FINDING REFERENCE NUMBER 2024-005 FEDERAL PROGRAMS (ALN – 10.553) SCHOOL BREAKFAST PROGRAM (SBP) – CHILD NUTRITION CLUSTER (ALN – 10.555) NATIONAL SCHOOL LUNCH PROGRAM (NSLP) – CHILD NUTRITION CLUSTER (ALN – 10.559) SUMMER FOOD SERVICE PROGRAM FOR CHILDREN (SFSP) – CHILD NUTRITION CLUSTER (ALN – 10.582) FRESH FRUIT AND VEGETABLE PROGRAM (FFVP) – CHILD NUTRITION CLUSTER (ALN – 10.558) CHILD AND ADULT CARE FOOD PROGRAM (CACFP) U.S. DEPARTMENT OF AGRICULTURE (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.048A) CAREER AND TECHNICAL EDUCATION – BASIC GRANTS TO STATES (PERKINS V) (ALN – 84.367A) SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (formerly IMPROVING TEACHER QUALITY STATE GRANTS) (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS 1PRAEA18SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA19SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA20SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA21SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA22SCESUBA (10/01/2022 – 09/30/2023); 221PR300336E_A (10/01/2022 – 10/30/2024); S010A130052 (07/01/2013 – 09/30/2014); S010A140052 (07/01/2014 – 09/30/2015); S010A160052 (07/01/2015 – 09/30/2016); S010A160052 (07/01/2016 – 09/30/2017); H027A12003 (07/01/2012 – 09/30/2013); H027A14003 (07/01/2014 – 09/30/2015); H027A15003 (07/01/2015 – 09/30/2016); H027A18003 (07/01/2018 – 09/30/2019); H027A19003 (07/01/2019 – 09/30/2020); H027A20003 (07/01/2020 – 09/30/2021); H027A21003 (07/01/2021 – 09/30/2022); V048A180052 (07/01/2018 – 09/30/2019); S367A160052E (07/01/2016 – 09/30/2017); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Section 200.403 (g) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition 2 CFR Section 200.1, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient, any payment for ineligible goods or service, any duplicate payment, any payment for a good or service not received (except for those payments where authorized by law), any payment that is not authorized by law, and any payment that does not account for credit for applicable discounts. STATEMENT OF CONDITION As part of our audit procedures and interviews over financial reporting, we obtained a detail of accounts receivable related to duplicate or incorrect payments made for payroll transactions in the amount of $4,659,739. Invoices issued during the fiscal year ended June 30, 2024, balance, were distributed as federal and state, as follows: ALN Number Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 $ 167,694 10.558 1,240 84.010A 64,517 84.027A 228,284 84.041 546 84.048A 4,802 84.367A 1,027 84.425D 35,165 84.425U 27,501 Not Determined 2,357,671 Not Determined 25,907 Not Applicable 1,745,385 $ 4,659,739 Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) Special Education - Grants to States (IDEA, Part B) Impact Aid (Title VII of ESEA) Program Description Child Nutrition Cluster Child and Adult Care Food Program (CACFP) Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) COVID-19 Education Stabilizatiopn Fund: Elementary and Secondary School Emergency Relief Fund (ESSER) Total Invoices Issued Balance at 06/30/2024 Career and Technical Education - Basic Grants to States (Perkins V) Schoolwide Program (State and Federal Funds) Consolidated Funds (State and Federal Funds) State Funds COVID-19 Education Stabilizatiopn Fund: American Rescue Plan – Elementary and Secondary School Emergency (ARP ESSER) QUESTIONED COSTS Identified questioned costs are $530,776, which were identified as employees that didn't work for the Federal program. Other amount may be unallowed, if the PRDE can identify the portion of Federal funding incurred in Schoolwide and Consolidated activities. PERSPECTIVE INFORMATION The amount of $4,659,739, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2023-2024, the PRDE determined that an invoice for excess payroll payments proceeds. The PRDE was unable to indicate which amount of Schoolwide or Consolidated funds corresponds to Federal funding, because these funds close at year end. STATEMENT OF CAUSE The PRDE sends the Treasury Department of Puerto Rico a balance of the payroll, before the end of the fortnight, to speed up the payment process. By sending this information without balancing the hours worked, it causes errors in the payroll computations. POSSIBLE ASSERTED EFFECT The PRDE incurred payments to employees for hours not worked, and for which specific grants were received. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2023-005). RECOMMENDATIONS We recommend PRDE design and implement adequate internal controls and payroll processes that will identify in real – time or sooner any incorrect payroll payment made. FINDING REFERENCE NUMBER 2024-005 – continuation VIEWS OF RESPONSIBLE OFFICIALS Management agrees with the audit finding and has implemented a comprehensive corrective action plan to address payroll processing errors, strengthen internal controls, and ensure accurate and timely payments. As part of PRDE’s Fiscal Plan of 2020–2021, the Department launched the official integration project between the Time, Attendance, and Leave (TAL) system and the Payroll (RHUM) system. This integration ensures that payroll disbursements are made only after the employee’s attendance has been validated through the TAL system. Employees are required to record their attendance using biometric verification or have an authorized leave properly documented and approved by their supervisor before receiving payment. If attendance is not validated, the system automatically issues a notification and applies the necessary adjustment. This project, initiated in November 2020 with the collaboration of the Puerto Rico Fiscal Oversight and Management Board (FOMB), MS Consulting, the Department of the Treasury (Hacienda), the Financial Advisory Authority (AAFAF), and the Puerto Rico Innovation and Technology Service (PRITS), was fully integrated by February 2021. As a result, PRDE has significantly reduced overpayments, duplicate payments, and other payroll inconsistencies. To reinforce this effort, PRDE issued a new Time and Attendance Policy on December 7, 2021, later updated on April 11, 2022, which clearly defines employee responsibilities, authorized leaves, disciplinary procedures, and supervisor accountability. Under this policy, employees and supervisors are required to follow strict timekeeping procedures, and noncompliance triggers automatic system notifications and salary adjustments. The PRDE’s Time and Attendance staff continues to monitor and maintain compliance through: i. Ongoing training sessions for PRDE personnel; ii. System dashboards tracking attendance behaviors; iii. Issuance of notifications and payroll adjustments as required; and iv. Regular follow-up and evaluation activities. Additionally, PRDE’s Finance Office implemented a reconciliation process that integrates data from TAL, RHUM, and SIFDE, ensuring that payroll expenditures align with validated attendance records. The system now performs cross-checks before submission to the Treasury Department, preventing disbursements for unverified time. These combined measures—technological integration, policy enforcement, staff training, and reconciliation controls—have strengthened payroll accuracy, reduced the risk of overpayments, and improved financial accountability across the Department. IMPLEMENTATION DATE Done RESPONSIBLE PERSON Evelyn Rodríguez Cardé Finance Office Director Jullymar Octtaviani Vega Sub-Secretary of Administration