank two times, on July 15, 2021 and July 20, 2021. The expenditure reimbursement by PRDOH was not duplicated since the funds were properly billed to PRDOH. The Bank, once the incident was identified, made the necessary arrangements and was able to recover the duplicated amount completely. - On June 26, 2023, the Bank identified a duplicated grant disbursement for $49,271 made to two different bank accounts. Due to an inadvertent error when processing the disbursement on June 28, 2020, the grant was disbursed to an incorrect account and then was later disbursed to the correct bank account. The investigation of the first disbursement was not completed by the Bank at the time of processing the second disbursement for the grant. The expenditure of the grant reimbursed by the PRDOH was not duplicated since the funds were billed properly to PRDOH. The Bank has not been able to recover the duplicated amount completely. We noted several instances where the information in the Grant Management System of Record was inaccurate. The situations noted were as follows: • While reviewing the report provided for closeout procedures, we noted differences in four (4) cases for the grant amount as per the grant award agreement and the amount included in the closeout report. The differences amounted to $112,390 and were due to cases with a grant award extension application where the Grant Management System of Record replaced the first award information with the second award. • As a result of our closeout procedures testing, we noted the following situations: - For twelve (12) cases, representing 20% of total sample, we could not validate the eligibility review start date. The data disclosed in this field on the first application was the date of the grant award extension. - In one (1) case, representing 2% of total sample, we could not obtain certain information from the Award Coordination Section in the Grant Management System of Record in relation to the application evaluated (first application) due to system problem that replaced information with the data for the extension award application for additional funds. - For five (5) cases, representing 8% of total sample, the approved grant amount as per Grant Management System of Record, does not agree with the amount disclosed in the corresponding grant award agreement nor in the grant award report provided for audit purposes due to replacement of data with information for extension award application. - In one (1) case, representing 2% of total sample, the approved grant amount as per the Grant Award Agreement does not agree with the amount in the Grant Award Report provided for audit purposes due to replacement of information with second award application in extension for additional funds. B4 - For five cases (5), representing 16% of the total sample, we could not validate the Duplication of Benefits (DOB) status updated date. The data disclosed in this field on the first application was from the grant award extension and not for the grant being evaluated. - For two cases (2), representing 6% of the total sample, some data from the DOB Section in the Grant Management System of Record was not related to the first application. The data disclosed on the first application was from the grant award extension. - For one case (1), representing 3% of the total sample, the approved grant amount as per Grant Management System of Record did not agree with the amount disclosed in the corresponding Grant Award Agreement nor in the Closeout Report provided for audit purposes. The information in the Grant Management System of Record reflected data from the grant award extension instead of data related to the first application.

We performed a closeout test to validate procedures surrounding the expenditure review and closeout of the grants. We selected a sample of sixty-one (61) cases for detail testing in the total amount of $2,942,184 from a total of 317 grants awarded amounting to $15,294,128 for which closeout procedures were completed during the year ended June 30, 2023. For one (1) case out of the sixty-one (61) cases examined, representing 2% of the sample, we noted the case was identified with a duplication of benefits (DOB) in the system. Upon further review, we noted the Business Applicant received a grant from another government agency for working capital in the amount of $276,203 that was not disclosed by the Business Applicant at the time the grant was approved. The documents supporting the grant were provided by the Business Applicant during the expenditure review and closeout procedures. This grant, when considered in the calculation for DOB for the grant approved of $150,000, created a duplicative assistance. As a result, due to failure to receive additional grant information from the Business Applicant, there was no unmet need at the time the grant was approved. The expenditure review and closeout procedures for the grant were completed and confirmation of compliance was sent to the Business Applicant although the system showed a DOB in the review. No explanation was found in the notes with the evaluation to determine the benefits were not duplicated. In addition, the DOB in the system was later removed by request to the system administrator without the proper analysis and supporting documentation for the change requested.

• Monthly Reporting We compared the amount of grants awarded as per the Administrative and Performance Reports submitted to the Puerto Rico Deparment of Housing (PRDOH) with the amount reported in the Schedule of Expenditures and Federal Awards as of June 30, 2023. We noted a difference of $14,966,519 due to grants awarded in February 2023 and March 2023 that were not reflected in the Administrative and Performance Reports. This caused a discrepancy in the cumulative actual total amount of grants awarded for the year that impacts the results in the monitoring of performance by PRDOH. The Bank needs to reconcile the figures with the accounting system to confirm the information for the period is properly reflected in the Administrative and Performance Reports before the submission of the report to ensure the monitoring performed by PRDOH is based on correct and reliable information. • Accounting Records and Reconciliations In relation to the CDBG-DR Fund, although disbursements are recorded in a separate fund, the Bank does not present, on a monthly basis, the revenues, expenses, assets, and liabilities in the Bank’s general ledger. Instead, the Bank is recording the transactions as revenues, expenses, assets, and liabilities related to the CDBG-DR fund at year end. The CDBG-DR fund activity is monitored in another system that is maintained parallel to the Bank’s general ledger. This additional system is used for the reporting process but is not monitored and reconciled jointly with the Bank’s general ledger. Entity level controls related to monthly approvals, reconciliations, actual versus budget comparisons, and other financial reporting controls are performed in another system that does not make automatic interface with the Bank’s general ledger.

The Single Audit Report of the Bank for the fiscal year ended June 30, 2023, was not submitted on or before March 31, 2024, as required by the Uniform Guidance. The Single Audit related to such period was completed after the 9 months deadline.

We compared the amount of grants awarded as per the Administrative and Performance Reports submitted to the PRDOH with the amount reported in the Schedule of Expenditures and Federal Awards and noted a difference of $14,966,519 that was not reconciled.

We performed different audit testing to validate compliance with the Terms and Conditions that the Bank as Subrecipient shall comply with applicable Puerto Rico Department of Housing’s policies and guidelines. From a total of 1,600 SBF Program Recovery Grants (the grants) awarded to business applicants during the year ended June 30, 2023, in the amount of $80,195,314, we performed a grant award test to validate various compliance requirements for the grant. We selected a sample of sixty-one (61) grants awarded as follows: eighteen (18) awarded for working capital purposes, thirty-four (34) awarded for working capital and equipment and nine (9) grants awarded for the purchase of equipment, in the total amount of $2,896,504. In addition, we performed a closeout test to validate procedures surrounding expenditure review and closeout of the grant. We selected a sample of sixty-one (61) cases, in the total amount of $2,942,184 from a total of 317 grants awarded amounting to $15,294,128 for which closeout procedures were completed during the year ended June 30, 2023. We noted the following: Amount Awarded Computed Incorrectly, Duplicated Grant Disbursements and Incorrect Data in Grant Management System of Record for the Grants. Management has not consistently applied procedures as described in the Bank’s policies for underwriting, duplication of benefits, expenditure review and closeout.

We performed different audit testing to validate compliance with the Terms and Conditions that the Bank as Subrecipient shall comply with applicable Puerto Rico Department of Housing’s policies and guidelines. We noted the following instances where the amount of the award was computed incorrectly: - We recomputed the amount of the grant awarded and noted that in one (1) case, representing 2% of the total sample, the amount of the award was computed incorrectly. The amount of over payment to the Business Applicant amounted to $308. - In one (1) case, representing 2% of the total sample, the amount of award was computed incorrectly. The amount of over payment to the Business Applicant amounted to $3,283. We noted the following instances where documents were missing in the Grant Management System of Record for the Grants (Canopy) or the document had missing information. - For the grants awarded for equipment, we reviewed the supporting documentation for required quotes and noted that in fourteen (14) cases, or 23%, the quotes provided by the Business Applicants did not have a date. - For three (3) cases, representing 5% of total sample, the grant award agreement in the documents presented in Canopy was not dully signed. Total awarded grants to these business applicants amounted to $150,000. As a result of our observation, management uploaded to Canopy the signed grant award agreements. - For one (1) case, representing 3% of total sample, the grant award agreement was not located on file. The document was found in the grant award extension file. - For two (2) cases, representing 6% of the total sample, certain documentation related to the benefits received was not located in the file. Documents were found in the grant award extension file. We noted two duplicated grant disbursements made by the Bank as follows: - On June 14, 2023, the Bank identified a duplicated grant disbursement made for $50,000 to one Business Applicant. The grant was disbursed by the Bank two times, on July 15, 2021 and July 20, 2021. The expenditure reimbursement by PRDOH was not duplicated since the funds were properly billed to PRDOH. The Bank, once the incident was identified, made the necessary arrangements and was able to recover the duplicated amount completely. - On June 26, 2023, the Bank identified a duplicated grant disbursement for $49,271 made to two different bank accounts. Due to an inadvertent error when processing the disbursement on June 28, 2020, the grant was disbursed to an incorrect account and then was later disbursed to the correct bank account. The investigation of the first disbursement was not completed by the Bank at the time of processing the second disbursement for the grant. The expenditure of the grant reimbursed by the PRDOH was not duplicated since the funds were billed properly to PRDOH. The Bank has not been able to recover the duplicated amount completely. We noted several instances where the information in the Grant Management System of Record was inaccurate. The situations noted were as follows: • While reviewing the report provided for closeout procedures, we noted differences in four (4) cases for the grant amount as per the grant award agreement and the amount included in the closeout report. The differences amounted to $112,390 and were due to cases with a grant award extension application where the Grant Management System of Record replaced the first award information with the second award. • As a result of our closeout procedures testing, we noted the following situations: - For twelve (12) cases, representing 20% of total sample, we could not validate the eligibility review start date. The data disclosed in this field on the first application was the date of the grant award extension. - In one (1) case, representing 2% of total sample, we could not obtain certain information from the Award Coordination Section in the Grant Management System of Record in relation to the application evaluated (first application) due to system problem that replaced information with the data for the extension award application for additional funds. - For five (5) cases, representing 8% of total sample, the approved grant amount as per Grant Management System of Record, does not agree with the amount disclosed in the corresponding grant award agreement nor in the grant award report provided for audit purposes due to replacement of data with information for extension award application. - In one (1) case, representing 2% of total sample, the approved grant amount as per the Grant Award Agreement does not agree with the amount in the Grant Award Report provided for audit purposes due to replacement of information with second award application in extension for additional funds. B4 - For five cases (5), representing 16% of the total sample, we could not validate the Duplication of Benefits (DOB) status updated date. The data disclosed in this field on the first application was from the grant award extension and not for the grant being evaluated. - For two cases (2), representing 6% of the total sample, some data from the DOB Section in the Grant Management System of Record was not related to the first application. The data disclosed on the first application was from the grant award extension. - For one case (1), representing 3% of the total sample, the approved grant amount as per Grant Management System of Record did not agree with the amount disclosed in the corresponding Grant Award Agreement nor in the Closeout Report provided for audit purposes. The information in the Grant Management System of Record reflected data from the grant award extension instead of data related to the first application.

We performed a closeout test to validate procedures surrounding the expenditure review and closeout of the grants. We selected a sample of sixty-one (61) cases for detail testing in the total amount of $2,942,184 from a total of 317 grants awarded amounting to $15,294,128 for which closeout procedures were completed during the year ended June 30, 2023. For one (1) case out of the sixty-one (61) cases examined, representing 2% of the sample, we noted the case was identified with a duplication of benefits (DOB) in the system. Upon further review, we noted the Business Applicant received a grant from another government agency for working capital in the amount of $276,203 that was not disclosed by the Business Applicant at the time the grant was approved. The documents supporting the grant were provided by the Business Applicant during the expenditure review and closeout procedures. This grant, when considered in the calculation for DOB for the grant approved of $150,000, created a duplicative assistance. As a result, due to failure to receive additional grant information from the Business Applicant, there was no unmet need at the time the grant was approved. The expenditure review and closeout procedures for the grant were completed and confirmation of compliance was sent to the Business Applicant although the system showed a DOB in the review. No explanation was found in the notes with the evaluation to determine the benefits were not duplicated. In addition, the DOB in the system was later removed by request to the system administrator without the proper analysis and supporting documentation for the change requested.

• Monthly Reporting We compared the amount of grants awarded as per the Administrative and Performance Reports submitted to the Puerto Rico Deparment of Housing (PRDOH) with the amount reported in the Schedule of Expenditures and Federal Awards as of June 30, 2023. We noted a difference of $14,966,519 due to grants awarded in February 2023 and March 2023 that were not reflected in the Administrative and Performance Reports. This caused a discrepancy in the cumulative actual total amount of grants awarded for the year that impacts the results in the monitoring of performance by PRDOH. The Bank needs to reconcile the figures with the accounting system to confirm the information for the period is properly reflected in the Administrative and Performance Reports before the submission of the report to ensure the monitoring performed by PRDOH is based on correct and reliable information. • Accounting Records and Reconciliations In relation to the CDBG-DR Fund, although disbursements are recorded in a separate fund, the Bank does not present, on a monthly basis, the revenues, expenses, assets, and liabilities in the Bank’s general ledger. Instead, the Bank is recording the transactions as revenues, expenses, assets, and liabilities related to the CDBG-DR fund at year end. The CDBG-DR fund activity is monitored in another system that is maintained parallel to the Bank’s general ledger. This additional system is used for the reporting process but is not monitored and reconciled jointly with the Bank’s general ledger. Entity level controls related to monthly approvals, reconciliations, actual versus budget comparisons, and other financial reporting controls are performed in another system that does not make automatic interface with the Bank’s general ledger.

The Single Audit Report of the Bank for the fiscal year ended June 30, 2023, was not submitted on or before March 31, 2024, as required by the Uniform Guidance. The Single Audit related to such period was completed after the 9 months deadline.