MUNICIPIO DE COROZALLocal Government

Finding Reference: 2025-004 (cross-referenced as 2025-001) Type of Finding: Material Weakness in Internal Control Over Compliance and Material Noncompliance • Federal Agency: U.S. Department of Housing and Urban Development / Department of Health and Human Services / Department of Treasury / Department of Homeland Security / Department of Agriculture / U.S. Federal Transportation Administration and U.S. Environmental Protection Agency • Federal Program Name: Housing Choice Voucher / Community Service Block Grant Program Recovery Grant / Housing Opportunities for People with Aids / State Block Grant Program / Community Service Block Grant Program / Title III, Part C, Nutrition Services / Coronavirus State and Local Recovery Funds / Coronavirus Relief Funds / Community Disaster Loan / Public Assistance Grant / Rural Housing Preservation Grant / Formula Grants for Rural Areas and Cleanup Cooperative Agreements. • Assistance Listing Number (ALN): 93.569 / 93.045 / 21.027 / 21.019 / 97.030 / 97.036 / 10.433 / 20.509 and 66.818 • Federal Award Number and Year: 21.019 – CRF-AFFAF Pass-Through Entity: 93.569 – Families and Children Administration and 20.509 – Department of Transportation and Public Works Criteria or Specific Requirement: Pursuant to Uniform Guidance (2 CFR 200.510(b)), the auditee must prepare a Schedule of Expenditures of Federal Awards (SEFA) for the period covered by the auditee's financial statements which must be accurate and reconciled. Furthermore, 2 CFR 200.302 requires non-federal entities to establish financial management systems that provide accurate, current, and complete disclosure of the financial results of each federally- sponsored project or program, and to maintain effective control over and accountability for all funds, property, and other assets. Condition (Cross-Reference): The Municipality’s core accounting system lacked the technical and functional capacity to accurately aggregate transactions and produce reliable financial records or balanced reports due to an un-reconciled migration of historical opening balances. (Cross-Reference): The complete details regarding the operational failure of the financial software system, the database corruption, and the timeline are fully described in Finding 2025-001 under Section II – Financial Statement Findings of this schedule. Effect or Potential Effect: Because the core accounting database cannot output accurate balances, the Municipality is unable to verify the completeness or accuracy of its Trial Balances by Funds or Accounts. Questioned Costs: $0.00 (None). Although the accounting system failed to produce reports, no specific unallowable transactions or questioned costs were identified during our compliance testing. Cause: See Finding 2025-001 for the root cause regarding inadequate data-validation protocols and poor system-migration oversight by management. Recommendation: We recommend that management implement the exact corrective action plan detailed in Finding 2025- 001. In addition, management must establish an interim manual ledger or spreadsheet tracking matrix to ensure that all federal expenditures for this major program are manually reconciled with federal drawdowns and physical invoices until the core accounting system

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Housing Choice Voucher Section-8, IPA number RQ54 CFDA Number: 14.871 Compliance Requirement: Type of Finding: Material Noncompliance Reporting and Material Weakness Responsible Official: Federal Program Director Condition: The Municipality did not submit the required Financial Reports to the US Housing and Urban Development for the fiscal year ending June 30, 2020 during the required period. The unaudited Financial Report was not submitted on or before August 30, 2020, also, the audited Financial Report was not submitted on or before September 30, 2020. Criteria: 22 CFR § 5.801 Uniform financial reporting standards, (b) (1) Entities (or individuals) to which this subpart is applicable must provide to HUD such financial information as required by HUD. Such information must be provided on a n annual basis, except as required more 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 the excessive; and (3) Submitted in such form and substance as prescribed by HUD. Also, on Section (c) (1) the financial information to be submitted to HUD in accordance with paragraph (b) of this section, must be submitted to HUD annually, no later than 60 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. In addition, on Section (d) (1) states that unaudited financial statements will be required 60 days after the PHA”s fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA’s fiscal year end, in accordance with the Single Audit Act and 2 CFR Part 200, Subpart F. Questioned Cost: None determined Cause: Puerto Rico was affected by the Covid-19 Pandemic in Corozal, causing a delay in the financial reports required by HUD on 2020 and 2021. Effect: The Municipality did not comply with the submission date required for the Financial Reports to the US Housing and Urban Development; this could affect the continuance and new approvals of federal program funds. Recommendation: We recommend the Municipality to maintain adequate accounting records related to the federal funds in order to properly prepare the financial statements accurate and in a timely manner. In addition, the Municipality need to implement adequate internal controls procedures in order to assure that the supporting documentation is available on a timely manner. Also, proper training in the accounting system should be obtained by the personnel in charge of preparing the bank reconciliations and Financial Reports required by HUD. Identification of a repeat finding: This is a repeat finding from the immediate previous audit 2021-004. Views of responsible officials and planned corrected action: The municipality agrees with the finding and will adhere to the correction action plan on page 82 on this report.

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Housing Choice Voucher Section-8, IPA number RQ54 CFDA Number: 14.871 Compliance Requirement: Type of Finding: Material Noncompliance Reporting and Material Weakness Responsible Official: Federal Program Director Condition: The accounting system for the Housing Choice Voucher program is maintained independently from the Municipality’s accounting system. As these systems are not reconciled with each other, discrepancies persist at year-end, complicating the auditor’s task of achieving accurate and reliable balances in order to meet the deadlines for issuing the required reports to the Department of Housing and Urban Development. Criteria: The § 902.33 Financial reporting requirements states the following: (a) Annual financial report. All PHAs must submit their unaudited and audited financial data to HUD on an annual basis. The financial information must be: (1) Prepared in accordance with Generally Accepted Accounting Principles (GAAP), as further defined by HUD in supplementary guidance; and (2) Submitted electronically in the format prescribed by HUD using the Financial Data Schedule (FDS). (b) Annual unaudited financial information report filing dates. The unaudited financial information to be submitted to HUD in accordance with paragraph (a) of this section must be submitted to HUD annually, no later than 2 months after the PHA's fiscal year end, with no penalty applying until the 16th day of the 3rd month after the PHA's fiscal year end, in accordance with § 902.62. (c) Annual audited financial information compliance dates. Audited financial statements will be required no later than 9 months after the PHA's fiscal year end, in accordance with the Single Audit Act and 2 CFR part 200, subpart F. Questioned Cost: None determined Cause: Due to the lack of reconciliation between Municipality and Housing Choice Voucher systems, discrepancies accumulate at year-end, complicating the auditor’s ability to produce reliable balances. This, in turn, poses challenges in meeting the deadlines for the submission of required reports to the Department of Housing and Urban Development. Effect: The Municipality make more difficult for the auditors to obtain reliable balances for the Single Audit. This situation could affect the continuance and new approvals of federal program funds. Recommendation: The Municipality must conduct a reconciliation of its systems against Housing Choice Voucher at least every two months to clarify any uncertainties and to anticipate or detect any discrepancies in a timely manner. This proactive approach will help ensure that a situation like this does not recur. Identification of a repeat finding: This is not a repeat finding from previous year.

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Housing Choice Voucher Section-8, IPA number RQ54 CFDA Number: 14.871 Compliance Requirement: Type of Finding: Material Noncompliance Reporting and Material Weakness Responsible Official: Federal Program Director Condition: The Municipality did not submit the required Financial Reports to the US Housing and Urban Development for the fiscal year ending June 30, 2020 during the required period. The unaudited Financial Report was not submitted on or before August 30, 2020, also, the audited Financial Report was not submitted on or before September 30, 2020. Criteria: 22 CFR § 5.801 Uniform financial reporting standards, (b) (1) Entities (or individuals) to which this subpart is applicable must provide to HUD such financial information as required by HUD. Such information must be provided on a n annual basis, except as required more 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 the excessive; and (3) Submitted in such form and substance as prescribed by HUD. Also, on Section (c) (1) the financial information to be submitted to HUD in accordance with paragraph (b) of this section, must be submitted to HUD annually, no later than 60 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. In addition, on Section (d) (1) states that unaudited financial statements will be required 60 days after the PHA”s fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA’s fiscal year end, in accordance with the Single Audit Act and 2 CFR Part 200, Subpart F. Questioned Cost: None determined Cause: Puerto Rico was affected by the Covid-19 Pandemic in Corozal, causing a delay in the financial reports required by HUD on 2020 and 2021. Effect: The Municipality did not comply with the submission date required for the Financial Reports to the US Housing and Urban Development; this could affect the continuance and new approvals of federal program funds. Recommendation: We recommend the Municipality to maintain adequate accounting records related to the federal funds in order to properly prepare the financial statements accurate and in a timely manner. In addition, the Municipality need to implement adequate internal controls procedures in order to assure that the supporting documentation is available on a timely manner. Also, proper training in the accounting system should be obtained by the personnel in charge of preparing the bank reconciliations and Financial Reports required by HUD. Identification of a repeat finding: This is a repeat finding from the immediate previous audit 2021-004. Views of responsible officials and planned corrected action: The municipality agrees with the finding and will adhere to the correction action plan on page 82 on this report.

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Housing Choice Voucher Section-8, IPA number RQ54 CFDA Number: 14.871 Compliance Requirement: Type of Finding: Material Noncompliance Reporting and Material Weakness Responsible Official: Federal Program Director Condition: The Municipality did not submit the required Financial Reports to the US Housing and Urban Development for the fiscal year ending June 30, 2020 during the required period. The unaudited Financial Report was not submitted on or before August 30, 2020, also, the audited Financial Report was not submitted on or before September 30, 2020. Criteria: 22 CFR § 5.801 Uniform financial reporting standards, (b) (1) Entities (or individuals) to which this subpart is applicable must provide to HUD such financial information as required by HUD. Such information must be provided on a n annual basis, except as required more 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 the excessive; and (3) Submitted in such form and substance as prescribed by HUD. Also, on Section (c) (1) the financial information to be submitted to HUD in accordance with paragraph (b) of this section, must be submitted to HUD annually, no later than 60 days after the end of the fiscal year of the reporting period, and as otherwise provided by law. In addition, on Section (d) (1) states that unaudited financial statements will be required 60 days after the PHA”s fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA’s fiscal year end, in accordance with the Single Audit Act and 2 CFR Part 200, Subpart F. Questioned Cost: None determined Cause: Puerto Rico was affected by the Covid-19 Pandemic in Corozal, causing a delay in the financial reports required by HUD on 2020 and 2021. Effect: The Municipality did not comply with the submission date required for the Financial Reports to the US Housing and Urban Development; this could affect the continuance and new approvals of federal program funds. Recommendation: We recommend the Municipality to maintain adequate accounting records related to the federal funds in order to properly prepare the financial statements accurate and in a timely manner. In addition, the Municipality need to implement adequate internal controls procedures in order to assure that the supporting documentation is available on a timely manner. Also, proper training in the accounting system should be obtained by the personnel in charge of preparing the bank reconciliations and Financial Reports required by HUD. Identification of a repeat finding: This is a repeat finding from the immediate previous audit 2020-004. Views of responsible officials and planned corrected action: The municipality agrees with the finding and will adhere to the correction action plan on page 99 on this report.

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Housing Choice Voucher Section-8, IPA number RQ23 CFDA Number: 14.871 Compliance Requirement: Type of Finding: Material Noncompliance and Material Weakness Responsible Official: Federal Program Director Condition The Municipality did not submit the required Financial Reports to the US Housing and Urban Development for the fiscal year ending June 30, 2020 during the required period. The unaudited Financial Report was not submitted on or before August 31, 2020, also, the audited Financial Report was not submitted on or before September 30, 2020. Criteria 22 CFR ? 5.801 Uniform financial reporting standards, (b) (1) Entities (or individuals) to which this subpart is applicable must provide to HUD such financial information as required by HUD. Such information must be provided on a n annual basis, except as required more 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 the excessive; and (3) Submitted in such form and substance as prescribed by HUD. Also, on Section (c) (1) the financial information to be submitted to HUD in accordance with paragraph (b) of this section, must be submitted to HUD annually, no later than 60 days after the end of the fiscal year of the reporting period, and as otherwise provided y law. In addition, on Section (d) (1) states that unaudited financial statements will be required 60 days after the PHA?s fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA?s fiscal year end, in accordance with the Single Audit Act and 2 CFR Part 200, Subpart F. Questioned Cost None determined Cause On March 16, 2020, Puerto Rico was affected by the Covid-19 Pandemic in Corozal, causing a delay in the preparation of the bank reconciliations and in the financial reports required by HUD Effect The Municipality did not comply with the submission date required for the Financial Reports to the US Housing and Urban Development; this could affect the continuance and new approvals of federal program funds

Federal Agency: U.S. Department of Housing and Urban Development Pass-through Agency: N/A Federal Program Title: Community Development Block Grant/Entitlement Grant CFDA Number: 14.228 Compliance Requirement: Equipment and Real Property Management Type of Finding: Material Noncompliance and Material Weakness Responsible Official: Federal Program Director Condition The Municipality did not provide documentation to support that a physical inventory was taken for the past years and results were reconciled with property records, as required. Criteria Property records must be maintained that include a description of the property, an identification number, the source of property, who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft shall be investigated. Adequate maintenance procedures must be developed to keep the property in good condition. If the grantee or sub grantee is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Questioned Cost None determined Cause Municipality does not have accurate records to properly trace the property and equipment activities that should be reported to HUD Effect The Municipality is exposed to possible grantor sanctions and inaccuracies in the maintenance of its capital assets. Capital assets could also be lost, stolen, or disposed of without being detected.

Type of Finding: Material noncompliance and material weakness Program: Section-8 Voucher Program IPA number RQ23 Condition The Municipality did not submit the required Financial Reports to the US Housing and Urban Development of fiscal year ending June 30, 2019 during the required period. The unaudited Financial Report was not submitted on or before August 31, 2019, also, the audited Financial Report was not submitted on or before September 30, 2020. Criteria 22 CFR ? 5.801 Uniform financial reporting standards, (b) (1) Entities (or individuals) to which this subpart is applicable must provide to HUD such financial information as required by HUD. Such information must be provided on a n annual basis, except as required more 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 the excessive; and (3) Submitted in such form and substance as prescribed by HUD. Also, on Section (c) (1) the financial information to be submitted to HUD in accordance with paragraph (b) of this section, must be submitted to HUD annually, no later than 60 days after the end of the fiscal year of the reporting period, and as otherwise provided y law. In addition, on Section (d) (1) states that unaudited financial statements will be required 60 days after the PHA?s fiscal year end, and audited financial statements will then be required no later than 9 months after the PHA?s fiscal year end, in accordance with the Single Audit Act and 2 CFR Part 200, Subpart F. Questioned Cost None determined Cause On September 20, 2017, Puerto Rico was affected by Hurricane Maria in Corozal, causing a delay in the preparation of the bank reconciliations and in the financial reports required by HUD. Effect The Municipality did not comply with the submission date required for the Financial Reports to the US Housing and Urban Development; this could affect the continuance and new approvals of federal program funds. Recommendation We recommend the Municipality to maintain adequate accounting records related to the federal funds in order to properly prepare the financial statements accurate and in a timely manner. In addition, the Municipality need to implement adequate internal controls procedures I order to assure that the supporting documentation is available on a timely manner. Also, proper training in the accounting system should be obtained by the personnel in charge of preparing the bank reconciliations and Financial Reports required by HUD. Management Response It is important to establish for the purposes of this finding that the extended delay in the submission of financial respond to the substantial loss of the municipal information due to the stroke of Hurricane Maria thorough Corozal. Having said that, we are taking the necessary steps to speed up the process for submitting financial reports under current circumstances in order to comply within the required period.

Material weakness and material noncompliance in disbursement. Condition During our disbursement test for internal controls over financial reporting one invoice was claimed in excess of the Department of Homeland Security. As part of our audit procedures over internal control for disbursements for all funds, we selected a sample of forty (40) transactions. Invoice from supplier was not property verified by pre-intervention of documents approved overpaid of $3,990. Criteria CFR Title 44 ? Emergency Management and Assistance and part 200, Uniform Administrative Requirements, cost principles and Audit requirements for federal awards. Compliance with applicable law and regulations, the cost must follow criteria in order to be allowable under Federal Award: a. Transactions are properly recorded and accounted for; b. Transactions are executed in compliance with: 1. Federal statutes, regulations, and the terms and conditions of the Federal award that could have direct and material effect on a Federal program; c. Be determined in accordance with generally accepted accounting principles (GAAP) d. Be adequately documented. Questioned Cost $3,990 Cause The Municipality disbursement procedure was not verify as required by Municipal Laws. Effect Municipality may incur in unallowable expenditures paying an amount in excess. Recommendation We recommend the Municipality to make the best effort with the suppliers. Management Response Agreed with the finding, the Finance Director start the procedure to returned the amount to Federal Emergency Agency.