Finding 1156486 (2024-001)

Material Weakness Repeat Finding
Requirement
G
Questioned Costs
-
Year
2024
Accepted
2025-09-29

AI Summary

  • Core Issue: The Organization is currently non-compliant with matching fund requirements due to IMPI's withdrawal of support.
  • Impacted Requirements: The EPA Assistance Agreement mandates securing matching funds from the Mexican government, which has not been fulfilled.
  • Recommended Follow-Up: The Organization should seek alternative funding sources in Mexico and engage with the federal awarding agency for potential solutions.

Finding Text

Compliance and IC over Compliance Assistance Listing Number 66.202 Environmental Protection Agency Endowment EPA Assistance Agreement ID Number: XP989490-01-0 Dated September 30, 1999 Criteria: Per the EPA Assistance Agreement Terms and Conditions "3. Upon receiving the grant award, the grantee will secure matching funds from the Mexican government." Condition Found: On September 26, 2011, the Organization obtained a match from the Instituto Mexicano de la Propiedad Industrial “IMPI” on behalf of the Mexican government. The match was in Mexican Peso equivalent of $5 million US Dollars based on that day’s exchange rates published on the date of the agreement by the Banco de Mexico in the Diario Oficial de la Federacion. During April 2020 IMPI notified the Organization that they will no longer provide the matching funds due to economic hardship related to covid 19. Context: The condition noted was identified as part of our review of federal awards. Effect: The Organization is in non-compliance with match requirements. Cause: IMPI will no longer match the funds due to economic hardship related to covid 19. Questioned Cost: None Recommendation: It is recommended the Organization seek additional contributions sourced within Mexico. In addition, the Organization should contact the federal awarding agency to discuss possible alternative resolutions to this finding. Views of Responsible Officials We filed a lawsuit in 2020 because the way IMPI withdrew from the agreement was illegal, which had a favorable outcome in late 2021. We filed a second lawsuit, that we also won, to enforce the previous lawsuit as the funds have not been reestablished. We expect this to be resolved by the end of March 2025.

Corrective Action Plan

The Foundation pursued legal action because the way in which the IMPI withdrew from our agreement was found to be illegal. The Mexican court agreed with our position, and by the end of 2021, the Foundation had received a favorable resolution on the 2020 lawsuit. This led to initial meetings with IMPI's renewed top management, but unfortunately, we were unable to reset the funds. In June 2022, the Foundation formally requested that the IMPI reset the funds in order to continue functioning under the agreement, as a legally developed addendum had been created to supplement the original agreement. There were hectic changes in top management at the Mexican Ministry of Economy and the IMPI in 2022, resulting in unproductive efforts from previous negotiations. Then, in July 2023, the Foundation submitted a second lawsuit to enforce the one won in 2021, which was accepted by the court. On 13 September 2024, the Foundation was notified by the court of a favorable resolution regarding this second lawsuit. The IMPI still has one final opportunity to contest this resolution, although the probability of changing the outcome is minimal. Consequently, the Foundation's executives and its Board of Governors resumed communication with the IMPI's legal team to accelerate the resetting of the funds and the collaboration agreement. This was unsuccessful. Although the final ruling generally favored the Foundation, FUMEC filed a direct appeal for constitutional protection, claiming that the returns generated should not be limited to December 2022 but should instead be accumulated and calculated until IMPI actually made the payment; that is, until the month of 2024 in which IMPI complied with the ruling handed down on July 1, 2024. The court revoked the contested trial of July 1, 2024, and issued a new ruling, reiterating the considerations regarding the period and the amounts that IMPI is obliged to pay to FUMEC, in order to fully restore FUMEC's infringed subjective right. In compliance with this ruling, on September 8, 2025, the court issued a new ruling considering that the Collaboration Agreement was still in force and that IMPI had not demonstrated that it had fulfilled its obligations. Consequently, and reiterating its previous ruling, the court granted IMPI a period of no more than four months to comply with the Collaboration Agreement. IMPI was therefore required to reimburse the principal funds of $5 million USD to FUMEC’s endowment and pay the returns due for the period from August 2020 to May 2024. Proposed completion date – 2Q2026. Contact person – Eugenio Marin, Executive Director

Categories

Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1156485 2024-001
    Material Weakness Repeat

Programs in Audit

ALN Program Name Expenditures
47.U01 Endowment $4.00M
43.U01 Endowment $3.00M
10.U01 Endowment $1.90M
93.283 Centers for Disease Control and Prevention Investigations and Technical Assistance $919,173
93.318 Protecting and Improving Health Globally: Building and Strengthening Public Health Impact, Systems, Capacity and Security $159,379
47.U01 Endowment Expenses $69,293
43.U01 Endowment Expenses $50,712
66.202 Congressionally Mandated Projects $34,506
10.U01 Endowment Expenses $33,038
81.U01 Inclusive Energy Innovation Prize $19,502
19.022 Educational and Cultural Exchange Programs Appropriation Overseas Grants $11,161
11.307 Economic Adjustment Assistance $2,549