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September 15, 2005
  • Community Planning and Development
2005-AT-1013
2005-AT-1013.pdf

What We Audited and Why

We completed an audit of the Corporación para el Fomento Económico de la Ciudad Capital (Corporation) independent capital fund. The review was initiated in response to a request from the Department of Housing and Urban Development's (HUD) San Juan Office of Community Planning and Development, which was not satisfied with the Corporation's overall performance in administering its independent capital fund. HUD's concerns stemmed from the results of a monitoring review conducted by the Municipality of San Juan (Municipality) and included concern over the Corporation's use of program income funds for ineligible purposes. The objective of our audit was to determine whether the Corporation administered the independent capital fund in accordance with HUD requirements.

What We Found

The Corporation did not follow HUD requirements in the administration of its independent capital fund. Contrary to HUD requirements, the Corporation retained more than $1.48 million in interest earned from its Community Development Block Grant (Block Grant) revolving fund account.

The Corporation's financial management system did not fully comply with applicable HUD requirements. The system did not properly identify the application of more than $1 million in administrative fees charged, allowed the use of $463,618 for ineligible expenditures, did not account for all program income, and maintained a high balance in its Block Grant fund account.

In four loans reviewed, the Corporation did not maintain adequate records to demonstrate that activities met at least one of the three Block Grant national objectives. Therefore, the related expenditures of four loans totaling $631,195 are considered unsupported pending an eligibility determination by HUD.

What We Recommend

We recommend the director of the San Juan Office of Community Planning and Development require the Municipality to repay $1.48 million in interest earned from the Block Grant revolving fund and repay $463,618 in ineligible expenditures. The director should also require the Municipality to provide all supporting documentation and determine the appropriateness and eligibility of $1.64 million in Block Grant disbursements. We also recommend that the director require the Municipality to develop and implement an internal control plan to ensure the independent capital fund has a financial management system that complies with HUD requirements and that funds are used in a timely manner.

For each recommendation without a management decision, please respond and provide status reports in accordance with HUD Handbook 2000.06, REV-3.

Please furnish us copies of any correspondence or directive issued because of the audit.

Recommendations

Community Planning and Development

  •  
    Status
      Open
      Closed
    2005-AT-1013-002-A
    $1,011,801.00
    Questioned Costs

    Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.

    Require the Municipality to obtain and submit all supporting documentation and HUD determine the eligibility and propriety of $1,011,801 in administrative costs the Corporation charged to the Block Grant revolving fund. Any amounts determined ineligible must be reimbursed to the Block Grant program from nonfederal funds.

  •  
    Status
      Open
      Closed
    2005-AT-1013-003-A
    $631,195.00
    Questioned Costs

    Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.

    Require the Municipality to obtain and submit all supporting documentation and HUD determine the eligibility and compliance with national objectives of the $631,195 the Corporation disbursed for the four loans. Any amounts determined ineligible must be reimbursed to the Block Grant program from nonfederal funds.