FINDING REFERENCE NUMBER 2024-026 (See Finding Reference Number 2024-006) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2201PRLIEA (Federal Award Year: 10/1/2021 – 9/30/2023) 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200.302, requires recipient's and subrecipient's financial management system must provide for the following: (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; (4) effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303; and (6) written procedures to implement the requirements of § 200.305. 2 CFR 200.305, Federal Payments, establishes that: (a) payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”; (b) for recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance regarding cash management, we obtained a procedures manual. We found the following deficiencies: 1. The effective date is April 2024. 2. In the section describing the LIHEAP process, the US Department of Agriculture is mentioned instead of the US Department of Health and Human Services. 3. It does not identify the personnel responsible for the processes to establish segregation of duties. 4. In our interviews it was noted that only one person is in charge of all drawdowns, and no proper supervision or review of the documentation is performed. In addition, a detail of the requests related to the program was obtained; however, this request information does not reconcile with the revenue recognized in PRIFAS. The following deficiencies were identified: 1. The document includes amounts identified as LIHEAP, which belongs to another Federal program, the Low-Income Household Water Assistance Program (ALN 93.499), in the amount of $295,354.51. 2. Three (3) deposits were included in the detail that were not recorded in PRIFA in the amount of $491,243.33. 3. Three (3) deposits were included in PRIFA that were not included in the detail in the amount of $502,901.10. From a population of fifty (50) revenue transactions, six (6) transactions were selected to ensure that the correct amounts were requested from the Federal program and that the documents indicated in the manual were included with each petition. The following deficiencies were observed: 1. The documents included do not contain signatures from the personnel who perform each process. 2. The documentation included in the manual does not match the documentation included in the documents submitted with each petition. 3. In two (2) requests, the form DF-155, “Request for Federal Funds” was not included as part of the documentation. 4. A form used, IF-8, does not have a sequence number. The document does not provide for signatures, in addition, it makes reference to the Governmental Development Bank, which closed in 2017. 5. In two (2) requests, no detail of the liquidation of benefits was included, only an Excel document. 6. We were unable to determine whether the drawdown was a reimbursement or an advance. 7. We noted that in one drawdown in the amount of $8,014,770, had a note in the documentation indicating that this request is made and pending of the final certification or closeout of the grant from the federal reporting area. 8. In another drawdown in the amount of $832,397.50, the document identified as DF-155 was completed requesting the amount of $1,515,694.80. Although, in handwriting is a comment indicating that this drawdown is partial in order to comply with Puerto Rico Treasury Department, therefore, only the amount of $1,036,663.43 is requested. This amount is also adjusted by $204,265.93, ending with a balance of $832,397.50. No evidence of the adjustment was included. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. The lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up affects this requirement. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF does not have a procedures manual that clearly establishes a segregation of duties, demonstrating compliance with the required internal control components. No standardized process is in place requiring documentation to be included, reviews and approvals of all requests for federal funds. POSSIBLE ASSERTED EFFECT The program may be requesting funds in excess of cash needs, or a reimbursement for funds not previously expended. The lack of internal controls may result in the program to be on a reimbursement basis. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-007/2023-035. RECOMMENDATIONS We recommend that management establish a written internal controls process that demonstrates compliance with cash management requirements and appropriate segregation of duties, and training to all areas regarding this compliance.