Audit 396276

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-006 Federal Agency: U.S. Department of Housing and Urban Development Program: Housing Voucher Cluster Section 8 Housing Choice Vouchers (ALN 14.871) Compliance Requirement: Special Tests and Provisions – Selection from the Waiting List (N) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: During our audit procedures over the waiting list and participant selection process, including our review of the PHA’s policies and a sample of participants admitted to the program during fiscal year 2024-2025, as well as a sample of applicants, we identified that one eligible applicant was not properly considered for admission in accordance with the PHA’s selection policies. Criteria: 24 CFR 982.54 (c) states that the PHA must administer the program in accordance with the PHA Administrative Plan. Chapter 3, Section 3.6 of the PHA’s Administrative Plan states that when vouchers become available, VBHA will reassess eligibility of applicants on the official Waiting List. The applicants are required to submit documents. Eligible applicants are selected from the waiting list according by current status preference and then based on date and time of application. Section 3.18 states that after the verification process is completed, VBHA will make a final determination of eligibility. Cause of Condition: The condition appears to have resulted from a breakdown in internal controls related to the administration of the waiting list and applicant selection process. Effect of Condition: An applicant was not provided with the opportunity to be admitted to the program after complying with the required documentation to determine eligibility. Recommendation: We recommend the Program Administrators to strengthen its internal controls in the management of the waiting list in order to comply with the Administration Plan Policies. Questioned Costs: None. Prior Year Findings: No. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings. For the delay in issuance of participant voucher we will issue a voucher for the participant as soon as the next voucher becomes available, in accordance with the program’s budget allocation. The participant has been assigned priority status and will be served immediately once funding permits. Checklists will be implemented and staff retraining will be performed to ensure all documents are included. Monthly monitoring schedules will be established by the compliance officer. Forms will be reviewed by the administrative assistant before submission. To strengthen internal controls, manuals will be updated and training will be provided. Staff will validate income and eligibility documentation prior to approval and mandatory training sessions will be conducted on a quarterly basis. Implementation Date: Fiscal Year 2025-2026. Responsible Person: Héctor L. Rosado Calderón Federal Program’s Director

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-003 Federal Agency: U.S. Department of Homeland Security Pass-through Agency: Central Office of Recovery, Reconstruction and Resiliency of Puerto Rico (COR3) Federal Emergency Management Agency (FEMA) Program: Disaster Grants – Public Assistance (Presidentially Declared Disaster) (ALN 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of four (4) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports did not agree with the accounting and project records. Criteria: 2 CFR 200.302 (a) states that the states’ and other non-Federal entities’ financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Cause of Condition: The Municipality’s accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. Effect of Condition: The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. Recommendation: We recommend the Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission to the pass-through entity. Questioned Costs: None. Prior Year Findings: Yes. This finding is similar to prior-year finding 2024-003 and 2023-003. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings. During the past year, the Corrective Action Plan (PAC) has been implemented and expense reconciliation efforts have been ongoing. Currently, we are in the process of collecting all supporting documentation related to work performed for projects funded by FEMA. It is expected that the reconciliation of expenses will be completed over the next few quarters, and that expense reporting will continue during the quarters in which payments are made. Implementation Date: Fiscal Year 2025-2026. Responsible Person: José A. Torres Otero Program Accountant

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-004 Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: During our audit procedures, we found that the Program quarterly and annual closing reports were not submitted timely, as required by the contract agreement. Criteria: 45 CFR Part 98.67 (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. Also, the contract agreement states in Clause eleven (11) that the Municipality is responsible for the presentation of the trial balance and annual partial closing report fifteen (15) calendar days after the end of the contract. Ninety (90) days after, the Municipality should liquidate all obligations and present to the pass-through entity the final annual closing report (CC-006). Cause of Condition: The Program does not have effective internal controls to ensure that the required documentation and reports are submitted to the pass-through agency in the requested time frame. Effect of Condition: The Program is not in compliance with 45 CFR Part 98.67- Fiscal Requirements (c) (1) (2). Recommendation: Management should take the necessary steps to ensure that the Program submits its financial reports within the time frame required by the state pass-through agency. Questioned Costs: None. Prior Year Findings: Yes. This finding is similar to prior-year finding 2024-004 and 2023-004. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings. The ACUDEN agency has not yet closed the budget year 2024-2025. Therefore, even though the contract has ended, the remaining reimbursement from the agency has not been received. Therefore, the full closing report cannot be completed until this final amount is received. As a corrective measure for finding 2025-005, the Sub Director of Finance will establish an internal control system in which the processes and compliance with the submission of accounting reports for federal programs, including Child Care, will be periodically monitored. Implementation Date: Fiscal Year 2026-2027. Responsible Person: José A. Mathews Maisonet Program Accountant

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-005 Federal Agency: U.S. Department of Health and Human Services Pass-through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Period of Performance (H) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: During our audit procedures over the period of performance requirement, we identified that the Municipality disbursed $45,000 from the Child Care Emergency Ready Program after the approved period of performance had ended. Criteria: 45 CFR section 98.60 (d)(5)(i) states that determination of whether funds have been obligated and liquidated will be based on state or local law. Section (d)(9) states that any funds not obligated during the obligation period specified in paragraph (d) of this section will revert to the Federal government. Any funds not liquidated by the end of the applicable liquidation period specified in paragraph (d) of this section will also revert to the Federal government. Clause thirteen of the contract agreement establishes that a period not exceeding thirty days, following the expiration of the contract term, for the settlement of obligations pending payment. After that date, the payment of obligations with federal funds shall not be authorized. After this period, the Municipality shall be responsible for settling the obligations with its own funds. The Municipality may submit a written request to the Administrator for a waiver to extend this period for an additional sixty days, which may be granted as an exception. Cause of Condition: The Municipality lacked effective internal controls to ensure that the disbursements were limited to the approved period of performance. Monitoring procedures were insufficient to identify and prevent expenditures processed after the period of performance without proper authorization. Effect of Condition: Funds were expended in violation of federal requirements. This noncompliance may result in the Municipality being required to repay the questioned costs to the pass-through entity or federal government. Recommendation: We recommend that the Municipality strengthen internal controls over federal award compliance by implementing procedures to ensure that all expenditures are incurred within the approved period of performance. Additionally, the Municipality should seek guidance from the pass-through entity regarding the disposition of the questioned costs and pursue reimbursement or corrective action as required. Questioned Costs: $45,000 Prior Year Findings: No. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings. A letter was sent to ACUDEN detailing the adverse situations and the steps taken by our municipality to obtain reconsideration. This is because the payment was made without the extension letter, even though we had the authorization to commit the funds. Furthermore, the Emergency Ready funds reports were submitted, and we have not received any finding feedback from the Agency. We are still awaiting a response from the letter submitted. The Sub Director of Finance will establish an internal control system in which the comply with the due dates of agreements and various federal proposals, as well as with reports, payments of funds, and obligations, including Child Care, will be periodically monitored. Implementation Date: Fiscal Year 2026-2027. Responsible Person: José A. Mathews Maisonet Program Accountant