Finding Text
FINDING REFERENCE NUMBER 2024-024 (See Finding Reference Number 2024-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4 (Federal Award Years: 10/01/2022 through 09/30/2023); 241PR426S7003/4 (Federal Award Years: 10/01/2023 through 09/30/2024) 2023996117 (Federal Award Years: 10/01/2022 through 09/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we requested evidence of the indirect costs transactions. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect cost’s claims. The TANF program reported three (3) transactions related to indirect costs in the amount of $569,998.55, and for the Nutrition Assistance for Puerto Rico three (3) transactions were reported in the amount of $4,815,418.41. We requested evidence of one (1) transaction for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. ADSEF does not have an internal control process that allows for proper authorization and monitoring of the claims made for indirect costs. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for claiming and documenting indirect costs claims. The process of recording indirect costs is based on an excel spreadsheet, no detail of costs indicating the class object and transactions considered are maintained. POSSIBLE ASSERTED EFFECT Indirect costs calculation may include unallowable costs and not be detected timely. ADSEF cannot provide proper audit evidence of the amounts claimed as indirect costs. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-005/2023-033. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.