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2023-002 Financial Management and Internal Controls (Continued) Compliance Requirement Allowable Costs/Cost Principles Category Significant Deficiency in Internal Control and Noncompliance Federal Agency U.S. Department of the Treasury Pass-Through Entity Puerto Rico Fiscal Agency and Financial Advisory Authority ALN 21.027 Federal Program COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Federal Agency U.S. Small Business Administration ALN 59.075 Federal Program COVID-19 - Shuttered Venue Operators Program Federal Agency U.S. Department of Homeland Security through the Federal Emergency Management Agency Pass-Through Entity Central Office for Recovery, Reconstruction and Resiliency ALN 97.036 Federal Program Disaster Grants - Public Assistance (Presidentially Declared Disasters) Cause In 2022, the Corporation became subject to Single Audit compliance requirements for the first time. However, it underestimated the complexity of navigating the intricate laws, regulations, and financial management requirements associated with federal funds. The lack of prior experience in implementing adequate internal controls, coupled with the absence of established written policies, contributed to challenges in ensuring compliance with federal cost principles and financial reporting obligations. Effect Failure to comply with 2 CFR sections 200.302 and 200.305 could result in the Corporation incurring unallowable costs. Consequently, the Corporation may face temporary withholding of cash payments until the deficiency is corrected. Additionally, continued noncompliance could lead to further sanctions, including the suspension or termination of federal funding for the program, ultimately impacting the Corporation’s ability to fulfill its obligations and sustain operations. Questioned Costs None. Repeated Item Refer to Item No. 2022-002 in the Summary Schedule of Prior Audit Findings. Recommendation The Corporation should draft written policies under subpart E, Cost Principles of 2 CFR Part 200. In addition, the staff involved with federal funds should take courses on federal awards. Views of responsible officials Refer to Unaudited Corrective Action Plan.