Puerto Rican Family Institute, Inc.

FINDING REFERENCE NUMBER 2021-02 FEDERAL PROGRAM Head Start Program COMPLIANCE REQUIREMENT Reporting TYPE OF FINDING Noncompliance and material weakness Statement of Condition The Federal Financial Report (?Form SF-425? or ?FFR?s?) for (Grant Number 02TD00014801) for the period ended April 30, 2021 was submitted on December 22, 2021, which was one hundred fourteen days after its due date. The Federal Financial Report SF-425 for the quarter ended June 30, 2021 included obligations amounting to $600,185 in connection with certain construction contracts representing future commitments of funds for which the expenditure had not been incurred as of June 30, 2021. Criteria or Specific Requirement Form SF-425 must be submitted on a quarterly, semi-annual, or annual basis, as directed by the Federal Agency. The following reporting period end dates shall be used for interim reports: March 31st, June 30th, September 30th, or December 31st, or as instructed by the Federal Agency. For final FFR?s, the reporting period end date shall be the end date of the project or grant period. Quarterly and semi-annual interim reports shall be submitted no later than thirty days after the end of each reporting period. Annual reports shall be submitted no later than ninety days after the end of each reporting period. Final reports shall be submitted no later than ninety days after the project or grant period end date. As per instructions of Form SF-425, the grantee must not include any amounts for a future commitment of funds (such as a long-term contract) for which an obligation or expense has not been incurred. Questioned Costs Not applicable. Refer to explanation under ?Cause? below. Effect PRFI did not comply with the reporting requirements established by the Federal Agency; thus, expenditures incurred may not be allowed under the grant period ended June 30, 2021. Cause On September 30, 2021, PRFI requested an extension of the ninety-day period to liquidate and close out the obligations outstanding as of June 30, 2021 as reported under Form SF-425. On October 25, 2021, the Administration for Children and Families approved the extension to January 24, 2022 for purposes of liquidating the obligations. PRFI?s request for extension was due to several circumstances encountered as a consequence of COVID-19, as follows: delays in the delivery of construction materials, lack of labor in the construction industry to carry out renovations, shipment delays and shortage of employees in the construction industry, among others. Accordingly, PRFI?s understanding was that these construction costs incurred subsequent to year-end were approved by the Federal Agency through the extension granted on October 25, 2021. Recommendation PRFI should closely monitor compliance with reporting requirements established by the Federal Agency, including compliance with the commitments of funds under the federal programs. Management?s Response The Office of Head Start established new guidelines in submitting SF-425, which is now through the Payment Management System (?PMS?) portal. PRFI was unable to submit SF-425 for Grant Number 02TD 000147801 due to the fact the PMS portal was not functioning properly and also did not have Grant Number 02TD00014801 listed. Therefore, PRFI was unable to complete and submit the SF-425 by the due date. This matter was brought to the attention of Administration for Children and Families (?ACF?) Region II Fiscal Specialist and was also documented in the Head Start Enterprise System (?HSES?). PRFI maintains that the $600,185 should, in fact, be included in the final SF-425 for the period ended June 30, 2021, since the ACF approved PRFI?s request of extending the grant period on October 25, 2021. This allowed for the proper liquidation of obligation due to the delays of construction materials, lack of labor in the construction industry, and shipment as a result of the COVID-19 Pandemic and Omicron Variant.

FINDING REFERENCE NUMBER 2019-001 FEDERAL PROGRAM All programs COMPLIANCE REQUIREMENT Reporting TYPE OF FINDING Noncompliance and significant deficiency Criteria or Specific Requirement 2 CFR 200.512 Report Submission, (a) (1) The audit must be completed and the Data Collection Form described in paragraph (b) of this section and reporting package described in package (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditor?s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or federal holiday, the reporting package is due on the next business day. Condition PRFI did not submit the Data Collection Form and Reporting Package for the year ended June 30, 2018 to the Federal Audit Clearinghouse by the required due date, as it was submitted on October 22, 2019. Questioned Costs None identified. Effect PRFI did not comply with the submission date required for the Data Collection Form and Reporting Package, which may impact the continuance and new approvals of federal funds. In addition, for the next two fiscal years, PRFI is not considered a low risk auditee. Cause PRFI was not able to timely gather the financial information necessary to complete the audit of the financial statements and accordingly submit the Data Collection Form and Reporting Package. Recommendation PRFI should closely monitor compliance with the filing of the Data Collection Form and Reporting Package by its due date, as required by federal regulations.

FINDING REFERENCE NUMBER 2019-002 FEDERAL PROGRAM All programs COMPLIANCE REQUIREMENT Equipment/real property management TYPE OF FINDING Noncompliance and significant deficiency Criteria or Specific Requirement Non-profit organizations shall follow the provisions of OMB Circulars A-102 and A-110, which require that equipment be used in the program for which it was acquired, or, when appropriate, other federal programs. Equipment records shall be maintained, a physical inventory of equipment shall be taken at least once every two years and reconciled to the equipment records, an appropriate control system shall be used to safeguard equipment, and equipment shall be adequately maintained. Condition Although the books and records properly reflect an account for capital expenditures on a yearly basis related to property and equipment, the last physical inventory performed by PRFI has not been reconciled with such books and records. In addition, we noted instances in the physical observation report that the complete required information such as serial number and acquisition date, among other information, was not included. Questioned Costs None identified. Effect The condition may impact the proper safeguarding of property and equipment. Cause During the year ended June 30, 2017, PRFI received an additional grant action award of $9,052,345 for Head Start and Early Head Start programs related to fifteen centers that were previously being managed by Community Development Institute (?CDI?). This grant was considered a replacement grant as it was an existing grant managed by CDI. The transfer of these centers to PRFI included property and equipment for which CDI did not have detailed property and equipment records nor physical inventory reports to enable PRFI to adequately account for all the required information under federal regulations. In addition, a significant portion of said property and equipment was not in adequate condition and were related to items acquired even before CDI took over the operations of those centers. Accordingly, most of the property and equipment transferred from CDI was not capitalized in the books and records of PRFI but was included in the last physical observation report executed. In addition, PRFI uses the federal threshold of capitalizing acquisitions of $5,000 or more per unit in the books and records but items below this threshold may have been included in the physical observation report that is executed every two years. These matters have impacted the ability of PRFI to properly reconcile the physical inventory report with the books and records. Recommendation PRFI should execute a full analysis of the property and equipment additions as per books and records from the available annual data. From this available data, PRFI should reconcile the physical observation report taking into consideration the matters addressed above related to the cause of the finding. PRFI should ascertain that the physical observation report includes all the required information established in the federal guidelines. In addition, PRFI should consider the implementation of an accounting module that will assist in said reconciliation in the future. We understand that PRFI is currently engaged in the evaluation process of implementing an accounting module for said purposes.

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