Audit 391846

Finding Reference 2025-004 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: P.R. Department of Housing Program: Community Development Block Grant/State’s Program and Non-Entitlement Grants in Hawaii (Assistance Listing No. 14.228) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2023-004 and 2024-004. Statement of Condition In our reporting test, we evaluate four (4) quarterly reports and two (2) of them were not submitted and one (1) was submitted late. Additionally, two (2) quarterly reports that were submitted do not agree with the accounting records. Criteria Based on the CDBG agreements, the Municipality must submit to the Department of Housing reports on records, collections, and disbursements of Program Income on an annual and quarterly basis. Including the progress of the projects developed with the CDBG program. In addition, the Municipality will submit all the reports required by the Agency. Failure to comply with this provision will be just cause for the Department to stop the fund requisition process. § 200.332 Requirements for pass-through entities. (1) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. (2) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports. Cause of Condition The Municipality does not have the necessary personnel assigned to prepare and present reports in a timely manner. Effect of Condition The program is not in compliance with the reporting requirements as established in the contract agreement. Recommendation We recommend that the Municipality maintain constant monitoring to improve program controls. The reports must be presented as established in the agreement and guidelines of the Department of Housing. This will ensure compliance with the reporting requirements under the Community Development Block Grants/State’s Program and Non-entitlement Grant in Hawaii agreement. Questioned Cost None Prior Year Finding Yes. This finding is similar to prior-year finding 2023-004 and 2024-004. Views of Responsible Officials and Planned Corrective Action We concur with the findings. The Municipality will be implementing the following measures to address the finding related to the late filing of the quarterly reports of the CDBG Program: 1. An accountant was hired to assume direct responsibility for the preparation, review, and filing of the CDBG Program's financial and programmatic reports. 2. Technical guidance was requested and received from the Department of Housing to ensure proper preparation and compliance with applicable reporting requirements. 3. All overdue quarterly reports and corresponding reports were filed until December 2025, including the reconciliation of the requisitioned balances versus the paid balances. 4. An internal compliance calendar was established, with deadlines and administrative supervision, to ensure timely filing in future periods. Implementation Date: December 31, 2025 Responsible Person: Pedro Santiago Federal Programs Director

Finding Reference 2025-003 Federal Agency: U.S. Department of Treasury Pass-Through Agency: Puerto Rico Fiscal Agency and Financial Advisory Authority Program: Coronavirus State and Local Fiscal Recovery Funds (Assistance Listing No. 21.027) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2023-003 and 2024-003. Statement of Condition In our Reporting Test, we evaluated the Project and Expenditure Report submitted to the U.S. Department of Treasury during fiscal year 2024-2025. During our audit procedures, we identified differences between the amounts reported as current period expenditures, and the amounts recognized in the accounting system. Additionally, during the fiscal year the Municipality received new funds called Service of Excellence to Citizens also related to the Coronavirus State and Local Fiscal Recovery Funds Program. This allocation was granted through the Puerto Rico Fiscal Agency and Financial Advisory Authority. In our Reporting Test, we evaluated six (6) reports and could not validate their submission. Criteria The Coronavirus State and Local Fiscal Recovery Funds - Compliance and Reporting Guidance, Part I, Section 10 (d), states that all recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Appropriate accounting records must be maintained for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles In addition, where appropriate, controls need to be established to ensure the completion and timely submission of all mandatory performance and/or compliance reporting. On the other hand, the Resolution 2024-039 approved by Assistant Secretary of the Disbursement Oversight Committee, establish recipients under this Program (Service of Excellence to Citizens), as with all other eligible disbursements of CSFRF funds, shall remit to FAFAA biweekly reports detailing the use of funds for the purpose of complying with federal regulations and reporting to the Office of the Inspector General. These reports must be sent on the first and third Friday of each month, even if they do not have expenses for that month. Cause of Condition The Municipality does not have the necessary personnel assigned to prepare, review and present the reports in a timely manner. Additionally, the new personnel do not have evidence to be able to validate the submission of the reports. Effect of Condition The program is not in compliance with the reporting requirements as established by the Federal agencies. Recommendation We recommend training for the authorized personnel who administer the program, to better understand the reporting requirements and prepare timely reports. The Municipality should establish a monitoring system to ensure compliance with requirements established by the passthrough agency such as submitting the reports during the required time frame and where the fund expenses will be reported as incurred. This will ensure better control of the program. Questioned Cost None Prior Year Finding Yes. This finding is similar to prior-year finding 2023-003. Views of Responsible Officials and Planned Corrective Action We concur with the finding. The authorized personnel understand the reporting requirements. We are in the process of training additional personnel to have more resources to comply with all reporting requirements. The Finance Department is working with external consultants to address this situation, and be able to comply with all reports as required. Implementation Date: June 30, 2026 Responsible Person: Meyleen Hernández Rivera Finance Director

Finding Reference 2025-006 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Earmarking (G) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2024-006. Statement of Condition In our Earmarking Test, we found that the Municipality did not spend the required percentages according to the cost limitations and minimum required amounts of the approved budget for the categories of administration, quality services and quality services for infants and toddlers. Criteria The Clause Number Seven of the Grant Agreement states that the first party will provide the second party with a copy of the budget approved by the Assistant Program Administrator and/or the Assistant Administration Administrator, or a representative authorized by them. This budget may not be varied, changed, or altered without the prior written authorization of the first party. For this purpose, the second party must submit a written request for the change or adjustment to the budget to ensure the best use of funds. This request must be accompanied by the Expenditure Report and Projected Savings and/or any other reports of needs or other documents required by the first party. This request will be subject to the recommendation of the Program and the Budget Division of the first party. The first party may review the approved budget provided to the Supplier when it deems it appropriate to verify the effective use of the funds. Cause of Condition The Municipality’s Program Administration did not ensure that it spent the required percentage amounts to guarantee compliance with earmarking requirements for administration costs and quality improvement activities for infants and toddlers. Effect of Condition The program is not in compliance with earmarking requirements according to the approved budget. Recommendation Management should take the necessary steps to ensure that the Program complies with the quality earmarking requirements. The way to guarantee compliance would be by spending the entire allocation for the fiscal year. If management anticipates that it will not spend the entire allocation, it should request budget modifications from the delegating agency. Questioned Cost None Prior Year Finding Yes. This finding is similar to prior-year finding 2024-006. Views of Responsible Officials and Planned Corrective Action We concur with the finding. The Municipality has appointed as the official responsible the Finance Director for monitoring and reviewing compliance. Internal control procedures have been established to properly document and monitor the expenditure incurred and prospective obligations, and if the required amount or percentage cannot be spent, a waiver will be requested. Implementation Date: June 30, 2026 Responsible Person: Meyleen Hernández Rivera Finance Director

Finding Reference 2025-007 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Eligibility (E) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we evaluated four (4) participants files, and we found that two (2) of them do not have the Eligibility Certification. For that reason, we could not validate the eligibility of these participants. Criteria According to the agreement with the agency, the Municipality will have to evidence files for all the paperwork in each participating child's file that proves eligibility for the service as established. The program staff will have to complete the child's file in its entirety before starting service in any category. The service will not begin if the parent/guardian has not provided all the required documentation for the family's eligibility file and the corresponding Regional Office has not issued the Eligibility Certification CCEG-12-23Rev. Cause of Condition The Municipality’s Program Administration does not have effective internal controls to ensure that participant files have the necessary and required documentation to receive program services. Effect of Condition The Program is not in compliance with eligibility requirements. The Municipality provides services to participants without having the required documentation in the files. Recommendation Management must implement internal control to ensure that the eligible participant is properly documented at the time of receiving services. Questioned Cost None Prior Year Finding No. Views of Responsible Officials and Planned Corrective Action We concur with the finding. The Municipality will take steps to request the documentation again from the two participants for whom the corresponding eligibility certification was unavailable. In addition, instructions will be issued to ensure that all participants' eligibility documentation is reviewed periodically. Implementation Date: June 30, 2026 Responsible Person: Aracelis Fuentes Rodríguez Child Care Center Director

Finding Reference 2025-005 Federal Agency: U.S. Department of Homeland Security Pass-Through Agency: Central Office of Recovery, Reconstruction and Resiliency of Puerto Rico (COR3) Program: Disaster Grants – Public Assistance (Presidentially Declared Disaster) (ALN 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2023-005 and 2024-005. Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of eleven (11) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports did not agree with the accounting and project records. Criteria 2 CFR 200.302 (a) stated that the state’s and the other non-Federal entity’s financial management system, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Cause of Condition The Municipality accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. Effect of Condition The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. Recommendation We recommend that Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission of the next submission to the pass-through entity. Questioned Cost None Prior Year Finding Yes. This finding is similar to prior-year finding 2023-005 and 2024-005. Views of Responsible Officials and Planned Corrective Action We concur with the finding. We understand that only two reports did not agree with the accounting records. We have consultants that are responsible for the preparation of these reports. Instructions were given to the consultants in order to correct the reports that do not agree with the accounting records. There was a misunderstanding with the reports, in which the pass-through entity instructed that purchase orders and expenditures incurred should be reported. As subsequently clarified, only the expenditures incurred should be reported as expended. Implementation Date: June 30, 2026 Responsible Person: Meyleen Hernández Rivera Finance Director