Audit 407331

REQUIREMENT REPORTING TYPE OF FINDING MATERIAL WEAKNESS FEDERAL PROGRAM 14.871 – SECTION 8 HOUSING CHOICE VOUCHERS CONDITION The Municipality did not submit or file the required FASS-PH financial report for the fiscal year ended June 30, 2023. At the completion of the audit, the report remained outstanding and had not been uploaded to the FASS-PH system, resulting in noncompliance with HUD’s reporting requirements. CRITERIA Entities administering the Section 8 Housing Choice Voucher Program (AL 14.871) must submit annual financial information to the U.S. Department of Housing and Urban Development (HUD) through the Financial Assessment Subsystem – Public Housing (FASS-PH). This requirement is established under:  2 CFR 200.327–200.328 (Uniform Guidance reporting requirements)  HUD Uniform Financial Reporting Standards (UFRS)  HUD Public Housing Assessment System (PHAS) – FASS-PH requirements  Applicable HUD notices and guidance for FY 2023 These regulations require timely submission of complete and accurate financial data to allow HUD to evaluate the financial condition and compliance performance of the Municipality’s Housing Choice Voucher Program. CAUSE The failure to submit the FASS-PH report resulted from insufficient internal controls over the financial reporting process. Contributing factors included:  Lack of a formal monitoring process to track HUD reporting deadlines  Inadequate supervisory review of required submissions  Limited staff knowledge of HUD’s UFRS and FASS-PH reporting procedures EFFECT Non-compliance may result in HUD administrative actions, negative impact on the municipality’s financial assessment score, delays or interruptions in federal funding and potential for increased oversight or monitoring by HUD. QUESTIONED COST None RECOMMENDATION The municipality should establish and document formal internal controls to ensure timely preparation and submission of the FASS-PH report. Assign responsibility to specific personnel and implement a compliance calendar for HUD reporting deadlines. Provide training to financial staff on HUD reporting requirements, UFRS, and the FASS-PH system. Implement a supervisory review process to verify completeness and accuracy before submission. Submit the outstanding FASS-PH report as soon as possible, if HUD still permits late filing.

REQUIREMENT REPORTING TYPE OF FINDING MATERIAL WEAKNESS FEDERAL PROGRAM 21.027 - Coronavirus State and Local Fiscal Recovery Fund CONDITION For our tests, we requested copies of the Monthly Reports of Municipal Strengthening Fund Program (CSLFRF Funds) for the fiscal year ended on June 30, 2023. After our examination of the monthly reports, we noted that there are significant discrepancies between the dates submitted versus the required submission date. The differences are the following: CRITERIA Municipalities that receive and manage funds related to COVID-19 relief programs are required to submit financial and compliance reports to the Puerto Rico Financial Advisory and Fiscal Agency (AAFAF) within the dates set by that entity as a requirement for monitoring, transparency, and accountability. According to the guidelines issued by AAFAF for managing COVID-19 funds, quarterly reports must be filed on or before the 15th of the month following the end of the corresponding period. Likewise, entities receiving federal funds are responsible for maintaining adequate internal control systems and complying with all reporting requirements established by the granting entity and its administrators. Also, 2 CFR §200.303 requires federal recipients to establish and maintain effective Internal controls to ensure compliance with federal grant laws, regulations, and conditions. CAUSE The situation seems to be due to weaknesses in internal controls related to monitoring expiration dates, preparing reports on time, and managerial oversight of the process for meeting federal and state reporting requirements. EFFECT The late submission of reports limits AAFAF's ability to timely monitor the use of federal funds and increases the risk of not meeting program conditions, audit findings, and potential flags from state or federal agencies. Plus, it can affect the accuracy and timeliness of the information used for transparency and accountability processes required for COVID-19 recovery funds. QUESTIONED COST None RECOMMENDATION We recommend that the Municipal Administration strengthen internal controls related to the preparation, review, and submission of reports required by AAFAF. Establish a formal compliance schedule that includes all federal and state reporting deadlines. Assign staff responsible for monitoring and following up on the program's reporting requirements. Implement pre-review procedures to ensure that reports are complete and ready to be submitted by the 15th of the month following the end of the period and keep documented evidence of the preparation, review, and submission of each report for audit and monitoring purposes.

REQUIREMENT REPORTING TYPE OF FINDING MATERIAL WEAKNESS CONDITION The Single Audit Report for the fiscal year ended June 30, 2023, of the Municipality with due date of March 31, 2024 was submitted after 9 months deadline. The Single Audit related to such a period was completed after 9 month deadline. CRITERIA Public Law 104-156, known as the Single Audit Act, section 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non-Federal Organization’s financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor’s reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor’s report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9- month timeframe would place an undue burden on the non-Federal Organization. CAUSE The municipality did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the municipality in the due date established by the Single Audit Act. EFFECT Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. QUESTIONED COST None RECOMMENDATION The municipality shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report to the Federal Clearinghouse before the 9-month deadline. Finding represents a significant problem. The municipality will accelerate the process to contract auditors to carry out the audit and submit the report on time.