Finding Text
FINDING REFERENCE NUMBER 2024-007 FEDERAL PROGRAM (ALN – 84.002) ADULT EDUCATION – BASIC GRANTS TO STATES U.S. DEPARTMENT OF EDUCATION AWARD NUMBER V002A210053 (07/01/2021 – 09/30/2023) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 29 USC 3302(a)(1) establishes that the 82.5% of the state eligible agency grant fund may use for grants and contracts for eligible providers. 29 USC 3302(a)(2) and 3303 establishes that the funds used for state leadership activities shall not exceed 12.5% of the state eligible agency’s grants funds. 29 USC 3302 (a)(3) establishes that the used for necessary and reasonable administrative expenses of the state eligible agency shall not be more than 5% of the grants funds, or $85,000, whichever is greater. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with Earmarking we performed a test to the expenses from V002A210053, that is the grant that ends in the fiscal year of our audit. The PRDE did not comply with the required earmarking percentages for the program. In the period expense analysis, we found that only 79% was allocated to grants and contracts for eligible providers, which is below than stipulated 82.5%. Additionally, they spent 13.4% on leadership activities, above the stipulated maximum of 12.5%. They spent 6% on administrative expenses, compared to the maximum of 5%. QUESTIONED COSTS None. PERSPECTIVE INFORMATION When the PRDE receives the program's budget, enters it into the accounting system with the earmarking percentages required by the Federal agency. The fiscal team monitors expenses to ensure compliance. However, they did not spend 100% of the funds and did not ensure that the expenses incurred from grant V002A210053 met the percentages stipulated by the program. STATEMENT OF CAUSE The PRDE lack of an adequate tracking system that would allow management to monitor the progress of expenses in relation to the Earmarking percentages during the fiscal year. POSSIBLE ASSERTED EFFECT Failure to comply with these requirements puts the PRDE at risk of having to return misallocated Federal funds. IDENTIFICATION OF REPEAT FINDING Not previously reported. RECOMMENDATIONS Management is encouraged to conduct ongoing expense analysis to ensure compliance with the program requirements. VIEWS OF RESPONSIBLE OFFICIALS The Workforce Innovation and Opportunity Act (WIOA) of 2014, Title II – Adult Education and Family Literacy Act, Section 3302(a) establishes the earmarking percentages that apply to the total amount of the federal award as follows: Section 3302(a) – State Distribution of funds: Each eligible agency receiving a grant under section 3291(b) for a fiscal year— (1) shall use not less than 82.5 percent of the grant funds to award grants and contracts under section 3321 of this title and to carry out section 3305 of this title, of which no more than 20 percent of such amount shall be available to carry out section 3305; (2) shall use not more than 12.5 percent of the grant funds to carry out State leadership activities under section 3303; and (3) shall use not more than 5 percent of the grant funds, or $85,000, whichever is greater, for the administrative expenses of the eligible agency. In accordance with this statutory requirement, the Puerto Rico Department of Education (PRDE) allocated the required percentage of the total federal award as established by WIOA. The earmarking requirement is based on allocation, not expenditure, as confirmed by federal regulations and guidance. The PRDE fully executed this process and properly allocated the percentage of the total grant to subgrants, leadership, and administrative activities. This is evidenced in the PRDE financial system (SIFDE) and the federal financial report (FFR) issued by the program at the end of the grand period. Actual expenditure levels depend on factors outside the agency’s direct control, such as provider operational changes, enrollment fluctuations, or cost variances. Federal law does not equate earmarking with expenditures; instead, it requires allocation of grant funds according to the statutory percentages. For the reasons, management does not concur with the audit finding and respectfully asserts that the PRDE is in full compliance with the WIOA Title II earmarking requirements. Auditor Comment on Management Response for Finding No. 2024-007 As stated in your response to the finding, the PRDE made a “budget allocation” for the authorized funds in the award. But, as stated in PRDE response, also WIOA Regulation established the following: “The Workforce Innovation and Opportunity Act (WIOA) of 2014, Title II – Adult Education and Family Literacy Act, Section 3302(a) establishes the following requirement: Section 3302(a) – State distribution of funds: Each eligible agency receiving a grant under section 3291(b) for a fiscal year— (1) shall use not less than 82.5 percent of the grant funds to award grants and contracts under section 3321 of this title and to carry out section 3305 of this title, of which no more than 20 percent of such amount shall be available to carry out section 3305; (2) shall use not more than 12.5 percent of the grant funds to carry out State leadership activities under section 3303; and (3) shall use not more than 5 percent of the grant funds, or $85,000, whichever is greater, for the administrative expenses of the eligible agency.” Regulation stated clearly that the earmarking compliance requirement are based on use (“shall use” not “shall allocate”). IMPLEMENTATION DATE None RESPONSIBLE PERSON Yarilis Santiago Ramos Auxiliary Secretary of Alternative Education María de los A. Lizardí Valdés Office of Federal Affairs Director