Finding Text
FINDING REFERENCE NUMBER 2024-047 (See Finding Reference Number 2024-019) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – EBT RECONCILIATION TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with Compliance Supplement and the State Plan, the EBT services provider makes payments to authorized retailers, network, third party providers, and financial institutions on behalf of the Government of Puerto Rico for benefits accessed and distributed to recipients daily. The EBT services provider is reimbursed as authorized by the Popular Bank of Puerto Rico (PBPR). Payments are recorded and compared to the Daily Activity File and Daily Payments Summary File prepared by the EBT services provider for the Department of the Family. EBT system reports provide these and other standardized computer reports as well as ad hoc access to EBT system data to perform the following key reconciliation: 1) Benefits authorized = benefits posted. 2) Benefits accessed by recipients (net EBT account debits/credits) = benefit amount transactions approved by the EBT services provider. 3) Net EBT account debits/credits = amount paid to merchants and financial institutions, “+/-” authorized adjustments. 4) Amount paid to merchants and financial institutions = funds requested by the EBT services provider, “+/-” authorized adjustments. The 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit of compliance with the EBT reconciliation requirements for the fiscal year ended June 30, 2024, we identified the following deficiencies: • ADSEF was unable to provide updated written reconciliation procedures or manuals. They provided a manual from 2012, which was not updated with the data currently used. • No evidence was provided to show that EBT benefits were reconciled or matched to Federal drawdowns (SF-425 or PMS). QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records. STATEMENT OF CAUSE ADSEF deficiencies stem from the absence of formal updated written reconciliation procedures, inadequate internal controls over EBT operations, lack of staff training, and unclear assignment of responsibilities related to reconciliation and oversight. POSSIBLE ASSERTED EFFECT ADSEF lack of updated written reconciliation process increases the risk of undetected errors or irregularities in EBT transactions, potential misstatements in Federal financial reports, and unaccounted variances between Federal funding and benefit disbursements. It also limits the agency’s ability to monitor program performance and meet audit and compliance obligations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-026/2023-057. RECOMMENDATIONS We recommend ADSEF develop and implement updated formal, written reconciliation procedures, clearly outlining roles, responsibilities, and the frequency of reconciliations. Additionally, we advise providing staff with comprehensive training on reconciliation protocols and internal control requirements to ensure consistency and compliance.