Audit 401230

Finding Reference 2025-003 Federal Agency: U.S. Department of Housing and Urban Development Pass-Through Agency: P.R. Department of Housing Federal Program: Community Development Block Grants/State’s Program and Non-Entitlement Grants in Hawaii (Assistance Listing No. 14.228) Requirement: Equipment and Real Property Management (F) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) Statement of Condition: Section II – Financial Statements Findings – Finding Reference 2024-002. Criteria: CFR 570.505 Use of Real Property - The standards described in this section apply to real property within the recipient's control which was acquired or improved in whole or in part using CDBG funds in excess of $25,000. These standards shall apply from the date CDBG funds are first spent for the property until five years after closeout of an entitlement recipient's participation in the entitlement CDBG program or, with respect to other recipients, until five years after the closeout of the grant from which the assistance to the property was provided. Cause of Condition: Section II – Financial Statements Findings – Finding Reference 2025-002. Effect of Condition: We could not identify the property acquired with CDBG funds to realize the proper evaluation as required. Recommendation: Section II – Financial Statements Findings – Finding Reference 2025-002. Questioned Costs: None. Prior Year Finding: This finding is similar to prior year finding 2022-003, 2023-003 and 2024-003. Views of Responsible Officials and Planned Corrective Action: We concur with the audit finding. As expressed in the corrective action related to Finding 2025-002, we are going to identify budgetary resources to engage another staff to work with the capital assets subsidiary ledger completeness. Implementation Date: June 30, 2026 Responsible Person: Mrs. Miraisa David Esparra Finance Department Director

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: Activities Allowed – Housekeepers activity (A) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) Statement of Condition: We examined four (4) files of housekeeper program participants and found the following exceptions: a) The Program staff did not visit at least twice per month the participant’s housing unit to ensure the quality of services, according to the activity procedures guide. b) The monthly evaluation of the work carried out by the housekeeper was not carried out. Criteria: 24 CFR, Section 570.484 states that the Municipality must ensure that the program funds benefit very low, low and moderate-income persons and retain documentation justifying its certification. Also, the Municipality has an operational guide approved by its pass-through agency, P.R. Housing Department where it is established all procedures and program requirements for housekeeper activities. Cause of Condition: The Municipality’s controls and procedures failed to ensure that the participant’s files include all the required documents to comply with the Program requirements. Effect of Condition: The Municipality is not in compliance with the Code of Federal Regulations 24, Section 570.484 and with the operational guide. Recommendation: We recommend management follow the procedures established by the P.R. Department of Housing in the procedures manual, including the use of the forms included in it. Questioned Cost: None. Prior Year Finding: This finding is similar to prior year finding 2023-005 and 2024-004. Views of Responsible Officials and Planned Corrective Action: We acknowledge and accept the observation noted during the Single Audit regarding the frequency of monitoring visits and the completion of monthly evaluations for participants in the Housekeeper Program. We understand that, according to the program’s activity procedures guide, staff are expected to conduct at least two visits per month to each participant’s housing unit and to complete a monthly evaluation of the services provided. However, we would like to provide additional context regarding the operational realities of the program. The assigned Program Coordinator is responsible for overseeing approximately 20 program participants, which would require a minimum of 40 home visits per month to fully comply with the two-visits-per-month requirement. Considering that there are, on average, 20 working days per month, this expectation represents a significant workload within the available time. In addition to conducting home visits and preparing the corresponding reports, the coordinator performs a wide range of essential duties. These include supervising and addressing situations involving approximately 20 housekeeper aides, coordinating services and referrals with external agencies to meet participants’ social needs, organizing meetings, managing administrative responsibilities such as procurement of supplies used by the aides, and participating in program-related administrative meetings. We can attest that the coordinator consistently demonstrates a high level of commitment and diligence in fulfilling these responsibilities. Priority is given to participants with more complex or urgent needs, and in such cases, visits may occur more than once per month. However, meeting the requirement of two visits per month for every participant presents a significant challenge given the scope of responsibilities assigned. We remain committed to evaluating our processes and identifying opportunities to strengthen compliance while ensuring the continued quality and effectiveness of services provided to program participants. Notwithstanding these challenges, we will continue making every effort to comply with the requirements established in the CDBG guidelines. Implementation Date: March 31, 2027 Responsible Person: Mr. Hector R. Sanjurjo Rodríguez Federal Programs Director

Finding Reference 2025-005 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: P.R. Department of Family Federal Program: Child Care and Development Block Grant (ALN 93.575) Requirement: Earmarking (G) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) 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 amounts that were spent on direct services did not meet the minimum amount. Effect of Condition: The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation: Management should take the necessary steps to ensure that the Program complies with the direct service 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 2024-005. Views of Responsible Officials and Planned Corrective Action: We concur with the audit finding. The Municipality did not comply with the required direct service spending percentage due to the limited availability of direct service providers under the program’s Child Care Network (Red de Cuido) division. As a result, only 10 children were enrolled, compared to the 18 originally budgeted. This situation ultimately led to the elimination of the Child Care Network division in the 2025-2026 proposal, as the program required a minimum of 10 service providers, a threshold that could not be met due to the lack of available personnel. Implementation Date: June 30, 2026 Responsible Person: Mr. Hector R. Sanjurjo Rodríguez Federal Programs Director

Finding Reference 2025-006 Federal Agency: All agencies and pass-through agencies identified in the Schedule of Expenditures of Federal Awards Federal Program: All Programs identified in the Schedule of Expenditures of Federal Awards Requirement: Single Audit Act Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) Statement of Condition: The Single Audit Report for the fiscal year ended June 30, 2025, was not issued within nine (9) months after the end of the audit period. The Data Collection Form and the reporting package were not submitted on a timely basis. Criteria: The Single Audit Act, as amended, requires that the audit report must be submitted to the Federal Audit Clearinghouse no later than nine (9) months after the end of the audit period. Cause of Condition: The Municipality did not comply with the established regulation as prescribed by the Office of Management and Budget (OMB) CFR Part 200. Effect of Condition: The Municipality could lose federal grants due to the noncompliance with the Single Audit Act requirements. Recommendation: Procedures should be implemented to ensure that the Municipality complies with the established Federal Regulation, as prescribed by OMB CFR Part 200. Questioned Cost: None. Prior Year Finding: No. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. The preparation of the financial statements for the fiscal year ending June 30, 2026, has begun. In addition, the progress of the audit will be continuously monitored with the external auditors hired by the Municipality to ensure that they are issued on or before March 30, 2027. Implementation Date: June 30, 2026 Responsible Person: Mrs. Miraisa David Esparra Finance Department Director