FAC Explorer

Audit 37389

FY End
2022-06-30
Total Expended
$3.97M
Findings
2
Programs
8
Organization: Municipality of Culebra (PR)
Year: 2022 Accepted: 2023-03-30
Auditor: Torres Fred & CO

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
29922 2022-004 - Yes F
606364 2022-004 - Yes F

Programs

ALN Program Spent Major Findings
21.019 Coronavirus Relief Fund $1.29M Yes 0
14.228 Community Development Block Grants/state's Program and Non-Entitlement Grants in Hawaii $1.00M Yes 1
97.036 Disaster Grants - Public Assistance (presidentially Declared Disasters) $565,944 - 0
21.027 Coronavirus State and Local Fiscal Recovery Funds $489,276 - 0
97.030 Community Disaster Loans $420,344 - 0
93.575 Child Care and Development Block Grant $138,378 - 0
93.045 Special Programs for the Aging_title Iii, Part C_nutrition Services $51,551 - 0
10.558 Child and Adult Care Food Program $8,782 - 0

Contacts

Name Title Type
FHHXLDT9JK51 Pedro Padron Auditee
7877423006 Frankie Torres Auditor
No contacts on file

Notes to SEFA

Title: Loan/loan guarantee outstanding balances Accounting Policies: 1.The Schedule is prepared from Municipalitys accounting records and presents only a selected portion of the operations of the Municipality, it is not intended to, and does not present, the financial position or changes in net position of the Municipality.2.The Municipality in accordance with the terms and conditions of the grants, records the financial transactions which are consistent with accounting principles generally accepted in the United States of America.3.Expenditures are recognized in the accounting period in which the liability is incurred, if measurable or when actually paid, whichever occurs first.4.Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, except for the programs Section 8 Housing Choice Vouchers (HCV) and Disaster Grants- Public Assistance. Expenditures for HCV Program are equal to the ACC subsidy for the PHA fiscal period. Expenditures for Disaster Grants- Public Assistance are recognized in the period when; (a) FEMA has approved the PW and (b) eligible expenditures are incurred. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. COMMUNITY DISASTER LOANS (97.030) - Balances outstanding at the end of the audit period were 674873.
Title: NOTE 7 COMMUNITY DISASTER LOANS Accounting Policies: 1.The Schedule is prepared from Municipalitys accounting records and presents only a selected portion of the operations of the Municipality, it is not intended to, and does not present, the financial position or changes in net position of the Municipality.2.The Municipality in accordance with the terms and conditions of the grants, records the financial transactions which are consistent with accounting principles generally accepted in the United States of America.3.Expenditures are recognized in the accounting period in which the liability is incurred, if measurable or when actually paid, whichever occurs first.4.Expenditures reported on the Schedule are reported on the modified accrual basis of accounting, except for the programs Section 8 Housing Choice Vouchers (HCV) and Disaster Grants- Public Assistance. Expenditures for HCV Program are equal to the ACC subsidy for the PHA fiscal period. Expenditures for Disaster Grants- Public Assistance are recognized in the period when; (a) FEMA has approved the PW and (b) eligible expenditures are incurred. De Minimis Rate Used: N Rate Explanation: The auditee did not use the de minimis cost rate. In fiscal year 2017-2018, FEMA issued to the Municipality a five-year promissory note for a maximum amount of $1,349,746 for financial assistance under the Community Disaster Loans (CDL) program, bearing interest at 2.75% annually. The program helps local governments to overcome a loss in revenues as a result of a natural disaster, in order to perform its governmental operational functions. Neither principal nor interest payments are required until maturity. The terms of the loan provide that if the Municipality has not recovered sufficiently to meet its operating budget after three full fiscal years, repayment of all or part of the loan may be cancelled. The principal balance at June 30, 2022, was $674,873. Federal statutes and regulations do not impose continuing compliance requirements on the outstanding balance of the loan, other than the repayment of the loan. Therefore, the outstanding balance of the loan is not included in the face of the Schedule. Program transactions during fiscal year 2021-2022 year are as follows: DescriptionAmountOutstanding note balance, at beginning of year$ 674,873Note advances received during fiscal year 2021-2022 674,873Note cancellation during fiscal year 2021-2022 (674,873)Total outstanding note balance, June 30, 2022$ 674,873Current year loan expenditures$ 420,344On September 30, 2021, the United States Congress passed The Extending Government Funding and Delivering Emergency Assistance Act (P.L. 117-43). According to P.L. 117-43, Section 1601. (a), Repayments of the remaining balances of all loans, as of September 30, 2021, by the Federal Emergency Management Agency under section 417 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5184) are hereby cancelled. Therefore, the outstanding balance ($674,873) as of September 30, 2021, of the referenced CDL was cancelled pursuant to P.L. 117-43.

Finding Details

Finding 2022-004
FINDING 2022-004 FEDERAL PROGRAM COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) (CFDA NO. 14.228) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PASS THROUGH STATE HOUSING DEPARTMENT CATEGORY INTERNAL CONTROL/COMPLIANCE NONCOMPLIANCE EQUIPMENT AND REAL PROPERTY MANAGEMENT TOPIC SENTENCE Lack of controls over property and equipment acquired with Federal Funds. CONDITIONS The Municipality and the Community Development Block Grant Program (CDBG) are not maintaining adequate internal controls over property and equipment items acquired with Federal Funds. In testing property and equipment, we noted the following: ? The property records do not indicate, among other things the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, use and condition of the property, and any ultimate disposition data including the date of disposal. ? The CDBG Program did not count with a general ledger or a property subsidiary ledger where all property and equipment transactions are registered. For such reason, we could not ascertain that all capital outlays and property dispositions were recorded. In addition, related annual depreciation is not being calculated and accounted for. CRITERIA 24 CFR 85.32(d) establishes that procedures for managing equipment will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft shall be investigated. MUNICIPALITY OF CULEBRA, PUERTO RICO 24 CFR 85.20 (b)(3), establishes that effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgratees must adequately safeguard all such property and must assure that it is used solely for authorized purposes. CAUSE The CDBG Program has inadequate internal control procedures that guarantee adequate records, registering and safeguarding of property and equipment. EFFECT Due to the lack of internal controls and property accounting records, we could not validate the accuracy and completeness of the annual physical inventory report and any other related report against an accounting general ledger accounts. The Municipality is exposed to the risk of possible unauthorized use and disposition of equipment due to the lack of internal controls and property records. In addition, sanctions could be imposed by the Lead Agency State CDBG Program or the federal awarding agency. RECOMMENDATION The Property Division must require each office, department and federal program that acquires property and equipment to submit a report including a full description of the assets, location, use, responsible person, cost, and any other pertinent data. In addition, the CDBG Program and the Accounting Department should establish a property control account and a subsidiary ledger to provide for the reconciliation of property. QUESTIONED COST: None
Finding 2022-004
FINDING 2022-004 FEDERAL PROGRAM COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) (CFDA NO. 14.228) DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT PASS THROUGH STATE HOUSING DEPARTMENT CATEGORY INTERNAL CONTROL/COMPLIANCE NONCOMPLIANCE EQUIPMENT AND REAL PROPERTY MANAGEMENT TOPIC SENTENCE Lack of controls over property and equipment acquired with Federal Funds. CONDITIONS The Municipality and the Community Development Block Grant Program (CDBG) are not maintaining adequate internal controls over property and equipment items acquired with Federal Funds. In testing property and equipment, we noted the following: ? The property records do not indicate, among other things the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, use and condition of the property, and any ultimate disposition data including the date of disposal. ? The CDBG Program did not count with a general ledger or a property subsidiary ledger where all property and equipment transactions are registered. For such reason, we could not ascertain that all capital outlays and property dispositions were recorded. In addition, related annual depreciation is not being calculated and accounted for. CRITERIA 24 CFR 85.32(d) establishes that procedures for managing equipment will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft shall be investigated. MUNICIPALITY OF CULEBRA, PUERTO RICO 24 CFR 85.20 (b)(3), establishes that effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgratees must adequately safeguard all such property and must assure that it is used solely for authorized purposes. CAUSE The CDBG Program has inadequate internal control procedures that guarantee adequate records, registering and safeguarding of property and equipment. EFFECT Due to the lack of internal controls and property accounting records, we could not validate the accuracy and completeness of the annual physical inventory report and any other related report against an accounting general ledger accounts. The Municipality is exposed to the risk of possible unauthorized use and disposition of equipment due to the lack of internal controls and property records. In addition, sanctions could be imposed by the Lead Agency State CDBG Program or the federal awarding agency. RECOMMENDATION The Property Division must require each office, department and federal program that acquires property and equipment to submit a report including a full description of the assets, location, use, responsible person, cost, and any other pertinent data. In addition, the CDBG Program and the Accounting Department should establish a property control account and a subsidiary ledger to provide for the reconciliation of property. QUESTIONED COST: None