Finding 485649 (2023-005)

Finding No. 2023-005 – Biweekly and quarterly reporting Federal Program ALN 21.027 Coronavirus State and Local Fiscal Recovery Fund - ARP Act ALN 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program Name of Federal Agency U.S. Department of Treasury U.S. Department of Homeland Security Pass-through Entity Puerto Rico Department of Treasury Central Office of Recovery, Reconstruction and Resiliency (COR3) Category Non-compliance / Material weakness in internal controls over compliance Compliance Requirement Reporting Criteria As stated in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (the Uniform Guidance), § 200.303 Internal controls, “the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards.” In addition, the grant agreement establishes in its Exhibit A of the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF, its Spanish acronym) guidelines, Grant Plan, Reporting, the following: “Following Uniform Guidance for all uses of Coronavirus State Fiscal Recovery Funds, recipients under this Program, as with all other eligible disbursements of CSFRF funds, shall remit to AAFAF biweekly reports detailing use of funds for the purpose of complying with federal regulations and reporting to the Office of the Inspector General).” Furthermore, as per FEMA requirements: “All recipients shall develop a plan for the administration of the Hazard Mitigation Grant Program (HMGP) according to the 44 CFR Section 206.437(a). The minimum administrative plan must include Quarterly Progress Report Program (QPR) to the Regional Administrator on any approved and open projects according to the 44 CFR Section206.437(b)(4)(xii).” Condition During our audit procedures regarding the compliance requirement related to reporting, we noted that, during the fiscal year ended June 30, 2023: • For ALN 21.027 - Coronavirus State and Local Fiscal Recovery Fund - ARP Act o The Corporation was not able to provide audit evidence for the submission of four (4) biweekly reports, out of a sample of eight (8) reporting dates. o One (1) monthly report, out of a sample of eight (8) reporting dates, was submitted later than its due date as follows: • For ALN 97.036 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program o The Corporation was required to submit four (4) quarterly reports during the year ended June 30, 2023. The Corporation provided incomplete reports for quarters 3 and 4. The report of quarter 3 does not include the correct amounts already expensed by the Corporation, while the report of quarter 4 was not completed and signed by the preparer. Cause Lack of policies and internal controls properly established and monitored to assure the documenting and timely submission of compliance reports. Effect As a result of this condition, the grantor may issue warnings and/or impose penalties to the Corporation. Also, the grantor was deprived of timely taking any action that it understood to be pertinent in the program. The analysis, evaluations, and decision-making of the grantee could be affected. Questioned cost None. Context For ALN 21.027 - Coronavirus State and Local Fiscal Recovery Fund - ARP Act: • Of a total of eight (8) biweekly reports selected to test, the Corporation was not able to provide evidence of submission for four (4) biweekly reports. • One (1) of the eight (8) biweekly reports selected to test was submitted after its due date. For ALN 97.036 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program, from a sample of four (4) reporting dates: • Two (2) reports (from quarters 3 and 4) were incomplete. • One (1) report (from quarter 3) was inaccurate as to the amount of funds expended by the Corporation. • One (1) report (from quarter 4) was not completed and signed by the preparer. Identification of a repeat finding This is a repeat finding from the immediate previous audit, Finding No. 2022-004. Recommendation We strongly recommend the Corporation to institute policies and procedures that stipulate the specific tasks and the personnel in charge of filing the required reports. Also, the policies and procedures should designate the member of management in charge of monitoring the compliance with the reporting requirements in order to make sure that the Corporation is filing the reports by their respective due dates. It is critically important that timely and accurate reports be produced to ensure that the goals and purposes of the grant have been achieved and accounted for properly. Views of responsible officials and planned corrective actions The Corporation’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Corporation’s response on pages 87 to 92.