Finding Text
FINDING NO. 2024-002: PROGRAM REPORTS AND ACCOUNTING RECORDS Repeated Finding: Yes Criteria: As more fully described in finding 2024-005, the subrecipient agreement between the Bank and the Puerto Rico Department of Housing (PRDOH), establishes in the Terms and Conditions Part IV. Performance, Monitoring and Reporting, Section B. Reporting, that the Bank as Subrecipient shall submit monthly progress reports to the PRDOH, on the form and with the content to be specified and required by the PRDOH. Also, the CDBG-DR Financial Policy of the PRDOH establishes that the Bank, as subrecipient is responsible for ensuring that separate accounting is maintained for CDBG-DR funds in its internal accounting system and records. Condition: As described in finding 2024-005: For the year ended June 30, 2024, we compared the amount of grants awarded as per the Administrative and Performance Reports submitted to the PRDOH with the amount reported in the Schedule of Expenditures and Federal Awards and noted an unreconciled difference of $25,766,191. In relation to the CDBG-DR Fund, although disbursements are recorded in a separate fund, the Bank does not present, on a monthly basis, the revenues, expenses, assets, and liabilities in the Bank’s general ledger. Instead, the Bank is recording the transactions as revenues, expenses, assets, and liabilities related to the CDBG-DR fund at year end. The CDBG-DR fund activity is monitored in another system that is maintained parallel to the Bank’s general ledger. This additional system is used for the reporting process but is not monitored and reconciled jointly with the Bank’s general ledger. Entity level controls related to monthly approvals, reconciliations, actual versus budget comparisons, and other financial reporting controls are performed in another system that does not make automatic interface with the Bank’s general ledger. We noted the following situations related to accounting records for the year ended June 30, 2024: The trial balance provided by management for audit procedures relating to CDBG-DR funds had not been reconciled with the subsidiary records for grant expenditures, including both direct and indirect costs. The Bank does not maintain accurate subsidiary records for key financial components in relation to previous and current year such as CDBG-DR receivables, payables, and inter-fund balances. The reconciliation of CDBG-DR accounts for the fiscal year ending June 30, 2024, was completed by the Bank’s management a year after closing as part of the audit process. This included the preparation of subsidiary records for the related receivables, payables, and inter-fund balances and the recording into the Bank’s general ledger. Cause: The observations noted in finding 2024-005 appear to be largely due to the effect of the lack of monthly presentation of transactions of CDBG-DR Fund transactions in the general ledger and related reconciliations of general ledger with subsidiaries and related program reports. Also, a lack of programs and data interphase communication between the Bank’s Financial and Federal Programmatic Divisions does not permit the accurate and prompt reconciliation of the CDBG-DR accounting records, reports, and subsidiaries. Effect: Refer to finding 2024-005 for the effect of this observation. This resulted in a material weakness in the internal control related to the CDBG-DR Fund transactions in general ledger and related reconciliations. Recommendation: Refer to finding 2024-005 for the recommendation for the observations associated with this finding.