Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed Federal Programs ALN 20.106, Airport Improvement Program Name of Federal Agency U.S. Department of Transportation - Federal Aviation Administration Category Internal Control/Compliance; Significant Deficiency Compliance Requirement Equipment and Real Property Management Criteria 2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. 2 CFR 200.313 (d) (2) establishes that a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. 2 CFR 200.313 (d) (3) establishes that a control system must be developed to ensure adequate safeguard to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 2 CFR 200.313 (d) (4) establishes that adequate maintenance procedures must be developed to keep the property in good condition. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 95 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Criteria – (continued) 2 CFR 200.313 (d) (5) establishes that if the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Property Division Manual No. 500 Section .12 (A) (1) establishes that the General Services Manager together with the Property Division Supervisor will be responsible to take an annual physical inventory. Also, will be responsible for maintaining files to evidence the annual physical inventory taking. Property Division Manual No. 500 Section .12 (A) (4) establishes that Property Division Supervisor will be responsible for investigating and determining the changes that correspond to the founded differences as a result of inventory. Property Division Manual No. 500 Section .16 (1) establishes that all equipment acquired with federal funds will be properly identified and made reference of sourced funds, percentage of federal participation and number of agreement or grant, as apply. Condition While obtaining our understanding of the policies and procedures in place at the Authority’s office in relation to the management of property and equipment, management represented to us that the required physical inventory has not been performed by the Authority’s Property Division personnel during the last seven years as required. Cause The Authority’s lack of personnel has been the principal cause for not taking the physical inventory of property and equipment, as required by federal regulations. Also, due to the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80), a total of 127 eligible employees of the Authority took advantage of the benefits from the incentivized program under said act. In addition, some personnel have simply resigned from their occupied position and left the Authority willingly. The significant reduction in experienced personnel, particularly in key financial functions, occurred prior to the completion of fiscal year-end closing procedures. The Authority did not have an adequate succession or transition plan to ensure continuity of operations and effective internal control during this workforce reduction. Consequently, the Authority experienced disruption in the Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 96 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Cause – (continued) performance of key financial reporting processes and became increasingly reliant on external consultants to complete certain closing entries and procedures. Effect The lack of a periodic physical inventory procedures does not allow the Authority the timely identification of issues related to federally acquired property and equipment in order to take needed actions to prevent or correct inadequate condition. The Authority is exposed to the risk of possible unauthorized use, misappropriation and disposition of property without being noticed due to the lack of internal controls and proper supporting accounting records. Such condition exposed the Authority not to take any action to recover any suffered loss as reconciliation of physical assets to accounting records could not be made. Context This finding was present in the prior year single audit report as finding 2024-004 and 2023-004. Corrective action plan from the prior year single audit report (issued September 29, 2025) stated that during fiscal year 2025‐2026 the Human Resources area will conduct an analysis and evaluation of all vacant positions to determine which ones can be hired. Once this analysis is completed, management will obtain the required approval to hire additional personnel to address the physical inventory observation and counting. Therefore, the condition is still present as of June 30, 2025. Identification of repeat finding This is a repeat finding from the immediate previous audit, Finding 2024-004. Questioned costs Could not be determined. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Recommendation We recommend management to appoint personnel to perform this task. Such personnel might come from contracting outsourced third-party providers or hiring new or training current personnel to assist in the capital assets inventory taking procedures. In addition, we recommend that management enforce the procedures to be followed by the Property Division to mitigate the risks of misappropriation. This could be denominated as a special project to be included as part of the subsequent fiscal year budget and be contracted with a third party as the benefits overweight the risk of loss. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 108-114.
Finding No: 2025-005 – Late filing of data collection form and reporting package Federal Programs ALN 20.106, Airport Improvement Program ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN 21.027, Coronavirus State and Local Fiscal Recovery funds Name of Federal Agency U.S. Department of Transportation - Federal Aviation Administration U.S. Department of Homeland Security U.S Department of Treasury Category Internal Control/Compliance; Significant Deficiency Compliance Requirement Reporting Criteria 2 CFR 200.512 (a) (1) establishes that the audit must be completed, and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditors' report(s), or nine months after the end of the audit period. Condition The Authority did not submit the required data collection form and reporting package within the required period by March 31, 2026 (9 months after the end of fiscal year). Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 99 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-005 – Late filing of data collection form and reporting package – (continued) Cause The Authority did not comply with this requirement since the audit of its financial statements, and accordingly its reporting package and procedures, were not ready to be released by the due date. Such delay was mainly attributed to the Authority having difficulties with its timely monthly closings due to its limited personnel in the area of Accounting and Federal Funds Affairs Division. This was enhanced by the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80) mentioned in findings 2024-003 and 2024-004. Effect Federal grantors were prevented from being informed on a timely basis of the current and previous audits findings, recommendations and corrective action being taken by the Authority. Also there has been a late disclosure about the Authority’s operating results. Consequently, any action, further requirements or request of support from the federal grantor could not be executed on a timely basis or not executed at all. Context The complete audit reporting package including the Data Collection Form, which is an annual requirement, was filed after the corresponding due date. Identification of a repeat finding This is a repeat finding from the immediate previous audit, Finding 2024-005. Questioned costs. None Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-005 – Late filing of data collection form and reporting package – (continued) Recommendation We recommend to the Authority to establish a reporting and filing schedule with the Federal Affairs Division to review filing of required annual reporting in order to ascertain that all team members be aware of due dates, including any extensions, if applicable. Such scheduling must be shared to the corresponding officials at the central government in charge of providing the necessary financial information to be included as part of the Authority’s financial statements. Also, the Authority should evaluate the necessity of additional personnel in the area of Accounting and Federal Funds Affairs Division. In addition, we recommend management to recruit new personnel to assist in the financial reporting process. Such personnel might come from contracting outsourced third-party providers or hiring new or training current personnel to assist in the financial reporting process. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See
Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Category U.S. Department of Treasury U.S. Department of Homeland Security Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. 2. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 102 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Criteria – (continued) 3. Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. 5. Comparison of expenditures with budget amounts for each Federal award. 6. Written procedures to implement the requirements of § 200.305. 7. Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. In addition, the 2 CFR Compliance Supplement states the following under Special Test and Provisions – Project Accounting: For large projects, the recipient is required to make an accounting to Federal Emergency Management Agency (FEMA) of eligible costs. Similarly, the subrecipient must make an accounting to the recipient. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the FEMA-State Agreement, all grant conditions were met, and that payments for that project were made in accordance with the applicable payment provisions. For improved and alternate projects, if the total cost of the projects does not equal or exceed the approved eligible costs, then the auditor should expect to see an adjustment to reduce eligible costs (44 CFR section 206.205). For Small Projects, FEMA does not adjust estimated costs to the actual incurred amount. The Subrecipient must certify that they completed the approved SOW, and the Recipient must certify that they made all payments in accordance with the FEMA-State/Territory/Tribe agreement. This is typically completed on a Small Project Completion Certification. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 103 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Condition During our procedures over the Authority’s funds received from FEMA we noticed the following: 1. Return of interest earned on FEMA-related funds totaling approximately $211,853 was not timely recorded in the general ledger and was subsequently recorded through a post-closing entry dated January 26, 2026. 2. Management initially misclassified approximately $6 million received under the Coronavirus State and Local Fiscal Recovery Funds as state funds rather than federal awards. As a result, the amount was originally excluded from the Schedule of Expenditures of Federal Awards (the Schedule). Cause The condition was caused by the Authority's lack of personnel on the federal funds management office which has been present during prior audit periods, the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80), and the resignation of some personnel from their occupied position and left the Authority willingly as stated in finding 2025-004 are the main causes for the condition. Effect Inadequate accounting and controls over federal funds can cause incorrect revenue recognition as capital advances are recognized as revenue when used appropriately and not when received. In addition, this can cause amounts to be included on the Schedule incorrectly as some of the activities received as capital advances have not actually occurred. It also creates risk of allocating funds in the incorrect federal awards as some of these have similar uses and assistance listing numbers. Also, the Authority could be subject to penalties or sanctions from the Federal Grantor. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 104 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Context The Authority recognized as federal award revenue of $6 million approximately, as contributions from the Commonwealth of Puerto Rico and therefore were originally not included in the Schedule. Also, $211,853 on the bank accounts where FEMA funds were deposited had to be returned since the funds cannot be deposited in an interest-bearing account. Journal entry recognizing this return was subsequently recorded through a post-closing entry dated January 26, 2026. Identification of repeat finding This is a repeat finding from the immediate previous audit, Finding 2025-006 Questioned costs None as adjustments were made during the audit to correct the misstatement. Recommendation We recommend the Authority’s Federal Funds Management Office (FFMO) and finance department coordinate with the external consultant who handles federal funds received from FEMA to better identify and classify funds received. In addition, we recommend the Authority to address the FFMO personnel limitations by hiring additional personnel for the Authority, re-shifting task between current personnel or by relaying on outsourced third party providers. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 108-114.
Finding No: 2025-007 – Lack of controls over minimizing the time elapsing between the transfer of funds from the pass-through entity and the disbursement of funds by the Authority . CFR Part 200 Subpart D Subsection 200.305 states the following: For recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. The recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. Whenever possible, advance payment requests by the recipient or subrecipient must be consolidated to cover anticipated cash needs for all Federal awards received by the recipient from the awarding Federal agency or pass-through entity. During our audit procedures, we identified that most capital advances received during fiscal years 2025 and 2024 from FEMA were still unused on June 30, 2025, with no procedures to minimize the time elapsing between funds received and disbursed. In addition the Authority had to returned unused funds to the pass through entity since they remained unused for more than a year.