MUNICIPALITY OF MARICAO

Finding Reference 2025-006 Federal Agency: U.S. Department of Health and Human Services Federal Program Title and ALN: Child Care and Development Block Grant (CCDF Cluster) (ALN 93.575) Compliance Requirement: Reporting – Financial Reporting (L) (MW) Type of finding: Material Weakness in Internal Control (MW), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we noted that the Program did not maintain an adequate set of accounting records that present the financial position and results of its operations of the program. In addition, required financial reports were not submitted within the established reporting deadlines. CriteriaTitle 2 U.S. Code of Federal Regulations (CFR) 200.328 and 200.329 require subrecipients to submit accurate, complete, and timely performance and financial reports in accordance with the terms and conditions of the Federal award. Additionally, 2 CFR 200.303 requires non-Federal entities to establish and maintain effective internal control over Federal programs to provide reasonable assurance that Federal awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the award. Additionally, the subaward agreement and reporting guidelines issued by the pass-through entity (ACUDEN) also establish specific reporting deadlines and require that reported financial information be supported by the subrecipient’s accounting records. Cause of Condition The program staff faced performance challenges due to a lack of staff which caused the accounting records to be delayed. Effect of Condition As a result of the inadequate maintenance of accounting records and untimely preparation of financial reports, the Municipality failed to submit the required report within the 30 calendar days required by the regulation, which leads to the noncompliance of the reporting requirement. Recommendation We recommend that management strengthen internal controls over financial reporting by: • Ensuring accounting records are maintained current and reconciled on a monthly basis; • Establishing formal written reporting procedures with clear timelines; • Assigning personnel responsible for report preparation and review; and • Implementing supervisory review procedures to verify that reports agree with underlying accounting records prior to submission. Questioned Costs None Prior-Year Finding This is a new finding. View of Responsible Official and Planned Corrective Action Plan The Municipality agrees with the finding and stated that it will implement corrective actions to improve compliance with reporting requirements. Management plans to formalize reporting procedures, assign responsible personnel, and require reconciliations between reported amounts and accounting records prior to submission of reports to ACUDEN, along with enhanced supervisory review. Implementation Date: July 1, 2026 Responsible Person: Mr. Luis A. Velez Rivera, Finance Director

Finding 2021-006: PHA Non-Audited Financial Report Submission to HUD annually no later than 90 days after the end of fiscal year 06-30-2021 - Non-Compliance Criteria: The 24CFR 5.801 Title 24-Housing and Urban Development Part 5 - General HUD Program Requirements Subpart H - Uniform Financial Reporting Standards Sec. 5.801 established that each PHA must provide to HUD, on an annual basis, such financial information as required by HUD. This financial information must be: (1) Prepared in accordance with Generally Accepted Accounting Principles as further defined by HUD in supplementary guidance; (2) Submitted electronically to HUD through the internet, or in such other electronic format designated by HUD, or in such non-electronic format as HUD may allow if the burden or cost of electronic reporting is determined by HUD to be excessive; and (3) Submitted in such form and substance as prescribed by HUD. (c) Annual financial report filing dates. PHA's Financial Report must be submitted to HUD annually, no later than 90 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. Condition: During our audit, we noted that GAAP-based unaudited financial information was submitted after due date. The due date of the annual unaudited submission was August 31, 2021. Effect: The Municipality was in noncompliance with the Financial Reporting submission which could decrease the funds receive or the elimination of funds under Section 8 program. Cause: The Municipality did not submit the Non-Audited Financial Report within the 90 days period provided by Law nor requested an extension of time to submit its unaudited financial information 15 days before the submission due date, by electronically submitting the requests through the FASS-PH Secure System website. Identification of a repeat finding: This is a repeat finding from the immediate previous audit 2020-006. Recommendation: We recommend the Municipality to instruct the HUD Coordinator, in order this situation does not occur in the future. Views of responsible officials and planned corrective actions: The Municipality agrees with this finding and will adhere to the correction action plan attached at the end of this audit report, and states the following: ? The Municipality contracted professional services in order to submit the Non-Audited Financial Report to the Housing and Urban Department (HUD). Questioned Costs: None

Finding 2020-006: PHA Non-Audited Financial Report Submission to HUD annually no later than 90 days after the end of fiscal year 06-30-2020 - Non-Compliance Criteria: The 24CFR 5.801 Title 24-Housing and Urban Development Part 5 - General HUD Program Requirements Subpart H - Uniform Financial Reporting Standards Sec. 5.801 established that each PHA must provide to HUD, on an annual basis, such financial information as required by HUD. This financial information must be: (1) Prepared in accordance with Generally Accepted Accounting Principles as further defined by HUD in supplementary guidance; (2) Submitted electronically to HUD through the internet, or in such other electronic format designated by HUD, or in such non-electronic format as HUD may allow if the burden or cost of electronic reporting is determined by HUD to be excessive; and (3) Submitted in such form and substance as prescribed by HUD. (c) Annual financial report filing dates. PHA's Financial Report must be submitted to HUD annually, no later than 90 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. Condition: During our audit, we noted that GAAP-based unaudited financial information was submitted after due date. Due to COVID-19 pandemic, the due date was moved to October 30, 2020, instead of August 31, 2020. However, the Municipality submitted the report on January 27, 2022. Effect: The Municipality was in noncompliance with the Financial Reporting submission which could decrease the funds receive or the elimination of funds under Section 8 program. Cause: The Municipality did not submit the Non-Audited Financial Report within the 90 days period provided by Law nor requested an extension of time to submit its unaudited financial information 15 days before the submission due date, by electronically submitting the requests through the FASS-PH Secure System website. Identification of a repeat finding: This is a repeat finding from the immediate previous audit 2019-004. Recommendation: We recommend the Municipality to instruct the HUD Coordinator, in order this situation does not occur in the future. Views of responsible officials and planned corrective actions: The Municipality agrees with this finding and will adhere to the correction action plan attached at the end of this audit report, and states the following: ? The Municipality contracted professional services in order to submit the Non-Audited Financial Report to the Housing and Urban Department (HUD). Questioned Costs: None

Finding 2020-07: Late submission of single audit report package Federal Programs: All Federal Agencies in the SEFA Criteria: Title 2, Subtitle A, Chapter II, Part 200 named ?Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards? Subpart F- Audit Requirements, under 200.512 ?Report Submission? states that the audit shall be completed and the Data Collection Form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section shall be submitted to the Federal Clearinghouse designated by OMB within the earlier of 30 calendar days after receipt of the auditor's reports, or nine months after the end of the audit period. Condition: The Municipality did not submit the single audit reports and reporting package for the year ended June 30, 2020, to the Federal Clearinghouse during the required submission deadline period. Effect: The Municipality may be subject to sanctions such as: 1. Withholding a percentage of federal awards until the audit is completed satisfactorily, 2. Withholding or disallowing overhead costs, 3. Suspending federal awards until the audit is conducted, 4. Terminating the federal award. Cause: Financial information contained in the Governmental-Wide and Governmental Funds Financial Statements was not available before the reporting package submission due date extension of three months, until June 30, 2021. Data was provided after June 30. Identification of a repeat finding: None. Recommendation: We recommend that the Municipality should start the process of compiling and preparing the financial information to complete the Governmental-Wide and Governmental Funds Financial Statements and the Schedule of Expenditures of Federal Awards with enough time to assure that such information is available for the audit process, before March 31, and to provide it with enough time so the audit process can be completed before such due date. Views of responsible officials and planned corrective actions: The Municipality agrees with this finding and will adhere to the correction action plan attached at the end of this audit report, and states the following: ? The Municipality contracted the professional services of an Accounting Firm, in order to submit the Single Audit report and reporting package to the Federal Clearinghouse, during the required submission deadline period. Questioned Costs: No

2019-004 PHA Non Audited Financial Report Submission to HUD annually no later than 90 days after the end of fiscal year 06-30-2019 ? Non Compliance Criteria: The 24CFR 5.801 Title 24-Housing And Urban Development Part 5 ? General HUD Program Requirements Subpart H ? Uniform Financial Reporting Standards Sec. 5.801 established that each PHA must provide to HUD, on an annual basis, such financial information as required by HUD. This financial information must be: (1) Prepared in accordance with Generally Accepted Accounting Principles as further defined by HUD in supplementary guidance; (2) Submitted electronically to HUD through the internet, or in such other electronic format designated by HUD, or in such nonelectronic format as HUD may allow if the burden or cost of electronic reporting is determined by HUD to be excessive; and (3) Submitted in such form and substance as prescribed by HUD. (c) Annual financial report filing dates. PHA?s Financial Report must be submitted to HUD annually, no later than 90 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. Condition: The Municipality has not complied to submit the unaudited PHA Financial Report for the year ended on 06-30-2019. Effect: The Municipality was in noncompliance with the Financial Reporting submission which could decrease the funds receive under Section 8. Cause: The Municipality did not submit the Non-Audited Financial Report within the 90 days period provided by Law nor requested an extension of time to submit its unaudited financial information 15 days before the submission due date, by electronically submitting the requests through the FASS-PH Secure System website. Recommendation: We recommend the Municipality to instruct the HUD Coordinator in order this situation do not occur in the future. Views of responsible officials and planned corrective actions: The Municipality agrees with this finding and will adhere to the correction action plan on page 93 in this audit report. 91 Identification of a repeat finding: N/A Questioned Costs: None 2019-005

2019-005 Community Disaster Loan (CDL) Expenditures not properly identified. Criteria: The Community Disaster loan (CDL), was given to the municipality, with the possibility of forgiveness, of this being used for the purpose of receiving a supplement or assistance in those income not received due to the economic situations caused by Hurricanes Irma and Maria. As a requirement of Article 7.001 and 8.010 of Law 81 of Autonomous Municipalities of Puerto Rico, the municipality had to create a bank account in the special fund for better management, but instead, the CDL was deposited in the general fund, making its operation unpredictable within the framework of transactions that appear in the General Fund. Condition: During the audit we noted a lack of supporting documentation for the Community Disaster Loan deposited in the general fund. Cause: The Municipality is not in compliance with the requirement by law to open a special fund for the CDL. Accordingly office of management and budget of the Government of Puerto Rico. Effect: May not complied with the regulation require to obtain the forgiveness of loan. Recommendation: We recommend the Municipality retain all procurement related documents for the required time period in accordance with Federal and State law. Views of responsible officials and planned corrective actions: The Municipality agrees with this finding and will adhere to the correction action plan on page 93 in this audit report. Identification of a repeat finding: N/A Questioned Costs: Unknown