FINDING REFERENCE NUMBER 2025-004 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 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 – 84.425D) 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 (10/01/2017 – 09/30/2018); 1PRAEA19SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA20SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA21SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA22SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA23SCESUBA (10/01/2022 – 09/30/2023); 1PRAEA24SCESUBA (10/01/2023 – 09/30/2024); 1PRAEA25SCESUBA (10/01/2024 – 09/30/2025); H027A1200003 (07/01/2020 – 09/30/2021); H027A2200003 (07/01/2022 – 09/30/2023); H027A2300003 (07/01/2023 – 09/30/2024); H027A2400003 (07/01/2024 – 09/30/2025); V048A180052 (07/01/2018 – 09/30/2019); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 09/30/2022); S425U210029 (03/24/2021 – 09/30/2023) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE 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 $3,756,580. Invoices issued during the fiscal year ended June 30, 2025, balance, were distributed as federal and state, as follows: Assistance Listing Number Program Description Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 Child Nutrition Program Cluster $ 94,915 84.010A Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) 13,665 84.027 Special Education – Grants to States (IDEA, Part B) 33,798 84.425D COVID-19 Education Stabilization Fund: Elementary and Secondary School Emergency Relief Fund 43,252 84.425U COVID-19 Education Stabilization Fund: American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP ESSER) 55,837 Subtotal 241,467 Not Determined Schoolwide Program (State and Federal Funds) 2,106,827 Not Determined Consolidated Funds (State and Federal Funds) 32,730 Not Applicable State Funds 1,375,556 Total Invoices Issued Balance at 06/30/2025 $ 3,756,580 QUESTIONED COSTS Identified questioned costs are $241,467, 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 This is a systemic deficiency. The amount of $3,756,580, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2024-2025, 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 2024-005). 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.