Finding Text
Finding No. 2024-001 – NONCOMPLIANCE WITH US GAAP – VARIABLE INTEREST ENTITIES (VIE)
Name of Federal Agency
U.S. Department of Housing and Urban Development Pass-through the Puerto Rico Housing Finance
Authority
Federal Program
Community Development Block Grant - Disaster Recovery
Assistance Listing Number
14.218
Category
Internal Control Over Financial Statements
Compliance Requirement
None
Criteria
Per 2 CFR §200.302(b)(2), non-Federal entities must provide accurate, current, and complete disclosure of
financial results in accordance with the terms and conditions of the Federal award. Additionally, under U.S.
GAAP, Accounting Standards Codification (ASC) 810 – Consolidation requires that entities evaluate
whether they hold a variable interest in another entity and, if so, determine whether that entity qualifies as a
variable interest entity (VIE) and whether it should be consolidated. Failure to consolidate required VIEs
results in a financial statement presentation that is not in conformity with U.S. GAAP.
Condition
During our audit, we noted that the Organization did not perform the required assessment under ASC 810
to determine whether two entities in which it holds variable interests, the Gladys Project and Rosario
Projects, should be consolidated. As a result, the financial statements do not include the financial position
and results of operations of these potentially required variable interest entities.
Cause
The Organization has not implemented adequate internal control procedures to ensure compliance with the
accounting requirements for the identification and consolidation of VIEs as per ASC 810.
Effect
The failure to assess and potentially consolidate these VIEs represents a departure from U.S. GAAP and
resulted in a modified (qualified) audit opinion. This may impair the users’ ability to fully understand the
financial condition and results of operations of the Organization and may result in incomplete or inaccurate
financial reporting to stakeholders, including federal agencies.Questioned Cost
None
Recommendation
We recommend that the Organization establish formal procedures to identify and evaluate variable interest
entities in accordance with ASC 810. Management should also obtain specialized training on consolidation
principles and seek technical accounting support as needed to ensure compliance with U.S. GAAP and
federal reporting requirements.
Views of Responsible Officials
The management of the Institution agrees with this finding.
Responsible Person
Ms. Ceciliana Cabrer
President