Puerto Rico Safe Drinking Water Treatment Revolving Loan Fund

Finding Number - 2025-003 Cash Management; Allowable Costs Federal Agency Department of Health & Human Services Federal Program Epidemiology and Laboratory Capacity for Infectious Diseases ALN 93.323 Grant Number Various Compliance Requirement Cash Management / Unallowable Costs Type of Findings Internal Control over Compliance / Compliance Category Significant Deficiency Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In accordance with 2 CFR §200.303, non-federal entities are required to establish and maintain effective internal control over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the award. Such controls should include procedures to ensure expenditures are timely identified and included in reimbursement requests. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Condition During our testing of expenditures charged to the Epidemiology and Laboratory Capacity (ELC) program, we identified instances in which expenditures incurred and paid during fiscal year 2022 were included in reimbursement requests submitted during 2025. Although the expenditures appear to relate to allowable program activities, the significant lapse of time between the payment date and the reimbursement request indicates weaknesses in the monitoring and tracking of expenditures pending reimbursement. Also, because the expenditures were originally incurred and paid in 2022, and supporting documentation for prior reimbursement requests was not readily available for the period under audit, we were unable to determine whether these costs had been previously requested for reimbursement. Drawdown No. Type Receipt Date Document No. Check Issuance Date Amount 1525250884 Reimbursement 11-Apr-25 426878 7/21/2022 $ 491,400 428005 8/25/2022 249,960 428049 8/25/2022 558,600 433231 10/11/2022 525,000 440140 11/7/2022 211,803 440145 11/7/2022 248,660 440156 11/7/2022 204,941 429703 6/24/2022 767,102 435438 8/12/2022 745,039 447617 12/8/2022 211,312 $ 4,213,817 Cause Management explained that, in prior periods, drawdown requests were processed manually and on an advanced basis. Subsequently, the Department implemented an electronic system to submit drawdown requests and transitioned the process to a reimbursement method. As part of this transition, certain advance requests that had been processed manually were not properly cleared in the new system and remained recorded as if they had not been requested. Because these requests appeared as pending in the system, they were later submitted again through the new reimbursement process, resulting in duplicate requests in the system records. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Effect As a result, these requests appeared as outstanding in the electronic system and were later submitted again through the reimbursement process. This situation created duplicate drawdown requests in the system records and increased the risk of misstated drawdown activity and potential over-requesting of federal funds if not properly identified and reconciled. Questioned Costs None Perspective Information During our procedures, management explained that prior to the implementation of the current electronic drawdown system, requests for federal funds were submitted manually on an advanced basis. Subsequently, the Department implemented an electronic system to process drawdown requests and transitioned the funding methodology from advances to a reimbursement basis. As part of this transition, certain drawdown requests that had already been submitted manually were not properly cleared or recorded in the new system and remained reflected as pending. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management implement procedures to reconcile manual drawdown requests processed prior to the implementation of the electronic system with the transactions recorded in the system. In addition, management should conduct a comprehensive and detailed review of all legacy transactions that originated before the system transition to ensure that any requests previously processed manually are properly identified, cleared, and supported by adequate documentation. This review should be performed with heightened scrutiny to detect any duplicate or unreconciled drawdown requests. Furthermore, management should establish ongoing controls to periodically review outstanding balances in the system and ensure that all drawdown records are accurate, complete, and appropriately supported. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number- 2025-004 Group VIII Matching Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Matching Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Per 42 CFR §433 and the approved State Plan under the Medicaid program, federal reimbursement must be claimed using the appropriate Federal Medical Assistance Percentage (FMAP) applicable to each eligibility category. Under the Affordable Care Act expansion provisions, expenditures related to Childless Adults under Group VIII are eligible for a 90% FMAP during the audit period. However, expenditures related to the Parent/Caretaker eligibility category are subject to the regular FMAP rate applicable to the state during the audit period (approximately 76%–77.5%). Therefore, claims submitted to the federal government must properly distinguish eligibility categories to ensure the correct matching percentage is applied. Condition During our testing of federal reimbursement claims, we identified five (5) invoices in which the description of the expenditure referenced Group VIII, which includes the following eligibility categories: ✓ Childless Adults ✓ Children age 19–20 ✓ Parent/Caretaker All five invoices were claimed at the enhanced FMAP rate of 90%. However, Parent/Caretaker expenditures during the audit period were eligible only for the regular FMAP rate (76%–77.5%). As a result, expenditures that may have corresponded to Parent/Caretaker beneficiaries were included in claims submitted at the enhanced 90% rate without documented support demonstrating proper eligibility classification. Cause The condition resulted from system limitations and the absence of automated eligibility classification during the period prior to MMIS implementation. The lack of system functionality to segregate eligibility categories within Group VIII resulted in all related expenditures being claimed at the enhanced FMAP rate. Effect Claiming expenditures at an incorrect FMAP rate may result in: • Potential overstatement of federal reimbursement • Noncompliance with federal matching requirements • Risk of repayment to the federal government if amounts are determined to be ineligible. Questioned Costs Indeterminable Perspective Information Due to the absence of beneficiary-level segregation and supporting documentation distinguishing eligibility categories within Group VIII during the audit period, we were unable to determine the portion, if any, of the tested expenditures attributable to the Parent/Caretaker category that may have been claimed at an incorrect FMAP rate. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management: 1. Perform a retrospective analysis of Group VIII expenditures during the audit period to determine whether any Parent/Caretaker expenditures were improperly claimed at the 90% FMAP rate. 2. Quantify and return any overclaimed federal funds, if applicable. 3. Implement formal written procedures to ensure that eligibility categories are properly classified prior to submission of federal claims. 4. Ensure that the enhanced MMIS segregation controls implemented in Q3 2024 are formally documented and subject to periodic supervisory review. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number - 2025-005 Rebates Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Allowable Costs / Activities Cash Management Reporting Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Pursuant to Section 1927 of the Social Security Act (42 U.S.C. § 1396r-8) and implementing regulations at 42 C.F.R. Part 447, Subpart I, states must: ✓ Report quarterly drug utilization data to manufacturers within 60 days after the end of each quarter; and ✓ Ensure that manufacturers remit rebate payments within 30 days after receipt of utilization data; and ✓ Properly identify, record, and credit rebate collections to the Medicaid program in a timely manner. Department of Health of the Commonwealth of Puerto Rico Schedule of Findings and Questioned Costs – (Continued) For the Fiscal Year Ended June 30, 2025 - 47 - Section III- Findings and Questioned Costs Relating to Federal Awards– (continued) Finding Number - 2025-005 Rebates – (continued) Criteria – (continued) In addition, 2 C.F.R. § 200.302 (Financial Management) requires non-federal entities to maintain effective financial management systems that provide accurate, current, and complete disclosure of financial results and ensure proper accounting for program income and federal funds. Further, 2 C.F.R. § 200.305 (Payment) requires that federal funds be minimized between drawdown and disbursement and that program income and recoveries be properly accounted for and applied. Condition During our audit, we identified that the Medicaid Cluster Program (the Program) returned Medicaid drug rebates outside of the federally required timeframes established under the Medicaid Drug Rebate Program. Specifically, rebates received from pharmaceutical manufacturers were not identified, recorded, and returned to the Medicaid program in accordance with the regulatory deadlines prescribed by federal law and regulation. As a result, federal Medicaid funds were not reconciled and credited in a timely manner, and program expenditures were overstated for the applicable reporting periods. Quarter End period Due date Remmitance date Late Q1 FFY2024 3/31/2024 6/29/2024 9/20/2024 83 Q1 FFY2024 3/31/2024 6/29/2024 12/5/2024 159 Q1 FFY2024 3/31/2024 6/29/2024 4/25/2025 300 Q2 FFY2023 6/30/2023 9/28/2023 9/20/2024 358 Q2 FFY2023 6/30/2023 9/28/2023 12/5/2024 434 Q2 FFY2023 6/30/2023 9/28/2023 4/25/2025 575 Q2 FFY2024 6/30/2024 9/28/2024 12/5/2024 68 Q2 FFY2024 6/30/2024 9/28/2024 4/25/2025 209 Q3 FFY2023 9/30/2023 12/29/2023 9/20/2024 266 Q3 FFY2023 9/30/2023 12/29/2023 12/5/2024 342 Q3 FFY2023 9/30/2023 12/29/2023 4/25/2025 483 Q3 FFY2024 9/30/2024 12/29/2024 4/25/2025 117 Q4 FFY2023 12/31/2023 3/30/2024 9/20/2024 174 Q4 FFY2023 12/31/2023 3/30/2024 12/5/2024 250 Q4 FFY2023 12/31/2023 3/30/2024 4/25/2025 391 Cause The Program relies on information provided by the actuaries of Puerto Rico Health Insurance Administration (PRHIA) to identify and calculate Medicaid drug rebates. PRHIA is responsible for compiling and providing the necessary rebate data to the Program. Based on the information received from PRHIA, management processes the corresponding reimbursements once the data is received. However, the Program does not maintain independent monitoring procedures to verify the completeness and timeliness of the information provided by PRHIA, nor does it perform periodic reconciliations between rebate information received and program expenditures to ensure that all applicable rebates are properly identified and credited to the Medicaid program in accordance with federal requirements. Effect As a result of this condition: ✓ The Program was not in compliance with federal Medicaid Drug Rebate Program requirements and Uniform Guidance financial management standards; and ✓ There is an increased risk of questioned costs and federal disallowances. Questioned Costs Indeterminable Perspective Information Under the program, state Medicaid agencies are required to submit quarterly drug utilization data to participating manufacturers. Based on this data, manufacturers calculate and remit rebate payments to the state. These rebate revenues constitute program income and must be applied to reduce Medicaid expenditures in accordance with federal law and Uniform Guidance. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal monitoring and reconciliation procedures to ensure that all Medicaid drug rebate information received from PRHIA is complete and accurately recorded. This should include periodic reconciliations between rebate data provided by PRHIA, rebate receipts, and related Medicaid program expenditures. Also, management should implement a formal follow-up process with PRHIA to periodically confirm that all applicable rebate information has been provided and processed in a timely manner. We also recommend that management: ✓ Implement written policies and procedures governing the identification, recording, reconciliation, and return of Medicaid drug rebates; ✓ Establish periodic reconciliation controls to ensure rebate receipts are timely credited to the Medicaid program; ✓ Strengthen oversight and monitoring of rebate activity to ensure compliance with Section 1927 of the Social Security Act and 42 C.F.R. Part 447; and ✓ Provide training to financial and program staff regarding federal rebate compliance requirements. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number - 2025-006 Late vendor credits Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Cost Principles Type of Finding Internal Control over Compliance / Compliance Category Other Criteria In accordance with the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 CFR §200.305(b)(1) requires that pass-through entities ensure payments to subrecipients are made in a timely manner, generally within a reasonable period after receipt of a valid request for payment. Federal guidance and established administrative practice interpret a reasonable period for purposes of cash management compliance to mean no later than 30 calendar days following receipt of a proper payment request, unless the pass-through entity reasonably determines the request to be improper. This requirement applies regardless of whether the federal award operates on a reimbursement basis and is intended to ensure compliance with federal cash management standards and minimize the time between disbursement of funds and federal reimbursement. Criteria – (continued) For Medicaid program (Assistance Listing 93.778), CMS regulations further require that expenditures claimed for Federal Financial Participation (FFP) be based on actual, incurred, and properly documented costs in accordance with 42 CFR §433.32 and applicable CMS financial management guidance. CMS oversight emphasizes timely payment and proper cash management practices to ensure that expenditures are valid and that federal funds are drawn only for allowable and properly incurred costs. Additionally, 2 CFR §200.332(a) requires pass-through entities to monitor subrecipients and ensure compliance with applicable federal requirements, including adherence to cash management provisions. Condition During testing of subrecipient disbursements, it was noted that six (6) payments included in the sample of 178 were made more than 30 calendar days after the pass-through entity received a valid request for payment from the subrecipient. The delays ranged from 46 to 150 days beyond the regulatory requirement. Item No. Check Date (Voucher id) Invoice Date Audited Amount 1 1/24/2025 00536685 12/4/2024 $ 1,458 2 5/23/2025 00553562 12/23/2024 $ (1,321,563) 3 5/23/2025 00553519 12/23/2024 $ 2,111 4 5/23/2025 00553562 4/1/2025 $ (220,261) 5 7/23/2024 00515301 6/7/2024 $ 5,876 6 7/23/2024 00515303 6/7/2024 $ 8,911 Also, we identified two (2) instances in which vendor credits related to previously issued invoices were not applied to the corresponding invoices until approximately one (1) to three (3) months after the original drawdown was requested. Item No. Invoice number Invoice date Credit amount Drawdown not including credit Date credit return Days 1 RF VITAL 25-003 12/27/2024 $ (1,321,563) 1/13/2025 6/3/2025 -141 2 RF VITAL 25-006 4/10/2025 $ (220,261) 4/28/2025 6/3/2025 -36 Cause The delays in payment were primarily attributable to internal cash management and administrative practices, including the practice of awaiting the receipt of federal funds or internal approvals prior to issuing payment to the subrecipient. These practices were not aligned with the timing requirements established under Uniform Guidance. Management indicated that the Program waits until sufficient positive fund balances are available before processing the return of outstanding credits. As a result, certain credit balances may remain pending until adequate funds are available to complete the reimbursement. This practice may delay the timely return of funds in accordance with applicable requirements. Effect Failure to remit payment to subrecipients within the required 30-day timeframe. Continued noncompliance may increase the risk of: a) Audit findings under the Uniform Guidance, b) Increased federal oversight, c) Potential questioned costs, and d) Strained financial operations for subrecipients due to delayed reimbursement. The delayed application of credits resulted in temporary overstatements of expenditures used to support Federal drawdowns. Although the credits were eventually applied, the timing difference may result in noncompliance with cash management requirements under 2 CFR §200.305, as Federal funds may have been drawn in excess of immediate cash needs. Questioned Costs None Perspective Information This finding was identified during the audit of the Medicaid program (Assistance Listing 93.778) for the fiscal year ended 2025. The payments tested related to expenditures incurred and invoiced by a state agency acting as a subrecipient under an interagency agreement. Although both the pass-through entity and the subrecipient are agencies within the same state government, federal regulations treat them as distinct entities for purposes of cash management compliance. Prior Year Audit Finding This is not a prior year finding Recommendation It is recommended that the pass-through entity strengthens internal controls over subrecipient payments to ensure that all valid requests for payment are processed and paid within the 30-calendar-day timeframe required by 2 CFR §200.305(b)(1). Management should also ensure that payment procedures are not contingent upon the timing of federal drawdowns and that any delays are adequately documented and communicated to the subrecipient. We recommend that management strengthen internal controls over the drawdown process by implementing a formal review procedure to verify that all outstanding vendor credits have been identified and applied prior to submitting a Federal draw request. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number - 2025-007 Manage Care Audits Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Special tests Type of Finding Internal Control over Compliance Category Other Criteria Federal Medicaid managed care regulations (42 CFR Part 438.358) and PRHIA contract requirements for Managed Care Organization (MCO) oversight stipulate that findings from External Quality Review Organization (EQRO) reports should be used to monitor and improve the quality of services and that corrective actions should be implemented in a timely manner. Also, the regulations require that EQRO technical reports be made publicly available, including publication on the State’s website. Timely follow-up and public availability of these reports are essential to ensure transparency, compliance with quality standards, and adherence to State Plan requirements. Condition During our review of the EQRO’s activities for Puerto Rico Medicaid MCOs, we noted that the 2023 EQRO report issued by Mercer identified findings across all four MCOs that required corrective actions. However, management did not perform documented follow-up or monitoring to ensure these findings were addressed throughout 2024. Instead, MCOs were not reviewed for resolution of these issues until the subsequent annual EQRO review. Also, we verified that the results of these periodic audits were posted on the state’s website, as required by federal regulations. However, most recent reports were not included on website. Cause Management relied primarily on the subsequent annual EQRO review to determine whether MCOs had addressed the 2023 findings, rather than implementing ongoing monitoring procedures throughout 2024. As a result, formal internal procedures to document the monitoring of corrective actions and the timely publication of the reports on the website have not been fully established. Effect The lack of documented monitoring procedures and confirmation of public posting may result in delays in addressing identified findings and limit transparency regarding program performance. This condition may also increase the risk of noncompliance with federal Medicaid managed care regulations and applicable contractual requirements. Questioned Costs None Perspective Information During our review of the EQRO oversight process, we noted that the Program receives technical reports prepared by the External Quality Review Organization (EQRO) related to the performance and quality of services provided by the Managed Care Organizations (MCOs). These reports include findings and recommendations intended to support monitoring activities and improve the quality of services provided under the Medicaid managed care program. However, documentation supporting timely follow-up on the findings and confirmation that the reports were made publicly available on the Program’s website was not consistently maintained. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal procedures to document the review and follow-up of EQRO findings and recommendations, including tracking the implementation of corrective actions by the MCOs. Also, management should implement a process to ensure that all required EQRO technical reports are published on the Program’s website in a timely manner and that evidence of such publication is retained for monitoring and compliance purposes. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number: 2024-003 Agency: Department of Health & Human Services Federal Program: Maternal and Child Health Services Block Grants to the States ALN: 93.994 Compliance Requirement: Earmarking Category: Material Weakness in Internal Control over Compliance Criteria 45 CFR sections 92.20(a) and (b) (1) to (4) establish that: a) A State must expend and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its subgrantees and cost-type contractors, must be enough to, 1. Permit preparation of reports required by this part and the statutes authorizing the grant, and 2. Permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of other grantees and subgrantees must meet the following standards: 1. Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant. 2. Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. if unit cost data are required, estimates based on available documentation will be accepted whenever possible. Condition We noted the following deficiencies related to the grant awards B04MC47443: a. The PRDH does not segregate financial records sufficiently in order to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the percentage restrictions of the grant award. b. We could not evaluate if the program is in compliance with the established earmarking requirements since the expenses were recorded for each of the award components and not the earmarking activity. Cause This situation occurs because the accounting records currently used by the PRDH do not have a reliable system to account for funds awarded to them. The chart of accounts in the financial system is not sufficiently expanded to account for each of the earmark requirements. Effect The PRDH could exceed the established expenditures limits per activity for the grant award. Noncompliance with the earmarking requirements could lead to significant administrative sanctions by the grantor, including reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve program objectives. Questioned Costs None Perspective Information Finding represents a significant problem. The agency will review internal controls to ensure that comply with federal government requirements. Prior Year Audit Finding 2023-004 Recommendation The PRDH must expand the chart of accounts in order to account for the amounts claimed for administrative expenditures independently. This expansion would permit the tracing of funds to a level of expenditure to establish that such funds have not been used in violation of the restrictions and prohibitions of the program as defined in 42 USC 705(a)(3). Also, payroll expenses must be recorded into each of the corresponding program activities, as follows: a) Preventive and primary care services for children. b) Services for children with special health care needs. Views of Responsible Officials PRDOH agrees with the finding. PRDOH has fixed the segregation of financial record, we already have the system in place in People Soft 8.4 in which permit the tracing of the funds to the level of expenditures that will be adequate. Responsible Officials Dr. Manuel Vargas Bernier Program Director 787-765-2929 ext. 4583 Mrs. Diana Ferrer Rivera Senior Accountant 787-765-2929 ext. 4551 Mrs. Lydia Magaly Cabrera Accountant 787-765-2929 ext. 4587 Estimate Date of Completion The process is in place for the grants that start for the fiscal year 2024-2025.

Finding Number: 2024-004 Agency: Department of Health & Human Services Federal Program: Immunization Cooperative Agreement ALN: 93.268 Grant Number: Various Compliance Requirement: Cash Management Category: Significant Deficiency in Internal Control over Compliance Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. 2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Condition During our procedures, we found the following exceptions: a) In a sample of twenty-five (25) cash drawdown petitions for the Immunization Cooperative Agreement, we observed transactions with the check issued after the required time lapsed in accordance with the program advance type request. Cause Programs have not established written procedures and internal controls to properly follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Effect Failure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments, or other special conditions. Questioned Costs None Perspective Information Finding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the 3 days timeframe. Prior Year Audit Finding None Recommendation The PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds. Views of responsible officials The PRDOH is working with the Finance Department to establish and strengthen our internal controls to ensure all payments comply with the guidelines established by the Federal Government. On the other hand, the PRDOH is working and verifying our own written procedures to ensure that payments are issued promptly after the drawdown is made. Responsible Officials Mrs. Camille Francisco Peguero Program Accountant 787-765-2929 ext. 3287 Dr. Angel M. Rivera Garcia Program Director 787-765-2929 ext. 3338 Estimated Completion Date The Completion date for the revised procedures will be by December 2025.

Finding Number: 2024-005 Agency: Department of Health & Human Services Federal Program: Maternal and Child Health Services Block Grant to the State ALN: 93.994 Grant Number: Various Compliance Requirement: Cash Management Category: Significant Deficiency in Internal Control over Compliance Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. 2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Condition During our procedures, we found the following exceptions: a) In a sample of fifteen (25) cash drawdown petitions for Maternal and Child Health Services Block Grant to the State, we observed transactions with the check issued after the required time lapsed in accordance with the program advance type request. Cause Programs have not established written procedures and internal controls to properly follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Effect Failure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments, or other special conditions. Questioned Costs None Perspective Information Finding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the 3 days timeframe. Prior Year Audit Finding None Recommendation The PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds. Views of responsible officials The PRDOH is working with the Finance Department to establish and strengthen our internal controls to ensure all payments comply with the guidelines established by the Federal Government. On the other hand, the PRDOH is working and verifying our own written procedures to ensure that payments are issued promptly after the drawdown is made. Responsible Officials Dr. Manuel Vargas Bernier Program Director 787-765-2929 ext. 4583 Mrs. Diana Ferrer Rivera Senior Accountant 787-765-2929 ext. 4551 Mrs. Lydia Magaly Cabrera Accountant 787-765-2929 ext. 4587 Estimated Completion Date The Completion date for the revised procedures will be by December 2025.

Finding Number: 2024-006 Agency: Department of Health & Human Services Federal Program: Epidemiology and Laboratory Capacity for Infectious Diseases ALN: 93.323 Grant Number: Various Compliance Requirement: Cash Management Category: Significant Deficiency in Internal Control over Compliance Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. 2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Condition During our procedures, we found the following exceptions: a) In a sample of fifteen (25) cash drawdown petitions for Epidemiology and Laboratory Capacity for Infectious Diseases, we observed transactions with the check issued after the required time lapsed in accordance with the program advance type request. Cause Programs have not established written procedures and internal controls to properly follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Effect Failure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments, or other special conditions. Questioned Costs None Perspective Information Finding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the 3 days timeframe. Prior Year Audit Finding None Recommendation The PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds. Views of responsible officials The PRDOH is working with the Finance Department to establish and strengthen our internal controls to ensure all payments comply with the guidelines established by the Federal Government. On the other hand, the PRDOH is working and verifying our own written internal procedures to ensure that payments are issued promptly after the drawdown is made. Responsible Officials Mrs. Sylvianette Luna Anavitate Program Director 787-765-2929 ext. 3121 Mr. Bryan Santos Martínez Financial and Accountant Analyst 787-765-2929 ext. 3361 Estimated Completion Date The Completion date for the revised procedures will be by December 2025.

Finding Number: 2024-007 Agency: Department of Health & Human Services Federal Program: Maternal and Child Health Services Block Grant to the State ALN: 93.994 Grant Number: 23B04MC47443 Compliance Requirement: Reporting Category: Material Weakness on Internal Control and Noncompliance Criteria 2 CFR Part 200 Section 328 established unless otherwise approved by OMB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated standards lead. This information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. 2 CFR Part 200 Section 303 states that the entity must be established and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. Condition We could not observe the SF-425 reports for the grant 23B04MC47443. According to the program accountant, the SF-425 report for the current period was due on December 30, 2024, as specified in the Notice of Award. The program requested a waiver to submit the report on January 31, 2025. The Department of Health's Office of External Resources submitted the request through the Payment Management System on January 9, 2025. As of now, the federal government has not responded to this waiver request. Cause The PRDH has not established effective procedures for the timely filing of the required financial reports. Effect The PRDH is not in compliance with the federal regulations on reporting. The inaccurate and untimely reporting prevents the Federal awarding agency and PRDF’s management from monitoring the program financial activities, assessing the achievements of the program, and evaluating the grant award for subsequent years. Questioned Costs None Perspective Information As part of our audit procedures over reporting requirements, we evaluated Federal Financial Reports (SF-425) for the quarter ended on July 31, 2024. The test revealed that the report was not in compliance. Prior Year Audit Finding None Recommendation Management should take appropriate actions to implement internal controls procedures should be enforced to ascertain that required reports are timely filed; otherwise, a waiver or extension of time must be obtained. Views of responsible officials PRDH agrees with the finding. In this case there were three (3) more reports submitted for extension to the federal government, however, with this particular report the PRDH did not receive an answer. However, we have procedures in place in order to meet the reporting requirements to all federal programs be submitted on time. The PRDH is working with the Division of External Resources (Federal Program) to establish and strengthen our internal controls to ensure all federal reports comply with the guidelines established by the Federal Government. Responsible Officials Dr. Manuel Vargas Bernier Program Director 787-765-2929 ext. 4583 Mrs. Diana Ferrer Rivera Senior Accountant 787-765-2929 ext. 4551 Mrs. Lydia Magaly Cabrera Accountant 787-765-2929 ext. 4587 Estimated Completion Date Estimated date of completion immediately.

Criteria 45 CFR, Part 74, Subpart C, Section 74.21; 7 CFR, Part 3016, Subpart C, Section 3016.20 establishes the following: a) A State must expend and account for grant funds in accordance with State Laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub-grantees and cost-type contractors, must be sufficient to: 1. Allow preparation of reports required by this part and the statutes authorizing the grant, and 2. Allow the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of the grantees and sub-grantees must meet the following standards: 1. Financial reporting - Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant. 2. Accounting records - Grantees and sub-grantees must maintain records that adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures and income.3. Internal control - Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Grantees and sub-grantees must adequately safeguard all such property and must ensure that it is used solely for authorized purposes. 4. Budget control - Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financia1 information must be related to performance or productivity data including the development of unit cost information whenever appropriate or specifically required in the grant or sub_x0002_grant agreement. If unit cost data are required, estimates based on available documentation will be accepted, whenever possible. s. Source documentation - Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records contract and sub-grant award documents, etc. During our audit procedures for the fiscal year ended June 30, 2023, we noted the following deficiencies related with the accounting procedures and financial reporting practices of the PRDH: a) The PRDH has inappropriate and/or incomplete cut-off procedures, as well as incomplete month-end and year-end reconciliation and closing procedures which prevent the timely processing of adjustments. Many transactions and adjustments are posted months after the applicable closing with a retroactive effect due to delays in the processing of information, especially those related to payroll transactions. b) During our audit procedures related to compliance with the reporting requirements, we noted that the Finance Department does not reconcile on a timely basis the accounting transactions recorded in their system with the ubsidiary ledger and reports prepared by the federal programs administration. Cause PRDH management has not implemented effective internal controls to ensure a reliable accounting system to accurately account for funds administered. Also, is caused by the lack of analysis of financial transactions recorded during the fiscal year and the lack of monitoring and supervision by the PRDH's management. Effect The PRDH is unable to prepare accurate and complete financial reports on a timely basis. Due to significant reconciliation efforts, report may contain significant errors that may pass undetected. Questioned Costs NonePerspective Information Finding represents a significant problem. The Department of Health must plan to improve accounting and financial reporting practices. Prior Year Audit Finding 2022-001 Recommendation PRDH should evaluate their current accounting and financial reporting software to ensure that the PRDH maximizes its use, establishment or revision of policies and procedures, establishment of periodic reconciliation and analysis of accounting transactions and additional training to accounting personnel related to accounting and financial reporting matters, including year-end closing procedures. Views of Responsible Officials The PRDOH agrees with the finding. However, PRDOH has implemented various corrective actions. Regarding Project Costing Module, the PRDOH already has implemented the Travel and Expenses Module, Payment Management System, which integrates with the Account Receivable to streamline revenue records and Payroll Solutions. The effectiveness of these will be observed during the fiscal year 2024-2025. Also, the PRDOH and Central Government are currently working on ERP implementation in all Government Agencies. This new ERP will be in place in the fiscal year 2024-2025. Furthermore, the PRDOH has established control in order for all program to ensure the timely performed reconciliations between the finance office, the federal affair office, this procedure has started since august 2022. In the other hand the State Department of Treasury has begun a series of training with regard the new ERP that will, be in place by October 2024. This new system in order to close the monthly period all programs will need to reconcile first before closing of the period. Responsible Officials Mrs. Velmary Martinez Y ace Finance Director Mrs. Mayra Reyes Accounting Office Supervisor Estimated Completion Date Tel. 787-765-2929 ext. 3291 Tel. 787-765-2929 ext. 3294 Implementation is expected to be completed on or before the end of October 2024.

Criteria 2 CFR 200.303 establish that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR 200.430 establishes that the cost of compensation for personnel services is allowable to the extent that it follows an appointment made in accordance with the governmental unit's laws and rules and meets the merit system or other requirements required by federal law, where applicable. Compensation for personal services may also include fringe benefits which are addressed in §200.431 Compensation-fringe benefits. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i) of this section, Standards for Documentation of Personnel Expenses, when applicable. (i) The Non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those working on Federal awards. Condition a. During our audit, on a sample of sixty (60) personnel files, we observed that the personnel files are not being kept current and in some instances were incomplete. b. The PRDH does not have established written policies and manuals which can define standard internal controls for each program and/ or region of the entity. Cause PRDH has not established an effective internal control designed to ensure the accuracy and completeness of the employee files. Also, the incompleteness of the files may depend on the time that the employee started working in the agency. Effect Due to law and regulation changes, incomplete files may result in inadequate documentation to support compliance with the criteria over management and administration of personnel files. Also, in the case of employees paid with federal funds it may result in cost disallowances for personnel that do not meet the requirements to be employed by the corresponding federal program. Questioned Costs None Perspective Information Finding does not represent a significant problem. The Department has addressed this finding and it's been taking the steps necessary to reduce incidences to a minimum. We selected 60 employee files from the agency. Prior Year Audit Finding 2022-002 Recommendation PRDH should immediately undertake a process to review all personnel files and validate that the minimum requirement documents are appropriately completed and included in each personnel file. Also, the PRDH must update the salary change form in file in order to reflect current salary as stated in the digital information system. Views of Responsible Officials The PRDOH agrees with the finding. However, PRDOH has implemented several corrective actions. The PRDOH established an internal control to ensure that the required documents are recorded in the files. The Director of Human Resources presented a work plan, in order to implement an effective procedure for reviewing files. A control sheet of documents required to the active records was established in which the Human Resources Officers of the regions and Hospital were requested to verify the employee's files for the required documentation that is need it in the files. Responsible Officials Ledo. Luis Rivera Villanueva Mrs. Luz S. Ramos Pedroza Mrs. Maribel Zayas Estimated Completion Date Sec. Auxiliar de Recursos Humanos Specialist Payroll Officer Director 787-765-2929 ext. 4273 787-765-2929 ext. 4273 787-765-2929 ext. 4209 Implementation is expected to be completed on or before the end of October 2024.

Criteria 2 CFR Part 200 Section 328 established unless otherwise approved by 0MB, the Federal awarding agency must solicit only the OMB-approved governmentwide data elements for collection of financial information (at time of publication the Federal Financial Report or such future, OMB-approved, governmentwide data elements available from the OMB-designated standards lead. This information must be collected with the frequency required by the terms and conditions of the Federal award, but no less frequently than annually nor more frequently than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes, and preferably in coordination with performance reporting. The Federal awarding agency must use OMB-approved common information collections, as applicable, when providing financial and performance reporting information. 2 CFR Part 200 Section 303 states that the entity must be establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. Cause The PRDH has not established effective procedures for the timely filing of the required financial reports. Effect The PRDH is not in compliance with the federal regulations on reporting. The inaccurate and untimely reporting prevents the Federal awarding agency and PRDF's management from monitoring the program financial activities, assessing the achievements of the program, and evaluating the grant award for subsequent years. Questioned Costs None Perspective Information As part of our audit procedures over reporting requirements, we evaluated Federal Financial Reports (SF-425) for the quarter ended on July 31, 2023. The test revealed that the report was not in compliance. Prior Year Audit Finding None Recommendation Management should take appropriate actions to implement internal controls procedures should be enforced to ascertain that required reports are timely filed; otherwise, a waiver or extension of time must be obtained. Views of responsible officials The PRDOH agrees with the finding. Also, for that particular report there was a confusion on the date as to when was need it to be submitted by the federal government. However, we have established procedures to meet the reporting requirements to all federal programs be submitted on time. Responsible Officials Mrs. Sylvianette Luna Anavitate Program Director 787-765-2929 ext. 3121 Mr. Bryan Santos Martinez Financial and Accountant Analyst 787-765-2929 ext. 3361 Estimated Completion Date Implementation is expected to be completed on or before the end of October 2024.

Criteria 45 CFR sections 92.20(a) and (b) (1) to (4) establish that: a) A State must expend and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub grantees and cost-type contractors, must be enough to, 1. Permit preparation of reports required by this part and the statutes authorizing the grant, and 2. Permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of other grantees and sub grantees must meet the following standards: 1. Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant. 2. Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. if unit cost data are required, estimates based on available documentation will be accepted whenever possible. Condition We noted the following deficiencies related to the grant awards B04MC40159, B04MC45241: a. The PRDH does not segregate financial records sufficiently in order to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the percentage restrictions of the grant award. b. We could not evaluate if the program is in compliance with the established earmarking requirements since the expenses were recorded for each of the award components and not the earmarking activity. Cause This situation occurs because the accounting records currently used by the PRDH do not have a reliable system to account for funds awarded to them. The chart of accounts in the financial system is not sufficiently expanded to account for each of the earmark requirements. Effect The PRDH could exceed the established expenditures limits per activity for the grant award. Noncompliance with the earmarking requirements could lead to significant administrative sanctions by the grantor, including reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve program objectives. Questioned Costs None Perspective Information Finding represents a significant problem. The agency will review internal controls to ensure that comply with federal government requirements. Prior Year Audit Finding 2022-004 Recommendation The PRDH must expand the chart of accounts in order to account for the amounts claimed for administrative expenditures independently. This expansion would permit the tracing of funds to a level of expenditure to establish that such funds have not been used in violation of the restrictions and prohibitions of the program as defined in 42 USC 705(a)(3). Also, payroll expenses must be recorded into each of the corresponding program activities, as follows: a) Preventive and primary care services for children. b) Services for children with special health care needs. Views of Responsible Officials The PRDOH agrees with the finding. PRDOH has fixed the segregation of financial records, we have systems in place within our system People Soft 8.4 in which permit the tracing of funds to a level of the expenditures that will be adequate. PRDOH will implement this system for the proposal of 2024. Also, the same system will be used in the new ERP system by the treasury Department that should be starting by July 2025. Responsible Officials Dr. Manuel Vargas Bernier Mrs. Diana Ferrer Rivera Estimate Date of Completion Program Director Senior Accountant 787-765-2929 ext. 4583 787-765-2929 ext. 4551 Implementation is expected to be completed on or before the end of October 2024.

Criteria SMAs must establish and maintain a program for conducting periodic risk analyses to ensure appropriate and cost-effective safeguards are incorporated into new and exjsting systems. State agencies must perfollTl risk analyses whenever significant system changes occur. SMAs shall review ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum the revjews shall include an evaluation of physical and data security operating procedures and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition The security plan for ADP (Automatic Data Processing) system, including policies and procedmes to address contingency plans in the event of unforeseen interruptions has not been implemented and tested. Cause This situation was primarily caused by the lack of effective internal control over ADP Risk Analysis and System Security Review. Effect Critical business functions may not be resumed on time in case an emergency or disaster causes the ADP system resources to become unable to meet critical processing needs in the event of a short or long-term interruption of service. Questioned Costs None Prior Year Audit Finding 2022-007 Recommendation The State Medical Agency (SMA) should carry-out or contract to perform independent audit no less than once every three years to each Manage Care Organizations to validate the accuracy, truthfulness, and completeness of the financial information submitted, and post the results on its websites. Views of Responsible Officials The DOH disagrees with this finding as they believe the MCO should have received a SOC 1 Type I and Type 2 Report. The DOH has requested this information from the MCO however it has not been provided yet due to the short time frame for gathering the requested information. Responsible Officials Dinorah Collazo Ortiz Felmarie Cruz Morales Marcia Berrios De La Torre Estimated Completion Date Executive Director Fiscal Director Financial Advisor 787-765-2929 ext. 3402 787-765-2929 ext. 6721 787-765-2929 ext. 6746 Implementation is expected to be completed on or before the end of the year 2025.

Criteria 0MB Uniform Guidance subpart B .200(a) establishes that Non-Federal entities that expend $500,000 ($750,000 for fiscal yem·s ending after December 25,2015) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part. 0MB Uniform Guidance subpart B .220 establishes that except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part shall be performed annually. Public Law 104-156, known as the Single Audit Act, sections 7502 (b) (1) and (2)(B) e tablish that the non-Federal Organization shall transmit the reporting package, which shall include the non_x0002_Federal Organization's financial statements, schedule of expenditures of Federal awards corrective action plan defined under subsection (i), and auditor's reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor's report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504 when the 9-month timeframe would place an undue burden on the non_x0002_Federal Organization. Condition The Single Audit Report for the fiscal year ended June 30, 2023, of the PRDH with due date of March 31, 2024, was ubmitted after the 9 months deadline. The Single Audit related to such a period was completed after the 9 months deadline. Cause The PRDH did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the PRDH in the due date established by the Single Audit Act.Effect Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs None Perspective Information Finding represents a significant problem. The agency will accelerate the process to contract auditors to carry out the audit and submit the report on time. Prior Year Audit Finding 2022-008 Recommendations The PRDH shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report of PRDH to the Federal Clearinghouse before the 9 months deadline. Also, the PRDH should establish procedures for the monthly and year end closing process to allow enough time for the performance and completion of the required single audit by its external auditors. Views of Responsible Officials PRDOH accepts the finding, due to a misinterpretation on the waiver given by the F AC with regard to Hurricane Fiona, the PRDOH incurred in a delay for the contracting for the 2023 single audit. Currently the Department has accelerated the hiring process of the auditors for 2023 and 2024. The 2023 report is in the final stages of revision. On the other hand, the 2024 report is in the process for the renewal of the contract which is expected to start at the end of August 2024. Responsible Official Hector Stewart Torres Velmary Martinez Y ace Estimated Completion Date Director Federal Programs Division Finance Department Director 787-765-2929 Ext.4871 787-765-2929 Ext.3291 Implementation is expected to be completed on or before the end of March 2025.

Criteria 45 CFR, Part 74, Subpart C, Section 74.21; 7 CFR, Part 3016, Subpart C, Section 3016.20 establishes the following: a) A State must expend and account for grant funds in accordance with State Laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub-grantees and cost-type contractors, must be sufficient to: 1. Allow preparation of reports required by this part and the statutes authorizing the grant, and 2. Allow the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of the grantees and sub-grantees must meet the following standards: 1. Financial reporting - Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant. 2. Accounting records - Grantees and sub-grantees must maintain records that adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income. 3. Internal control - Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Grantees and sub-grantees must adequately safeguard all such property and must ensure that it is used solely for authorized purposes. 4. Budget control - Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or sub-grant agreement. If unit cost data are required, estimates based on available documentation will be accepted, whenever possible. 5. Source documentation - Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and sub-grant award documents, etc. Condition During our audit procedures for the fiscal year ended June 30, 2022, we noted the following deficiencies related with the accounting procedures and financial reporting practices of the PRDH: a) The PRDH has inappropriate and/or incomplete cut-off procedures, as well as incomplete month-end and year-end reconciliation and closing procedures which prevent the timely processing of adjustments. Many transactions and adjustments are posted months after the applicable closing with a retroactive effect due to delays in the processing of information, especially those related to payroll transactions. b) During our audit procedures related to compliance with the reporting requirements, we noted that the Finance Department does not reconcile, on a timely basis, the accounting transactions recorded in their system with the subsidiary ledger and reports prepared by the federal programs administration. Cause PRDH management has not implemented effective internal controls to ensure a reliable accounting system to accurately account for funds administered. Also, is caused by the lack of analysis of financial transactions recorded during the fiscal year and the lack of monitoring and supervision by the PRDH's management. Effect The PRDH is unable to prepare accurate and complete financial reports on a timely basis. Due to significant reconciliation efforts, report may contain significant errors that may pass undetected. Questioned Costs None Perspective Information Finding represents a significant problem. The Department of Health must plan to improve accounting and financial reporting practices. Prior Year Audit Finding 2021-001 Recommendation PRDH should evaluate their current accounting and financial reporting software to ensure that the PRDH maximizes its use, establishment or revision of policies and procedures, establishment of periodic reconciliation and analysis of accounting transactions and additional training to accounting personnel related to accounting and financial reporting matters, including year-end closing procedures. Views of Responsible Officials The PRDOH partially agrees with the finding. However, PRDOH has implemented various corrective actions. Regarding Project Costing Module, the PRDOH already has implemented the Travel and Expenses Module, Payment Management System, which integrates with the Account Receivable to streamline revenue records and Payroll Solutions. The effectiveness of these will be observed during the fiscal year 2024-2025. Also, the PRDOH and Central Government are currently working on ERP implementation in all Government Agencies. This new ERP will be in place in the fiscal year 2024-2025. Furthermore, the PRDOH has established control in order for all program to ensure the timely performed reconciliations between the finance office, the federal affair office, this procedure has started since august 2022. In the other hand the State Department of Treasury has begun a series of training with regard the new ERP that will, be in place by July 2024. This new system, in order to close the monthly period all programs will need to reconcile first before closing of the period. Responsible Officials Mrs. Velmary Martinez Yace Finance Director Tel. 787-765-2929 ext. 3291 Mrs. Mayra Reyes Accounting Office Supervisor Tel. 787-765-2929 ext. 3294 Estimated Completion Date October, 2025, for project implementation.

Criteria 2 CFR 200.303 establish that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 2 CFR 200.430 establishes that the cost of compensation for personnel services is allowable to the extent that it follows an appointment made in accordance with the governmental unit's laws and rules and meets the merit system or other requirements required by federal law, where applicable. Compensation for personal services may also include fringe benefits which are addressed in §200.431 Compensation—fringe benefits. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i) of this section, Standards for Documentation of Personnel Expenses, when applicable. (i) The Non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those working on Federal awards. Condition a. During our audit, on a sample of sixty (60) personnel files, we observed that the personnel files are not being kept current and in some instances were incomplete. b. One personnel file of federal funds was not provided for our evaluation. c. The PRDH does not have established written policies and manuals which can define standard internal controls for each program and / or region of the entity. Cause PRDH has not established an effective internal control designed to ensure the accuracy and completeness of the employee files. Also, the incompleteness of the files may depend of the time that the employee started working in the agency. Effect Due to law and regulation changes, incomplete files may result in inadequate documentation to support compliance with the criteria over management and administration of personnel files. Also, in the case of employees paid with federal funds, it may result in cost disallowances for personnel that do not meet the requirements to be employed by the corresponding federal program. Questioned Costs None Perspective Information Finding does not represent a significant problem. The Department has addressed this finding and it’s been taking the steps necessary to reduce incidences to a minimum. We selected 60 employee files from all agency. Prior Year Audit Finding 2021-002 Recommendation PRDH should immediately undertake a process to review all personnel files and validate that the minimum requirement documents are appropriately completed and included in each personnel file. Also, the PRDH must update the salary change form in file in order to reflect current salary as stated in the digital information system. Views of Responsible Officials During the month of August, the Office of Human Resources and Labor Relations was audited by the ADA. It is to this that we respond to the findings indicated in the audit, as follows: Over the past few years we have developed an internal control, using a document entitled Check sheet, which contains the list of documents required for the appointment of employees and another for the audit of files. It contains three columns for the collation of documents required by the Analysts of the Appointments and Changes Section and ends with the collation of the Division Supervisor, before being referred to the Personnel Officers of our regions. This document has been modified according to needs, changes, procedures and new regulations. It is important to mention that many of our audited personnel records pertain to employees appointed in years where the required requirements or documents were minimal, and no evidence was required or maintained in the personnel file. Related to the academic preparation contained in the personnel files, they are documents required by the Recruitment and Selection Section and these respond to the minimum requirements and alternatives of the class, according to the Agency's Classification Plan. Each class specification sets minimum requirements for the position the candidate will hold. On the other hand, when the previously known Administration of Health Services Facilities (AFASS) closed in 1999, its employees went to the Department of Health with the file they had, whose procedures and processes were not uniform to those of our Agency. The Regions and Hospitals have delegated the verification of documents, to work on appointments and other personnel transactions, such as job reclassifications, promotions and others. This delegation brings the process of standardizing and authorizing DSP-29 by the Recruitment and Selection Section, to ensure that it is complied with as established in the Classification Plan. The agency is in the process of updating these documents as long as a change in the employee's job classification is applied. These are transactions that allow us to update the employees’ record to the new class they will occupy. In the case of Doping Test results, we mention that these are found in the Medical Record of each employee. By HIPPA law, these are not filed in the personnel file. Of the aspects pointed out in the audit, the Department of Health has developed greater review and audit measures by the analysts of our agency, before the defunct Quality Control Section, who watched over and audited the personnel files of the Regions, providing control and compliance with the documents required according to the Regulations and Standards that govern the Office of Human Resources and Labor Relations. The Office of Human Resources presented a work plan to implement an effective and efficient personnel file review procedure to comply with and improve the agency's personnel processes and transactions. Responsible Officials Lcdo. Luis Rivera Villanueva Sec. Auxiliar de Recursos Humanos 787-765-2929 ext. 4273 Mrs. Luz S. Ramos Pedroza Specialist 787-765-2929 ext. 4273 Mrs. Maribel Zayas Payroll Officer Director 787-765-2929 ext. 4209 Estimated Completion Date Implementation is expected to be completed on or before the end of the fiscal year June 30, 2024.

Criteria 2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. 2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.Condition During our procedures, we found the following exceptions: a) In a sample of fifteen (15) cash drawdown petitions for Epidemiology and Laboratory Capacity for Infectious Diseases, we observed transactions with the check issued after the required time lapsed in accordance with the program advance type request.Cause Programs have not established written procedures and internal controls to properly follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Effect Failure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments, or other special conditions. Questioned Costs None Perspective Information Finding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the 3 days timeframe. Prior Year Audit Finding None Recommendation The PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds. Views of responsible officials For the audited period and until August 2023, the procedure of the program and the Department of Health was "advanced" and was as follows: 1. The Epidemiology program worked with the validation of the voucher and recovered the director's signature for the punch of the "certificate". Once the validation and signature were in place, the cash request was processed. Once the cash request was remitted or the credit notice was registered, the receipt was delivered to the Tax Intervention area. 2. The Fiscal Intervention area works on the approval of the payment on the vouchers. Vouchers were worked on a first-come, first-served basis. This intervention process can take a week or more. The program had no control over the timing of payment approvals. This created a weakness when it came to cash management compliance. The program did confirm that the money was available at the time the payment was approved but had no control over the date the payment was approved. However, due to the nature of our funds and the volume of invoices, the Treasury Department asked us to change the modality for terms of cash requests from "advanced" to reimbursement. This began to be implemented as of September 2023. This method of reimbursement makes it easier for the program to have better control over cash management. With this method, the program requests the funds on the days that the Treasury Department makes the payment rolls. Once the petition is created on the same day of the print run and approved by the Program Director, it is submitted to the Office of Federal Affairs to prepare the request for funds to the federal government. The Office of Federal Affairs has the flexibility and agility to process such a request within two days. This helps us to meet the requirements of cash management. Responsible Officials Mrs. Sylvianette Luna Anavitate Program Director 787-765-2929 ext. 3121 Mr. Bryan Santos Martínez Financial and Accountant Analyst 787-765-2929 ext. 3361 Estimated Completion Date Implementation is expected to be completed on or before the end of the fiscal year June 30, 2024.

Criteria 45 CFR sections 92.20(a) and (b) (1) to (4) establish that: a) A State must expend and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its subgrantees and cost-type contractors, must be enough to, 1. Permit preparation of reports required by this part and the statutes authorizing the grant, and 2. Permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of other grantees and subgrantees must meet the following standards: 1. Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant. 2. Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. if unit cost data are required, estimates based on available documentation will be accepted whenever possible. Condition We noted the following deficiencies related to the grant awards B04MC40159, B04MC45241: a. The PRDH does not segregate financial records sufficiently in order to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the percentage restrictions of the grant award. b. We could not evaluate if the program is in compliance with the established earmarking requirements since the expenses were recorded for each of the award components and not the earmarking activity. Cause This situation occurs because the accounting records currently used by the PRDH do not have a reliable system to account for funds awarded to them. The chart of accounts in the financial system is not sufficiently expanded to account for each of the earmark requirements. Effect The PRDH could exceed the established expenditures limits per activity for the grant award. Non¬compliance with the earmarking requirements could lead to significant administrative sanctions by the grantor, including reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve program objectives. Questioned Costs None Perspective Information Finding represents a significant problem. The agency will review internal controls to ensure that comply with federal government requirements. Prior Year Audit Finding 2021-008 Recommendation The PRDH must expand the chart of accounts in order to account for the amounts claimed for administrative expenditures independently. This expansion would permit the tracing of funds to a level of expenditure to establish that such funds have not been used in violation of the restrictions and prohibitions of the program as defined in 42 USC 705(a)(3). Also, payroll expenses must be recorded into each of the corresponding program activities, as follows: a) Preventive and primary care services for children. b) Services for children with special health care needs. Views of Responsible Officials The PRDOH partially agrees with the finding. The narrative of compliance with the requirement is presented annually in the report to the federal government. They are evidenced by the completed forms for budget and reported expenses that are submitted for the annual request for funds. The accounts between the programs have already been separated, so it shows the fulfillment of the Earmarking 30-30-10; Each is assigned 30% or more for required service and no more than 10% for the administration thereof. In the order hand the PRDOH has encountered challenges with the payroll to separate the percentage work for each grant however, this is shown on all the monitoring made by the federal government and all the reports send by the program. Also, with the new ERP from the Department of Treasury the new system will allow for that purpose, at this time the Department of treasury is currently working with the agency with the data conversation to migrate to the new system, this system is expected to be running by October 2024. Responsible Officials Dr. Manuel Vargas Bernier Program Director 787-765-2929 ext. 4583 Mrs. Diana Ferrer Rivera Senior Accountant 787-765-2929 ext. 4551 Estimate Date of Completion Implementation is expected to be completed on or before the end of the year, 2024.

Criteria 45 CFR section 92.41 (b) (4) establishes that when reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 42 CFR section 430.30 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter. 42 CFR section 457.630 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) and Form CMS-21 (Quarterly Children's Health Insurance Program Statement of Expenditures for title XXI), to central office (with a copy to the regional office) not later than 30 days after the end of the quarter. Condition For our tests, we requested copies of the Federal Financial Reports (FFR 425) and Quarterly Statement of Expenditures for the Medical Assistance Program (CMS 64) for the fiscal year ended on June 30, 2022. After our examination of the Quarterly Statement of Expenditures for the Medical Assistance Program, we noted that there are significant discrepancies between what is reported on CMS 64 versus what is registered on general ledger. The differences are the following:Cause These situations occurred because program management has not established effective procedures to ensure the timely performed reconciliations between the expenditures reported on CMS 64 Report versus the expenditures registered on the accounting system (PeopleSoft). Effect Because there is no timely and accurate reconciliation, the PRDH may be providing incorrect financial reports to federal granting agency. In addition, the maintenance of alternate accounting records (or program) that are not reconciled may result in inaccurate financial reporting. Questioned Costs None Prior Year Audit Finding 2021-005 Recommendations The PRDH should establish enhanced policies and procedures that must maintain an adequate communication with the Finance Department in order to assure the proper reconciliation between what is reported on CMS 64 with what is registered on the accounting system (PeopleSoft). Views of responsible officials The PRDOH partially agrees with the finding. because the PRDOH has implemented several corrective actions. PRDOH has established control for all programs to ensure the timely performed reconciliations between the finance office, the federal affairs office, this procedure has started since august 2022. On the other hand, the Department of Treasury has begun a series of training with regard to the ERP that will be in place by October 2024. This new system, to close the monthly period all programs will need to reconcile first before closing the period. Responsible Officials Dinorah Collazo Ortiz Executive Director 787-765-2929 ext. 3402 Felmarie Cruz Morales Fiscal Director 787-765-2929 ext. 6721 Marcia Berrios De La Torre Financial Advisor 787-765-2929 ext. 6746 Estimated Completion Date Implementation is expected to be completed on or before October 31, 2024.

Criteria 45 CFR section 92.41 (b) (4) establishes that when reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 42 CFR section 430.30 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter. 42 CFR section 457.630 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) and Form CMS-21 (Quarterly Children's Health Insurance Program Statement of Expenditures for title XXI), to central office (with a copy to the regional office) not later than 30 days after the end of the quarter. Condition For our tests, we requested copies of the Federal Financial Reports (SF 425) for the fiscal year ended on June 30, 2022. After our examination of the Federal Financial Reports (SF-425) we noted that there are significant discrepancies between what is reported on SF-425 versus what is registered on general ledger. The differences are the following:Cause These situations occurred because program management has not established effective procedures to ensure the timely performed reconciliations between the expenditures reported on SF-425 Report versus the expenditures registered on the accounting system (PeopleSoft). Effect Because there is no timely and accurate reconciliation, the PRDH may be providing incorrect financial reports to federal granting agency. In addition, the maintenance of alternate accounting records (or program) that are not reconciled may result in inaccurate financial reporting. Questioned Costs None Prior Year Audit Finding 2021-006 Recommendations The PRDH should establish enhanced policies and procedures that must maintain an adequate communication with the Finance Department in order to assure the proper reconciliation between what is reported on SF-425 with what is registered on the accounting system (PeopleSoft). Views of responsible officials The PRDOH partially agrees with the finding. because the PRDOH has implemented several corrective actions. PRDOH has established control for all programs to ensure the timely performed reconciliations between the finance office, the federal affairs office, this procedure has started since august 2022. On the other hand, the Department of Treasury has begun a series of training with regard to the ERP that will be in place by October 2024. This new system, to close the monthly period all programs will need to reconcile first before closing the period. Responsible Officials Dinorah Collazo Ortiz Executive Director 787-765-2929 ext. 3402 Felmarie Cruz Morales Fiscal Director 787-765-2929 ext. 6721 Marcia Berrios De La Torre Financial Advisor 787-765-2929 ext. 6746 Estimated Completion Date Implementation is expected to be completed on or before October 31, 2024.

Criteria SMAs must establish and maintain a program for conducting periodic risk analyses to ensure appropriate and cost-effective safeguards are incorporated into new and existing systems. State agencies must perform risk analyses whenever significant system changes occur. SMAs shall review ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR section 95.621). Condition The security plan for ADP (Automatic Data Processing) system, including policies and procedures to address contingency plans in the event of unforeseen interruptions has not been implemented and tested. Cause This situation was primarily caused by the lack of effective internal control over ADP Risk Analysis and System Security Review. Effect Critical business functions may not be resumed on time in case an emergency or disaster causes the ADP system resources to become unable to meet critical processing needs in the event of a short or long-term interruption of service. Questioned Costs None Prior Year Audit Finding None Recommendation The State Medical Agency (SMA) should carry-out or contract to perform independent audit no less than once every three years to each Manage Care Organizations to validate the accuracy, truthfulness, and completeness of the financial information submitted, and post the results on its websites. Views of Responsible Officials The DOH disagrees with this finding as they believe the MCO should have received a SOC 1 Type 1 and Type 2 Report. The DOH has requested this information from the MCO, however, it has not been provided yet due to the short time frame for gathering the requested information. Responsible Officials Dinorah Collazo Ortiz Executive Director 787-765-2929 ext. 3402 Felmarie Cruz Morales Fiscal Director 787-765-2929 ext. 6721 Marcia Berrios De La Torre Financial Advisor 787-765-2929 ext. 6746 Estimated Completion Date Implementation is expected to be completed on or before the end of the year, 2024.

Criteria OMB Uniform Guidance subpart B .200(a) establishes that Non-Federal entities that expend $500,000 ($750,000 for fiscal years ending after December 25,2015) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part. OMB Uniform Guidance subpart B .220 establishes that except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part shall be performed annually. Public Law 104-156, known as the Single Audit Act, sections 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non-Federal Organization's financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor's reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor's report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month timeframe would place an undue burden on the non-Federal Organization. Condition The Single Audit Report for the fiscal year ended June 30, 2022 of the PRDH with due date of March 31, 2023 was submitted after the 9 months deadline. The Single Audit related to such period was completed after the 9 months deadline. Cause The PRDH did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the PRDH in the due date established by the Single Audit Act. Also, the PRDH did not establish procedures for the monthly and year end closing procedures to allow for the timely performance of the Single Audits. Effect Non-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs None Perspective Information Finding represents a significant problem. The agency will accelerate the process to contract auditors to carry out the audit and submit the report on time. Prior Year Audit Finding None Recommendations The PRDH shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report of PRDH to the Federal Clearinghouse before the 9 months deadline. Also, the PRDH should establish procedures for the monthly and year end closing process to allow enough time for the performance and completion of the required single audit by its external auditors. Views of Responsible Officials PRDOH accepts the finding, due to a misinterpretation on the waiver given by the FAC with regard to Hurricane Fiona, the PRDOH incurred in a delay for the contracting for the 2022 single audit. At this time the Department has accelerated the hiring process of the auditors for 2022 and 2023. The 2022 report is in the final stages for distribution and upload to the FAC. On the other hand, the 2023 report is in the field work stage. As per conversation with the auditors we are expecting to be ready by August 2024. Responsible Official Hector Stewart Torres Director Federal Programs Division 787-765-2929 Ext.4871 Estimated Completion Date 2022 report by the end of March 2024 and the 2023 report by August 2024.

Finding Number: 2021-001 Agency: U.S. Department of Health & Human Services Federal Program: All Programs CFDA: 93.778, 93.767, 10.557, 93.994, 93.917 Compliance Requirement: Financial Administration- Standards for Financial Management System Category: Financial, Internal Control Weakness and Noncompliance Criteria 45 CFR, Part 74, Subpart C, Section 74.21; 7 CFR, Part 3016, Subpart C, Section 3016.20 establishes the following: a) A State must expend and account for grant funds in accordance with State Laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub-grantees and cost-type contractors, must be sufficient to: 1. Allow preparation of reports required by this part and the statutes authorizing the grant, and 2. Allow the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of the grantees and sub-grantees must meet the following standards: 1. Financial reporting - Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant. 2. Accounting records - Grantees and sub-grantees must maintain records that adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income. 3. Internal control - Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Grantees and sub-grantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes.4. Budget control - Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or sub-grant agreement. If unit cost data are required, estimates based on available documentation will be accepted, whenever possible. 5. Source documentation - Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and sub-grant award documents, etc. Condition During our audit procedures for the fiscal year ended June 30, 2021, we noted the following deficiencies related with the accounting procedures and financial reporting practices of the PRDH: a) The PRDH has inappropriate and/or incomplete cut-off procedures, as well as incomplete month-end and year-end reconciliation and closing procedures which prevent the timely processing of adjustments. Many transactions and adjustments are posted months after the applicable closing with a retroactive effect due to delays in the processing of information, especially those related to payroll transactions. b) During our audit procedures related to compliance with the reporting requirements, we noted that the Finance Department does not reconcile, on a timely basis, the accounting transactions recorded in their system with the subsidiary ledger and reports prepared by the federal programs administration. Cause PRDH management has not implemented effective internal controls to ensure a reliable accounting system to accurately account for funds administered. Also, is caused by the lack of analysis of financial transactions recorded during the fiscal year and the lack of monitoring and supervision by the PRDH's management. Effect The PRDH is unable to prepare accurate and complete financial reports on a timely basis. Due to significant reconciliation efforts, report may contain significant errors that may pass undetected. Questioned Costs None Perspective Information Finding represents a significant problem. The Department of Health must plan to improve accounting and financial reporting practices. Prior Year Audit Finding 2020-001 Recommendation PRDH should evaluate their current accounting and financial reporting software to ensure that the PRDH maximizes its use, establishment or revision of policies and procedures, establishment of periodic reconciliation and analysis of accounting transactions and additional training to accounting personnel related to accounting and financial reporting matters, including year-end closing procedures. Views of Responsible Officials The PRDOH partially agrees with the finding. However, PRDOH has implemented various corrective actions. Regarding Project Costing Module, the PRDOH already has implemented the Travel and Expenses Module, Payment Management System, which integrates with the Account Receivable to streamline revenue records and Payroll Solutions. The effectiveness of these will be observed during the fiscal year 2022-2023. Also, the PRDOH and Central Government are currently working on ERP implementation in all Government Agencies. Responsible Officials Mrs. Velmary Martinez Yace Finance Director Tel. 787-765-2929 ext. 3291 Mrs. Mayra Reyes Accounting Office Supervisor Tel. 787-765-2929 ext. 3294 Estimated Completion Date Project implementation is expected to be completed in or before July 2024.

Condition a. During our audit, on a sample of sixty (60) personnel files, we observed that the personnel files are not being kept current and in some instances were incomplete. See Schedule of Findings and Questioned Costs for table. b. The PRDH does not have established written policies and manuals which can define standard internal controls for each program and / or region of the entity. Cause PRDH has not established an effective internal control designed to ensure the accuracy and completeness of the employee files. Also, the incompleteness of the files may depend of the time that the employee started working in the agency. Effect Due to law and regulation changes, incomplete files may result in inadequate documentation to support compliance with the criteria over management and administration of personnel files. Also, in the case of employees paid with federal funds, it may result in cost disallowances for personnel that do not meet the requirements to be employed by the corresponding federal program. Questioned Costs None Perspective Information Finding does not represent a significant problem. The Department has addressed this finding and it?s been taking the steps necessary to reduce incidences to a minimum. We selected 60 employee files among all department. Prior Year Audit Finding 2020-002 Recommendation PRDH should immediately undertake a process to review all personnel files and validate that the minimum requirement documents are appropriately completed and included in each personnel file. Also, the PRDH must update the salary change form in file in order to reflect current salary as stated in the digital information system. Views of responsible officials The PRDOH partially agrees with the finding. However, PRDOH has implemented several corrective actions. The PRDOH established an internal control to ensure that the required documents are recorded in the files. The Director of Human Resources presented a work plan, in order to implement an effective procedure for reviewing files. A control sheet of documents required to the active records was established in which the Human Resources Officers of the regions and Hospital were requested to verify the employee?s files for the required documentation that is need it in the files. Responsible official Sra. Rachel Pagan Gonzalez Secretaria Auxiliar de Recursos Humanos 787-765-2929 ext. 4273 Mrs. Luz S. Ramos Pedroza Specialist 787-765-2929 ext. 4273 Mrs. Maribel Zayas Payroll Officer Director 787-765-2929 ext. 4209 Estimated Completion Date Implementation is expected to be completed on or before the end of the fiscal year June 30, 2023.

Finding Number: 2021-003 Agency: U.S. Department of Health and Human Services Federal Program: Medical Assistance Program CFDA: 93.778 Compliance Requirement: Eligibility Category: Significant Deficiency and Noncompliance Criteria 42 CFR 435.948 through 435.956 and state requirements as documented in the state plan, verification plan and manual used by state eligibility workers. The state is required (as described at 42 CFR 435.914) to maintain facts in the case file to support the eligibility determination. 2 CFR Part 200 Section 303 - Internal controls, states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government?, issued by the Comptroller General of the United States and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).(b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards.(c) Evaluate and monitor the non-Federal entity's compliance with statute, regulations and the terms and conditions of Federal awards.(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state and local laws regarding privacy and obligations of confidentiality. Condition Internal control deficiencies have permitted that participants? files do not include required documentation for eligibility determination purposes or file not provided for revision. The test found the following exceptions: ? Two files not provided for our revision. ? Citizenship and income evidence not found in one participant file. Effect The PRDOH does not adhere to the established internal controls and is not adequately documenting participants? eligibility. Cause The PRDH had internal control procedures over the process of evaluating the eligibility of participants, however, employees did not adhere to established internal control procedures and the enforcement remedies were not adequately implemented. Perspective Information A sample of sixty participants? files from an office in each region from a population of 1,423,912 participants. Our sample was a statistically valid sample. Prior Year Audit Finding None Recommendation The PRDOH should enforce existing internal control procedures to manage, review, and monitor and safeguard participants? files to ensure that they contain all documentation required by the federal regulations. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost None Views of responsible officials The Medicaid Program as State Agency awardee established are maintained internal control over the Federal award providing reasonable assurance in compliance with Federal statues, regulations, and the terms and conditions of the Federal award. As an example, the following Letters from the Executive Director Mr. Ricardo Colon and Luz Romero Operations Director (see list above). ? PMED 1407 ? ?Manejo de Informacion provista por los solicitantes y/o beneficiarios-estados de cuentas instituciones bancarias, cooperativas?. Effective December 9, 2014 ? PMED 1513 ? Enmienda carta circular 1407. Effective October 2, 2015 ? PMED 1602 ? Expedientes Programa Medicaid. Effective June 2, 2016 ? PMED 1703 - Verificacion fecha y lugar de nacimiento. Effective April 28, 207 ? PMED 1709 ? ?Recordatorio de utilizacion del Formulario MA9 o Formulario Declaracion del participante?. Effective September 14, 2017 The previous communications were authorized by the following Executive Directors. 2014 Executive Director ? Mr. Ricardo Colon Padilla, CPA 2017 to June 2021 (approximately) ? Mrs. Luz Cruz Romero, MBA The COVID Pandemic emergency period from March 15, 2020 to May 11, 2023 brough many physical, technological, and emotional challenges that affected and interrupted the normal operations in our local offices and in all Governmental Puerto Rico operations. Since 2021, PRMP has embarked in the process to transform Medicaid Program into the Medicaid Enterprise System (MES). In preparation for the ending of the PHE the PRMP upper leadership initiated a process of revision of all operational procedures to assure compliance and update the current procedures with the new technology. So, in 2021 a new Procedure Manual was compiled and will be published on April 1, 2023. However, some areas of concern were identified including the verification of citizenship and income. The new rules as SOPs? were distributed on March 17, 2023 and have been effective since March 20, 2023 To monitor compliance, we will be conducting a focus audit on the local offices from May to December 2023. Responsible official All the supervisors and directors of the Medicaid Local Offices Dinorah Collazo Ortiz, Esq. - Executive director Estimated Completion Date Implementation is expected to be completed in December 2023.

Finding Number: 2021-004 Agency: U.S. Department of Health and Human Services Federal Program: Children?s Insurance Program CFDA: 93.767 Compliance Requirement: Eligibility Category: Significant Deficiency and Noncompliance Criteria Except where law requires other procedures (such as for citizenship and immigration status information), the State may accept attestation of information needed to determine the eligibility of an individual for CHIP (either self-attestation by the individual or attestation by an adult who is in the applicant's household, as defined in ? 435.603(f) or family, as defined in section 36B(d)(1) of the Internal Revenue Code, an authorized representative, or if the individual is a minor or incapacitated, someone acting responsibly for the individual) without requiring further information (including documentation) from the individual. 2 CFR Part 200 Section 303 - Internal controls, states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in ?Standards for Internal Control in the Federal Government?, issued by the Comptroller General of the United States and the ?Internal Control Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).(b) Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards.(c) Evaluate and monitor the non-Federal entity's compliance with statute, regulations and the terms and conditions of Federal awards.(d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings.(e) Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state and local laws regarding privacy and obligations of confidentiality. Condition Internal control deficiencies have permitted that participants? files do not include required documentation for eligibility determination purposes or file not provided for revision. The test found the following exceptions: ? One file not provided for our revision. ? Citizenship and evidence not found in one participant file. Effect The PRDOH does not adhere to the established internal controls and is not adequately documenting participants? eligibility. Cause The PRDH had internal control procedures over the process of evaluating the eligibility of participants, however, employees did not adhere to established internal control procedures and the enforcement remedies were not adequately implemented. Perspective Information A sample of sixty participants? files from an office in each region from a population of 93,045 participants. Our sample was a statistically valid sample. Prior Year Audit Finding None Recommendation The PRDOH should enforce existing internal control procedures to manage, review, and monitor and safeguard participants? files to ensure that they contain all documentation required by the federal regulations. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost None Views of responsible officials The Medicaid Program as State Agency awardee established internal control over the Federal award providing reasonable assurance in compliance with Federal statues, regulations, and the terms and conditions of the Federal award. As an example, the following Letters from the Executive Director Mr. Ricardo Colon and Luz Romero Operations Director (see list below) ? PMED 1407 ? ?Manejo de Informacion provista por los solicitantes y/o beneficiarios-estados de cuentas instituciones bancarias, cooperativas?. Effective December 9, 2014 ? PMED 1513 ? Enmienda carta circular 1407. Effective October 2, 2015 ? PMED 1602 ? Expedientes Programa Medicaid. Effective June 2, 2016 ? PMED 1703 - Verificacion fecha y lugar de nacimiento. Effective April 28, 2017 ? PMED 1709 ? ?Recordatorio de utilizacion del Formulario MA9 o Formulario Declaracion del participante?. Effective September 14, 2017 The previous communications were authorized by the following Executive Directors. 2014 Executive Director ? Mr. Ricardo Colon Padilla, CPA 2017 to June 2021 (approximately) ? Mrs. Luz Cruz Romero, MBA The COVID Pandemic emergency period from March 15, 2020 to May 11, 2023 brough many physical, technological, and emotional challenges that affected and interrupted the normal operations in our local offices and in all Governmental Puerto Rico operations. Since 2021, PRMP has embarked in the process to transform Medicaid Program into the Medicaid Enterprise System (MES). In preparation for the ending of the PHE the PRMP upper leadership initiated a process of revision of all operational procedures to assure compliance and update the current procedures with the new technology. So, in 2021 a new Procedure Manual was compiled and will be published on April 1, 2023. However, some areas of concern were identified including the verification of citizenship and income. The new rules as SOPs? were distributed on March 17, 2023 and have been effective since March 20, 2023. To monitor compliance, we will be conducting a focus audit on the local offices from May to December 2023. Responsible officials All the supervisors and directors of the Medicaid Local Offices Dinorah Collazo Ortiz, Esq. - Executive director Estimated Completion Date Implementation is expected to be completed in December 2023.

Finding Number: 2021-005 Agency: U.S. Department of Health and Human Services Federal Program: Medical Assistance Program CFDA: 93.778 Compliance Requirement: Reporting Category: Material Weakness in Internal Control- Financial Reporting Criteria 45 CFR section 92.41 (b) (4) establishes that when reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 42 CFR section 430.30 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter. 42 CFR section 457.630 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) and Form CMS-21 (Quarterly Children's Health Insurance Program Statement of Expenditures for title XXI), to central office (with a copy to the regional office) not later than 30 days after the end of the quarter. Condition For our tests, we requested copies of the Federal Financial Reports (FFR 425) and Quarterly Statement of Expenditures for the Medical Assistance Program (CMS 64) for the fiscal year ended on June 30, 2021. After our examination of the Federal Financial Reports (SF-425) and Quarterly Statement of Expenditures for the Medical Assistance Program, we noted that there are significant discrepancies between what is reported on CMS 64 and SF-425 versus what is registered on general ledger. The differences are the following: Cause These situations occurred because program management has not established effective procedures to ensure the timely performed reconciliations between the expenditures reported on CMS 64 Report versus the expenditures registered on the accounting system (PeopleSoft). Effect Because there is no timely and accurate reconciliation, the PRDH may be providing incorrect financial reports to federal granting agency. In addition, the maintenance of alternate accounting records (or program) that are not reconciled may result in inaccurate financial reporting. Questioned Costs None Recommendations The PRDH should establish enhanced policies and procedures that must maintain an adequate communication with the Finance Department in order to assure the proper reconciliation between what is reported on CMS 64 with what is registered on the accounting system (PeopleSoft). Views of responsible officials The PRDOH partially agrees with the finding because PRDOH has implemented several corrective actions. The PRDOH has established control in order for all programs to ensure the timely performed reconciliations between the finance office, the federal affair office, this procedure has started since August 2022. On the other hand the Department of Treasury has begun a series of training with regard the new ERP that will, be in place by July 2024. This new system, in order to close the monthly period all programs will need to reconcile first before closing the period. Responsible Officials Mrs. Velmary Martinez Yace Finance Director Tel. 787-765-2929 ext. 3291 Mrs. Mayra Reyes Accounting Office Supervisor Tel. 787-765-2929 ext. 3294 Lydia Torres Medina Interim Fiscal Director Medicaid Tel. 787-765-2929 ext. 6731 Estimated Completion Date PRDOH estimated all systems will be in place by June 30, 2023.

Finding Number: 2021-006 Agency: U.S. Department of Health and Human Services Federal Program: Medical Assistance Program CFDA: 93.778 Compliance Requirement: Reporting Category: Material Weakness in Internal Control- Financial Reporting Criteria 45 CFR section 92.41 (b) (4) establishes that when reports are required on a quarterly or semiannual basis, they will be due 30 days after the reporting period. When required on an annual basis, they will be due 90 days after the grant year. Final reports will be due 90 days after the expiration or termination of grant support. 42 CFR section 430.30 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter. 42 CFR section 457.630 (c) (1) establishes that the State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) and Form CMS-21 (Quarterly Children's Health Insurance Program Statement of Expenditures for title XXI), to central office (with a copy to the regional office) not later than 30 days after the end of the quarter. Condition For our tests, we requested copies of the Federal Financial Reports (SF 425) and Quarterly Statement of Expenditures for the Medical Assistance Program (CMS 64) for the fiscal year ended on June 30, 2021. After our examination of the Federal Financial Reports (SF-425) and Quarterly Statement of Expenditures for the Medical Assistance Program, we noted that there are significant discrepancies between what is reported on SF-425 versus what is registered on general ledger. The differences are the following: Cause These situations occurred because program management has not established effective procedures to ensure the timely performed reconciliations between the expenditures reported on SF-425 Report versus the expenditures registered on the accounting system (PeopleSoft). Effect Because there is no timely and accurate reconciliation, the PRDH may be providing incorrect financial reports to federal granting agency. In addition, the maintenance of alternate accounting records (or program) that are not reconciled may result in inaccurate financial reporting. Questioned Costs None Recommendations The PRDH should establish enhanced policies and procedures that must maintain an adequate communication with the Finance Department in order to assure the proper reconciliation between what is reported on SF 425 with what is registered on the accounting system (PeopleSoft). Views of responsible officials The PRDOH partially agrees with the finding because PRDOH has implemented various corrective actions. The PRDOH has established control in order for all program to ensure the timely performed reconciliations between the finance office, the federal affair office and the programs, this procedure has started since august 2022. On the other hand, the State Department of Treasury has begun a series of training with regard to the new ERP that will, be in place by July 2024. This new system, in order to close the monthly period all programs will need to reconcile first before closing of the period. Responsible Officials Mrs. Velmary Martinez Yace Finance Director Tel. 787-765-2929 ext. 3291 Mrs. Mayra Reyes Accounting Office Supervisor Tel. 787-765-2929 ext. 3294 Lydia Torres Medina Interim Fiscal Director Medicaid Tel. 787-765-2929 ext. 6731 Estimated Completion Date PRDOH estimated all systems will be in place by June 30, 2023.

Finding Number: 2021-007 Agency: U.S. Department of Health & Human Services Federal Program: Medical Assistance Program, Children?s Insurance Program CFDA: 93.778, 93.767 Compliance Requirement: Special Test and Provisions- Manage Care Financial Audit Category: Significant Deficiency and Noncompliance Criteria 42 CFR section 438.602 (e) and (g) establishes the State must periodically, but no less frequently than once every 3 years, conduct, or contract for the conduct of, an independent audit of the accuracy, truthfulness, and completeness of the encounter and financial data submitted by, or on behalf of, each MCO, PIHP or PAHP. The State must post on its Web site, as required in ? 438.10(c)(3), the following documents and reports: (1) The MCO, PIHP, PAHP, or PCCM entity contract. (2) The data at ? 438.604(a)(5). (3) The name and title of individuals included in ? 438.604(a)(6). (4) The results of any audits under paragraph (e) of this section. Condition State Medicaid Agency (SMA) did not provide us with an independent audit carried out to each MCO to validate that information provided is accurate, truthful, and complete and post the results of on its websites. Cause This situation was primarily caused because State Medicaid Agency (SMA) does not conduct or contract to perform an independent audit to validate the accuracy, truthfulness, and completeness of the financial information submitted by each MCO. Effect State Medicaid Agency (SMA) does not ensure that each managed care organization provides correct, accurate, truthful, and complete financial information required by the Medicaid Assistance Program. Questioned Costs None Perspective Information The Department will provide and reinforce monitoring procedures to assure compliance with SMA audits. Prior Year Audit Finding None Recommendation The State Medical Agency (SMA) should carry-out or contract to perform independent audit no less than once every three years to each MCO to validate the accuracy, truthfulness, and completeness of the financial information submitted, and post the results on its websites. Views of Responsible Officials The PRDOH agrees with the finding. However, PRDOH has implemented a corrective action. Mercer Government Human Services Consulting (Mercer), part of Mercer Health & Benefits LLC, was contracted to conduct an encounter and financial data audit in accordance with 42 ? CFR 438.602(e) specification, which requires ?periodic audits (once every three years) for accuracy, truthfulness and completeness of encounter data and financial data.? Additionally, to fulfill these requirements the State must post results of any audits as mandated in 42 CFR ? 438.602(g). Both requirements are applicable to managed care contracts with an effective date of July 1, 2017, or later. The Centers for Medicare and Medicaid Services (CMS) has issued limited guidance on what states are required to do as part of this audit; however, in December 2019 CMS released a document titled, ?State Toolkit for Validating Medicaid Managed Care Encounter Data1.? On page 53 of this document, CMS indicates states can meet the requirements outlined in 42 ? CFR 438.602(e) by performing (or contracting with an entity to perform) the validation activities described in the External Quality Review Organization (EQRO) Encounter Data Validation (EDV) Protocol. Responsible Officials Maria Garcia Ducos Program Integrity Director 787-765-2929 ext. 6756 Estimated Completion Date Implementation is expected to be completed on or before the end of the fiscal year June 30, 2023.

Finding Number: 2021-008 Agency: Department of Health & Human Services Federal Program: Maternal and Child Health Services Block Grants to the States CFDA: 93.994 Compliance Requirement: Earmarking Category: Material Weakness in Internal Control over Compliance and Compliance Criteria 45 CFR sections 92.20(a) and (b) (1) to (4) establish that: a) A State must expend and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its subgrantees and cost-type contractors, must be enough to, 1. Permit preparation of reports required by this part and the statutes authorizing the grant, and 2. Permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. b) The financial management systems of other grantees and subgrantees must meet the following standards: 1. Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant. 2. Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. if unit cost data are required, estimates based on available documentation will be accepted whenever possible. Condition We noted the following deficiencies related to the grant awards 19B04MC32568, 20B04MC33864: a. The PRDH does not segregate financial records sufficiently in order to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the percentage restrictions of the grant award. b. We could not evaluate if the program is in compliance with the established earmarking requirements since the expenses were recorded for each of the award components and not the earmarking activity. Cause This situation occurs because the accounting records currently used by the PRDH do not have a reliable system to account for funds awarded to them. The chart of accounts in the financial system is not sufficiently expanded to account for each of the earmark requirements. Effect The PRDH could exceed the established expenditures limits per activity for the grant award. Non?compliance with the earmarking requirements could lead to significant administrative sanctions by the grantor, including reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve program objectives. Questioned Costs None Perspective Information Finding represents a significant problem. The agency will review internal controls to ensure that comply with federal government requirements. Prior Year Audit Finding None Recommendation The PRDH must expand the chart of accounts in order to account for the amounts claimed for administrative expenditures independently. This expansion would permit the tracing of funds to a level of expenditure to establish that such funds have not been used in violation of the restrictions and prohibitions of the program as defined in 42 USC 705(a)(3). Also, payroll expenses must be recorded into each of the corresponding program activities, as follows: a) Preventive and primary care services for children. b) Services for children with special health care needs. Views of Responsible Officials The PRDOH partially agrees with the finding. The narrative of compliance with the requirement is presented annually in the report to the federal government. They are evidenced by the completed forms for budget and reported expenses that are submitted for the annual request for funds. The accounts between the programs have already been separated, so it shows the fulfillment of the Earmarking 30-30-10; Each is assigned 30% or more for required service and no more than 10% for the administration thereof. In the order hand the PRDOH has encountered challenges with the payroll in order to separate the percentage work for each grant. However, with the new ERP from the Department of Treasury the new system will allow for that purpose, this system is expected to be running by July 2024. Responsible Officials Dr. Manuel Vargas Bernier Program Director 787-765-2929 ext. 4583 Mrs. Diana Ferrer Rivera Senior Accountant 787-765-2929 ext. 4551 Estimate Date of Completion Implementation is expected to be completed on or before the end of the fiscal year July 1, 2024.

Finding Number: 2021-009 Agency: U.S. Department of Health & Human Services Federal Program: Medical Assistance Program CFDA: 93.778 Compliance Requirement: Special Test and Provisions- External Quality Review Organization (EQRO) Category: Significant Deficiency and Noncompliance Criteria 42 CFR Subpart E section 438.354 establishes that the SMA must ensure that each managed care organization is evaluated annually on quality, timeliness, and access to the health care services by an EQRO. The state must ensure that the EQRO conducting such reviews is competent and independent. Condition State Medicaid Agency (SMA) did not meet with the EQRO requirement during the evaluated period. Although we were provided with a contract with an independent company that will carry out the processes, this is not within the evaluated period. Cause This situation was primarily caused because State Medicaid Agency (SMA) does not conduct or contract an independent subcontractor timely. Effect State Medicaid Agency (SMA) does not ensure that each managed care organization is evaluated annually by an EQRO. Questioned Costs None Perspective Information The Department will provide and reinforce monitoring procedures to assure compliance with EQRO contractual process. Prior Year Audit Finding None Recommendation The State Medical Agency (SMA) will reinforce the contractual process of the EQRO. Views of Responsible Officials The PRDOH agrees with the finding. However, PRDOH has implemented a corrective action. Mercer Government Human Services Consulting (Mercer), part of Mercer Health & Benefits LLC, was contracted to conduct an encounter and financial data audit in accordance with 42 ? CFR 438.602(e) specification, which requires ?periodic audits (once every three years) for accuracy, truthfulness and completeness of encounter data and financial data.? Additionally, to fulfill these requirements the State must post results of any audits as mandated in 42 CFR ? 438.602(g). Both requirements are applicable to managed care contracts with an effective date of July 1, 2017, or later. The Centers for Medicare and Medicaid Services (CMS) has issued limited guidance on what states are required to do as part of this audit; however, in December 2019 CMS released a document titled, ?State Toolkit for Validating Medicaid Managed Care Encounter Data1.? On page 53 of this document, CMS indicates states can meet the requirements outlined in 42 ? CFR 438.602(e) by performing (or contracting with an entity to perform) the validation activities described in the External Quality Review Organization (EQRO) Encounter Data Validation (EDV) Protocol. Responsible Officials Mrs. Maria Garcia Ducos Program Integrity Director 787-765-2929 ext. 6756 Estimated Completion Date Implementation is expected to be completed on or before the end of the fiscal year June 30, 2023.

Finding Number: 2020-001Agency: U.S. Department of Health & Human ServicesFederal Program: All Major ProgramsCFDA: 10.557, 93.778, 93.767, 93.917, 93.994Compliance Requirement: Financial Administration- Standards for Financial Management SystemCategory: Financial, Internal Control Weakness and NoncomplianceCriteria45 CFR, Part 74, Subpart C, Section 74.21; 7 CFR, Part 3016, Subpart C, Section 3016.20 establishes the following:a) A State must expend and account for grant funds in accordance with State Laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub-grantees and cost-type contractors, must be sufficient to:1. Allow preparation of reports required by this part and the statutes authorizing the grant, and2. Allow the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes.b) The financial management systems of the grantees and sub-grantees must meet the following standards:1. Financial reporting - Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant.2. Accounting records - Grantees and sub-grantees must maintain records that adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income.3. Internal control - Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Grantees and sub-grantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes.4. Budget control - Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or sub-grant agreement. If unit cost data are required, estimates based on available documentation will be accepted, whenever possible.5. Source documentation - Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and sub-grant award documents, etc.ConditionDuring our audit procedures for the fiscal year ended June 30, 2020, we noted the following deficiencies related with the accounting procedures and financial reporting practices of the PRDH:a) The PRDH has inappropriate and/or incomplete cut-off procedures, as well as incomplete month-end and year-end reconciliation and closing procedures which prevent the timely processing of adjustments. Many transactions and adjustments are posted months after the applicable closing with a retroactive effect due to delays in the processing of information, especially those related to payroll transactions.b) The PRDH has inappropriate and/or incomplete budgeting controls between grants awards distributions and programmatic activities allocations. The PRDH does not provide a mechanism to ensure that costs do not exceed the budgeted level for each program activity.c) The PRDH has adjustments posted in a excel file still pending to be posted in Puerto Rico Integrated Financial Accounting System (PRIFAS). This payroll adjustments totaling $6,856,735 of which $4,027,297 belong to federal funds.CausePRDH management has not implemented effective internal controls to ensure a reliable accounting system to accurately account for funds administered. Also, is caused by the lack of analysis of financial transactions recorded during the fiscal year and the lack of monitoring and supervision by the PRDH's management.EffectThe PRDH is unable to prepare accurate and complete financial reports on a timely basis. Due to significant reconciliation efforts, report may contain significant errors that may pass undetected.Questioned CostsNonePerspective InformationFinding represent a significant problem. The Department of Health must plan to improve accounting and financial reporting practices.Prior Year Audit Finding2019-001RecommendationPRDH should evaluate their current accounting and financial reporting software to ensure that the PRDH maximizes its use, establishment or revision of policies and procedures, establishment of periodic reconciliation and analysis of accounting transactions and additional training to accounting personnel related to accounting and financial reporting matters, including year-end closing procedures.Views of Responsible OfficialsThe Puerto Rico Department of Health (PRDOH) partially agrees with this finding. Beginning October 2021, the PRDOH will start implementing the Project Costing Module in the PeopleSoft Financials application. During this, the PRDOH will standardize all its Federal Fund Management procedures. The work plan for the implementation includes standards, operations procedures, and reports that comply with all Federal Sponsors requirements and training to all end-users.Regarding pending adjustments in payroll, it is essential to mention that the Financial Oversight and Management Board for Puerto Rico implements new procedures that change the operation of all agencies during the fiscal year. However, to avoid discrepancies between the Puerto Rico Integrated Financial Accounting System (PRIFAS) and our system, effective July 1st, 2021, the PRDOH, in a monthly basis will reconcile the payroll between both systems. This procedure will prevent pending adjustments after year closing that affect the financial report.Estimated Completion DateDecember 2022 for Project Costing Implementation.

Finding Number: 2020-002Agency: U.S. Department of Health & Human ServicesFederal Program: All Federal Major ProgramsCFDA: 10.557, 93.778, 93.767, 93.917, 93.994Compliance Requirement: Payroll and Personnel FilesCategory: Significant Deficiency in Internal Control over Payroll and Personnel Files - Accurate and Completeness of Personnel FilesCriteria2 CFR 200.303 establishe that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.2 CFR 200.430 establishes that the cost of compensation for personnel services is allowable to the extent that it follows an appointment made in accordance with the governmental unit's laws and rules and meets the merit system or other requirements required by federal law, where applicable. Compensation for personal services may also include fringe benefits which are addressed in ?200.431 Compensation?fringe benefits. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees:(1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities.(2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and(3) Is determined and supported as provided in paragraph (i) of this section, Standards for Documentation of Personnel Expenses, when applicable.(i) The Non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those working on Federal awards.Conditiona) During our audit, on a sample of sixty (60) personnel files, we observed that the personnel files are not being kept current and in some instances were incomplete.See Scgedule of Findings and Questioned Cost for table.b) The PRDH does not have established written policies and manuals which can define standard internal controls for each program and / or region of the entity.CausePRDH has not established an effective internal control designed to ensure the accuracy and completeness of the employee files. Also, the incompleteness files may depend of the time that the employee started working in the agency.EffectDue to law and regulation changes, incomplete files may result in inadequate documentation to support compliance with the aforementioned criteria over management and administration of personnel files. Also, in the case of employees paid with federal funds, it may result in cost disallowances for personnel that do not meet the requirements to be employed by the corresponding federal program.Questioned CostsNonePerspective InformationFinding does not represent a significant problem. The Department has addressed this finding and it?s been taking the steps necessary to reduced incidences to a minimum. We selected 60 employee files among all department.Prior Year Audit Finding2019-002RecommendationPRDH should immediately undertake a process to review all personnel files and validate that the minimum requirement documents are appropriately completed and included in each personnel file. Also, the PRDH must update the salary change form in file in order to reflect current salary as stated in the digital information system.Views of responsible officialsThe Department of Health established an internal control to ensure that the required documents are recorded in the files. A Control Sheet of Documents Required to the Active Records was established, in which the Human Resources Officers of the regions and Hospitals were requested to check the existence of the required documents of the designation of the employee and / or request them as long as it is necessary in accordance with the laws and procedures at the time of this.The Assistant Secretary of Human Resources, Regional Offices and Hospitals continues to work with the deficiencies found as part of the audit procedures. The updated file was requested from the Department of Finance to compare the salaries officialized in the file of the employees.A Work Plan was implemented regarding the Account and Salary Figure of the employees that, together with the Office of Federal Affairs, the Accountant and Program Director and / or Office sends to the Office of Human Resources to certify the employees who are paid under this new "Grant". Once this change is certified, a table is drawn up official with each of the names, position number of the employee, in order to carry out the officialization of the files and systems.The Director of Human Resources presented a work plan, in order to implement an effective and efficient procedure for reviewing files which has been used in the Assistant Secretary of Human Resources and Labor Relations and the Regional Human Resources Offices and Hospitals in order to improve processes.The Office of Human Resources and Payroll will maintain the follow-up and monitoring in the processes of change and formalization of changes of figures of accounts, salaries, terminations of designations and new designations, etc. To ensure that these changes are correctly in the payment system in accordance with the documents approved in the employee files.Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2022.

Finding Number: 2020-003Agency: Department of Health & Human ServicesFederal Program: Maternal and Child Health Services Block Grants to the StatesCFDA: 93.994Grant Number: 19B04MC32568Grant Period: October 1, 2018, through September 30, 2020Compliance Requirement: Cash ManagementCategory: Significant Deficiency in Internal Control over Compliance and NoncomplianceCriteria2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.ConditionDuring our procedures, we found the following exceptions:a) In a sample of six (6) cash drawdown petitions for Maternal and Child Health Services Block Grant to the States, we observed three (3) transactions with the check issued after the required time lapsed in accordance with the program reimbursement type request.See Schedule of Findings and Questioned Costs for table.CausePrograms have not established written procedures and internal controls to proper follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Another cause is that the finance division is currently understaffed in order to process payments.EffectFailure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments, or other special conditions.Questioned CostsNonePerspective InformationFinding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the timeframe.Prior Year Audit Finding2019-005RecommendationThe PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds.Views of responsible officialsThe Department of Health recognizes the disbursement's importance promptly after completing the drawdown and receiving the credit notice from the bank. However, Puerto Rico was declared under an Emergency due to the impact of Covid- 19 since March 13th, 2020. The emergency changes the operations of the agencies, including the disbursement process. The sample selected in this finding corresponds to a drawdown performed in March 2020, just at the beginning of the emergency.The Department of Health already has a preliminary written procedure pending to be approved. Also, a new office in the Department of Health named Project Management Office will monitor that all federal funds will be promptly disbursed.Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year is June 30, 2022.

Finding Number: 2019-001Agency: U.S. Department of Health & Human ServicesFederal Program: All ProgramsCFDA: 93.778, 93.767, 10.557, 93.994, 93.074,93.940,93.917Compliance Requirement: Financial Administration- Standards for FinancialManagement SystemCategory: Financial, Internal Control Weakness and NoncomplianceCriteria45 CFR, Part 74, Subpart C, Section 74.21; 7 CFR, Part 3016, Subpart C, Section 3016.20 establishes the following:a) A State must expend and account for grant funds in accordance with State Laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its sub-grantees and cost-type contractors, must be sufficient to:1. Allow preparation of reports required by this part and the statutes authorizing the grant, and2. Allow the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes.b) The financial management systems of the grantees and sub-grantees must meet the following standards:1. Financial reporting - Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant.2. Accounting records - Grantees and sub-grantees must maintain records that adequately identify the source and application of funds provided for financially assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income.3. Internal control - Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Granteesand sub-grantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes.4. Budget control - Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or sub- grant agreement. If unit cost data are required, estimates based on available documentation will be accepted, whenever possible.5. Source documentation - Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and sub-grant award documents, etc.ConditionDuring our audit procedures for the fiscal year ended June 30, 2019, we noted the following deficiencies related with the accounting procedures and financial reporting practices of the PRDH:a) The PRDH has inappropriate and/or incomplete cut-off procedures, as well as incomplete month-end and year-end reconciliation and closing procedures which prevent the timely processing of adjustments. Many transactions and adjustments are posted months after the applicable closing with a retroactive effect due to delays in the processing of information, especially those related to payroll transactions.b) The PRDH has inappropriate and/or incomplete budgeting controls between grants awards distributions and programmatic activities allocations. The PRDH does not provide a mechanism to ensure that costs do not exceed the budgeted level for each program activity. For Maternal and Child Health Services Grant to States we were unable to verify its compliance with earmarking requirements, as further explained in finding 2019-007.CausePRDH management has not implemented effective internal controls to ensure a reliable accounting system to accurately account for funds administered. Also, is caused by the lack of analysis of financial transactions recorded during the fiscal year and the lack of monitoring and supervision by the PRDH's management.EffectThe PRDH is unable to prepare accurate and complete financial reports on a timely basis. Due to significant reconciliation efforts, report may contain significant errors that may pass undetected.Questioned CostsNonePerspective InformationFinding represent a significant problem. The Department of Health must plan to improve accounting and financial reporting practices.Prior Year Audit Finding2018-001RecommendationPRDH should evaluate their current accounting and financial reporting software to ensure that the PRDH maximizes its use, establishment or revision of policies and procedures, establishment of periodic reconciliation and analysis of accounting transactions and additional training to accounting personnel related to accounting and financial reporting matters, including year-end closing procedures.Views of Responsible OfficialsThe Puerto Rico Treasury Department (PRTD) is working in a project involving the accounting system of the Puerto Rico Government and agencies. This project is directed to improve the accounting system and the recording of transactions. The improvements will allow the Government to have a financial data in a more accurate and timelier basis, including the receipts of funds, recording of expenditures, and payment to suppliers, payroll, payments and adjustments, among others. This project is in a preliminary phase, in which the government is analyzing the financial/accounting processes, analysis of functional and processes requirement, gathering data and information and processes from the different government agencies. The PRDH prepared a document sent PRTD with the functional requirements of the agency to comply with the state regulation as well as federal regulation. This project still in the process of gathering data and all the requirements. Status and or advances of the project, as well as, expected timetable of completion of phases can be provided upon notification of the PRTD.Until completion of the new project for the Puerto Rico Government, PRDH is working to improve and correct deficiencies of the actual processes of the Finance as follows:1. To improve its cut-off procedures, month-end and year-end closing procedures and reconciliations processes will perform the following:a. Retraining the finance personnel in relation to the procedures included in the Manuals for the reconciliation between PRIFAS 7.5 and PeopleSoft 8.4 (PS8.4) and month-end and year-end closing procedures. Training sessions will be held for the Finance Office and Programs personnel. These training sessions will be based on significant processes, recording of transactions, reconciliation procedures, year-end closing procedures, timely recognition of federal funds drawdown and indirect cost and any other subject to be addressed to ensure the proper recording of transactions of the PRDH. The training sections is uncertain due to the Covid-19 pandemic that we are currently facing. Nevertheless, PRDH have trained personnel using Microsoft teams app.2. During fiscal year 2018-2019, the PRTH together with the PRTD continue the process to correct and/or improve the recording process of the payroll transactions to improve the recording of grants awards distribution and programmatic activities allocations and the PRTD are working in the creation of account/accounts codes based on the Federal Grant Distribution (grant, project, programmatic activities, etc.) for payroll accounts. Accounts in PS8.4 are being created by category, project and or programmatic activity for all other expenditures and charges no-payroll related, such as suppliers and other services. These new set or creation of chart of accounts and accounts codes for payroll transactions will result in the following improvements:a. Programmatic activities allocation information for federal financial assistance programs will be available to properly comply with earmarking requirements.b. The PRDH will be able to obtain financial information directly through PS8.4. This will eliminate the alternate manual control for preparing the reconciliation maintain by the Federal Programs.c. The PRDH will help to reduce the payroll transactions currently classified as in ?error? as part of interphase between PRTD payroll module (PRIFAS 7.5) and PS8.4 to register the payroll expenses.d. Reduce the payroll charges by PRIFAS 7.5 to accounts that should be closed and/or with no budget, and which require additional reconciliation efforts.e. The Program and Finance Offices? personnel will be able to perform the year-end closing, adjustments, and reconciliation procedures in a more effective and efficient manner.Responsible OfficialsMrs. Velmary Martinez Fiscal Office Director Tel. 787-765-2929 ext.3291Mrs. Mayra Reyes Accounting Office Supervisor Tel. 787-765-2929 ext.3294Mrs. Marlene Cesareo PeopleSoft System Supervisor Tel.787-765-2929 ext.3306Estimated Completion DateEstimated date of completion will depend on the dates of project of the PRTD involving the accounting system of Puerto Rico Government and agencies.

Finding Number: 2019-002Agency: U.S. Department of Health & Human ServicesFederal Program: All Federal ProgramsCFDA: 93.074, 93.994, 93.767, 93.778, 93.917, 93.940,10.557Compliance Requirement: Payroll and Personnel FilesCategory: Significant Deficiency in Internal Control over Payroll and Personnel Files - Accurate and Completeness of Personnel FilesCriteria2 CFR 200.303 establishes that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.2 CFR 200.430 establishes that the cost of compensation for personnel services is allowable to the extent that it follows an appointment made in accordance with the governmental unit's laws and rules and meets the merit system or other requirements required by federal law, where applicable. Compensation for personal services may also include fringe benefits which are addressed in?200.431 Compensation?fringe benefits. Costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees:(1) Is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities;(2) Follows an appointment made in accordance with a non-Federal entity's laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and(3) Is determined and supported as provided in paragraph (i) of this section, Standards for Documentation of Personnel Expenses, when applicable.(i) The Non-Federal entity establishes consistent written policies which apply uniformly to all faculty members, not just those working on Federal awards.Conditiona) During our audit, on a sample of forty (40) personnel files, we observed that the personnel files are not being kept current and in some instances were incomplete."See Schedule of Findings and Questiones Costs for chart/table"b) The PRDH does not have established written policies and manuals which can define standard internal controls for each program and / or region of the entity.CausePRDH has not established an effective internal control designed to ensure the accuracy and completeness of the employee files. Also, the incompleteness of files may depend on the time that the employee started working in the agency.EffectDue to law and regulation changes, incomplete files may result in inadequate documentation to support compliance with the criteria over management and administration of personnel files. Also, in the case of employees paid with federal funds, it may result in cost disallowances for personnel that do not meet the requirements to be employed by the corresponding federal program.Questioned CostsNonePerspective InformationFinding does not represent a significant problem. The Department has addressed this finding and it?s been taking the steps necessary to reduce incidences to a minimum. We selected 40 employee files among all departments.Prior Year Audit Finding2018-002RecommendationPRDH should immediately undertake a process to review all personnel files and validate that the minimum required documents are appropriately completed and included in each personnel file. Also, the PRDH must update the salary change form in file in order to reflect current salary as stated in the digital information system.Views of responsible officialsDuring the past two (2) years we have developed internal control, under a document entitled Check Sheet, about the documents required for the designation of employees and another for the audit of files. This contains three columns for the comparison of what is required and requested by the Analysts of the Designation and Changes Division and ends with the comparison of the supervisor of the Division, before being referred to the Personnel Officers of our regions. The document known as the Check Sheet has been modified according to the needs, changes, procedures, and new regulations.It is important to mention that many of our audited Personnel Files belong to employees appointed in years where the requirements or documents required were minimal and no evidence was required or kept in the personnel file.In terms of the academic preparation contained in the personnel files, they are documents required by our Recruitment and Selection Division and these respond to the requirements and minimum alternatives of the class, according to the Agency's Classification Plan. Each Class specification establishes minimum requirements for the position the candidate will occupy. Another important aspect to mention is that the Department of Health in 1999, when closing the formerly known Administration of Health Services Facilities (AFASS), its employees went to the Department of Health and with them their files, whose procedures and processes were not uniform to those of our agency. In addition to the delegation to the regions and hospitals of the Requirements Verification Certification (DSP-29), to work appointments and other personnel transactions, such as job reclassifications, promotions, among others. This delegation brings the process of unifying and authorizing the DSP-29, by our Recruitment and Selection Division, to ensure that it is complied with as established by our Classification Plan.The Agency is in the updating of these documents, as long as a change is applied in the classification of the employee's position. These are transactions that allow us to update the employee's file to the new class they will occupy. In the case of the results of the Doping Test, we mention that these are found in the medical record of each employee, by HIPPA Law, these are not filed in the personnel file.These are several of the aspects indicated in the audit, which have represented the development of greater review and auditing measures on the part of the analysts of the Appointments and Changes Division of our agency, in the face of the defunct Quality Control Division, who edited and audited the personnel files of the regions, providing control and compliance with the documents required according to the regulations and standards that govern the Office of Human Resources and Labor Relations of the Commonwealth of Puerto Rico.The Assistant Secretary for Human Resources will present a work plan in order to implement an effective and efficient procedure for reviewing the personnel files, in order to comply with and improve the processes and personnel transactions of the Agency.Responsible officialsMrs. Luz Cruz Payroll and Human Resources Office Director Tel. 787-765-2929 ext. 4220Mrs. Maribel Zayas Payroll Office Director Tel. 787-765-2929 ext. 4209Mrs. Celia Perez Auxiliary Secretary of Human Resources Tel. 787-765-2929 ext. 4270Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2021.

Finding Number: 2019-003Agency: Department of Health & Human ServicesFederal Program: Hospital Preparedness Program and Public Health Emergency Preparedness Aligned Cooperative AgreementsCFDA: 93.074Grant Number: 181NU90921903, 196NU90921903Grant Period: July 1, 2017 through June 30, 2019Compliance Requirement: Cash ManagementCategory: Significant Deficiency in Internal Control over Compliance and ComplianceCriteria2 CFR 200.305 (b), states that recipients must follow procedures to minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement and establish similar procedures for sub-recipients.31 CFR section 205.33 (a) establishes that a State must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. A Federal Program Agency must limit a funds transfer to a State to the minimum amounts needed by the State and must time the disbursement to be in accord with the actual, immediate cash requirements of the State in carrying out a Federal assistance program or project.The OMB Uniform Guidance establishes that the State has written policies that provides procedures for requesting cash advances as close as is administratively possible to actual cash outlays and reimbursement only after costs have been incurred and to monitoring of cash management activities.ConditionDuring our procedures, we found the following exceptions:a) In a sample of five (5) cash drawdown petitions for Hospital Preparedness Program (HPP) and Public Health Emergency Preparedness (PHED) Aligned Cooperative Agreements (CFDA 93.074), we observed four (4) transactions with the check issued after the required time lapsed in accordance with the type of request:"See Schedule of Findings and Questioned Cost for table"CauseProgram has not established written procedures and internal controls to proper follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Another cause is that the finance division is currently understaffed in order to process payments.EffectFailure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments also, or other special conditions.Questioned CostsNonePerspective InformationFinding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the timeframe. We selected 5 cash drawdowns, of which four (4) transactions per drawdown were observed.Prior Year Audit Finding2018-003RecommendationThe PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds.Views of responsible officialsThe program has established as a procedure that the request is made when the payment requirements are completed (documents such as receipts, invoices, certifications, etc.) to minimize this situation.The PRDH Federal Affairs Office (FAO) requests the funds in Payment Management System (PMS). PMS sends to FAO a credit notice with a specific date. This credit notice must be posted by the FAO in the corresponding account within People Soft 8.4 Program. If for example, a credit notice is dated 10/28, the FAO posts it in the system with that same date, regardless if it is being posted later. (Our Program?s credit notice is dated 10/28 but the FAO posts it on 11/01).Other factors include:a. If the posting is made on Friday it is not until the next business day that the payment is processed.b. The Program also depends on the availability of the Accounts Payable and Fiscal Intervention personnel who register and approve payments on the system.c. The Program depends on the local Department of Treasury who issues the checks (the payment is approved but it is Hacienda who determines when the check is issued).Written procedures are being prepared and are under revision that will be part of our guides.Responsible OfficialsMrs. Jessica Cabrera, Public Emergency Preparedness, Tel. 787-773-0600 ext.4347Mrs. Wanda Catala, Program Accountant, Tel. 787-773-0600 ext.4347Mrs. Laura Medina Rivera, Authorizing Official, Tel. 787-765-2929 ext. 3686Mrs. Velmary Martinez, Finance Office Director, Tel. 787-765-2929 ext. 3291Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2021.

Finding Number: 2019-004Agency: Department of Health & Human ServicesFederal Program: HIV Prevention Activities Health Department BasedCFDA: 93.940Grant Number: NU62PS924525Grant Period: January 1, 2018 through December 31, 2022Compliance Requirement: Cash ManagementCategory: Significant deficiency in Internal Control over ComplianceCriteria2 CFR 200.305 (b), states that recipients must follow procedures to minimize the time elapsing between the transfer of funds from the U.S. Treasury and disbursement and establish similar procedures for sub-recipients.31 CFR section 205.33 (a) establishes that a State must minimize the time between the drawdown of Federal funds from the Federal government and their disbursement for Federal program purposes. A Federal Program Agency must limit a funds transfer to a State to the minimum amounts needed by the State and must time the disbursement to be in accord with the actual, immediate cash requirements of the State in carrying out a Federal assistance program or project.The OMB Uniform Guidance establishes that the State has written policies that provides procedures for requesting cash advances as close as is administratively possible to actual cash outlays and reimbursement only after costs have been incurred and to monitoring of cash management activities.ConditionInternal control tests were performed for the Cash Management area to evaluate the procedures required by federal law in cash drawdown withdrawals from federal funds assigned to the HIV Prevention Activities Program.We selected 3 cash drawdowns from the total drawdown for the year ended June 30, 2019 and randomly selected 5 transactions from each drawdown, for the total of 15 transactions. During our procedures, we found the following exceptions:a) We observed one (1) transaction with the check issued after the required time lapsed in accordance with the type of request:"See Schedule of Findings and Questioned Costs for table"CauseProgram has not established written procedures and internal controls to proper follow up the finance division in order to pay to the suppliers and services providers on the timely basis. Another cause is that the finance division in currently understaffed in order process payments.EffectFailure to minimize the time elapse between the drawdowns from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by Federal grantors, such as withholding payments also, or other special conditions.Questioned CostsNonePerspective InformationFinding does not represent a significant problem. The Department has addressed this finding and is taking the steps necessary to reduce incidences. We selected 3 cash drawdowns for the year ended June 30, 2019.Prior Year Audit FindingNot ApplicableRecommendationThe PRDH should establish written procedures that payments are issue promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of fund. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds.Views of responsible officialsThe Office of Finance has established procedures to minimize the time elapse between the drawdowns from the US Treasury and the issuance of payments. Established procedures, includes that the Office of Fiscal Intervention may review the payment voucher and approve it for payment within a ten-day period. Due to the condition found, the Office of Fiscal Intervention will review the procedures established with the Office?s personnel to ensure that the deficiency may be corrected.The Office of Fiscal Intervention had only three employees to handle documents and review vouchers for payments for approximately thirty programs, between federal and state. During September 2020, the Office of Fiscal Intervention hired new personnel as part of their efforts increase the number of employees handling the payment transactions and to reduce the number of days for the review, approval, and issuance of payments.Payment vouchers are returned to the federal program due to errors found during the review and intervention process. It takes, approximately, three to five day for the federal program to review, make corrections and return the payment voucher to the Office of Fiscal Intervention for final approval and payment. To minimize the time elapse between the drawdowns from the US Treasury and the issuance of payments, the federal program may verify the errors, do the corrections, and return the voucher to the Office of Fiscal Intervention as soon as possible, within a two to a three-day period.Responsible OfficialsMr. Javier Vazquez Director of HIV Prevention Tel - 787-765-2929 ext. 3871Mrs. Damaris Andrades Program Accountant Tel - 787-765-2929 ext. 3613Mrs. Mayra Reyes Accounting Office Supervisor Tel - 787-765-2929 ext. 3294Mrs. Velmary Martinez Finance Office Director Tel ? 787-765-2929 ext. 3291Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2021.

Finding Number: 2019-005Agency: Department of Health & Human ServicesFederal Program: Maternal and Child Health Services Block Grants to the StatesCFDA: 93.994Grant Number: 17B04MC30639, 18B04MC31514, 19B04MC32568Grant Period: October 1, 2017 through September 30, 2019Compliance Requirement: Cash ManagementCategory: Significant Deficiency in Internal Control over Compliance and ComplianceCriteria2 CFR 200.302 states that each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds.2 CFR 200.333 states that financial records, supporting documents, statistical records, and all other non-Federal entity records must be retained for a period of three years from the date of submission of the final expenditure report. For Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.ConditionDuring our procedures, we found the following exceptions:a) In a sample of four (4) cash drawdown petitions for Maternal and Child Health Services Block Grant to the States, we observed four (4) transactions with the check issued after the required time lapsed in accordance with the type of request."See Schedule of Findings and Questioned Costs for table"CauseProgram has not established written procedures and internal controls to proper follow up the finance division in order to pay to the suppliers and service providers on a timely basis. Another cause is that the finance division is currently understaffed in order to process payments.EffectFailure to minimize the time elapsed between the drawdown from the US Treasury to the actual check issue date may result in the calculation and determination by the Federal grantors of interest costs on the average balance of funds held beyond the reasonable time. This situation may also expose the PRDH to possible sanctions by federal grantors, such as withholding payments also, or other special conditions.Questioned CostsNonePerspective InformationFinding represents a significant and repetitive problem. The Department will reinforce procedures over the disbursement process to ensure that all program payments are made within the timeframe.Prior Year Audit FindingNoneRecommendationThe PRDH should establish written procedures that payments are issued promptly after the drawdown is made. This will minimize the time elapsed between the drawdown and the payment of funds. The PRDH should also establish a procedure to periodically monitor the cash balances of Federal programs for the possible identification, investigation, and resolution of unused funds.Views of responsible officialsThe Program makes the request for funds after the invoices are processed and sent to the Finance Office in order to avoid going into default, since the Program does not have control of how much work flow the Finance Office has and in what time will you approve it.Responsible OfficialsMr. Manuel Vargas, Program Director, Part AB, Tel.787-765-2929 ext. 4583Mrs. Diana Ferrer, Program Accountant, Part A&B, Tel.787-765-2929 ext. 4661Mr. Miguel Valencia, Program Director, Part C, Tel.787-765-2929 ext. 4587Mrs. Lydia M. Cabrera, Program Accountant, Part C Accounting, Tel.787-765-2929 ext. 4586Mrs. Mayra Reyes, Office Supervisor Finance Office, Tel.787-765-2929 ext. 3294Mrs. Velmary Martinez, Finance Office Director, Tel.787-765-2929 ext. 3291Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2021.

Finding Number: 2019-006Agency: Department of Health & Human ServicesFederal Program: All ProgramsCFDA: 10.557, 93.778, 93.767, 93.994,93.917, 93.074, 93.940Grant Period: October 1, 2017 through September 30, 2019Compliance Requirement: Equipment and Real Property ManagementCategory: Significant Deficiency in Internal Control over Compliance and ComplianceCriteriaA physical inventory of the property must be taken, and the results reconciled with the property records at least once every 2 years (2 CFR section 200.313(d)(2)).Article XIV of the State's Property Rules and Regulations (Reglamento #11: "Control y Contabilidad de la Propiedad") sections (A) and (B) establish that the property registers of the agencies should be supported by a physical inventory. The Property Division of the Puerto Rico Treasury Department ("PRTD") will establish the date in which the agencies will perform their annual inventory.Article XIV of the State's Property Rules and Regulations (Reglamento #11: "Control y Contabilidad de la Propiedad") section (D) establishes that the agencies will prepare the inventory in an electronic form using the SC795 Form, Fixed Assets Physical Inventory. The form SC795 and 5C795.1 (Physical Inventory Certification) forms will be sent to the PRTD. The inventory should include the following: (1) description of the property; (2) the acquisition date; (3) Cost of the property; (4) property class; (5) property number, and (6) source of funds for the purchase of property.Conditiona) The PRDH does not perform a complete physical inventory of the property.b) Property records have not been reconciled.c) The property division of the PRDH does not maintain an effective property and equipment information system from which a current and complete subsidiary ledger can be prepared.CauseThe PRDH does not enforce the written procedures regarding physical inventory and proper record keeping of equipment purchased with federal awards. Grantors may impose sanctions or special conditions restricting the use of federal funds for equipment or other property acquisition.EffectThe PRDH is exposed to the risk of possible unauthorized use and dispositions of equipment due to the lack of adequate internal controls and adequate property and equipment records.Questioned CostsCould not be determined.Perspective InformationFinding represents a significant problem. The Property Office of the Department of Health has been making improvements to maintain an effective property and equipment information system.Prior Year Audit Finding2018-004RecommendationsThe PRDH should implement a new property and equipment record system per Federal Program in which all of the information regarding equipment should be detailed and available for reports. The information should include location of the asset, owner, transfers, theft, misappropriation, etc. Those records should include accountability, control and detection of possible loss or theft of property. Those records should be properly supervised to ascertain that the information registered is accurate.Views of responsible officialsThe PRDH must design and implement appropriate procedures for the recording, management and disposition of equipment and property; that include effective an efficient internal control element. In addition, policies and procedures must ensures the correct use and management of assets.The Department must ensure that the PS8.4 system includes all the equipment-related information that is required by federal regulation and thus once maximizes the use of the PS8.4 system. In addition, the identification and management of assets will be facilitated. The PRDH must perform a physical inventory at least once every two years, as required by federal regulation. The results/differences must be reconciled with the subsidiary of the property module and in turn with the general ledger.The PRDH understands the need to correct the deficiencies identified in the audit findings and the risk it faces if it is not corrected, and the federal requirements are met. This project will be led by the Finance Office, which is responsible for the fiscal part, but must have the integration of the other offices and/or programs of the department. As part of the initial evaluation of the project, certain needs have already been identified and step follow as part of the project implementation.Below an overview of the project phases. This project should have a detailed work plan for each of the phases.1. Physical Inventoryb. The taking of physical inventory will require the personnel effort, as well as the use of technological equipment.i. Technology equipment - a bar code system for physical inventory taking. This system must integrate with PS8.4 to facilitate the recording/reconciliation of the inventory taking.ii. Personnel/Logistics ? all the locations of the Department and the resources to be used for the physical inventory must be identified.iii. Establish a calendar of physical inventory taking per unit of fixed assets.2. Balances Reconciliationsf. Any difference between the results of the physical inventory and the subsidiary should be reconciled. In addition, the subsidiary of the property module shall be reconciled with the general ledger.g. The Finance Office should consider the initial balance of assets not recorded as part of the conversion made to PS8.4 at the time of reconciliation between the subsidiary and the physical inventory.3. Design and implementation of policies and proceduresa. Identify significant processes, risk factors and internal controls for the recording of property and management. This should include all departments areas, offices and/or programs related to the asset acquisition and management process.b. Evaluation, design and implementation of procedures manuals for the management of the property. Which must include acquisition recording of assets, property management, forfeitures/dispositions, depreciation, physical inventory taking, reconciliation processes and others.c. Modification to the PS8.4 property module for cool slightly to new procedures, as need.d. Proper implementation of established procedures.i. Distribution of new procedures to staff and training sessions to all staff. A schedule of recurrent trainings should be established in the initial stages to ensure the correct implementation by the staff.ii. Implementation of automated controls in the property module to ensure the recording of all necessary information related to the acquisition and/or disposition of the asset and in compliance with federal regulation.Responsible OfficialsMrs. Joanna Pagan, Property and Equipment Office Director, Tel. 787-765-2929 ext. 3638Mrs. Maricarmen Molina, General Services Office Director, Tel. 787-765-2929 ext. 3627Mrs. Velmary Martinez, Finance Office Director, Tel. 787-765-2929 ext. 3291Mrs. Mayra Reyes, Accounting Office Supervisor, Tel. 787-765-2929 ext. 3294Mrs. Marlene Cesareo, PeopleSoft System Supervisor, Tel. 787-765-2929 ext. 3306Estimate Date of CompletionImplementation is in process, expected to be completed on or before the year ending June 30, 2021.

Finding Number: 2019-007Agency: Department of Health & Human ServicesFederal Program: Maternal and Child Health Services Block Grants to the StatesCFDA: 93.994Grant Number: 17B04MC30639,18B04MC31514, 19B04MC32568Grant Period: October 1, 2017 through September 30, 2019Compliance Requirement: Earmarking and Level of EffortCategory: Material Weakness in Internal Control over Compliance and ComplianceCriteria45 CFR sections 92.20(a) and (b) (1) to (4) establish that:a) A State must expend and account for grant funds in accordance with State laws and procedures for expending and accounting for its own funds. Fiscal control and accounting procedures of the State, as well as its subgrantees and cost-type contractors, must be enough to-1. Permit preparation of reports required by this part and the statutes authorizing the grant, and2. Permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes.b) The financial management systems of other grantees and subgrantees must meet the following standards:1. Financial reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant.2. Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required in the grant or subgrant agreement. if unit cost data are required, estimates based on available documentation will be accepted whenever possible.ConditionWe noted the following deficiencies related to the grant awards 17B04MC30639, 18B04MC31514, 19B04MC32568:a) The PRDH does not segregate financial records sufficiently in order to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the percentage restrictions of the grant award.b) We could not evaluate if the program is in compliance with the established earmarking requirements since the expenses were recorded for each of the award component and not the earmarking activity.c) Information of Level of Effort requirement were not provided to the auditor to evaluate if the program is in compliance.CauseThis situation occurs because the accounting records currently used by the PRDH do not have a reliable system to account for funds awarded to them. The chart of accounts in the financial system is not sufficiently expanded to account for each of the earmark requirements.EffectThe PRDH could exceed the established expenditures limits per activity for the grant award. Noncompliance with the earmarking requirements could lead to significant administrative sanctions by the grantor, including reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve program objectives.Questioned CostsNonePerspective InformationFinding represents a significant problem. The agency will review internal controls to ensure that comply with federal government requirements.Prior Year Audit Finding2018-005RecommendationThe PRDH must expand the chart of accounts in order to account for the amounts claimed for administrative expenditures independently. This expansion would permit the tracing of funds to a level of expenditure to establish that such funds have not been used in violation of the restrictions and prohibitions of the program as defined in 42 USC 705(a)(3). Also, payroll expenses must be recorded into each of the corresponding program activities, as follows:a) Preventive and primary care services for children.b) Services for children with special health care needs.Views of Responsible OfficialsThe narrative of compliance with the requirement is presented annually in the report to the federal government. They are evidenced with the completed forms for budget and reported expenses that are submitted for the annual request for funds. The accounts have already been separated between the programs, thus evidencing compliance with Earmarking 30-30-10; each one is assigned 30% or more for required services and no more than 10% for their administration. For the DMNA, it would be facilitated if the Department of Health establishes an electronic payroll system similar to those implemented in the FQHCs, where each employee has several accounts awarded to pay their salary and their FTE is awarded. There is the option of creating two additional accounts to separate the administration expenses of the funds assigned to each program, but the current system and the option that you offer us is viable, since the payroll expense could only go out through one of the accounts and it would have to be awarded to each of these by means of wages.Responsible OfficialsMr. Manuel Vargas, Program Director, Part AB, Tel.787-765-2929 ext. 4584Mrs. Diana Ferrer, Program Accountant, Part A&B, Tel.787-765-2929 ext. 4661Mr. Miguel Valencia, Program Director, Part C, Tel.787-765-2929 ext. 4587Mrs. Lydia M. Cabrera, Program Accountant, Part C Accounting, Tel.787-765-2929 ext. 4586Mrs. Mayra Reyes, Office Supervisor Finance Office, Tel.787-765-2929 ext. 3294Mrs. Velmary Martinez, Finance Office Director, Tel.787-765-2929 ext. 3291Estimate Date of CompletionImplementation is in process, expected to be completed on or before the year ended June 30, 2021.

Finding Number: 2019-008Agency: All Federal Agencies in the SEFAFederal Program: All Federal Agencies in the SEFACFDA: All Federal Agencies in the SEFAGrant Number: All Federal Agencies in the SEFAGrant Period: October 1, 2016 through September 30, 2018Compliance Requirement: ReportingCategory: Financial, Internal Control Weakness and NoncomplianceCriteriaOMB Uniform Guidance subpart B .200(a) establishes that Non-Federal entities that expend $500,000 ($750,000 for fiscal years ending after December 25,20 15) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part.OMB Uniform Guidance subpart B .220 establishes that except for the provisions for biennial audits provided in paragraphs (a) and (b) of this section, audits required by this part shall be performed annually.Public Law 104-156, known as the Single Audit Act, sections 7502 (h) (1) and (2)(B) establish that the non-Federal Organization shall transmit the reporting package, which shall include the non- Federal Organization's financial statements, schedule of expenditures of Federal awards, corrective action plan defined under subsection (i), and auditor's reports developed pursuant to this section, to a Federal clearinghouse designated by the Director, and make it available for public inspection within the earlier of 30 days after receipt of the auditor's report; or 9 months after the end of the period audited, or within a longer timeframe authorized by the Federal agency, determined under criteria issued under section 7504, when the 9-month timeframe would place an undue burden on the non- Federal Organization.ConditionThe Single Audit Report for the fiscal year ended June 30, 2019 of the PRDH with due date of March 31, 2020 was submitted after the 9 months deadline. The Single Audit related to such period was completed after the 9 months deadline. Also, the Executive Office of the President issued a notice of waivers from M-20-17 memorandum to extend the Single Audit Submission (2 CFR 200.512) which establish ?Awarding agencies, in their capacity as cognizant or oversight agencies for 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, 2020, to delay the completion and submission of the Single Audit reporting package, as required under Subpart F of 2 CFR ? 200.501 -Audit Requirements, to six (6) months beyond the normal due date. No further action by awarding agencies is required to enact this extension. This extension does not require individual recipients and subrecipients to seek approval for the extension by the cognizant or oversight agency for audit; however, recipients and subrecipients should maintain documentation of the reason for the delayed filing. Recipients and subrecipients taking advantage of this extension would still qualify as a "low-risk auditee" under the criteria of 2 CFR ? 200.520 (a)- Criteria for a low-risk auditee.?CauseThe PRDH did not have internal controls and processes to enable compliance with completing and submitting the Single Audit Report of the PRDH in the due date established by the Single Audit Act. Also, the PRDH did not establish procedures for the monthly and year end closing procedures to allow for the timely performance of the Single Audits.EffectNon-compliance with the above-mentioned requirement could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements.Questioned costsNonePerspective InformationFinding represent a significant problem. The agency will accelerate the process to contract auditors to carry out the audit and submitted the report on time.Prior Year Audit Finding2018-006RecommendationsThe PRDH shall establish controls and procedures to enable compliance with completion and submission of the Single Audit Report of PRDH to the Federal Clearinghouse before the 9 months deadline. Also, the PRDH should establish procedures for the monthly and year end closing process to allow enough time for the performance and completion of the required single audit by its external auditors.Views of Responsible OfficialsPRDH established internal controls and procedures to enable compliance for the compilation and submission of the Single Audit Report before the 9 months deadline. Among the actions taken to prevent non-compliance of filing in a timely manner are:1. An employee was selected to specifically dedicate time and effort related to auditing processes since March 2019. For reasons of staff change and the difficulties the agency has faced during this year 2020, including events such as tremors and impact of the COVID-19 pandemic, filing of Single Audit has been unexpectedly delayed from the original work plan set to be completed by March 2020. Notwithstanding, new personnel was identified to continue the pending deliverables to complete the audit report.2. Due to the delays suffered to file audit for fiscal year 2018 consequently Single Audit 2019 suffered delays as well since both reports were being drafted simultaneously. For the audits of 2018, 2019 and 2020, the same external auditors firm was hired, in accordance with the efforts carried out by the last Deputy Director of Planning, Development and Federal Affairs, so that these audit reports would run parallel and be file almost simultaneously.Notwithstanding, as previously mentioned, due to the unprecedented occurrence of the pandemic COVID-19, OMB announced a waiver for extension of Single Audit submission, in accordance with 2 CFR ? 200.512. Also, while Single Audit processes for 2018 and 2019 were performed simultaneously, there were only a few pending deliverables of Single Audit 2019 left, such as the notification and reply of the findings identified by the external audit firm.This past June 9, 2020, the external audit firm issued a communication requesting an additional contract for Single Audit 2019, since this past March 13, 2020, certification of the SEFA 2019 was received from the Department but filing of Single Audit was delayed. This past March 16, 2020, due to the complications arising from the pandemic COVID-19 the Government of Puerto Rico took necessary precautions by implementing island wide lockdown to prevent an outbreak. Therefore, the contract for Single Audit 2019 suffered a standstill. Consequently, a new contract had to be granted to complete the rest of the pending deliverables. Meanwhile, as previously mentioned, the Federal Government issued several waivers postponing the filing of Single Audits.Furthermore, the new contract for Single Audit 2019 was finally registered in the Controller?s Offices this past September 18, 2020 with a term until October 15, 2020. Consequently, since a work plan was not proposed by the external auditor?s firm and established until October 15, 2020 between the parties, the filing of the Single Audit 2019 has been delayed until December 2020 in accordance with the work plan of reference.Corrective Action PlanAs part of the preventive measures to file the Single Audit in a timely manner, an employee was selected to specifically dedicate time and effort related to auditing processes. Coordination of weekly meetings and phone calls with the external audit firm and the Programs has rendered immediate results to follow through with an established work plan. Therefore, time has been properly managed to collect the necessary information.Timely coordination and communication will be essential in order to comply with the timely filing, in case the occurrence of events beyond our control, such as a variance of the pandemic COVID-19, etc., which may result in extreme precautions taken by the Government, or natural events such as earthquakes or hurricanes.Responsible OfficialsMrs. Laura Medina Authorizing Official Tel. 787-765-2929 ext. 3676Mrs. Velmary Martinez Finance Office Director Tel. 787-765-2929 ext. 3291Estimated Completion DateImplementation is expected to be completed on or before the end of the fiscal year June 30, 2021.

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