Finding 403461 (2023-003)

Finding No. 2023-003 – Energy Incentive Program disbursement to Ineligible Providers and Beneficiaries Federal Program Coronavirus State and Local Fiscal Recovery Funds ALN 21.027 Name of Federal Agency U.S. Department of Treasury Pass-through Entity Puerto Rico Department of Treasury Compliance Requirement Activities Allowed Type of Finding Internal control over compliance/non-compliance Category Material Weakness Criteria According to the 31 CFR Subtitle A Part 35 Subpart 35.6 (b)(3)(ii)(B)(2). Eligible uses 35.6(b) A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria. (3) A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts. (ii) Responding to the negative economic impacts of the public health emergency for purposes including, (B) assistance to small businesses including, (2) a program, service, capital expenditure, or other assistance that responds to disproportionately impacted small businesses, including rehabilitation of commercial properties; storefront and façade improvements; technical assistance, business incubators, and grants for start-ups or expansion costs for small businesses; and programs or services to support micro-businesses. Additional criteria were established in the Energy Incentive Program Guidance issued by the Disbursement Oversight Committee established by the Government of Puerto Rico. Condition During our examination, we noted twelve (12) suppliers’ instances and thirty-two (32) instances of beneficiaries, which based on the regulation previously indicated, the Energy Incentive was paid to suppliers and beneficiaries that not provided required supporting documentation to be eligible. Context From a sample of thirty-three (33) suppliers and beneficiaries that receive the Energy Incentive payments, twelve (12) suppliers and thirty-two (32) beneficiaries did not meet the eligibility criteria. INELIGIBLE SUPPLIERS Case Id Amount Disbursed Questioned Cost 815 343,800.00 - 2590 274,646.37 - 1333 225,000.00 - 1681 607,644.00 - 245 558,730.00 - 575 973,727.31 - 1587 220,796.31 - 191 141,100.00 - 353 187,276.00 - 831 449,615.56 - 256 374,970.00 - 880 386,979.00 - Total $ 4,744,284.55 $ - Context – (continued) INELIGIBLE BENEFICIARIES Case Id Amount Disbursed Questioned Cost 465 25,000.00 25,000.00 180 25,000.00 25,000.00 701 25,000.00 25,000.00 1162 25,000.00 25,000.00 1386 25,000.00 - 730 24,872.50 - 444 25,000.00 - 1145 14,800.00 - 462 14,556.50 - 2590 25,000.00 - 1333 25,000.00 - 1681 25,000.00 25,000.00 1247 22,095.00 - 211 25,000.00 - 960 25,000.00 - 245 25,000.00 25,000.00 2741 25,000.00 25,000.00 575 25,000.00 25,000.00 1587 9,088.82 - 191 25,000.00 - 353 25,000.00 - 828 25,000.00 - 1071 25,000.00 25,000.00 1531 19,123.13 19,123.13 831 22,101.63 22,101.63 247 25,000.00 - 256 25,000.00 - 1791 25,000.00 - 2529 25,000.00 25,000.00 2023 15,000.00 15,000.00 880 25,000.00 - 815 25,000.00 25,000.00 Total $ 741,637.58 $ 331,224.76 TOTAL $ 5,485,922.13 $ 331,224.76 Cause The program administration suffered several changes which caused that the procedures established in the program guide not be followed correctly and the required documents not being properly safeguarded. Effect As a result of this condition, the US Department of Treasury may request the return of funds, issue warnings and/or impose penalties to the Department. Questioned Costs The known questioned costs were calculated by the amounts disbursed to ineligible suppliers and beneficiaries. We did not include as questioned costs the amounts disbursed for certain suppliers and beneficiaries, because the Department provide the required documentation after the field work was completed. Based on this reason, we modified the questioned costs based on the beneficiaries with missing required documents that were disbursed, for total questioned costs amounting to $331,224.76. Identification as a Repeated Finding This is not a repeat finding from the immediate previous audit. Recommendation We recommend the Department to strengthen controls in eligibility determination and disbursement of federal funds to ensure the compliance with the requirements of the program. In addition, implement a document control system to comply with document retention requirement. Any government and non-government entity receiving Program funds will be required to retain use of funds records and supporting documentation for a period of five (5) years. Views of responsible officials and planned corrective actions. Refer to the corrective action plan on pages 112-113.