Finding Text
FINDING REFERENCE NUMBER 2023-057 (See Finding Reference Number 2023-026)
FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO
U.S. DEPARTMENT OF AGRICULTURE
AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023)
211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025)
ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM)
COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – EBT RECONCILIATION
TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS
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:
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Benefits authorized = benefits posted.
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Benefits accessed by recipients (net EBT account debits/credits) = benefit amount transactions approved by the EBT services provider.
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Net EBT account debits/credits = amount paid to merchants and financial institutions, “+/-” authorized adjustments.
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Amount paid to merchants and financial institutions = funds requested by the EBT services provider, “+/-” authorized adjustments.
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, 2023, we identified the following deficiencies:
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ADSEF was unable to provide updated written reconciliation procedures or manuals.
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No evidence was provided to show that EBT benefits were reconciled or matched to Federal drawdowns (SF-425 or PMS).
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When asked about the assessment of SOC reports or vendor reviews, staff were unaware that such reports were required. The report was requested to EBT processor when we asked for it.
Additionally, written procedure manuals were requested; however, management indicated that no such manuals were in place at the time. A procedure manual was subsequently created for January 2025, but it lacks clarity regarding specific employee roles and responsibilities. After multiple interviews, we were able to identify the area in charge of the reconciliation process, they provided with a manual from 2012, which was not updated with the data currently used.
QUESTIONED COSTS No questioned costs identified.
PERSPECTIVE INFORMATION This deficiency is a systemic problem, the evidence provided to support the EBT reconciliation consisted solely of the receipt of the FIN-052 report and the manual entry of its data into Excel spreadsheets, and the SOC report from EBT provider. After multiple attempts to gain a comprehensive understanding of the reconciliation process, we were able to identify the people involved in the reconciliation process and the documents used. They finally provided with a written manual procedure, but was from 2012, which does not comply with Uniform Guidance requirements and documentation actually used.
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 No reported as prior audit finding.
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.