Finding Text
ALN 14.218-CDBG-DR/Entitlement Grant
Category:
Compliance/internal control significant deficiency
Compliance requirement:
Real property and equipment
Criteria:
BGCPR Finance Policies to administer CDBG-DR funds, established by the Puerto Rico Department of Housing in
Chapter 15, Section 2, require that sub-recipients must capitalize property and equipment with a cost of $500 or
more.
Condition:
The capitalization threshold used for property and equipment acquired with CDBG funds is not in compliance with
Finance Policies to administer CDBG-DR funds, as established by the Puerto Rico Department of Housing.
Cause:
The capitalization policy followed by BGCPR, with the exception of CDBG funds, is to capitalize property and
equipment with a cost of $5,000 or more.
Effect or potential effect:
Property and equipment acquired with CDBG-DR funds is being expensed instead of capitalizedContext:
In two instances reviewed, property and equipment acquired with CDBG-DR funds were not recorded in the
equipment detail, resulting in the assets being expensed instead of capitalized as required by the Finance Policies
to administer CDBG-DR funds.
Prior year finding:
During the year ended June 30, 2023, this condition was associated with finding 2023-002.
Recommendation:
We recommend that management updates its capitalization policy to include this specific requirement for property
and equipment acquired with CDBG-DR funds.
Views of responsible officials:
BGCPR acknowledges a significant oversight in the financial management of assets acquired with Community
Development Block Grant – Disaster Recovery (CDBG-DR) funds. Specifically, it has been identified that certain
property and equipment purchased using these funds were not properly recorded in the equipment detail ledger. As
a result of this omission, these assets were incorrectly treated as expenses in the financial records, rather than being
capitalized in accordance with BGCPR’s established financial policies and the federal guidelines governing the
administration of CDBG-DR funds. This misclassification not only affects the accuracy of BGCPR’s financial
statements but also represents a deviation from required asset management practices, which mandate the
capitalization and tracking of equipment to ensure accountability, proper depreciation, and compliance with grant
conditions
As a corrective measure, BGCPR will take the following actions and will anticipate completing on June 30, 2025:
a. BGCPR will implement a corrective action plan to strengthen accounting processes related to account
registration and equipment capitalization related to the CDBG-DR.
b. Procurement procedures for requesting, approving, and accepting goods and services, Include agency
consultation
c. Ensure accuracy in financial records that Maintain compliance with applicable regulations.
d. Account for taxes and support service costs (e.g., installation, delivery).
e. Ensure all purchases align with federal regulations.