Finding Number - 2025-003 Cash Management; Allowable Costs Federal Agency Department of Health & Human Services Federal Program Epidemiology and Laboratory Capacity for Infectious Diseases ALN 93.323 Grant Number Various Compliance Requirement Cash Management / Unallowable Costs Type of Findings Internal Control over Compliance / Compliance Category Significant Deficiency Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In accordance with 2 CFR §200.303, non-federal entities are required to establish and maintain effective internal control over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the award. Such controls should include procedures to ensure expenditures are timely identified and included in reimbursement requests. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Condition During our testing of expenditures charged to the Epidemiology and Laboratory Capacity (ELC) program, we identified instances in which expenditures incurred and paid during fiscal year 2022 were included in reimbursement requests submitted during 2025. Although the expenditures appear to relate to allowable program activities, the significant lapse of time between the payment date and the reimbursement request indicates weaknesses in the monitoring and tracking of expenditures pending reimbursement. Also, because the expenditures were originally incurred and paid in 2022, and supporting documentation for prior reimbursement requests was not readily available for the period under audit, we were unable to determine whether these costs had been previously requested for reimbursement. Drawdown No. Type Receipt Date Document No. Check Issuance Date Amount 1525250884 Reimbursement 11-Apr-25 426878 7/21/2022 $ 491,400 428005 8/25/2022 249,960 428049 8/25/2022 558,600 433231 10/11/2022 525,000 440140 11/7/2022 211,803 440145 11/7/2022 248,660 440156 11/7/2022 204,941 429703 6/24/2022 767,102 435438 8/12/2022 745,039 447617 12/8/2022 211,312 $ 4,213,817 Cause Management explained that, in prior periods, drawdown requests were processed manually and on an advanced basis. Subsequently, the Department implemented an electronic system to submit drawdown requests and transitioned the process to a reimbursement method. As part of this transition, certain advance requests that had been processed manually were not properly cleared in the new system and remained recorded as if they had not been requested. Because these requests appeared as pending in the system, they were later submitted again through the new reimbursement process, resulting in duplicate requests in the system records. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Effect As a result, these requests appeared as outstanding in the electronic system and were later submitted again through the reimbursement process. This situation created duplicate drawdown requests in the system records and increased the risk of misstated drawdown activity and potential over-requesting of federal funds if not properly identified and reconciled. Questioned Costs None Perspective Information During our procedures, management explained that prior to the implementation of the current electronic drawdown system, requests for federal funds were submitted manually on an advanced basis. Subsequently, the Department implemented an electronic system to process drawdown requests and transitioned the funding methodology from advances to a reimbursement basis. As part of this transition, certain drawdown requests that had already been submitted manually were not properly cleared or recorded in the new system and remained reflected as pending. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management implement procedures to reconcile manual drawdown requests processed prior to the implementation of the electronic system with the transactions recorded in the system. In addition, management should conduct a comprehensive and detailed review of all legacy transactions that originated before the system transition to ensure that any requests previously processed manually are properly identified, cleared, and supported by adequate documentation. This review should be performed with heightened scrutiny to detect any duplicate or unreconciled drawdown requests. Furthermore, management should establish ongoing controls to periodically review outstanding balances in the system and ensure that all drawdown records are accurate, complete, and appropriately supported. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number- 2025-004 Group VIII Matching Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Matching Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Per 42 CFR §433 and the approved State Plan under the Medicaid program, federal reimbursement must be claimed using the appropriate Federal Medical Assistance Percentage (FMAP) applicable to each eligibility category. Under the Affordable Care Act expansion provisions, expenditures related to Childless Adults under Group VIII are eligible for a 90% FMAP during the audit period. However, expenditures related to the Parent/Caretaker eligibility category are subject to the regular FMAP rate applicable to the state during the audit period (approximately 76%–77.5%). Therefore, claims submitted to the federal government must properly distinguish eligibility categories to ensure the correct matching percentage is applied. Condition During our testing of federal reimbursement claims, we identified five (5) invoices in which the description of the expenditure referenced Group VIII, which includes the following eligibility categories: ✓ Childless Adults ✓ Children age 19–20 ✓ Parent/Caretaker All five invoices were claimed at the enhanced FMAP rate of 90%. However, Parent/Caretaker expenditures during the audit period were eligible only for the regular FMAP rate (76%–77.5%). As a result, expenditures that may have corresponded to Parent/Caretaker beneficiaries were included in claims submitted at the enhanced 90% rate without documented support demonstrating proper eligibility classification. Cause The condition resulted from system limitations and the absence of automated eligibility classification during the period prior to MMIS implementation. The lack of system functionality to segregate eligibility categories within Group VIII resulted in all related expenditures being claimed at the enhanced FMAP rate. Effect Claiming expenditures at an incorrect FMAP rate may result in: • Potential overstatement of federal reimbursement • Noncompliance with federal matching requirements • Risk of repayment to the federal government if amounts are determined to be ineligible. Questioned Costs Indeterminable Perspective Information Due to the absence of beneficiary-level segregation and supporting documentation distinguishing eligibility categories within Group VIII during the audit period, we were unable to determine the portion, if any, of the tested expenditures attributable to the Parent/Caretaker category that may have been claimed at an incorrect FMAP rate. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management: 1. Perform a retrospective analysis of Group VIII expenditures during the audit period to determine whether any Parent/Caretaker expenditures were improperly claimed at the 90% FMAP rate. 2. Quantify and return any overclaimed federal funds, if applicable. 3. Implement formal written procedures to ensure that eligibility categories are properly classified prior to submission of federal claims. 4. Ensure that the enhanced MMIS segregation controls implemented in Q3 2024 are formally documented and subject to periodic supervisory review. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number - 2025-005 Rebates Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Allowable Costs / Activities Cash Management Reporting Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Pursuant to Section 1927 of the Social Security Act (42 U.S.C. § 1396r-8) and implementing regulations at 42 C.F.R. Part 447, Subpart I, states must: ✓ Report quarterly drug utilization data to manufacturers within 60 days after the end of each quarter; and ✓ Ensure that manufacturers remit rebate payments within 30 days after receipt of utilization data; and ✓ Properly identify, record, and credit rebate collections to the Medicaid program in a timely manner. Department of Health of the Commonwealth of Puerto Rico Schedule of Findings and Questioned Costs – (Continued) For the Fiscal Year Ended June 30, 2025 - 47 - Section III- Findings and Questioned Costs Relating to Federal Awards– (continued) Finding Number - 2025-005 Rebates – (continued) Criteria – (continued) In addition, 2 C.F.R. § 200.302 (Financial Management) requires non-federal entities to maintain effective financial management systems that provide accurate, current, and complete disclosure of financial results and ensure proper accounting for program income and federal funds. Further, 2 C.F.R. § 200.305 (Payment) requires that federal funds be minimized between drawdown and disbursement and that program income and recoveries be properly accounted for and applied. Condition During our audit, we identified that the Medicaid Cluster Program (the Program) returned Medicaid drug rebates outside of the federally required timeframes established under the Medicaid Drug Rebate Program. Specifically, rebates received from pharmaceutical manufacturers were not identified, recorded, and returned to the Medicaid program in accordance with the regulatory deadlines prescribed by federal law and regulation. As a result, federal Medicaid funds were not reconciled and credited in a timely manner, and program expenditures were overstated for the applicable reporting periods. Quarter End period Due date Remmitance date Late Q1 FFY2024 3/31/2024 6/29/2024 9/20/2024 83 Q1 FFY2024 3/31/2024 6/29/2024 12/5/2024 159 Q1 FFY2024 3/31/2024 6/29/2024 4/25/2025 300 Q2 FFY2023 6/30/2023 9/28/2023 9/20/2024 358 Q2 FFY2023 6/30/2023 9/28/2023 12/5/2024 434 Q2 FFY2023 6/30/2023 9/28/2023 4/25/2025 575 Q2 FFY2024 6/30/2024 9/28/2024 12/5/2024 68 Q2 FFY2024 6/30/2024 9/28/2024 4/25/2025 209 Q3 FFY2023 9/30/2023 12/29/2023 9/20/2024 266 Q3 FFY2023 9/30/2023 12/29/2023 12/5/2024 342 Q3 FFY2023 9/30/2023 12/29/2023 4/25/2025 483 Q3 FFY2024 9/30/2024 12/29/2024 4/25/2025 117 Q4 FFY2023 12/31/2023 3/30/2024 9/20/2024 174 Q4 FFY2023 12/31/2023 3/30/2024 12/5/2024 250 Q4 FFY2023 12/31/2023 3/30/2024 4/25/2025 391 Cause The Program relies on information provided by the actuaries of Puerto Rico Health Insurance Administration (PRHIA) to identify and calculate Medicaid drug rebates. PRHIA is responsible for compiling and providing the necessary rebate data to the Program. Based on the information received from PRHIA, management processes the corresponding reimbursements once the data is received. However, the Program does not maintain independent monitoring procedures to verify the completeness and timeliness of the information provided by PRHIA, nor does it perform periodic reconciliations between rebate information received and program expenditures to ensure that all applicable rebates are properly identified and credited to the Medicaid program in accordance with federal requirements. Effect As a result of this condition: ✓ The Program was not in compliance with federal Medicaid Drug Rebate Program requirements and Uniform Guidance financial management standards; and ✓ There is an increased risk of questioned costs and federal disallowances. Questioned Costs Indeterminable Perspective Information Under the program, state Medicaid agencies are required to submit quarterly drug utilization data to participating manufacturers. Based on this data, manufacturers calculate and remit rebate payments to the state. These rebate revenues constitute program income and must be applied to reduce Medicaid expenditures in accordance with federal law and Uniform Guidance. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal monitoring and reconciliation procedures to ensure that all Medicaid drug rebate information received from PRHIA is complete and accurately recorded. This should include periodic reconciliations between rebate data provided by PRHIA, rebate receipts, and related Medicaid program expenditures. Also, management should implement a formal follow-up process with PRHIA to periodically confirm that all applicable rebate information has been provided and processed in a timely manner. We also recommend that management: ✓ Implement written policies and procedures governing the identification, recording, reconciliation, and return of Medicaid drug rebates; ✓ Establish periodic reconciliation controls to ensure rebate receipts are timely credited to the Medicaid program; ✓ Strengthen oversight and monitoring of rebate activity to ensure compliance with Section 1927 of the Social Security Act and 42 C.F.R. Part 447; and ✓ Provide training to financial and program staff regarding federal rebate compliance requirements. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number - 2025-006 Late vendor credits Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Cost Principles Type of Finding Internal Control over Compliance / Compliance Category Other Criteria In accordance with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR §200.305(b)(1) requires that pass-through entities ensure payments to subrecipients are made in a timely manner, generally within a reasonable period after receipt of a valid request for payment. Federal guidance and established administrative practice interpret a reasonable period for purposes of cash management compliance to mean no later than 30 calendar days following receipt of a proper payment request, unless the pass-through entity reasonably determines the request to be improper. This requirement applies regardless of whether the federal award operates on a reimbursement basis and is intended to ensure compliance with federal cash management standards and minimize the time between disbursement of funds and federal reimbursement. Criteria – (continued) For Medicaid program (Assistance Listing 93.778), CMS regulations further require that expenditures claimed for Federal Financial Participation (FFP) be based on actual, incurred, and properly documented costs in accordance with 42 CFR §433.32 and applicable CMS financial management guidance. CMS oversight emphasizes timely payment and proper cash management practices to ensure that expenditures are valid and that federal funds are drawn only for allowable and properly incurred costs. Additionally, 2 CFR §200.332(a) requires pass-through entities to monitor subrecipients and ensure compliance with applicable federal requirements, including adherence to cash management provisions. Condition During testing of subrecipient disbursements, it was noted that six (6) payments included in the sample of 178 were made more than 30 calendar days after the pass-through entity received a valid request for payment from the subrecipient. The delays ranged from 46 to 150 days beyond the regulatory requirement. Item No. Check Date (Voucher id) Invoice Date Audited Amount 1 1/24/2025 00536685 12/4/2024 $ 1,458 2 5/23/2025 00553562 12/23/2024 $ (1,321,563) 3 5/23/2025 00553519 12/23/2024 $ 2,111 4 5/23/2025 00553562 4/1/2025 $ (220,261) 5 7/23/2024 00515301 6/7/2024 $ 5,876 6 7/23/2024 00515303 6/7/2024 $ 8,911 Also, we identified two (2) instances in which vendor credits related to previously issued invoices were not applied to the corresponding invoices until approximately one (1) to three (3) months after the original drawdown was requested. Item No. Invoice number Invoice date Credit amount Drawdown not including credit Date credit return Days 1 RF VITAL 25-003 12/27/2024 $ (1,321,563) 1/13/2025 6/3/2025 -141 2 RF VITAL 25-006 4/10/2025 $ (220,261) 4/28/2025 6/3/2025 -36 Cause The delays in payment were primarily attributable to internal cash management and administrative practices, including the practice of awaiting the receipt of federal funds or internal approvals prior to issuing payment to the subrecipient. These practices were not aligned with the timing requirements established under Uniform Guidance. Management indicated that the Program waits until sufficient positive fund balances are available before processing the return of outstanding credits. As a result, certain credit balances may remain pending until adequate funds are available to complete the reimbursement. This practice may delay the timely return of funds in accordance with applicable requirements. Effect Failure to remit payment to subrecipients within the required 30-day timeframe. Continued noncompliance may increase the risk of: a) Audit findings under the Uniform Guidance, b) Increased federal oversight, c) Potential questioned costs, and d) Strained financial operations for subrecipients due to delayed reimbursement. The delayed application of credits resulted in temporary overstatements of expenditures used to support Federal drawdowns. Although the credits were eventually applied, the timing difference may result in noncompliance with cash management requirements under 2 CFR §200.305, as Federal funds may have been drawn in excess of immediate cash needs. Questioned Costs None Perspective Information This finding was identified during the audit of the Medicaid program (Assistance Listing 93.778) for the fiscal year ended 2025. The payments tested related to expenditures incurred and invoiced by a state agency acting as a subrecipient under an interagency agreement. Although both the pass-through entity and the subrecipient are agencies within the same state government, federal regulations treat them as distinct entities for purposes of cash management compliance. Prior Year Audit Finding This is not a prior year finding Recommendation It is recommended that the pass-through entity strengthens internal controls over subrecipient payments to ensure that all valid requests for payment are processed and paid within the 30-calendar-day timeframe required by 2 CFR §200.305(b)(1). Management should also ensure that payment procedures are not contingent upon the timing of federal drawdowns and that any delays are adequately documented and communicated to the subrecipient. We recommend that management strengthen internal controls over the drawdown process by implementing a formal review procedure to verify that all outstanding vendor credits have been identified and applied prior to submitting a Federal draw request. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.
Finding Number - 2025-007 Manage Care Audits Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Special tests Type of Finding Internal Control over Compliance Category Other Criteria Federal Medicaid managed care regulations (42 CFR Part 438.358) and PRHIA contract requirements for Managed Care Organization (MCO) oversight stipulate that findings from External Quality Review Organization (EQRO) reports should be used to monitor and improve the quality of services and that corrective actions should be implemented in a timely manner. Also, the regulations require that EQRO technical reports be made publicly available, including publication on the State’s website. Timely follow-up and public availability of these reports are essential to ensure transparency, compliance with quality standards, and adherence to State Plan requirements. Condition During our review of the EQRO’s activities for Puerto Rico Medicaid MCOs, we noted that the 2023 EQRO report issued by Mercer identified findings across all four MCOs that required corrective actions. However, management did not perform documented follow-up or monitoring to ensure these findings were addressed throughout 2024. Instead, MCOs were not reviewed for resolution of these issues until the subsequent annual EQRO review. Also, we verified that the results of these periodic audits were posted on the state’s website, as required by federal regulations. However, most recent reports were not included on website. Cause Management relied primarily on the subsequent annual EQRO review to determine whether MCOs had addressed the 2023 findings, rather than implementing ongoing monitoring procedures throughout 2024. As a result, formal internal procedures to document the monitoring of corrective actions and the timely publication of the reports on the website have not been fully established. Effect The lack of documented monitoring procedures and confirmation of public posting may result in delays in addressing identified findings and limit transparency regarding program performance. This condition may also increase the risk of noncompliance with federal Medicaid managed care regulations and applicable contractual requirements. Questioned Costs None Perspective Information During our review of the EQRO oversight process, we noted that the Program receives technical reports prepared by the External Quality Review Organization (EQRO) related to the performance and quality of services provided by the Managed Care Organizations (MCOs). These reports include findings and recommendations intended to support monitoring activities and improve the quality of services provided under the Medicaid managed care program. However, documentation supporting timely follow-up on the findings and confirmation that the reports were made publicly available on the Program’s website was not consistently maintained. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal procedures to document the review and follow-up of EQRO findings and recommendations, including tracking the implementation of corrective actions by the MCOs. Also, management should implement a process to ensure that all required EQRO technical reports are published on the Program’s website in a timely manner and that evidence of such publication is retained for monitoring and compliance purposes. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.