MUNICIPALITY OF JUNCOSLocal Government

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-003 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Earmarking (G) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year findings 2024-004 and 2023-004. Statement of Condition In our Earmarking Test, we found that the Program did not comply with the quality earmark limitation that requires the program to spend at least nine percent (9%) of the funds on quality activities and at least an additional three percent (3%) on quality improvement for infants and toddlers on the program. Criteria 45 CFR, Subpart F, Section 98.50 (b) (1) states that of the aggregate amount of funds expended by a State or Territory was no less than seven percent in fiscal years 2016 and 2017, eight percent in fiscal years 2018 and 2019, and nine percent in fiscal year 2020 and each succeeding fiscal year shall be used for activities designed to improve the quality of child care services and increase parental options for, and access to, high-quality child care as described at 45 CFR Subpart F, Section 98.53. Section 98.50 (b) (2) states that no less than three percent in fiscal year 2017 and each succeeding fiscal year shall be used to carry out activities as such activities relate to the quality of care for infants and toddlers. Also, section 98.50 (b) (3) states that nothing in this section shall preclude the State or Territory from reserving a larger percentage of funds to carry out activities described in paragraphs (b) (1) and (2) of Section 98.50. Cause of Condition The program’s budget, approved by the pass-through entity, was not distributed according to the cost limitations required for the administrative, quality and direct costs. Therefore, the amounts spent per category of expenditure did not meet the minimum amounts. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation We recommend the Program’s Management to request the pass-through entity a revision of the approved budgeted amounts in order to make all the required adjustments to comply with the program cost limitations. Questioned Cost None. Prior Year Finding Yes. This finding is similar to prior-year findings 2024-004 and 2023-004. Views of Responsible Officials and Planned Corrective Action We do not concur with the auditors’ finding. The Municipality does not agree with the finding because we understand that it is the responsibility of the corresponding pass-through agency, which is why we did not request a review and modification of the budget. For the next fiscal year, the Municipality will remain vigilant in meeting the compliance requirements for the program. Implementation Date: Fiscal year 2025-2026. Responsible Person: Iris J. Ramos Morán

Finding Reference 2024-003 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Earmarking (G) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2023-004. Statement of Condition In our Earmarking Test, we found that the Program did not comply with the quality earmark limitation that requires the program to spend at least nine percent (9%) of the funds on quality activities and at least an additional three percent (3%) on quality improvement for infants and toddlers on the program. Criteria 45 CFR, Subpart F, Section 98.50 (b) (1) states that of the aggregate amount of funds expended by a State or Territory was no less than seven percent in fiscal years 2016 and 2017, eight percent in fiscal years 2018 and 2019, and nine percent in fiscal year 2020 and each succeeding fiscal year shall be used for activities designed to improve the quality of child care services and increase parental options for, and access to, high-quality child care as described at 45 CFR Subpart F, Section 98.53. Section 98.50 (b) (2) states that no less than three percent in fiscal year 2017 and each succeeding fiscal year shall be used to carry out activities as such activities relate to the quality of care for infants and toddlers. Also, section 98.50 (b) (3) states that nothing in this section shall preclude the State or Territory from reserving a larger percentage of funds to carry out activities described in paragraphs (b) (1) and (2) of Section 98.50. Cause of Condition The program’s budget, approved by the pass-through entity, was not distributed according to the cost limitations required for the administrative, quality and direct costs. Therefore, the amounts spent per category of expenditure did not meet the minimum amounts. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation We recommend the Program’s Management to request the pass-through entity a revision of the approved budgeted amounts in order to make all the required adjustments to comply with the program cost limitations. Questioned Cost None. Prior Year Finding Yes. This finding is similar to prior-year finding 2023-004. Views of Responsible Officials and Planned Corrective Action We do not concur with the auditors’ finding. The Municipality does not agree with the finding because we understand that it is the responsibility of the corresponding pass-through agency, which is why we did not request a review and modification of the budget. For the next fiscal year, the Municipality will remain vigilant in meeting the compliance requirements for the program. Implementation Date: Fiscal year 2024-2025. Responsible Person: Iris J. Ramos Morán

Finding Reference 2023-003 Federal Agency: U.S. Department of Treasury Pass-Through Agency: Puerto Rico Fiscal Agency and Financial Advisory Authority Program: Coronavirus State and Local Fiscal Recovery Funds (Assistance Listing No. 21.027) Compliance Requirement: Reporting – Performance Reporting (L) Type of Finding: Significant Deficiency (SD), Instance of Noncompliance (NC) Statement of Condition During the fiscal year, the Municipality administered funds from the Coronavirus State and Local Fiscal Recovery Funds. This allocation was granted directly from the Federal government and through the Puerto Rico Fiscal Agency and Financial Advisory Authority, respectively. In our Reporting Test, we found that the Municipality did not comply with the monthly compliance reporting requirements established by the Puerto Rico Fiscal Agency and Financial Advisory Authority. Criteria The Municipal Strengthening Fund Transfer Agreement, Clause 5.1, states that the transferee shall submit reports as the transferor determines are needed to verify use of the funds and compliance with conditions that are imposed on the Transfer Agreement, and such reports shall be in such form, with such content, as specified by the transferor in the transfer plan and future program instructions directed to all recipients. The Transfer Plan, on Exhibit A, establishes that starting on the 15th day of the month following receipt of the funds, and by the 15th day of each month, the Transferee will submit a Use of Funds Report for the prior month’s expenses. Also, on the Municipal Strengthening Fund Program Guidelines, the Puerto Rico Fiscal Agency and Financial Advisory Authority specified on the Reporting Requirements Section that the recipients are required to submit monthly financial reports using the reporting template provided by the program. Cause of Condition There is a lack of knowledge and training for personnel assigned. Additionally, the Municipality does not have adequate monitoring for the activity and the reports. Effect of Condition The program is not in compliance with the Reporting Requirements as established in the transfer agreement. Recommendation We recommend training for the authorized personnel who administer the program, to better understand the reporting requirements and develop complete and accurate reports. The Municipality should establish a monitoring system to ensure compliance with requirements established by the passthrough agency such as: submitting the reports during the 15th day of each month, where the fund expenses of the previous month will be reported as incurred. This will ensure better control of the program. Questioned Cost None Prior Year Finding None Views of Responsible Officials and Planned Corrective Action We concur with the auditors’ finding. The Municipality has not been able to submit the fund use reports on time because when we were filling out the template, the information was not automatically updated. This situation was notified to the agency and once the configuration was modified, the reports could be submitted. After the modification, the reports have been submitted in the corresponding format and with the content specified as required by the program. Implementation Date: Fiscal year 2024-2025. Responsible Person: Iris J. Ramos Morán

Finding Reference 2023-004 Federal Agency: U.S. Department of Health and Human Services Pass-Through Agency: Puerto Rico Department of Family Program: Child Care and Development Block Grant (ALN 93.575) Compliance Requirement: Earmarking (G) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition In our Earmarking Test, we found that the Program did not comply with the quality earmark limitation that requires the program to spend at least nine percent (9%) of the funds on quality activities and at least an additional three percent (3%) on quality improvement for infants and toddlers on the program. Also, we found that the Program did not comply with the direct spending earmark limitation that requires the program to spend not less than seventy percent (70%) to fund direct services. Criteria 45 CFR, Subpart F, Section 98.50 (b) (1) states that of the aggregate amount of funds expended by a State or Territory, no less than seven percent in fiscal years 2016 and 2017, eight percent in fiscal years 2018 and 2019, and nine percent in fiscal year 2020 and each succeeding fiscal year shall be used for activities designed to improve the quality of child care services and increase parental options for, and access to, high-quality child care as described at 45 CFR Subpart F, Section 98.53. Section 98.50 (b) (2) states that no less than three percent in fiscal year 2017 and each succeeding fiscal year shall be used to carry out activities as such activities relate to the quality of care for infants and toddlers. Also, section 98.50 (b) (3) states that nothing in this section shall preclude the State or Territory from reserving a larger percentage of funds to carry out activities described in paragraphs (b) (1) and (2) of Section 98.50. 45CFR, Subpart F, Section 95.50 (f) states that from Discretionary amounts provided for a fiscal year, the Lead Agency shall use not less than 70 percent to fund direct services (provided by the Lead Agency). Cause of Condition The program’s budget, approved by the pass-through entity, was not distributed according to the cost limitations required for the administrative, quality and direct costs. Therefore, the amounts spent per category of expenditure did not meet the minimum amounts. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation We recommend the Program’s Management to request to the pass-through entity a revision of the approved budgeted amounts in order to make all the required adjustments to comply with the program cost limitations. Questioned Cost None Prior Year Finding None Views of Responsible Officials and Planned Corrective Action We do not concur with the auditors’ finding. The Municipality does not agree with the finding because we understand that it is the responsibility of the corresponding pass-through agency, which is why we did not request a review and modification of the budget. For the next fiscal year, the Municipality will be on the lookout to meet the compliance requirements for the program. Implementation Date: Fiscal year 2024-2025. Responsible Person: Iris J. Ramos Morán

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