MUNICIPALITY OF CATANO

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-002 Federal Agency: U.S. Department of the 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 (L) Type of Finding: Significant Deficiency in Internal Controls (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 Puerto Rico Fiscal Agency and Financial Advisory Authority, respectively. In our Reporting Test, we evaluated the annual Project and Expenditure Report submitted to the U.S. Department of Treasury, six (6) bimonthly reports related to the Service of Excellence to Citizens Program and three (3) monthly reports related to the Municipal Strengthening Funds Program, submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority. We found that one (1) out of six (6) Service of Excellence to Citizens Reports was submitted late and expenditures were submitted before they were incurred. Also, two (2) out of three (3) Municipal Strengthening Funds Reports were submitted late and expenditures were not reported in the period that was incurred. Criteria 31 CFR 35.4(c) – Reservation of authority, reporting states that during the period of performance, recipients shall provide to the Secretary or her delegate, as applicable, periodic reports providing detailed accounting of the uses of funds. 31 CFR 35.5(b) – Use of funds states that a cost shall be considered to have been incurred for purposes of the general use of Coronavirus State and Local Fiscal Recovery Funds described in 31 CFR 35.5(a) if the recipient has incurred an obligation with respect to such cost by December 31, 2024. The Coronavirus State and Local Fiscal Recovery Funds - Compliance and Reporting Guidance, Part I, Section 10 (d), states that all recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditure pursuant to 2 CFR 200.1. Appropriate accounting records must be maintained for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, controls need to be established to ensure the completion and timely submission of all mandatory performance and/or compliance reporting. Table 4: Annual Project and Expenditure Report in Part 2 of the Guidance establishes that the deadline of the annual reports are thirty days after the end of the period, on April 30th for the reports ended on March 31st. 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, 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 in the Reporting Requirements Section that the recipients are required to submit monthly financial reports using the reporting template provided by the program. The instructions of the Service of Excellence to Citizens Reports, provided by the Fiscal Agency and Financial Advisory Authority, establish that the report must be updated and submitted before the first and third Friday of each month (bimonthly), starting at the date of the agreement. Cause of Condition There is a lack of knowledge and training for the 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 contract agreements and guidelines. 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 U.S. Department of the Treasury and the pass-through agency such as: (1) submitting the reports on a timely basis and (2) reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. Also, the Municipality should establish a process to validate that the amounts reported agree with the accounting records of the corresponding period reported to strengthen the internal controls of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2024-003, 2023-002 and 2022-002. Views of Responsible Officials and Planned Corrective Action We concur with the finding. Objective of the plan: The objective of this Corrective Action Plan is to address the observations identified in the audit and establish preventive measures to avoid future recurrences. Corrective Actions: 1. Schedule restructuring: • Create a detailed calendar with clear dates to define intermediate delivery deadlines to avoid delays (collection of information, analysis, writing, review, and submission) 2. Implementation of alerts and reminders: • Set up automatic alerts and email reminders for key dates (for example, 3 days before each deadline) 3. Review and Quality Control: • Establish an internal review of reports before final submission to ensure that the information reported is accurate and complete. The revision includes compliance with the requirements established by the agency. Compliance Monitoring: • Biweekly meetings: The team will have biweekly meetings to have updates regarding the progress and achievement of the deadlines. • Email notifications: Emails will be sent to document the timely submission of reports and when needed, waivers will be requested explaining situations that may have delayed the process to prepare accurate and complete reports on time. Evaluation: • Monthly evaluations will be performed to measure the compliance of the submission of the reports on the timeframe established by the agency. • Adjustments to the processes according to the response of the team. Implementation Date: Fiscal Year 2025-2026. Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

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 (Assistance Listing No. 93.575) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we found that the Program quarterly and annual closing reports were not submitted timely, as required by the contract agreement. Criteria 45 CFR Part 98.67 (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. Also, the contract agreement states in Clause eleven (11) that the Municipality is responsible for the presentation of the trial balance and annual partial closing report fifteen (15) calendar days after the end of the contract. Ninety (90) days after, the Municipality should liquidate all obligations and present to the pass-through entity the final annual closing report (CC-006). Cause of Condition The Program does not have effective internal controls to ensure that the required documentation and reports are submitted to the pass-through agency in the requested time frame. For the past years, the personnel in charge of the fiscal area have changed several times. The accountant that was in charge of the fiscal area of the program for the period audited, made efforts to comply with different programs requirements that were accumulated from prior years, but the preparation of financial reports was not achieved timely. Effect of Condition The Program is not in compliance with 45 CFR Part 98.67- Fiscal Requirements (c) (1) (2). Recommendation We recommend the Municipality recruits an accountant soon and provide the training needed to 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 pass-through agency. This will ensure better control of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2024-004 and 2023-003. Views of Responsible Officials and Planned Corrective Action We concur with the finding. Corrective Action Implemented 1. Request for Technical Assistance Technical assistance was requested from the corresponding state agency and all municipal components involved in the process, with the purpose of: • Establishing a structured work plan. • Aligning compliance processes. • Clearly defining the documentation required for quarterly reports. • Reviewing the processes of the Fiscal Monitoring System Portal. • Incorporating technical recommendations issued by the agency. 2. Measures Adopted by This Office As a result of the technical assistance, the following corrective actions were implemented: • Development of a Required Documentation Checklist to standardize the collection of information. • Clear definition of the scope of collaborative work among offices. • Formal establishment of tasks, roles, and responsibilities. • Assignment and monitoring of the limited staff designated by the office. • Update of the Fiscal Monitoring System Portal to grant access to newly authorized personnel. Results Achieved As a result of the implementation of the corrective action plan: • The required information from the various municipal offices was collected completely and in a timely manner. • The quarterly report was submitted by the established deadline (01/15/2026). • The agency validated compliance (01/30/2026). • The disbursement of funds was successfully received (02/04/2026). Evidence of Effectiveness • Compliance with the established deadline. • Confirmation of receipt and approval of the report. • Disbursement processed without findings or additional requirements. • Strengthened interdepartmental coordination. • A documented and standardized process for future quarterly cycles. Standardization and Prevention • The Checklist was adopted as an official tool of the process. • The assignment of roles and responsibilities was formally established. • Access to the Fiscal Monitoring System Portal is kept up to date. • Continuous monitoring was established to ensure compliance in future quarters. Observation Regarding Human Resources Although the corrective action proved effective and allowed for the timely submission of the report and receipt of the disbursement, the personnel currently assigned to the process also support multiple additional programs. While the situation was corrected following internal reorganization, the shared operational workload could pose a risk to the long-term sustainability of the control. It is recommended that the allocation of additional human resources be evaluated to strengthen operational continuity and prevent recurrence of the previously identified issue. Conclusion and Closure The corrective action implemented proved to be effective and sustainable, eliminating the deficiencies identified in the process of collecting and submitting quarterly reports. Regulatory compliance and strengthened administrative management are evidenced, ensuring continuity in the timely receipt of future disbursements. Implementation Date: Fiscal Year 2025-2026. Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-004 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 (Assistance Listing No. 93.575) Compliance Requirement: Earmarking (G) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition In our Reporting 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. 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. 45 CFR, Subpart F, Section 95.50 (d) states of the aggregate amount of funds expended, no more than five percent may be used for administrative activities as described in 45 CFR 98.54. 45 CFR, Subpart F, Section 95.50 (e) states that not less than 70 percent of the Mandatory and Federal and State share of Matching Funds shall be used to meet the child care need of families. Cause of Condition The Municipality’s Program Administration did not ensure that the required percentage amounts were spent to guarantee compliance with earmarking requirements. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. Recommendation We recommend the Municipality to recruit an accountant soon and provide the training needed to understand the program requirements. If it is anticipated that the entire allocation will not be spent, budget adjustments should be requested to the pass-through agency to comply with the earmarking requirements. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2024-005 and 2023-004. Views of Responsible Officials and Planned Corrective Action We concur with the finding. Corrective Action Implemented 1. Request for Technical Assistance Technical assistance was requested from the corresponding state agency and all municipal components involved in the process, with the purpose of: • Establishing a structured work plan. • Aligning compliance processes. • Clearly defining the documentation required for quarterly reports. • Reviewing the processes of the Fiscal Monitoring System Portal. • Incorporating technical recommendations issued by the agency. 2. Measures Adopted by This Office As a result of the technical assistance, the following corrective actions were implemented: • Development of a Required Documentation Checklist to standardize the collection of information. • Clear definition of the scope of collaborative work among offices. • Formal establishment of tasks, roles, and responsibilities. • Assignment and monitoring of the limited staff designated by the office. • Update of the Fiscal Monitoring System Portal to grant access to newly authorized personnel. • A deadline will be established for the submission of the quarterly report, thereby ensuring compliance with the minimum percentage required by the program under the quality activities category. Results Achieved As a result of the implementation of the corrective action plan: • The required information from the various municipal offices was collected completely and in a timely manner. • The quarterly report was submitted by the established deadline (01/15/2026). • The agency validated compliance (01/30/2026). • The disbursement of funds was successfully received (02/04/2026). Evidence of Effectiveness • Compliance with the established deadline. • Confirmation of receipt and approval of the report. • Disbursement processed without findings or additional requirements. • Strengthened interdepartmental coordination. • A documented and standardized process for future quarterly cycles. Standardization and Prevention • The Checklist was adopted as an official tool of the process. • The assignment of roles and responsibilities was formally established. • Access to the Fiscal Monitoring System Portal is kept up to date. • Continuous monitoring was established to ensure compliance in future quarters. Observation Regarding Human Resources Although the corrective action proved effective and allowed for the timely submission of the report and receipt of the disbursement, the personnel currently assigned to the process also support multiple additional programs. While the situation was corrected following internal reorganization, the shared operational workload could pose a risk to the long-term sustainability of the control. It is recommended that the allocation of additional human resources be evaluated to strengthen operational continuity and prevent recurrence of the previously identified issue. Conclusion and Closure The corrective action implemented proved to be effective and sustainable, eliminating the deficiencies identified in the process of collecting and submitting quarterly reports. Regulatory compliance and strengthened administrative management are evidenced, ensuring continuity in the timely receipt of future disbursements. Implementation Date: Fiscal Year 2025-2026 Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-005 Federal Agency: U.S. Department of Homeland Security Pass-through Agency: P.R. Central Office for Recovery, Reconstruction and Resiliency (COR3) Program: Disaster Grants - Public Assistance (Presidentially Declared Disasters (Assistance Listing No. 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of seven (7) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we identified that the reports did not agree with the accounting records. During our audit procedures, we identified that the reports noted that the reports did not agree with the accounting records. Criteria 2 CFR 200.302 (a) states that the states’ and other non-Federal entities’ financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Cause of Condition The Municipality’s accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. Effect of Condition The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. Recommendation We recommend the Program Administrators reconcile the differences between the quarterly report and the accounting records before the following submissions to the pass-through entity. Questioned Cost None. Prior Year Finding No. Views of Responsible Officials and Planned Corrective Action We concur with the finding. Adopted Measures • Expense Synchronization: A protocol will be implemented requiring contracted consultants to record and report incurred expenses only when a validated disbursement voucher is available, thereby ensuring the integrity of the financial flow. • Reconciliation: The office will conduct a detailed comparison between the draft quarterly report and the general ledger to identify and correct any discrepancies prior to final submission. • Compliance Timeline: An internal deadline will be established for the submission of the report, ensuring attainment of the minimum percentage required under the Quality Activities category through accurate financial data. Expected Outcome To ensure that all financial information submitted is complete, accurate, and fully aligned with the Municipality’s accounting records, thereby eliminating the risk of audit findings. Implementation Date: March 2026. Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Finding Reference 2024-003 Federal Agency: U.S. Department of the 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 (L) Type of Finding: Significant Deficiency in Internal Controls (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 Puerto Rico Fiscal Agency and Financial Advisory Authority, respectively. In our Reporting Test, we evaluated the annual Project and Expenditure Report submitted to the U.S. Department of Treasury. We found that the Report was not submitted timely. Also, we evaluated six (6) bimonthly reports related to the Service of Excellence to Citizens Program and three (3) monthly reports related to the Municipal Strengthening Funds Program, submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority. We found that two (2) out of six (6) Service of Excellence to Citizens Reports, and two (2) out of three (3) Municipal Strengthening Funds Reports were submitted late. Also, we found that the Municipality reported expenditures for the amounts of $550,000 and $141,030 that were not incurred. Criteria 31 CFR 35.4(c) – Reservation of authority, reporting states that during the period of performance, recipients shall provide to the Secretary or her delegate, as applicable, periodic reports providing detailed accounting of the uses of funds. 31 CFR 35.5(b) – Use of funds states that a cost shall be considered to have been incurred for purposes of the general use of Coronavirus State and Local Fiscal Recovery Funds described in 31 CFR 35.5(a) if the recipient has incurred an obligation with respect to such cost by December 31, 2024. The Coronavirus State and Local Fiscal Recovery Funds - Compliance and Reporting Guidance, Part I, Section 10 (d), states that all recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditure pursuant to 2 CFR 200.1. Appropriate accounting records must be maintained for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, controls need to be established to ensure the completion and timely submission of all mandatory performance and/or compliance reporting. Table 4: Annual Project and Expenditure Report in Part 2 of the Guidance establishes that the deadline of the annual reports are thirty days after the end of the period, on April 30th for the reports ended on March 31st. 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, 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 in the Reporting Requirements Section that the recipients are required to submit monthly financial reports using the reporting template provided by the program. The instructions of the Service of Excellence to Citizens Reports, provided by the Fiscal Agency and Financial Advisory Authority, establish that the report must be updated and submitted before the first and third Friday of each month (bimonthly), starting at the date of the agreement. Cause of Condition There is a lack of knowledge and training for the 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 contract agreements and guidelines. 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 U.S. Department of the Treasury and the pass-through agency such as: (1) submitting the reports on a timely basis and (2) reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. Also, the Municipality should establish a process to validate that the amounts reported agree with the accounting records of the corresponding period reported to strengthen the internal controls of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2023-002 and 2022-002. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. Objective of the plan: The objective of this Corrective Action Plan is to address the observations identified in the audit and establish preventive measures to avoid future recurrences. Corrective Actions: 1. Schedule restructuring: • Create a detailed calendar with clear dates to define intermediate delivery deadlines to avoid delays (collection of information, analysis, writing, review, and submission) 2. Implementation of alerts and reminders: • Set up automatic alerts and email reminders for key dates (for example, 3 days before each deadline) 3. Review and Quality Control: • Establish an internal review of reports before final submission to ensure that the information reported is accurate and complete. The revision includes compliance with the requirements established by the agency. Compliance Monitoring: • Biweekly meetings: The team will have biweekly meetings to have updates regarding the progress and achievement of the deadlines. • Email notifications: Emails will be sent to document the timely submission of reports and when needed, waivers will be requested explaining situations that may have delayed the process to prepare accurate and complete reports on time. Evaluation: • Monthly evaluations will be performed to measure the compliance of the submission of the reports on the timeframe established by the agency. • Adjustments to the processes according to the response of the team. Implementation Date: March 2025 Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Finding Reference 2024-004 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 (Assistance Listing No. 93.575) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we found that the Program did not submit all the annual closing reports or were submitted late to the pass-through entity, as required by the contract agreement. Criteria 45 CFR Part 98.67 (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. Also, the contract agreement states in Clause eleven (11) that the Municipality is responsible for the presentation of the trial balance and annual partial closing report fifteen (15) calendar days after the end of the contract. Ninety (90) days after, the Municipality should liquidate all obligations and present to the pass-through entity the final annual closing report (CC-006). Cause of Condition The Program does not have effective internal controls to ensure that the required documentation and reports are submitted to the pass-through agency in the requested time frame. The personnel in charge of the fiscal area have been changed again. The current program accountant has been correcting prior year programs situations, as requested by the pass-through entity. Therefore, the preparation of annual closing reports has not been achieved. Effect of Condition The Program is not in compliance with 45 CFR Part 98.67- Fiscal Requirements (c) (1) (2). 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 pass-through agency. This will ensure better control of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2023-003. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. Objective of the plan: The objective of this Corrective Action Plan is to address the observations identified in the audit and establish preventive measures to avoid future recurrences. Corrective Actions: 1. Schedule restructuring: • Create a detailed calendar with clear dates to define intermediate delivery deadlines to avoid delays (collection of information, analysis, writing, review, and submission) 2. Implementation of alerts and reminders: • Set up automatic alerts and email reminders for key dates (for example, 3 days before each deadline) 3. Review and Quality Control: • Establish an internal review of reports before final submission to ensure that the information reported is accurate and complete. The revision includes compliance with the requirements established by the agency. Compliance Monitoring: • Biweekly meetings: The team will have biweekly meetings to have updates regarding the progress and achievement of the deadlines. • Email notifications: Emails will be sent to document the timely submission of reports and when needed, waivers will be requested explaining situations that may have delayed the process to prepare accurate and complete reports on time. Evaluation: • Monthly evaluations will be performed to measure the compliance of the submission of the reports on the timeframe established by the agency. • Adjustments to the processes according to the response of the team. Implementation Date: March 2025 Responsible persons: • Person responsible for the implementation: Mrs. Erika J. Acevedo, Program’s Accountant • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Finding Reference 2024-005 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 (Assistance Listing No. 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 were not able to corroborate compliance with the earmarking requirements because the Municipality did not submit the program’s annual closing reports. 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. 45 CFR, Subpart F, Section 95.50 (d) states of the aggregate amount of funds expended, no more than five percent may be used for administrative activities as described in 45 CFR 98.54. 45 CFR, Subpart F, Section 95.50 (e) states that not less than 70 percent of the Mandatory and Federal and State share of Matching Funds shall be used to meet the child care need of families. Cause of Condition The Program does not have effective internal controls to ensure that the required documentation and reports are submitted to the pass-through agency in the requested time frame. The personnel in charge of the fiscal area have been changed again. The current program accountant has been correcting prior year programs situations, as requested by the pass-through entity. Therefore, the preparation of annual closing reports has not been achieved. Effect of Condition The program is not in compliance with 45 CFR, Subpart F, Section 98.50. 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 pass-through agency. This will ensure better control of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2023-004. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. Objective of the plan: The objective of this Corrective Action Plan is to address the observations identified in the audit and establish preventive measures to avoid future recurrences. Corrective Actions: 1. Schedule restructuring: • Create a detailed calendar with clear dates to define intermediate delivery deadlines to avoid delays (collection of information, analysis, writing, review, and submission) 2. Implementation of alerts and reminders: • Set up automatic alerts and email reminders for key dates (for example, 3 days before each deadline) 3. Review and Quality Control: • Establish an internal review of reports before final submission to ensure that the information reported is accurate and complete. The revision includes compliance with the requirements established by the agency. Compliance Monitoring: • Biweekly meetings: The team will have biweekly meetings to have updates regarding the progress and achievement of the deadlines. • Email notifications: Emails will be sent to document the timely submission of reports and when needed, waivers will be requested explaining situations that may have delayed the process to prepare accurate and complete reports on time. Evaluation: • Monthly evaluations will be performed to measure the compliance of the submission of the reports on the timeframe established by the agency. • Adjustments to the processes according to the response of the team. Implementation Date: March 2025 Responsible persons: • Person responsible for the implementation: Mrs. Erika J. Acevedo, Program’s Accountant • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

Finding Reference 2023-002 Federal Agency: U.S. Department of the 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 – Special Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (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 Puerto Rico Fiscal Agency and Financial Advisory Authority, respectively. In our Reporting Test, we evaluated three monthly reports submitted to the Puerto Rico Fiscal Agency and Financial Advisory Authority. We found that the Municipality submitted two of the three reports late. Also, we evaluated the annual Project and Expenditure Report submitted to the U.S. Department of Treasury. We found that the Municipality reported as current expenditures expenses that were reported incurred in the report from the prior period. 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, 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. In addition to the contract agreement with the Puerto Rico Fiscal Agency and Financial Advisory Authority, the Municipality had an agreement with the U.S. Department of Treasury to receive funds direct funds as a Non-entitlement and County Unit. We determined that the Municipality submitted the required annual report in time. The Coronavirus State and Local Fiscal Recovery Funds - Compliance and Reporting Guidance, Part I, Section 10 (d), states that all recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Appropriate accounting records must be maintained for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, controls need to be established to ensure the completion and timely submission of all mandatory performance and/or compliance reporting. Cause of Condition There is a lack of knowledge and training for the 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 contract agreement and guidelines. 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 pass-through agency such as: (1) submitting the reports during the 15th day of each month, where the fund expenses of the previous month will be reported as incurred. Also, the Municipality should establish a process to validate that the amounts reported agree with the accounting records of the corresponding period reported. This will ensure better control of the program. Questioned Cost None. Prior Year Finding This finding is similar to prior year finding 2022-003. Views of Responsible Officials and Planned Corrective Action We concur with the finding. The Municipality of Cataño (Federal Programs Office), as a corrective action, will use the calendar tool for notifications and reminders for the established dates so that we can submit compliance reports for ARPA Funds on time. Implementation Date: Fiscal year 2023-2024 Responsible Person: Carlos Flores Rivera, Federal Program Subdirector

Finding Reference 2023-003 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 (Assistance Listing No. 93.575) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition During our audit procedures, we found that the Program did not submit all the annual closing reports or were submitted late to the pass-through entity, as required by the contract agreement. Criteria 45 CFR Part 98.67 (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part. Also, the contract agreement states in Clause eleven (11) that the Municipality is responsible for the presentation of the trial balance and annual partial closing report fifteen (15) calendar days after the end of the contract. Ninety (90) days after, the Municipality should liquidate all obligations and present to the pass-through entity the final annual closing report (CC-006). Cause of Condition The Program does not have effective internal controls to ensure that the required documentation and reports are submitted to the pass-through agency in the requested time frame. There was a change in the personnel in charge of the fiscal area of the program. Therefore, reports have been submitted late or haven’t been submitted yet. Effect of Condition The Program is not in compliance with 45 CFR Part 98.67- Fiscal Requirements (c) (1) (2). 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 pass-through agency. This will ensure better control of the program. Questioned Cost None. Prior Year Finding No. Views of Responsible Officials and Planned Corrective Action We concur with the finding. In the month of January 2024, the Municipality of Cataño submitted a Letter to the ACUDEN Agency requesting additional time to be able to submit a closure report. This request is due to the fact that said agency has not disbursed the approved funds to the Program, to be able to carry out the breakdown of expenses and corresponding payments. To date we have not received a response to this request. The Municipality of Cataño (Federal Programs Office) undertakes to follow up with the relevant agency in future occasions to receive a response when an extension is requested for a compliance report. Implementation Date: Fiscal year 2023-2024 Responsible Person: Mrs. Yolanda Maldonado Oliver, Federal Programs Director

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 (Assistance Listing No. 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. 45 CFR, Subpart F, Section 95.50 (d) states of the aggregate amount of funds expended, no more than five percent may be used for administrative activities as described in 45 CFR 98.54. 45 CFR, Subpart F, Section 95.50 (f) (2) 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 No. Views of Responsible Officials and Planned Corrective Action We do not concur with the finding. This finding is not applicable because what is stated about the description in the approved budget is not stipulated by the Municipality of Cataño, which is the one being audited. This description is designated from ACUDEN. Implementation date: Fiscal year 2023-2024 Responsible official: Mrs. Lymara Salgado, Child Care Program Director

Finding Reference: 2022-002 Federal Agency: U.S. Department of the Treasury Pass-through Agency: Puerto Rico Fiscal Agency and Financial Advisory Authority & Puerto Rico Department of Health Program: Coronavirus Relief Fund (Assistance Listing No. 21.019) Compliance Requirement: Reporting ? Special Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding(s) 2021-003. Statement of Condition: During the fiscal year the Municipality administered funds from the Coronavirus Relief Program, this allocation was granted through two government agencies, Puerto Rico Fiscal Agency and Financial Advisory Authority & Puerto Rico Department of Health, respectively. In our Reporting Test, we found that the Municipality did not comply with the monthly compliance reporting requirements established by the Department of Health. Criteria: The Transfer Agreements, Clause 5.1, 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, 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. Transferor will transfer emergency assistance fund to transferee for necessary expenditures related to the COVID-19 emergency by making a transfer on the basis set out in this Agreement and in the Transfer Plan attached as Exhibit A. The reports must be due on the 15th day of each month, the transferee will submit a use of funds transfer report for the prior month?s expenses. Cause of Condition: There is a lack of knowledge and training to personal assigned. Additionally, the Municipality does not have an adequate monitoring for the activity and the reports. Effect of Condition: The program is not in compliance with the Reporting Requirements as established in agreement. Recommendation: We recommend training for the authorized personnel to work with the program where they can understand and know how to develop the required reports by the pass-through agency. Also, the Municipality should establish a monitoring system to ensure compliance with established requirements, such as: submit the reports during the 15th day of each month, where the fund expenses of the previous month will be reported. This will ensure better control for the program. Questioned Cost: None. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. The Municipality has taken corrective measures for faithful compliance with the established reporting dates. Compliance oversight will be strengthened for this program or any other required funds.

Finding Reference: 2022-003 Federal Agency: U.S. Department of the 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 ? Special Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (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 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. Also, the Municipality reported as expense the amounts obligated, instead of the amounts accrued. 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, 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. During the fiscal year 2021-2022, in addition to the contract agreement with the Puerto Rico Fiscal Agency and Financial Advisory Authority, the Municipality signed an agreement with the US Department of Treasury to receive funds direct funds as a Non-entitlement and County Unit. Those transfer agreements also established reporting requirements that we determined that the Municipality was in compliance. Cause of Condition: There is a lack of knowledge and training to personnel assigned. Additionally, the Municipality does not have an adequate monitoring for the activity and the reports. Effect of Condition: The program is not in compliance with the Reporting Requirements as established in 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 pass-through 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 for the program. Questioned Cost: None. Views of Responsible Officials and Planned Corrective Action: We concur with the finding. The Municipality has taken corrective measures for faithful compliance with the established reporting dates. Training and supervision of compliance personnel for this program or any other required funds will be reinforced.

Finding Reference: 2021-002 Federal Agency: U.S. Department of the Treasury Pass-through Agency: Puerto Rico Health Department Program: Coronavirus Relief Fund (Assistance Listing No. 21.019) Compliance Requirement: Allowable Cost / Cost Principles (B) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: In our Payroll Test, we found that the Municipality did not comply with the limit labor hours by employee position as established by the pass-through agency. Additionally, after reviewing payroll, cumulative cards, attendance sheets and files of all employees under the program, we did not found evidence to justify overtime. According to Municipal Case Investigation and Contact Tracing System (SMICRC), overtime can be justified if it is due to participation in meetings at the central or regional level, and impact activities such as COVIVEOS. Criteria: In the Project Guide: Municipal Case Investigation and Contact Tracing System (SMICRC) of the Department of Health, Section 2.2, it is recommended that for every 25,000 habitants there should be a work team for investigation and contact tracing of at least 5 people. The system must have the ability to respond from Monday to Saturday. While the epidemiologist must be on-call 24 hours a day for any emergency. The guide establishes working hours according to the different positions assigned, however, there must be the flexibility to pay overtime, if necessary, which includes participation in meetings at the central or regional level, and impact activities such as COVIVEOS. Cause of Condition: There is a lack of adequate monitoring of hours worked by program employees. Effect of Condition: The Departments in charge are not in compliance with the range of labor hours established in SMICRC of Health Department. Recommendation: We recommend the Departments in charge to establish monitoring procedures to ensure the accuracy of the hours worked monthly, based on the SMICRC, established by the pass-through agency to guarantee compliance with the project guide. Additionally, daily control must be maintained, in which, if the employee worked overtime, have a reason and evidence to justify the payroll costs. This will guarantee better performance and control in the program and departments in charge. Questioned Cost: None Views of Responsible Officials and Planned Corrective Action: The Municipality of Cata?o is committed to maintaining continuous monitoring of the guidelines and procedures of the Municipal Case Investigation and Contact Tracing System. This in conjunction with the Office of Human Resources to keep track of records of hours worked by program employees, with the purpose of maintaining adequate supervision and preventing these findings from being repeated. View of Responsible Officials and Planned Corrective Action:The Municipality of Cata?o is committed to maintaining continuous monitoring of the guidelines and procedures of the Municipal Case Investigation and Contact Tracing System. This in conjunction with the Office of Human Resources to keep track of records of hours worked by program employees, with the purpose of maintaining adequate supervision and preventing these findings from being repeated.

Finding Reference: 2021-003 Federal Agency: U.S. Department of the Treasury Pass-through Agency: Puerto Rico Fiscal Agency and Financial Advisory Authority & Puerto Rico Department of Health Program: Coronavirus Relief Fund (Assistance Listing No. 21.019) Compliance Requirement: Reporting ? Special Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition: In our Reporting Test, we found that the Municipality did not comply the monthly compliance reporting requirements established by the pass-through agency. Criteria: The Transfer Agreements, Clause 5.1, 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, 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. Transferor will transfer emergency assistance fund to transferee for necessary expenditures related to the COVID-19 emergency by making a transfer on the basis set out in this Agreement and in the Transfer Plan attached as Exhibit A. The reports must be due on the 15th day of each month, the transferee will submit a use of funds transfer report for the prior month?s expenses. Cause of Condition: There is a lack of knowledge and training to personal assigned. Additionally, the Municipality does not have an adequate monitoring for the activity and the reports. Effect of Condition:The program is not in compliance with the Reporting Requirements as established in agreement. Recommendation: We recommend training for the authorized personnel to work with the program where they can understand and know how to develop the required reports by the pass-through agency. Also, the Municipality should establish a monitoring system to ensure compliance with established requirements, such as: submit the reports during the 15th day of each month, where the fund expenses of the previous month will be reported. This will ensure better control for the program. Questioned Cost: None Views of Responsible Officials and Planned Corrective Action: The Municipality is committed to effectively monitor the preparation and submission of all reports required by the Municipal Case Investigation and Contact Tracing System, thus complying with the deadlines established in the program guides. Views of Responsible Officials and Planned Corrective Action: The Municipality is committed to effectively monitor the preparation and submission of all reports required by the Municipal Case Investigation and Contact Tracing System, thus complying with the deadlines established in the program guides.

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