Audit 384837

2024-004 Type of finding: Federal Award Situation: Significant deficiency; compliance with federal regulations. Federal Program: All Programs Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): 2023-002, 2022-002 Questioned Costs: None Condition: The Municipality could not provide, on a timely basis, the information needed to complete the preparation of their financial statements, therefore the financial statements were available to be audited after the due date established by the federal government. The Single Audit reporting package, as defined and required in 2 CRF 200.512 for fiscal year ended June 30, 2024, was not submitted timely. Context: The Municipality is required by law to design and implement procedures that support the preparation of its financial statements. The Municipality could not provide, on a timely basis, the information needed to complete the preparation of their financial statements, therefore the financial statements were available to be audited after the due date established by the federal government. Criteria: As per 2 CRF 200.12, the audit, data collection form, and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the audit period. 2 CRF 200.508 states that it is the auditee's responsibility to to (1) prepare financial statements, including the schedule of expenditures of federal awards in accordance with 2 CFR 200.510, (2) promptly follow up and take corrective action on audit findings, including preparing a summary schedule of prior audit findings and a corrective plan, and (3) provide the auditor access to personnel, accounts, books, records, supporting documentation, and any other information needed for the auditor to perform the audit required by this part, among other things. Municipal Code (Law 107, August 2020, as amended) , Chapter 2, Article 2.007 states that the Finance Director will among other things, maintain and guard all books, files and documents related to the accounting and financial activity of the Municipality; take appropriate measures to implement and recommend internal controls procedures to protect and account for Municipal property and funds; and supervise, among other things, the preparation of financial reports. Chapter 8, Article 2.095 states that the Municipality must ascertain that their accounting system complies with the following: (1) Provide complete information on the results of municipal operations; (2) provide the appropriate financial information necessary for an efficient municipal administration (3) has effective control and accounting of all funds, property, and assets belonging to the municipality; and (4) produce reliable reports and financial statements that serve as the basis for the preparation and justification of the budgetary needs of the municipality. Cause: The Municipality’s accounting system does not provide the necessary information for the compilation of their financial statements. In order to address this situation, the Municipality has engaged a consultant to assist with the preparation, analysis, and necessary adjustments to prepare the Municipality’s financial statements. However, this procedure involves the participation of various municipal employees at different levels in the Municipality’s organizational structure which adds time to an already time-consuming task. The financial statements are finally available for audit after being approved by the Municipality. In addition to the situation described above, the Municipality has experienced a backlog in the compilation of the data required for the preparation of their financial statements since the major disaster area declared on September 18, 2022, due to the passage of Hurricane Fiona. Although the federal government granted time flexibilities regarding the submissions of financial statements for the fiscal year ended June 30, 2021, no flexibilities were granted for fiscal year ending June 30, 2022, and beyond. The Municipality issued their June 30, 2023 on June 17, 2025 and submitted their data collection form on August 29, 2025. This situation prevented the timely submission of the current fiscal year Single Audit reporting package. Effect: Because of the situation described above, the financial records needed for the preparation and subsequent audit of the financial statements were not obtained timely. The Municipality did not comply with the report submission requirement since the audit was not submitted within nine months after their fiscal period end date. Auditor’s recommendation: Management should design and implement procedures that support the timely compilation of data and the necessary approvals across management for the preparation of its financial statements. Management should continue to fulfill their auditee responsibilities as stated in 2 CRF 200.508, which among other things, require management to prepare appropriate financial statements and provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit to ensure that subsequent financial reporting packages are submitted timely. View of responsible officials: The Municipality is working diligently to publish its statements on time. In 2025 the Municipality published two audited statements (2022 and 2023) and the 2024 audited statements are expected to be published in January 2026. The 2025 audited financial statements will be published on time. Auditor Comments: The submission dates of the Municipality’s financial statements for the last two years, as published in FAC.gov are as follows: Fiscal Year / Published Date June 30, 2023 / August 29, 2025 June 30, 2022 / October 9, 2024 Audit Status: Unresolved

2024-005 Type of finding: Federal Award. Situation: Significant deficiency; compliance with federal regulations. Federal Program: Coronavirus State and Local Fiscal Recovery Fund (ALN 21.027) Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): None Questioned Costs: None Condition: The Municipality did not provide for our review five (5) monthly reports required to be submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf) for the Coronavirus State Fiscal Recovery Funds (Municipal Strengthening Fund Program). Program regulations state that the report must be submitted monthly. The Municipality did not provide for our review the annual report established by Treasury regarding the Coronavirus Local Fiscal Recovery Fund program. Context: The Municipality submitted for our review seven (7) seven of the twelve (12) monthly reports required to be submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf) for the Coronavirus State Fiscal Recovery Funds - Use of Funds Report. We were unable to evaluate five (5) of the monthly reports. These reports were required to be submitted monthly for all the expenses incurred under the Assistance Program to Municipalities. The Municipality is required to submit to the U.S. Department of Treasury a SLFRF Compliance Report every year. The Municipality did not provide for our review the Compliance Report for the Report Period: Annual March 2024. Criteria: Under the Municipal Strengthening Fund Program, the Municipality must report to the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf) program expenses for the month, 15 days after the end of the month. Under the Coronavirus Local Fiscal Recovery Fund Award Terms and Conditions Agreement with the U.S. Department of Treasury, the Municipality agrees to comply with any reporting obligations established by Treasury as they relate to this award. Also, records shall be maintained by the recipient for a period of five (5) years after all funds have been expended or returned to Treasury, whichever is later. Cause: The Municipality did not have adequate internal controls or monitoring procedures in place to ensure that all required Coronavirus State and Local Fiscal Recovery Fund reports were timely prepared, submitted, and retained for audit and oversight purposes. Effect: The Municipality is not in compliance with its grant awards. As per 2 CFR 200.339 When the Federal agency determines that noncompliance cannot be remedied by imposing specific conditions, the Federal agency may take one or more of the following actions: (a) Temporarily withhold payments until the recipient or subrecipient takes corrective action, (b) Disallow costs for all or part of the activity associated with the noncompliance of the recipient or subrecipient., (c) Suspend or terminate the Federal award in part or in its entirety, among others measures. Auditor’s recommendation: The Municipality should implement internal controls and procedures to ensure that the required reports are completed and submitted in a timely manner, and made available for audit, as per program regulations. View of responsible officials: All monthly reports were delivered on time to AFAAF as established on the guidelines and following the agency’s reporting guidelines and support. The Municipality is full compliance with the Puerto Rico Fiscal Agency and Financial and Financial Advisory Authority. Auditor Comments: The Municipality did not provide for our review five (5) monthly reports required to be submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf) for the Coronavirus State Fiscal Recovery Funds (Municipal Strengthening Fund Program), therefore we were unable to ascertain if these reports were submitted timely to the Puerto Rico Fiscal Agency and Financial Advisory Authority (AFAAF) The Municipality did not provide for our review the Compliance Report for the Report Period: Annual March 2024, therefore we cannot ascertain that this report was submitted timely to the U.S. Department of Treasury. Audit Status: Unresolved

2024-006 Type of finding: Federal Award. Situation: Significant deficiency; compliance with federal regulations. Federal Program: Community Development Block Grant (ALN 14.228) Compliance Requirements: Reporting Prior-Year(s) Audit Finding(s): None Questioned Costs: None Condition: The Municipality did not provide for our review the reports required to be submitted under the Community Development Block Grant program and the Community Development Disaster Recovery Program to the Puerto Rico Department of Housing. Context: The Municipality is required to submit monthly, quarterly and annual reports to the Puerto Rico Department of Housing for projects disbursed with funds from the Community Development Block Grant and Community Development Disaster Recovery Program. None of these reports were submitted to us for our review. Criteria: Community Development Block Grant awards establish that the Municipality is required to submit to the Puerto Rico Department of Housing (PRDOH) the reports of registrations, collections, disbursements of Program Income (Annual and Quarterly) and progress for projects disbursed with the CDBG program. For the Community Development Disaster Recovery Program, the grant agreement establishes that the Subrecipient will be responsible for submitting monthly reports to the (PRDOH) to inform status of tasks, work progress, construction schedule analysis, and financial status by project. Each report must be prepared in compliance with PRDOH’s reporting requirements. Cause: The Municipality did not have adequate internal controls and record-retention procedures to ensure that required Annual, Quarterly and Monthly Reports were properly prepared, retained, and made available for audit and monitoring purposes. Effect: The Municipality is not in compliance with its grant awards. As per 2 CFR 200.339 When the Federal agency determines that noncompliance cannot be remedied by imposing specific conditions, the Federal agency may take one or more of the following actions: (a) Temporarily withhold payments until the recipient or subrecipient takes corrective action, (b) Disallow costs for all or part of the activity associated with the noncompliance of the recipient or subrecipient., (c) Suspend or terminate the Federal award in part or in its entirety, among others measures. Auditor’s recommendation: The Municipality should implement internal controls and procedures to ensure that the required reports are completed and submitted in a timely manner, and made available for audit, as per program regulations. View of responsible officials: The Municipality Administration is currently addressing the control and compliance issue. Starting on January 2026 prior year reports will be submitted. Full compliance expected to start on January 2026 going forward. Audit Status: Unresolved