Finding 1238178 (2025-001)

Material Weakness Repeat Finding
Requirement
G
Questioned Costs
-
Year
2025
Accepted
2026-09-29

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 is now unmet.
  • Recommended Follow-Up: The Organization should seek alternative funding sources in Mexico and consult 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 have filed muliple lawsuits dating back to 2020 because the way IMPI withdrew from the agreement was illegal. The latest ruling was September 8, 2025 and requires IMPI to reestablish the $5,000,000 endowment and pay the unpaid investment earnings from August 2020 to May 2024. We expect this to be resolved in the second quarter of 2026.

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. On September 8, 2025, a federal court issued a new ruling ordering the IMPI to do the following: 1. Within four months, return $5 million USD to FUMEC's endowment (matching funds). 2. Submit a financial expert report to determine the amount of accrued earnings that the IMPI must pay to FUMEC from August 2020 until the funds are returned. Between October 2025 and April 2026 (7 months), IMPI filed eight different appeals in an attempt to overturn the new ruling; all were rejected. However, IMPI succeeded in extending the deadline by four months to comply with the ruling. On May 20, the court certified that its ruling of September 8, 2025, had become definitive and informed IMPI that the four-month deadline to comply with the ruling will end on September 29, 2026; and that if IMPI fails to demonstrate compliance with the ruling within the granted period, the complaint procedure provided for by law will be initiated. Proposed completion date – 4Q2026. Contact person – Eugenio Marin, Executive Director

Categories

Matching / Level of Effort / Earmarking

Other Findings in this Audit

  • 1238177 2025-001
    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
93.318 PROTECTING AND IMPROVING HEALTH GLOBALLY: BUILDING AND STRENGTHENING PUBLIC HEALTH IMPACT, SYSTEMS, CAPACITY AND SECURITY $180,412
93.283 CENTERS FOR DISEASE CONTROL AND PREVENTION INVESTIGATIONS AND TECHNICAL ASSISTANCE $117,180
47.U01 ENDOWMENT EXPENSES $69,517
81.U01 INCLUSIVE ENERGY INNOVATION PRIZE $60,450
43.U01 ENDOWMENT EXPENSES $50,870
66.202 CONGRESSIONALLY MANDATED PROJECTS $34,618
10.U01 ENDOWMENT EXPENSES $33,145