Audit 393130

Finding Reference 2025-003 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 2024-004 & 2023-004. Statement of Condition In our Earmarking Test, we found that the Program did not comply with the direct spending earmark limitation that requires the program to spend no less than seventy percent (70%) to fund direct services. Criteria 45 CFR, Subpart F, Section 95.50 (f) (2) states that from Discretionary amounts provided for a fiscal year, the Lead Agency shall use no less than seventy percent (70%) to fund direct services (provided by the Lead Agency). Cause of Condition The program’s budget, approved by the pass-through entity, was not distributed according to the cost limitations required for the direct services. Therefore, the amount spent per category of expenditure did not meet the minimum amount. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation We recommend the Program’s Management to request to the pass-through entity a revision of the approved budgeted amounts in order to make all the required adjustments to comply with the program cost limitations. Questioned Cost None Views of Responsible Officials and Planned Corrective Action We concur with the finding. As an internal control and prevention measure, the budget sent by the Agency will be verified with the percentages (%) established in the contract. If they do not match, ACUDEN will be asked to amend the budget. Also, as part of the corrective action plan, the municipality will be moving the location of its centers in search of better accessibility for participants and to be more aggressive in providing services and spending the allocations in full. Implementation Date: During fiscal year 2025-2026. Responsible Person: Mrs. Natasha Vázquez Federal Programs Director

Finding Reference 2025-004 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) It is not a prior-year finding. Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of five (5) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports of two (2) projects 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’s 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 Views of Responsible Officials and Planned Corrective Action We concur with the finding. During the testing of reports, the Quarterly Progress Reports of five (5) projects, corresponding to two (2) quarters of fiscal year 2024-2025, were evaluated. It was found that in two (2) projects, the quarterly reports did not match the accounting records or the project documentation. Therefore, for the purposes of this audit, the municipal accounting controls and procedures did not ensure that the reported information was accurate, up-to-date, and fully reconciled with the financial records. In light of the above, the reports will be reconciled with the accounting records, and the discrepancies found will be identified, documented, and adjusted in the system where the error originated, as appropriate. Furthermore, from this point forward, once the Quarterly Reports (QPR) are issued, a copy must be sent to the Program Accountant, the Finance Director, and myself for validation and reconciliation prior to official filing, thus preventing situations like this to occur. This process will form part of the internal control required to ensure that the reported information is accurate, current, complete, and consistent with the accounting records, in accordance with applicable federal requirements. Implementation Date: From March 2026. Full implementation is expected in fiscal year 2026-2027. Responsible Person: Mrs. Natasha Vázquez Federal Programs Director