Municipality of Lajas

SECTION III – FEDERAL AWARDS FINDING AND QUESTIONED COSTS FINDING NUMBER 2024-002 REQUIREMENT REPORTING TYPE OF FINDING MATERIAL WEAKNESS CONDITION The Single Audit Report for the fiscal year ended June 30, 2024, of the Municipality with due date of March 31, 2025 was submitted after the 9 months deadline. The Single Audit related to such a period was completed after 9-month deadline. CRITERIA Public Law 104-156, known as the Single Audit Act, section 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non-Federal Organization’s financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor’s reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor’s report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month timeframe would place an undue burden on the non-Federal Organization. EFFECT Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. QUESTIONED COST None RECOMMENDATION The municipality shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report to the Federal Clearinghouse before the 9-month deadline. Finding represents a significant problem. The municipality will accelerate the process to contract auditors to carry out the audit and submit the report on time. PRIOR YEAR FINDING This finding is a prior year finding identified as 2023-002. VIEWS OF RESPONSIBLE The Municipality has taken all necessary administrative measures toOFFICIALS AND PLANNED ensure compliance with the requirement to complete and submit the CORRECTIVE ACTION Single Audit Act. The Municipality has established a formal audit compliance calendar with interim milestones covering audit procurement/engagement, planning, fieldwork, issuance of draft reports, management review, and submission to the Federal Audit Clearinghouse. The Municipality has accelerated the procurement process to contract auditors earlier in the fiscal year and will include clear deliverables, target dates, and communication expectations in the audit engagement agreement. The Finance Department has prepared and maintains a standardized prepared-by-client (PBC) package to ensure that all required schedules and supporting documentation (including financial statement support, trial balances, and federal awards documentation such as the SEFA) are provided to auditors in a timely manner. Periodic status meetings have been held with responsible personnel and external auditors to monitor progress, promptly identify delays, and implement corrective measures to ensure the reporting package is submitted to the Federal Audit Clearinghouse before the 9-month deadline. Responsible Officials Finance Director / Federal Programs Coordinator/ Procurement Officer Estimated Completion Date June 30, 2026

FINDING NUMBER 2023-002 REQUIREMENT REPORTING TYPE OF FINDING MATERIAL WEAKNESS CONDITION The Single Audit Report for the fiscal year ended June 30, 2023, of the Municipality with due date of March 31, 2024 was submitted after the 11 months deadline. The Single Audit related to such a period was completed after 11-month deadline. CRITERIA Public Law 104-156, known as the Single Audit Act, section 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non-Federal Organization’s financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor’s reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor’s report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month timeframe would place an undue burden on the non-Federal Organization. CAUSE The municipality did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the municipality in the due date established by the Single Audit Act. EFFECT Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. QUESTIONED COST None RECOMMENDATION The municipality shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report to the Federal Clearinghouse before the 9-month deadline. Finding represents a significant problem. The municipality will accelerate the SECTION III – FEDERAL AWARDS FINDING AND QUESTIONED COSTS – (CONTINUED) FINDING NUMBER 2023-002 (CONTINUED) process to contract auditors to carry out the audit and submit the report on time. PRIOR YEAR FINDING This finding is a prior year finding identified as 2022-002. VIEWS OF RESPONSIBLE The Municipality will take all necessary administrative measures to OFFICIALS AND PLANNED promptly address and correct the situation. I will instruct the Finance CORRECTIVE ACTION Department to submit all required financial information promptly to our financial consultant and external auditor to meet the deadline for submitting the Single Audit Report for the year 2024 Responsible Officials Ramona Pacheco Machado Estimated Completion Date April 30, 2025

REQUIREMENT: ACCOUNTING RECORDS AND REPORTING SYSTEM; TYPE OF FINDING: SIGNIFICANT DEFICIENCY; CONDITION: The Single Audit Report for the fiscal year ended June 30, 2022 of the Municipality with due date of March 31, 2023 was submitted after the 12 months deadline. The Single Audit related to such a period was completed after 12 month deadline. CRITERIA: OMB Uniform Guidance subpart B 200(a) establishes that Non-Fedeal entities that expend $500,000 ($750,000 for fiscal year ending after December 25, 2015) or more in year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part. OMB Uniform Guidance sub part B. 220 establishes that except for the provision for biennial audit provided in paragraphs (a) and (b) of this section audits required by this part shall be performed annually. Public Law 104-156, known as the Single Audit Act, section 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non-Federal Organization’s financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor’s reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor’s report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month timeframe would place an undue burden on the non-Federal Organization.; CAUSE: The municipality did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the municipality in the due date established by the Single Audit Act.; EFFECT: Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements; RECOMMENDATION: We recommend management to continue strengthening the internal controls over the recordkeeping of the accounting transactions in the system. Also, technical training must be provided to the accounting staff to continue improving the recording of the financial transaction in the accounting system; PRIOR YEAR FINDING: This finding is a prior year finding indentified as 2021-001; VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE ACTION: TThe Municipality will take all necessary administrative measures to promptly address and correct the situation. I will instruct the Finance Department to submit all required financial information promptly to our financial consultant and external auditors to meet the deadline for submitting the Single Audit Report for the year 2024.; RESPONSIBLE OFFICIALS: Ramona Pacheco Machado - Finance Director.

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