Finding No: 2025-002– Failure to Prepare the Schedule of Expenditures of Federal Awards (SEFA) Federal Programs ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds - ARP Act ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) Name of Federal Agency US Department of Treasury (Pass-through from the Puerto Rico Coronavirus Relief Fund Disbursement Oversight Committee) U.S. Department of Homeland Security (Pass-through program from The Central Office of Recovery, Reconstruction and Resiliency) Category Internal Control; Compliance. Compliance Requirement Reporting Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200.510(b) requires the auditee to prepare a Schedule of Expenditures of Federal Awards that includes, at a minimum: • The total federal awards expended for each federal program and CFDA/Assistance Listing number; • The name of the federal agency and pass-through entity, if applicable; • The amount provided to subrecipients, if applicable. Condition The Administration did not prepare the Schedule of Expenditures of Federal Awards (SEFA) for the fiscal year ended June 30, 2025. As a result, the SEFA was not available at the time of the audit and had to be prepared with the assistance of the auditors. Cause Management lacks adequate procedures over the identification, accumulation, and reporting of federal award expenditures necessary to prepare the SEFA. Effect The failure to prepare the SEFA increases the risk that federal expenditures may be incomplete or inaccurate, which could result in noncompliance with Uniform Guidance requirements and improper determination of major programs. Context The Schedule of Expenditures and Federal Awards was not available at the time of the audit and had to be prepared with the assistance of the auditors. Identification of repeat finding None. Questioned costs None. Recommendation We recommend that management establish and maintain effective internal controls and procedures to ensure the SEFA is prepared, reviewed, and completed in accordance with 2 CFR 200.510(b) on a timely basis. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan .
Finding No: 2025-003– Internal control deficiencies over accounting and identification of federal funds received from the Federal Emergency Management Agency (FEMA) that should be included on SEFA Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) Name of Federal Agency U.S. Department of Homeland Security (Pass-through program from The Central Office of Recovery, Reconstruction and Resiliency) Category Internal Control; Compliance. Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. 2. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. 3. Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. 5. Comparison of expenditures with budget amounts for each Federal award. 6. Written procedures to implement the requirements of § 200.305. 7. Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. Condition During our procedures concerning the Administration’s funds received from FEMA we noticed that the reimbursement funds received from FEMA were not recognized as income during the year ended June 30, 2025. Cause The Administration recognized the reimbursement as an accrual and not as income during the year ended June 30, 2025. They have recognized only the amount that they disbursed during the year at their discretion. This accounting is correct when the funds received are capital advances. Effect This can result in amounts not to be included in the Schedule of Expenditures and Federal Awards in the correct period and understate SEFA. Also, the Administration could be subject to penalties or sanctions from the Federal Grantor. Context The Administration identified $6,543 as federal expenditures from prior years capital advances of FEMA awards but did not identify as expended the amount of $11,063 from advances. In addition, the Administration received reimbursements of $1,413,451 in the fiscal year, however management did not identify this amount as federal expenditures until the audit procedures was performed. Identification of repeat finding None. Questioned costs None, as adjustments were made during the audit to correct the misstatement. Recommendation We recommend validating, with the staff in charge of Engineering, the type of funds received from FEMA, if they are reimbursements or capital advances. When the funds received are reimbursements they should be recognized as income in the year received. If the funds are capital advances they should be recognized as unearned revenue and as income in the year in which they are disbursed. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan.