Audit 351279

Finding No. 2024-002 – Energy Incentive Program disbursement to Ineligible Providers and Beneficiaries Federal Program Coronavirus State and Local Fiscal Recovery Fund ALN 21.027 Name of Federal Agency U.S. Department of Treasury Pass-through Entity Puerto Rico Department of Treasury Compliance Requirement Activities allowed Type of Finding Internal control over compliance/non-compliance Category Material non-compliance and material weakness on internal controls over compliance Criteria According to the 31 CFR Subtitle A Part 35 Subpart 35.6 (b)(3)(ii)(B)(2). Eligible uses 35.6(b) A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria. (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts. (ii) Responding to the negative economic impacts of the public health emergency for purposes including, (B) assistance to small businesses including, (2) a program, service, capital expenditure, or other assistance that responds to disproportionately impacted small businesses, including rehabilitation of commercial properties; storefront and façade improvements; technical assistance, business incubators, and grants for start-ups or expansion costs for small businesses; and programs or services to support micro-businesses. Additional criteria were established in the Energy Incentive Program Guidance issued by the Disbursement Oversight Committee established by the Government of Puerto Rico. Condition During our examination, from a sample of five (5) beneficiaries, we noted three (3) which, based on the regulation previously indicated, the Energy Incentive was provided to without the required supporting documentation to support their eligibility. Cause The program administration underwent several changes which caused that the procedures established in the program guide not be followed correctly and the required documents not being properly safeguarded. This condition was identified during the prior year audit, however, corrective actions were taken subsequent to the completion of this phase for the federal program. Effect As a result of this condition, the US Department of Treasury may request the return of funds, issue warnings and/or impose penalties to the Department. Context From a sample of five (5) beneficiaries that received the Energy Incentive payments, three (3) beneficiaries, or 60% of the total sample, did not meet the eligibility criteria. The total sample size is $104,885, and we could not validate eligibility documentation for disbursements amounting to $57,640, or 55% of the total sample, as detailed below: Ineligible Beneficiaries Case Id Amount Disbursed Questioned Cost 2687 $ 7,800.00 $ 7,800.00 1195 25,000.00 25,000.00 2130 24,840.00 24,840.00 Total $ 57,640.00 The population from which the audit sample was obtained amounts to $3,274,031. Questioned Costs The known questioned costs are the funding used for the beneficiaries whose eligibility was not properly documented by the Department, which amounts to $57,640. The population from which the audit sample was obtained amounts to $3,274,031, which results in a likely misstatement amounting to $1,799,263. Identification as a Repeated Finding This is a repeat finding from the immediate previous audit, Finding No. 2023-003. Recommendation We recommend the Department to strengthen controls in eligibility determination and disbursement of federal funds to ensure the compliance with the requirements of the program. In addition, implement a document control system to comply with document retention requirement. Any government and non-government entity receiving Program funds must be required to retain use of funds records and supporting documentation for a period of five (5) years. Views of responsible officials and planned corrective actions. Refer to the corrective action plan on page 102

Finding No. 2024-002 – Energy Incentive Program disbursement to Ineligible Providers and Beneficiaries Federal Program Coronavirus State and Local Fiscal Recovery Fund ALN 21.027 Name of Federal Agency U.S. Department of Treasury Pass-through Entity Puerto Rico Department of Treasury Compliance Requirement Activities allowed Type of Finding Internal control over compliance/non-compliance Category Material non-compliance and material weakness on internal controls over compliance Criteria According to the 31 CFR Subtitle A Part 35 Subpart 35.6 (b)(3)(ii)(B)(2). Eligible uses 35.6(b) A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria. (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts. (ii) Responding to the negative economic impacts of the public health emergency for purposes including, (B) assistance to small businesses including, (2) a program, service, capital expenditure, or other assistance that responds to disproportionately impacted small businesses, including rehabilitation of commercial properties; storefront and façade improvements; technical assistance, business incubators, and grants for start-ups or expansion costs for small businesses; and programs or services to support micro-businesses. Additional criteria were established in the Energy Incentive Program Guidance issued by the Disbursement Oversight Committee established by the Government of Puerto Rico. Condition During our examination, from a sample of five (5) beneficiaries, we noted three (3) which, based on the regulation previously indicated, the Energy Incentive was provided to without the required supporting documentation to support their eligibility. Cause The program administration underwent several changes which caused that the procedures established in the program guide not be followed correctly and the required documents not being properly safeguarded. This condition was identified during the prior year audit, however, corrective actions were taken subsequent to the completion of this phase for the federal program. Effect As a result of this condition, the US Department of Treasury may request the return of funds, issue warnings and/or impose penalties to the Department. Context From a sample of five (5) beneficiaries that received the Energy Incentive payments, three (3) beneficiaries, or 60% of the total sample, did not meet the eligibility criteria. The total sample size is $104,885, and we could not validate eligibility documentation for disbursements amounting to $57,640, or 55% of the total sample, as detailed below: Ineligible Beneficiaries Case Id Amount Disbursed Questioned Cost 2687 $ 7,800.00 $ 7,800.00 1195 25,000.00 25,000.00 2130 24,840.00 24,840.00 Total $ 57,640.00 The population from which the audit sample was obtained amounts to $3,274,031. Questioned Costs The known questioned costs are the funding used for the beneficiaries whose eligibility was not properly documented by the Department, which amounts to $57,640. The population from which the audit sample was obtained amounts to $3,274,031, which results in a likely misstatement amounting to $1,799,263. Identification as a Repeated Finding This is a repeat finding from the immediate previous audit, Finding No. 2023-003. Recommendation We recommend the Department to strengthen controls in eligibility determination and disbursement of federal funds to ensure the compliance with the requirements of the program. In addition, implement a document control system to comply with document retention requirement. Any government and non-government entity receiving Program funds must be required to retain use of funds records and supporting documentation for a period of five (5) years. Views of responsible officials and planned corrective actions. Refer to the corrective action plan on page 102