Finding Text
FINDING REFERENCE NUMBER 2024-004 FEDERAL PROGRAM (ALN – 97.036) DISASTER GRANTS-PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS) PASS-THROUGH: PUERTO RICO CENTRAL OFFICE FOR RECOVERY, RECONSTRUCTION AND RESILIENCY (COR3) U.S. DEPARTMENT OF HOMELAND SECURITY AWARD NUMBER PA-02-PR-4339-PW-07254(0) (FY 2024) COMPLIANCE REQUIREMENT SPECIAL TEST AND PROVISIONS – PROJECT ACCOUNTING TYPE OF FINDING NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY CRITERIA The 44 CFR Section 206.205 “Payment of Claims” state for large projects, the recipient is required to make an accounting to FEMA of eligible costs. Similarly, the subrecipient must make an accounting to the recipient. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the FEMA-State Agreement, all grant conditions were met, and that payments for that project were made in accordance with the applicable payment provisions. For Small Projects the Subrecipient must certify that they completed the approved (State of Work) SOW, and the Recipient must certify that they made all payments in accordance with the FEMA-State/Territory/Tribe agreement. This is typically completed on a Small Project Completion Certification. Then, in addition, the Puerto Rico Central Office of Recovery, Reconstruction, and Resiliency (COR3), as a pass-through entity, requires Subrecipients to complete and submit a Quarterly Progress Report for each Project Worksheet (“PW”) through the Disaster Recovery Solution (“DRS”) Platform. This information is then submitted to the Federal Emergency Management Agency (FEMA) for ongoing and completed projects that are accounted for in accordance with the required certification. STATEMENT OF CONDITION For the testing the Special Test and Provision – Project Accounting for this program, we selected a sample of three (3) large projects from a population of twenty (20) large projects for the audit fiscal year 2023-2024. We requested the 3rd Quarterly Progress Report for the period from April – June 2024 and that was submitted for each of the sample selected. We noted for project worksheet number 7254 that the amount of $289,600 reported as expenditures incurred up to the quarter closing date had a difference of $28,960 over the amount of $260,640 reported as expenditures for this period in the Puerto Rico Integrated Financial Accounting System (PRIFAS). PRIFAS is the central financial management system used by the Commonwealth of Puerto Rico for budgeting, accounting, and managing funds, integrating with other systems like human resources (RHUM) to track expenses, payroll, and financial reporting for various government agencies, though some larger entities (component units) have separate systems, with PRIFAS acting as the backbone for overall fiscal management and cash flow reporting through the Puerto Rico Treasury Department. QUESTIONED COSTS None PERSPECTIVE INFORMATION After we received the Quarterly Progress Report we proceeded to make a comparison between this report and the Expenditures Report issued by the Puerto Rico Integrated Financial Accounting System (PRIFAS) of the Commonwealth of Puerto Rico for each of the large projects selected, in order to validate the data accuracy. We noted that the Department did not detect this discrepancy in these reports before the submission of the required Quarterly Progress Report for the project. STATEMENT OF CAUSE The Department did not have an effective internal control to ensure that the required financial information to be included as part of the preparation and submission of the Quarterly Progress Report is accurate according to the Puerto Rico Integrated Financial Accounting System (PRIFAS). POSSIBLE ASSERTED EFFECT The effect of this finding is that the pass-through entity COR3 received an incorrect amount of expenditure incurred for a large project. Also, the Federal agency FEMA received this incorrect and overstated amount of expenditure possibly affecting the continuance and new approvals of Federal funds for this program. IDENTIFICATION OF REPEAT FINDING This is not a repeat finding. RECOMMENDATIONS We recommend the Department maintain an adequate Quarterly Progress Report validation control before its submission to Federal Agency. This will avoid the incorrect inclusion of erroneous data in this Federal report. VIEWS OF RESPONSIBLE OFFICIALS We will working to establish an effective flow of communication between financial matters, including the budgetary area, and the programmatic area of infrastructure projects. This action will validate the information before submitting it to COR3. IMPLEMENTATION DATE March 31, 2026 RESPONSIBLE PERSON Budget Manager, Finance Director and Program Manager