FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005)
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 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023)
2021G990229 (TANF – COVID-19) (Federal Award Year: 2021)
2022G996117; 2023996117 (Federal Award Years: 2022 through 2023)
ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM)
COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES
TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS
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.”
In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.”
STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies:
i.
An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage.
ii.
An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000.
iii.
An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000.
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 costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions 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. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs.
STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions.
POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely.
IDENTIFICATION OF
REPEAT FINDING No reported as prior audit finding.
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.