Puerto Rico Ports AuthorityState Government

Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed Federal Programs ALN 20.106, Airport Improvement Program Name of Federal Agency U.S. Department of Transportation - Federal Aviation Administration Category Internal Control/Compliance; Significant Deficiency Compliance Requirement Equipment and Real Property Management Criteria 2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. 2 CFR 200.313 (d) (2) establishes that a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. 2 CFR 200.313 (d) (3) establishes that a control system must be developed to ensure adequate safeguard to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 2 CFR 200.313 (d) (4) establishes that adequate maintenance procedures must be developed to keep the property in good condition. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 95 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Criteria – (continued) 2 CFR 200.313 (d) (5) establishes that if the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Property Division Manual No. 500 Section .12 (A) (1) establishes that the General Services Manager together with the Property Division Supervisor will be responsible to take an annual physical inventory. Also, will be responsible for maintaining files to evidence the annual physical inventory taking. Property Division Manual No. 500 Section .12 (A) (4) establishes that Property Division Supervisor will be responsible for investigating and determining the changes that correspond to the founded differences as a result of inventory. Property Division Manual No. 500 Section .16 (1) establishes that all equipment acquired with federal funds will be properly identified and made reference of sourced funds, percentage of federal participation and number of agreement or grant, as apply. Condition While obtaining our understanding of the policies and procedures in place at the Authority’s office in relation to the management of property and equipment, management represented to us that the required physical inventory has not been performed by the Authority’s Property Division personnel during the last seven years as required. Cause The Authority’s lack of personnel has been the principal cause for not taking the physical inventory of property and equipment, as required by federal regulations. Also, due to the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80), a total of 127 eligible employees of the Authority took advantage of the benefits from the incentivized program under said act. In addition, some personnel have simply resigned from their occupied position and left the Authority willingly. The significant reduction in experienced personnel, particularly in key financial functions, occurred prior to the completion of fiscal year-end closing procedures. The Authority did not have an adequate succession or transition plan to ensure continuity of operations and effective internal control during this workforce reduction. Consequently, the Authority experienced disruption in the Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 96 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Cause – (continued) performance of key financial reporting processes and became increasingly reliant on external consultants to complete certain closing entries and procedures. Effect The lack of a periodic physical inventory procedures does not allow the Authority the timely identification of issues related to federally acquired property and equipment in order to take needed actions to prevent or correct inadequate condition. The Authority is exposed to the risk of possible unauthorized use, misappropriation and disposition of property without being noticed due to the lack of internal controls and proper supporting accounting records. Such condition exposed the Authority not to take any action to recover any suffered loss as reconciliation of physical assets to accounting records could not be made. Context This finding was present in the prior year single audit report as finding 2024-004 and 2023-004. Corrective action plan from the prior year single audit report (issued September 29, 2025) stated that during fiscal year 2025‐2026 the Human Resources area will conduct an analysis and evaluation of all vacant positions to determine which ones can be hired. Once this analysis is completed, management will obtain the required approval to hire additional personnel to address the physical inventory observation and counting. Therefore, the condition is still present as of June 30, 2025. Identification of repeat finding This is a repeat finding from the immediate previous audit, Finding 2024-004. Questioned costs Could not be determined. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-004 – Improvement required over the equipment and real property management for which the physical inventory observation over property has not been performed – (continued) Recommendation We recommend management to appoint personnel to perform this task. Such personnel might come from contracting outsourced third-party providers or hiring new or training current personnel to assist in the capital assets inventory taking procedures. In addition, we recommend that management enforce the procedures to be followed by the Property Division to mitigate the risks of misappropriation. This could be denominated as a special project to be included as part of the subsequent fiscal year budget and be contracted with a third party as the benefits overweight the risk of loss. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 108-114.

Finding No: 2025-005 – Late filing of data collection form and reporting package Federal Programs ALN 20.106, Airport Improvement Program ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN 21.027, Coronavirus State and Local Fiscal Recovery funds Name of Federal Agency U.S. Department of Transportation - Federal Aviation Administration U.S. Department of Homeland Security U.S Department of Treasury Category Internal Control/Compliance; Significant Deficiency Compliance Requirement Reporting Criteria 2 CFR 200.512 (a) (1) establishes that the audit must be completed, and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (c) of this section must be submitted within the earlier of 30 calendar days after receipt of the auditors' report(s), or nine months after the end of the audit period. Condition The Authority did not submit the required data collection form and reporting package within the required period by March 31, 2026 (9 months after the end of fiscal year). Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 99 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-005 – Late filing of data collection form and reporting package – (continued) Cause The Authority did not comply with this requirement since the audit of its financial statements, and accordingly its reporting package and procedures, were not ready to be released by the due date. Such delay was mainly attributed to the Authority having difficulties with its timely monthly closings due to its limited personnel in the area of Accounting and Federal Funds Affairs Division. This was enhanced by the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80) mentioned in findings 2024-003 and 2024-004. Effect Federal grantors were prevented from being informed on a timely basis of the current and previous audits findings, recommendations and corrective action being taken by the Authority. Also there has been a late disclosure about the Authority’s operating results. Consequently, any action, further requirements or request of support from the federal grantor could not be executed on a timely basis or not executed at all. Context The complete audit reporting package including the Data Collection Form, which is an annual requirement, was filed after the corresponding due date. Identification of a repeat finding This is a repeat finding from the immediate previous audit, Finding 2024-005. Questioned costs. None Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-005 – Late filing of data collection form and reporting package – (continued) Recommendation We recommend to the Authority to establish a reporting and filing schedule with the Federal Affairs Division to review filing of required annual reporting in order to ascertain that all team members be aware of due dates, including any extensions, if applicable. Such scheduling must be shared to the corresponding officials at the central government in charge of providing the necessary financial information to be included as part of the Authority’s financial statements. Also, the Authority should evaluate the necessity of additional personnel in the area of Accounting and Federal Funds Affairs Division. In addition, we recommend management to recruit new personnel to assist in the financial reporting process. Such personnel might come from contracting outsourced third-party providers or hiring new or training current personnel to assist in the financial reporting process. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See

Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency ALN 21.027, Coronavirus State and Local Fiscal Recovery Funds Category U.S. Department of Treasury U.S. Department of Homeland Security Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. 2. Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 102 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Criteria – (continued) 3. Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. 5. Comparison of expenditures with budget amounts for each Federal award. 6. Written procedures to implement the requirements of § 200.305. 7. Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. In addition, the 2 CFR Compliance Supplement states the following under Special Test and Provisions – Project Accounting: For large projects, the recipient is required to make an accounting to Federal Emergency Management Agency (FEMA) of eligible costs. Similarly, the subrecipient must make an accounting to the recipient. In submitting the accounting, the entity is required to certify that reported costs were incurred in performance of eligible work, that the approved work was completed, that the project is in compliance with the provisions of the FEMA-State Agreement, all grant conditions were met, and that payments for that project were made in accordance with the applicable payment provisions. For improved and alternate projects, if the total cost of the projects does not equal or exceed the approved eligible costs, then the auditor should expect to see an adjustment to reduce eligible costs (44 CFR section 206.205). For Small Projects, FEMA does not adjust estimated costs to the actual incurred amount. The Subrecipient must certify that they completed the approved SOW, and the Recipient must certify that they made all payments in accordance with the FEMA-State/Territory/Tribe agreement. This is typically completed on a Small Project Completion Certification. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 103 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Condition During our procedures over the Authority’s funds received from FEMA we noticed the following: 1. Return of interest earned on FEMA-related funds totaling approximately $211,853 was not timely recorded in the general ledger and was subsequently recorded through a post-closing entry dated January 26, 2026. 2. Management initially misclassified approximately $6 million received under the Coronavirus State and Local Fiscal Recovery Funds as state funds rather than federal awards. As a result, the amount was originally excluded from the Schedule of Expenditures of Federal Awards (the Schedule). Cause The condition was caused by the Authority's lack of personnel on the federal funds management office which has been present during prior audit periods, the early retirement program established under Act No. 80 of August 3, 2020 – “Law for Incentivized Retirement Program and Justice for Our Servants” (Act No. 80), and the resignation of some personnel from their occupied position and left the Authority willingly as stated in finding 2025-004 are the main causes for the condition. Effect Inadequate accounting and controls over federal funds can cause incorrect revenue recognition as capital advances are recognized as revenue when used appropriately and not when received. In addition, this can cause amounts to be included on the Schedule incorrectly as some of the activities received as capital advances have not actually occurred. It also creates risk of allocating funds in the incorrect federal awards as some of these have similar uses and assistance listing numbers. Also, the Authority could be subject to penalties or sanctions from the Federal Grantor. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs – (Continued) Year Ended June 30, 2025 - 104 - Part III – Federal Award Findings and Questioned Costs – (continued) Finding No: 2025-006 – Internal control deficiencies over accounting for federal funds received Context The Authority recognized as federal award revenue of $6 million approximately, as contributions from the Commonwealth of Puerto Rico and therefore were originally not included in the Schedule. Also, $211,853 on the bank accounts where FEMA funds were deposited had to be returned since the funds cannot be deposited in an interest-bearing account. Journal entry recognizing this return was subsequently recorded through a post-closing entry dated January 26, 2026. Identification of repeat finding This is a repeat finding from the immediate previous audit, Finding 2025-006 Questioned costs None as adjustments were made during the audit to correct the misstatement. Recommendation We recommend the Authority’s Federal Funds Management Office (FFMO) and finance department coordinate with the external consultant who handles federal funds received from FEMA to better identify and classify funds received. In addition, we recommend the Authority to address the FFMO personnel limitations by hiring additional personnel for the Authority, re-shifting task between current personnel or by relaying on outsourced third party providers. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 108-114.

Finding No: 2025-007 – Lack of controls over minimizing the time elapsing between the transfer of funds from the pass-through entity and the disbursement of funds by the Authority . CFR Part 200 Subpart D Subsection 200.305 states the following: For recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. The recipient or subrecipient must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the recipient or subrecipient, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a recipient or subrecipient must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the recipient or subrecipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient or subrecipient for direct program or project costs and the proportionate share of any allowable indirect costs. The recipient or subrecipient must make timely payments to contractors in accordance with the contract provisions. Whenever possible, advance payment requests by the recipient or subrecipient must be consolidated to cover anticipated cash needs for all Federal awards received by the recipient from the awarding Federal agency or pass-through entity. During our audit procedures, we identified that most capital advances received during fiscal years 2025 and 2024 from FEMA were still unused on June 30, 2025, with no procedures to minimize the time elapsing between funds received and disbursed. In addition the Authority had to returned unused funds to the pass through entity since they remained unused for more than a year.

While obtaining our understanding of the policies and procedures in place at the Authority’s office in relation to the management of property and equipment, management represented to us that the required physical inventory has not been performed by the Authority’s Property Division personnel during the last two years as required.

The Authority did not submit the required data collection form and reporting package within the required period by March 31, 2025 (9 months after the end of fiscal year).

During our procedures over the Authority’s funds received from FEMA we noticed the following: 1. Part of the funds received under ALN 97.036 were recorded as revenue without analyzing if the conditions for revenue recognition were met. When examining the evidence received, we noticed some of the funds were received as capital advances in which the Authority had recognized as revenue prior to expending the funds. These funds were incorrectly included in the original Schedule of Expenditures and Federal Awards (SEFA) without being expended. 2. The Authority did not correctly identify the correct federal award of funds received under ALN 97.056, Port Security Grant Program, which were originally identified under a the ALN 97.039, Hazard Mitigation Grant Program.

During our audit procedures, we identified that most capital advances received during fiscal years 2023 and 2024 from FEMA were still unused on June 30, 2024, with no procedures to minimize the time elapsing between funds received and disbursed.

During our audit procedures we detected that forms FAA 126 and Forms FAA 127 were not filed within the 120 days of the end of the airport’s fiscal year as required by the compliance supplement.

While obtaining our understanding of the policies and procedures in place at the Authority’s office in relation to the management of property and equipment, management represented to us that the required physical inventory has not been performed by the Authority’s Property Division personnel during the last two years as required.

The Authority did not submit the required data collection form and reporting package within the required period by March 31, 2023 (9 months after the end of fiscal year).

During our procedures over the Authority’s funds received from FEMA we noticed the following: 1. All funds received from FEMA were recorded as revenue without analyzing if revenue recognition was correct. When examining the evidence received, we noticed many of the funds were capital advances in which the Authority had recognized as revenue without expending the funds. These funds were included in the original Schedule of Expenditures and Federal Awards (SEFA) without being expended. 2. The authority did not make clear distinction on the correct federal award of the funds received on the accounting records. There were funds that belonged to ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) while others belonged to ALN 97.039, Hazard Mitigation Grant Program, however, the Authority did not make this distinction originally identifying them all under ALN 97.036.

During our audit procedures, we identified that most capital advances received from FEMA were still unused on June 30, 2023, with no procedures to minimize the time elapsing between funds received and disbursed.

During our testing for regional airport expenditures, we detected an employee working on Fernando Luis Ribas Dominicci Airport per the OP-48 (salary adjustment form) was being recorded as payroll expense for José Aponte Hernández Airport.

During our testing for Airport Improvement Program expenditures, we detected that there was a vendor which was not registered on System for Award Management (SAM) and was not verified on the excluded parties list system (EPLS)

Physical inventory observation over property has not been performed Condition: While obtaining our understanding of the policies and procedures in place at the Authority’s office in relation to the management of property and equipment, management represented to us that the required physical inventory has been not performed by the Authority’s Property Division during the last two years as required.

Late filing data collection form and reporting package Condition: The Authority did not submit the required data collection form and reporting package within the required period by March 31, 2023 (9 months after the end of fiscal year).

Quarterly Performance Reports and Form SF‐425 & Late filing of reports required by FAA regulations Condition: During our audit procedures we identified the following instances: a. We identified one (1) instance in which the annual form SF‐425 for Grant 3‐72‐0008‐019‐2021 was due December 31, 2022, but was submitted on March 30, 2023. b. In four (4) instances, Forms FAA 5100‐126 and FAA 5100‐127 which applies for seven (7) of the nine (9) airports, and had a due date of October 31, 2022, were filed on February 9, 2023.

Late filing of Milestone Progress Reports and Federal Financial Reports Condition: During our audit procedures, we identified various FFR’s and MPR’s under all grants active during fiscal year 2022 that were not submitted on the required due date as follows: * FFR under grant PR‐05‐0001 due 10/30/2021 was submitted on 12/20/2021. * FFR under grant PR‐90‐X296 due 10/30/2021 was submitted on 12/6/2021. * FFR under grant PR‐05‐0035 due 10/30/2021 was submitted on 12/20/2021. * MPR under grant PR‐05‐0001 due 10/30/2021 was submitted on 12/16/2021. * MPR under grant PR‐90‐X296 due 10/30/2021 was submitted on 12/7/2021. * MPR under grant PR‐05‐0035 due 10/30/2021 was submitted on 12/16/2021. * MPR under grant PR‐05‐0035 due 1/30/2022 has no submission date and we could not validate compliance with timely reporting.

Lack of proper subrecipient monitoring documentation over the procurement process and activities performed by subrecipient. Condition: The Authority lacked appropriate monitoring procedures and documentation over funds passed to the Puerto Rico Maritime Transport Authority under grants PR‐05‐0001, PR ‐05‐0035 and PR‐90‐X296. The Authority does not request results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F. In addition, the Memorandum of Understanding provided between the Authority and PRMTA ended in fiscal year June 30, 2020, and no extension was provided during the audit.

Lack of completeness of the information included in reports submitted through The Transit Award Management System (TrAMS) Condition: During our examination of our reports sample, we detected the final report for fiscal year June 30, 2022, due to be submitted through TrAMS on July 30, 2022, for grant PR‐05‐0035 did not include the total drawdowns that occurred during the fiscal year.

Finding No: 2021-003 ? Physical inventory observation over property has not been performedFederal ProgramsALN 20.106, Airport Improvement ProgramName of Federal AgencyU.S. Department of Transportation - Federal Aviation AdministrationCategoryInternal Control/Compliance; Significant DeficiencyCompliance RequirementEquipment and Real Property Management.Criteria2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.2 CFR 200.313 (d) (2) establishes that a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years.2 CFR 200.313 (d) (3) establishes that a control system must be developed to ensure adequate safeguard to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated.2 CFR 200.313 (d) (4) establishes that adequate maintenance procedures must be developed to keep the property in good condition.2 CFR 200.313 (d) (5) establishes that if the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Property Division Manual No. 500 Section .12 (A) (1) establishes that the General Services Manager together with the Property Division Supervisor coordinates will be responsible of take an annual physical inventory. Also, will be responsible of maintaining files to evidence the annual physical inventory taking.Property Division Manual No. 500 Section .12 (A) (4) establishes that Property Division Supervisor will be responsible of investigate and determine the changes that corresponds about the founded differences as a result of inventory.Property Division Manual No. 500 Section .16 (1) establishes that all equipment acquired with federal funds will be properly identified and made reference of sourced funds, percentage of federal participation and number of agreement or grant, as apply. ConditionWhile obtaining our understanding of the policies and procedures in place at the Authority?s office in relation to the management of property and equipment, management represented to us that the required physical inventory has not been performed by the Authority?s Property Division personnel during the last two years as required.CauseThe Authority?s lack of personnel has been the principal cause for non-taking the physical inventory of property and equipment, as required by federal regulations. Also, the COVID-19 pandemic has delayed the plans for taking the physical inventory.EffectThe lack of a periodic physical inventory procedures does not allow the Authority the timely identification of issues related to federally acquired property and equipment in order to take needed actions to prevent or correct inadequate condition.The Authority is exposed to the risk of possible unauthorized use, misappropriation and disposition of property without being notice due to the lack of internal controls and proper supporting accounting records. Such condition expose the Authority not to take any action to recover any suffered loss as reconciliation of physical assets to accounting records could not be made.ContextThis finding was present in the prior year audit as finding 2020-002. After inquires made in the current year, the condition still stands as management represented that no changes have been made nor any actions have been taken to correct this situationIdentification of repeat findingFinding 2020-002Questioned costsCould not be determined. Recommendation We recommend management to consider contracting or hiring new or to train current personnel to assist in the capital assets inventory taking procedures. Now that the bulk of the personnel have returned from Covid-19 quarantine, inventory procedures should continue. In addition, we recommend that management enforce the procedures to be followed by the Property Division to mitigate the risks of misappropriation. This could be denominated as a special project to be included as part of the subsequent fiscal year budget and be contracted with a third party as the benefits overweight the risk of loss. Views of responsible officials and planned corrective actions We agreed with the auditors finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 123-128.

Federal Programs ALN 20.106, Airport Improvement Program Name of Federal Agency U.S. Department of Transportation - Federal Aviation Administration Category Internal Control/Compliance; Significant Deficiency Compliance Requirement Reporting. Criteria 2 CFR 200.512 (a) (1) establishes that the audit must be completed, and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (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. The Office of Management and Budget (OMB) issued on March 19, 2021 memorandum M-20-21 in which awarding agencies, in their capacity or oversight agencies or audit, should allow recipients and subrecipients that have not yet filed their single audits with the Federal Audit Clearinghouse as of the date of the issuance of this memorandum that have fiscal year-ends through June 30, 2021, to delay the completion and submission of the Single Audit reporting package, as required under Subpart F of 2 CFR ? 200.501 to six months beyond the normal due date (March 31, 2022). Condition The Authority did not submit the required data collection form and reporting package within the required extended period by March 31, 2022 (9 months after the end of fiscal year) which was extended by the OMB memorandum M-21-20 for an additional 6 months. Cause The Authority did not comply with this requirement since the audit of its financial statements, and accordingly its reporting package and procedures, were not ready to be released by the 6-month extension period granted. Such delay was mainly attributed to the late receipt from the central government of the GASB 73/75 related documentation including the corresponding journal entries for the year ended June 30, 2021. Effect Federal grantors were prevented from being informed on a timely basis of the current and previous audits findings, recommendations and corrective action being taken by the Authority. Also there has been a late disclosure about the Authority?s operating results. Consequently, any action, further requirements or request of support from the federal grantor could not be executed on a timely basis or not executed at all. Context The complete audit reporting package including the Data Collection Form, which is an annual requirement, was filed after the corresponding due date. Identification of a repeat finding Finding 2020-004. Questioned costs None Recommendation We recommend to the Authority to establish a reporting and filing schedule with the Federal Affairs Division to review filing of required annual reporting in order to ascertain that all team members be aware of due dates, including any extensions, if applicable. Such scheduling must be shared to the corresponding officials at the central government in charge of providing the necessary financial information to be included as part of the Authority?s financial statements. Views of responsible officials and planned corrective actions We agreed with the auditors finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 123-128.

Finding No: 2021-005? Quarterly Performance Reports and Form SF-425 & Late filing of reports required by FAA regulations Federal Program ALN 20.106, Airport Improvement Program Name of Federal Agency U.S. Department of Transportation ? Federal Aviation Administration. Finding No: 2021-005? Quarterly Performance Reports and Form SF-425 & Late filing of reports required by FAA regulations ? (continued)CategoryInternal Control; ComplianceCompliance RequirementReportingCriteriaThe Grants awarded by the FAA state the following:Until the grant is completed and closed, you are responsible for submitting formal reports as follows:? A signed/dated SF-270 (non-construction projects) or SF-271 or equivalent (construction projects) and SF-425 annually, due 90 days after the end of each federal fiscal year in which this grant is open (due December 31 of each year this grant is open); and? Performance Reports, which are due within 30 days of the end of a reporting period asfollows:(i) Non-construction project: Due annually at end of the Federal fiscal year.(ii) Construction project: Submit FAA form 5370-1, Construction Progress and Inspection Report at the end of each fiscal quarter.ConditionDuring our audit procedures we identified the following instances:a. We identified three (3) instances in which the Quarterly Performance Report included along with the form SF-271, were not submitted at all as detailed below:Grant Period (Quarter Ended)3-72-7200-002-2018 September 30, 20203-72-7200-003-2019 September 30, 20203-72-0002-012-2019 December 31, 2020 . Condition ? (continued)b. We identified one (1) instance in which the annual form SF-425 for Grant 3-72-0020-033-2020 was not submitted at all.c. We identified the following late filings:? Form SF-425 for grant 3-72-7200-002-2018 with a year end of September 30, 2021, had a due date on December 31, 2021, but the filing date was on February 15, 2022? Forms FAA 5100-126 and FAA 5100-127 which applies for seven (7) airports, and had a due date of December 31, 2021, were filed on January 24, 2022.CauseThe Department of Planning, Engineering and Construction needs to assign more personnel to the Federal Funds Management Office in order to assist in the compliance process of the federal programs in both the financial and project requirements.EffectFederal grantors were prevented from being informed on a timely basis of the current operating results. Consequently, any action, further requirements, or request of support from the federal grantor could not be executed on a timely basis or not executed at all. Also the Authority could be subject to penalties or sanctions from the Federal Aviation Administration.ContextWe examined a total of ten (10) Quarterly Performance Report (MPR) and observed that three (3) of such reports, segregated in two (2) reports for the quarter ended September 30, 2020, and one (1) report for the quarter ended December 31, 2020, were not submitted to the FAA.We also examined a total of nine (9) forms SF-425 that were required to be submitted to the FAA and observed that one (1) form was not submitted at all and one (1) form that was not timely submitted as detailed above. Context ? (continued)Finally, seven (7) out of nine (9) regional airports, that required to prepare and submit the forms FAA 5100-126 and FAA 5100-127, were submitted late as detailed above.Identification of repeat findingYesQuestioned costsNone.RecommendationWe recommend the Authority make list of all reports required and the required submission dates, including the review of extensions, and establish calendar schedules to ascertain that all members in charge of the reports are aware of all reports required along with the corresponding filing dates.Views of responsible officials and planned corrective actionsWe agreed with the auditors finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 123-128.

Finding No. 2021-006 ? Reporting on employee retention percentageFederal ProgramALN 20.106, Airport Improvement ProgramName of Federal AgencyU.S. Department of Transportation - Federal Aviation Administration. CategoryInternal Control/Compliance; Significant DeficiencyCompliance RequirementReportingCriteriaSponsors for Large, Medium, and Small Hub Airports agree to continue to employ, through December 31, 2020, at least 90 percent of the number of individuals employed (after making adjustments for retirements or voluntary employee separations) by the airport as of March 27, 2020, unless this provision is specifically waived by the Secretary at the airport Sponsor?s written request. The Sponsor shall provide to the FAA the number of employees employed as of March 27, 2020, within 10 business days of this Grant being awarded. Provided further, the Sponsor will report to the FAA the number of employees as of June 30, September 30, and December 31 of 2020, within 10 business days of the end of each reporting period.ConditionDuring the audit procedures over the reporting compliance requirement area, we identified that the Authority submitted the quarterly reports including the number of employees after the 10 business days limit as stated in the requirement 22 of grant BQN-SOG-3-72-0020-033-2020.CausePRPA?s Human Resources Office did not submit the required information to the Federal Funds Management Office in time due to the effect of the COVID 19 Global Pandemic. Many personnel were not in the office creating a cascade effect causing difficulties filing reports on the due date.EffectThe Authority could be subject to penalties or sanctions from the federal grantor due to the late reporting. Context We examined the quarterly reports for June, September, and December 2020. These reports were submitted October 5, 2020, October 20, 2020, and January 19, 2021, all of them were submitted after the due date of 10 business days after the end of the period. Identification of repeat finding None. Questioned costs. None. Recommendation We recommend to management to design and implement a internal control process to identify required federal reports and determine its due dates in order to request and prepare report timely to comply with federal regulations. Views of responsible officials and planned corrective actions We agreed with the auditors finding and recommendation. See further details regarding this matter within the Corrective Action Plan provided on pages 123-128.

Finding No. 2020-001 ? Improvement required over the manual reconciliation process of the fixed assets subsidiary to overcome inefficiencies in the recording of fixed assets and the related depreciation expense We verified one (1) project terminated in 2017 that presented a significant amount reclassified from CIP during the year ended June 30, 2020. The project was reclassified to the module in year 2020, therefore the project was capitalized and related depreciation expense using manual entries that were reversed on June 30, 2020 when the module reclass was made.

During our audit procedures, we identified certain errors in journal entries recorded by management related to the following account balances: ? Allowance for bad debts related to accounts receivable was overstated $572 thousand as a result of a legal case settled with customer for approximately $75,000. ? Construction in progress related to capital assets of the LMMIA and the APP agreements was overstated by approximately $10.3 million. ? Construction in progress and related notes payable for a customer were understated by approximately $1,293,350. ? Construction in progress and accounts payable was understated related to a construction certification not recorded as of June 30, 2020 for approximately $2,648,300. ? Understatement of accounts receivable and notes payable related to reversing credit amortization to a customer for $480,000. As related to the allowance for bad debts journal entry, the confidential settlement and release agreement which caused it was signed in November 2020, after fiscal year ended on June 30, 2020. Accordingly, the adjustment refers to a condition that did not exist at the end of fiscal year. Based on the allowance for bad debts procedures, which consider the aging of accounts receivable balances, at June 30, 2020, the related customer already had a reserve of approximately 46% of its outstanding balance receivable.

Finding Number: 2020-003 ? Physical inventory observation over property has not been performed - (continued) Criteria ? (continued) 2 CFR 200.313 (d) (5) establishes that if the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Property Division Manual No. 500 Section .12 (A) (1) establishes that the General Services Manager together with the Property Division Supervisor coordinates will be responsible of take an annual physical inventory. Also, will be responsible of maintaining files to evidence the annual physical inventory taking. Property Division Manual No. 500 Section .12 (A) (4) establishes that Property Division Supervisor will be responsible of investigate and determine the changes that corresponds about the founded differences as a result of inventory. Property Division Manual No. 500 Section .16 (1) establishes that all equipment acquired with federal funds will be properly identified and made reference of sourced funds, percentage of federal participation and number of agreement or grant, as apply. ? While obtaining our understanding of the policies and procedures in place at the Authority?s office in relation to the management of property and equipment, we were informed that the required physical inventory has been not performed by the Authority?s Property Division during the last two years as required. The Authority?s lack of personnel has been the principal cause for non-taking the physical inventory of property and equipment, as required by federal regulations. Also, the COVID-19 pandemic has delayed the plans for taking the physical inventory. Finding No: 2020-003 ? Physical inventory observation over property has not been performed - (continued) Effect The lack of a periodic physical inventory procedures does not permit the Authority the timely identification of issues related to federally acquired property and equipment in order to take needed actions to prevent or correct inadequate condition. The Authority is exposed to the risk of possible unauthorized use, misappropriation and disposition of property due to the lack of internal controls and proper supporting accounting records. Context We noted the Capital Assets inventory count was not performed. During our certifications testing for our single audit procedures where we verified twenty-five (25) transactions that were not identified as Federal project cost or segregated from the rest of the Construction in Progress (CIP)) costs on the CIP detailed list.

Criteria 2 CFR 200.512 (a) (1) establishes that the audit must be completed, and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (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. The Office of Management and Budget (OMB) issued on March 19, 2021 memorandum M-20-21 in which awarding agencies, in their capacity or oversight agencies or audit, should allow recipients and subrecipients that have not yet filed their single audits with the Federal Audit Clearinghouse as of the date of the issuance of this memorandum that have fiscal year-ends through June 30, 2021, to delay the completion and submission of the Single Audit reporting package, as required under Subpart F of 2 CFR ? 200.501 to six months beyond the normal due date. - 110 - The Authority did not submit the required data collection form and reporting package within the required period of March 31, 2021 (9 months after the end of fiscal year) which was extended by the OMB memorandum M-21-20 for an additional 6 months or September 30, 2021. Cause The Authority did not review deadlines established for the submission of required annual reporting. This happened because of the financial statements were not ready to be released by the 6-month extension period, since the GASB 73/75 documents and related entries for the June 30, 2020 audit were not provided timely by central government. Effect Federal grantors were prevented from being informed on a timely basis of the current and previous audits findings and results. Consequently, any action, further requirements or support from the federal grantor could not be executed on a timely basis or at all. Context No context for this finding since this is an annual requirement to submit the Data Collection Form and the Reporting Package in the Federal Audit Clearinghouse.

Condition The Authority?s Executive Director of Planning, Engineering and Construction did not sign line 12b of the form which certifies the percentage of project completion during the quarters ending September 2019 and December 2019 for the following grants: ? 3-72-0012-024-2017 ? 3-72-0012-025-2018 ? 3-72-0015-010-2018 ? 3-72-0020-028-2017 ? 3-72-7200-002-2018 Cause The Department of Planning, Engineering and Construction requires more personnel to handle the compliance of the funds in both the financial and project requirements. Effect The signature of the Executive Director of Engineering serves as the certification and final authorization of the data contained on form SF-271 pertaining to the progress of the project. Without the verification of a qualifying personnel the report could have incorrect data.

Criteria Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR part 5, Labor Standards Provision Applicable to Contacts Governing Federal Financed and Assisted Construction). This include a requirement for the contractor or subcontractor to submit to the non-federal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); OMB Circular A-110 (2 CFR part 215, Appendix A, Contract Provisions); 2 CFR part 176, subpart C; and 2 CFR section 200.326). Condition During the audit procedures over Wage Rate requirement, we noticed that one of the contracts with a contractor working on a federally funded project lacked the required wage rate clause for the Davis Bacon Act required under the wage rate requirement. A certification separated from the contract was obtained instead. Cause There is a lack of knowledge in the Legal Department of the required clauses a contract under a federal program should have as they only included a certification and not the clause. The contract itself lacked the correct clause and there is no amendment that includes said clause. Effect The contract detected in is not in compliance with federal regulations and required federal clauses. Context The certification sample contained two (2) different contractors. One (1) of these contracts lacked the corresponding clause. Identification of repeat finding None Questioned costs None Recommendation The Federal Funds Department in coordination with the Legal Department should make a list of all contracts under federally funded projects and verify that contracts funded with federal funds include required clauses as stated in the criteria above. For any current active contracts that lack said clause, amendments should be made to include them. Views of responsible officials and planned corrective actions The aforementioned construction agreement?s (AP-18-19-5-026) Statement of Work was to ?furnish all labor, equipment, material, and services?for the Asphalt Seal Coat and Airfield Pavement Rehabilitation in the Fernando L. Ribas Dominicci Airport?. Said agreement had a term from September 2018 to June 2019 and one (1) Amendment extending the term until December 2019. During that period, as the auditor correctly implies, the original contract nor the amendment had the ?Davis-Bacon Act? clause included. This being an expired agreement, no amendments can be done to address that fact. The Legal Division will work closely with the Federal Funds Office to ensure all construction agreements for federally funded projects contain the required clauses. The Legal Division will create a corrective plan to validate all the agreements are in compliance and prevent this from happening again.

Criteria On March 19, 2020, OMB issued memorandum M-20-17, ?Administrative Relief for Recipients and Applications of Federal Financial Assistance Directly Impacted by the Novel Coronavirus (COVID- 19) due to Loss of Operations,? to provide additional flexibilities for federal award recipients affected by the loss of operational capacity and increased costs due to the COVID-19 crisis. The memorandum stated that awarding agencies may allow grantees to delay submission of financial, performance, and other reports up to three months beyond the normal due date. If awarding agencies allows such a delay, grantees will continue to draw down Federal funds without the timely submission of these reports. However, these reports must be submitted at the end of the postponed period. In addition, the awarding agencies may waive the requirement for recipients to notify the awarding agencies of problems, delays, or adverse conditions related to COVID-19 on a grant-by- grant basis (2 CFR ? 200.328(d)(l)). Condition During the audit procedures over the reporting compliance requirement area, we identified that the Authority submitted forms SF-271 for the Quarter of March 2020, which is due July 15, 2020, per Memorandum M-20-2017, on July 16, 2020, a day late of its due date. In addition, the forms FAA 5100-126 and 5100-127 for Fernando Luis Ribas Dominicci Airport which are due January 31, 2021, per the same memorandum, were submitted on March 16, 2021, which was due January 31, 2021. Cause Reporting was submitted late due to Covid 19 Pandemic. Many personnel were not in the office increasing the work of the federal funds officer creating difficulties filing reports on the due date. Even though, the late filing was made in less than 24 hours after the due date. Effect The Authority could be subject to penalties from the Federal Aviation Administration for late reporting or even fund reduction. Context Of the 6 (six) grants that required form SF-271, we identified that all reports for the quarter ending March 31, 2020, were submitted late. Of the nine regional airports, one airport submitted annual forms 5100-126 and 5100-127 after the due date.

Topic: The Authority?s lack of control over the recording of capital assets in the subsidiary and the related depreciation expense. Category: Internal Control Condition: During the audit procedures over the capital assets area, we noticed that capital assets subsidiary maintained by the Authority did not include all the capital assets owned by the Authority, as a result, manual adjustments have been recorded since 2013 to reconcile the capital assets subsidiary with the general ledger, to adjust the accumulated depreciation figures, and to recognize related depreciation expense. Criteria: Property Division Manual No. 500 Section .5 (A)(4) establishes that supervisor of the Property Division will perform the corresponding entries of capital assets to the electronic module of capital assets. The supervisor will maintain it updated with additions, retirements, transfers and any other change of property. Cause: The Authority has no personnel assigned to maintain and update, as necessary, the subsidiary of capital assets. Effect: Lack of an updated capital asset subsidiary resulted in several manual adjustments recorded during monthly closings of the Authority?s financial statements. In addition, it requires significant efforts from the finance division to reconcile the capital assets and depreciation expense. Questioned Costs: None Recommendation: Property and equipment constitute a significant part of the Authority?s financial position. Effective internal control procedures for the identification, recording and maintenance of capital assets should be an important oversight responsibility of management. We recommend management to consider the recording of all capital assets owned by the Authority, this will simplify the maintenance of such records, and mitigate the risk of inaccurate financial data.

Federal Programs: CFDA No. 20.106, Airport Improvement Program Category: Internal Control/Compliance Compliance Requirement: Equipment and Real Property Management Condition: ? While obtaining our understanding of the policies and procedures in place at the Authority?s office in relation to the management of property and equipment, we were informed that the required physical inventory has been not performed by the Authority?s Property Division during the last two years as required. ? We also noted that all capital assets acquired with federal funds are not properly identified by the program that provided the funds for the acquisition. Criteria: 2 CFR 200.313 (d) (1) establishes that property records must be maintained and should include a description of the property, a serial number or other identification number, the source of funding for the property, who holds the title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. 2 CFR 200.313 (d) (2) establishes that a physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. 2 CFR 200.313 (d) (3) establishes that a control system must be developed to ensure adequate safeguard to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. 2 CFR 200.313 (d) (4) establishes that adequate maintenance procedures must be developed to keep the property in good condition. Puerto Rico Ports Authority (A Component Unit of the Commonwealth of Puerto Rico) Schedule of Findings and Questioned Costs For the Year ended June 30, 2019 Page 81 2 CFR 200.313 (d) (5) establishes that if the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return. Property Division Manual No. 500 Section .12 (A) (1) establishes that the General Services Manager together with the Property Division Supervisor coordinates will be responsible of take an annual physical inventory. Also, will be responsible of maintaining files to evidence the annual physical inventory taking. Property Division Manual No. 500 Section .12 (A) (4) establishes that Property Division Supervisor will be responsible of investigate and determine the changes that corresponds about the founded differences as a result of inventory. Property Division Manual No. 500 Section .16 (1) establishes that all equipment acquired with federal funds will be properly identified and made reference of sourced funds, percentage of federal participation and number of agreement or grant, as apply. Cause: The Authority does not have the adequate internal control procedures to ascertain compliance with requirements related to the equipment and real property management. Effects: The lack of a periodic physical inventory procedures does not permit the Authority the timely identification of issues related to federally acquired property and equipment in order to take needed actions to prevent, or correct inadequate condition. The Authority is exposed to the risk of possible unauthorized use, misappropriation and disposition of equipment due to the lack of internal controls and proper supporting accounting records. Questioned Costs: Could not be determined. Recommendation: We recommend that management complete the physical inventory procedures of the property as soon as possible and reconcile results with the property as per general ledger and property records to ascertain completeness and accuracy of equipment and real property. In addition, we recommend that management enforce the procedures to be followed by the Property Division to mitigate the risks of misappropriation.

Federal Programs: CFDA No. 20.106, Airport Improvement Program Category: Internal Control/Compliance Compliance Requirement: Reporting Condition: The Authority did not submit the required data collection form and reporting package within the required period. Criteria: 2 CFR 200.512 (a) (1) establishes that the audit must be completed and the data collection form described in paragraph (b) of this section and reporting package described in paragraph (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. Cause: Missing to review deadlines established for the submission of required annual reporting. Effects: Required data collection from and reporting package were not submitted on time to comply with requirements. Questioned Costs: None Recommendation: We recommend to the Authority to establish calendars with the Federal Matters Division to review submission of required annual reporting in order to ascertain that all team members be aware of due dates.

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