Audit 389579

FEDERAL PROGRAM (ALN – 97.036) DISASTER GRANTS – PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS) PASS-THROUGH: PUERTO RICO CENTRAL OFFICE OF RECOVERY, RECONSTRUCTION, AND RESILIENCY (COR3) FEDERAL EMERGENCY MANAGEMENT AGENCY U.S. DEPARTMENT OF HOMELAND SECURITY (DHS) AWARD NUMBERS PA-02-PR-4339-PW-09011(9604) (FISCAL YEAR 2021) COMPLIANCE REQUIREMENT SPECIAL TESTS AND PROVISIONS – PROJECT ACCOUNTING TYPE OF FINDING NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY CRITERIA The 44 CFR Section 206.205 “Payment of Claims” state for large projects, the recipient is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the recipient. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the FEMA-State Agreement, all grant conditions were met, and that payments for that project were made in accordance with the applicable payment provisions. The Puerto Rico Central Office of Recovery, Reconstruction, and Resiliency (COR3), as a Pass-Through Entity, requires Subrecipients to complete and submit a Quarterly Progress Report for each Project Worksheet (“PW”) through the Disaster Recovery Solution (“DRS”) Platform. This information is then submitted to the Federal Emergency Management Agency (FEMA) for ongoing and completed projects that are accounted for in accordance with the required certification. In addition, 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION For purposes of the Special Test and Provision – Project Accounting testing for this program, the Institution maintains only one (1) large project identified under PW 9011. For this project, a population of four (4) quarterly reports was established, of which two (2) were selected for testing purposes for the fiscal year 2024–2025 audit. As a review of the 3rd Quarterly Progress Report for the period from April through June 2025, it was noted that the Institution reported $30,243.64 in expenditures for the period. However, upon comparison with the expenditures recorded in the Institution’s financial system, it was determined that the actual expenditures for the quarter totaled $98,481.96, resulting in a difference of $68,238.32 between the reported amount and the system records. In addition, for the requirement mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS NonePERSPECTIVE INFORMATION After we received the Quarterly Progress Report, we proceeded to make a comparison between this report and the Expenditures Report issued by the Institution accounting system for each of the quarters selected, in order to validate the data accuracy. We noted that the Institution did not detect this discrepancy in the report before the submission of the required Quarterly Progress Report for the project to the pass-through entity due to the lack of adequate revision procedure. STATEMENT OF CAUSE The Institution did not have an effective internal control to ensure that the required financial information to be included as part of the preparation and submission of the Quarterly Progress Report is accurate according to their accounting system. POSSIBLE ASSERTED EFFECT The Institution did not have an effective internal control to ensure that the required financial information to be included as part of the preparation and submission of the Quarterly Progress Report is accurate according to their accounting system. IDENTIFICATION AS A REPEAT FINDING Not previously reported. RECOMMENDATION We recommend the Institution maintain an adequate Quarterly Progress Report validation control before its submission to Federal Agency. This will avoid the incorrect inclusion of erroneous data in this Federal report to the Pass-Through Entity.