PUERTO RICO DEPARTMENT OF THE FAMILYLocal Government

FINDING REFERENCE NUMBER 2024-020 (See Finding Reference Number 2024-001) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our payroll audit procedures for TANF, we selected a sample of twenty-five (25) employees to evaluate internal controls and compliance with payroll transactions. ADSEF was unable to identify the personnel files of one (1) employee. This employee was certified by ADSEF as not being assigned to ADSEF. The employee was included in GL200 (payroll register). Additionally, we found discrepancies between the change report and the information from the last payroll of June 2024 for one (1) employee. QUESTIONED COSTS The salary paid to the employee during the fiscal year that were charged to the TANF program totalized $77,517.29. PERSPECTIVE INFORMATION This deficiency is systemic. The failure to maintain copies of employee files violates state and Federal regulations and prevents the validation of wages paid with Federal funds. The sampling was a statistically valid sample. STATEMENT OF CAUSE ADSEF does not maintain appropriate internal controls over employee records, as required by state and Federal regulations. If an employee was transferred to another agency, a copy of their personnel file must be retained for audit purposes and other requests from either the Federal or state government. POSSIBLE ASSERTED EFFECT Because we cannot review employee records, we cannot verify that the employee actually worked for the program for which their salary was assigned. This results in questionable costs. Deficiencies in employee record control prevent effective monitoring of salaries charged to Federal programs and compliance with state and Federal regulations. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF investigate why one employees were assigned to the Agency through RUM without a corresponding personnel file to support their payroll. Regarding the deceased employee, they should identify and locate their file. Additionally, we recommend establishing internal control processes that require verifying each payroll against the updated employee roster and monitoring employee files against payroll and employee rosters.

FINDING REFERENCE NUMBER 2024-021 (See Finding Reference Number 2024-002) FEDERAL PROGRAM (ALN – 96.001) SOCIAL SECURITY – DISABILITY INSURANCE U.S. SOCIAL SECURITY ADMINISTRATION AWARD NUMBERS 1804RQD100 (Federal Award Year: 10/1/2017 – 9/30/2018) 1904RQD100 (Federal Award Year: 10/1/2018 – 9/30/2019) 2004RQD100 (Federal Award Year: 10/1/2019 – 9/30/2020) 2104RQD100 (Federal Award Year: 10/1/2020 – 9/30/2021) 2204RQD100 (Federal Award Year: 10/1/2021 – 9/30/2022) 2304RQD100 (Federal Award Year: 10/1/2022 – 9/30/2023) 2404RQD100 (Federal Award Year: 10/1/2023 – 9/30/2024) ADMINISTRATION OFFICE OF THE SECRETARIAT COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INERNAL CONTROL AND COMPLIANCE – SIGNIFICANT DEFICIENCY AND NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our audit procedures over payroll transactions, we requested 25 employee files. The inspection of personnel files we noted the following deficiencies: 1. Evidence of the current wage was not observed in nine (9) files. 2. Evidence of the job description was not observed in ten (10) files. 3. We were unable to validate the accounting distribution of the salary in ten (10) files. 4. Evidence regarding documentation related to employment applications, certificates of no penal records, social security, and others were not available in the twenty-five (25) files requested. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systemic. The failure to maintain copies of employee files violates state and federal regulations and prevents the validation of wages paid with federal funds. The sample was a statistically valid sample. STATEMENT OF CAUSE According to state and Federal standards, the Secretariat does not keep the proper internal controls over personnel records in order to make the files available for inspection. POSSIBLE ASSERTED EFFECT The absence of required documentation, may result in noncompliance with applicable laws, regulations, and the Agency established requirements. Additionally, it may increase exposure to operational and legal risks and restricts the Agency ability to prove that workers are allowed to work and fulfill minimal qualifications. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS In order to guarantee that all necessary documentation is correct, comprehensive, and appropriately stored in compliance with established criteria, we recommend that the Agency tighten controls over the upkeep of personnel files. This should entail conducting regular checks of personnel files, using established procedures to confirm completeness, and making sure that any missing paperwork is quickly acquired and filed.

FINDING REFERENCE NUMBER 2024-022 (See Finding Reference Number 2024-003) FEDERAL PROGRAM (ALN – 10.542) PANDEMIC EBT FOOD BENEFITS (P-EBT) U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 2301PR456S9032 (Federal Award Years: 10/1/2022 through 3/31/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ELIGIBILITY // REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. In accordance with the approved State Plan, no summer 2023 P-EBT benefits may be issued to children who did not attend an NSLP-participating school at the end of the school year immediately preceding the summer. STATEMENT OF CONDITION As part of our internal control procedures for the financial management system regarding reporting requirements, we found the following deficiencies regarding the only report submitted during the fiscal year of September 30, 2023: • The amount reported as total Federal share of outlays (line 10.g.), was $35,356,789, and the amount of $879,121 (line 10.h) as total unliquidated obligations. The accounting system (PRIFA) reported total expenditures in the amount of $36,235,910, which is the sum of lines 10.g and 10.h. No unliquidated obligations are included in the database of PRIFA. • In addition, we noted an expenditure dated October 31, 2023, in the database for $92,157 that was not reported. This amount was not included as unliquidated obligation in the report of September and no other report was submitted that included this expenditure. • We have no administrative expenses recorded in the database; however, the reports provided listed $307,733 as administrative expenses. In relation to the allowable activities, we obtained a list of all participants that received the benefits. We noted that the information provided from SAIC system does not agree with the reports provided by Service EBT Provider. We noted that the lists of emissions from June 2023 through October 2023 totalized $36,181,839, in accordance with a list from SAIC. Emissions from the Service EBT Provider and accounting records presented expenditures in the amount of $36,328,067, a total difference of $146,228. This difference represents 1,052 participants that are not in the list provided from SAIC, but whose benefits were issued according to the reports from the Service EBT Provider. In relation to the evaluation of the eligibility requirements, we noted that 27 participants were duplicated in the lists from SAIC. In addition, we were unable to verify if the participant attended a private school that participated in the NSLP, because no evidence of the lists from the Puerto Rico Department of Education was provided. QUESTIONED COSTS $146,228. This amount is the total amount of benefits issued for 1,052 participants whose information was not provided. PERSPECTIVE INFORMATION These deficiencies are a systemic problem that is related to lack of proper training and segregation of duties when reporting (preparer and reviewer not being the same person). No proper internal controls are in place to ensure that all data used to issue the benefits is safeguarded and properly reconciled with accounting records. STATEMENT OF CAUSE ADSEF did not establish and implement adequate internal controls to ensure the accuracy, completeness, and supervisory review of financial information used in the preparation of Federal reports. In addition, financial data reported to the Federal agency was not consistently reconciled to the supporting accounting records and database prior to submission. Furthermore, no proper records are maintained of the data used to issue the benefits and how the reconciliation process from the SAIC system and benefits processed by the Service EBT Provider is made. POSSIBLE ASSERTED EFFECT The discrepancies between reported amounts and supporting records, along with lack of supervisory review, create a risk that Federal reports are inaccurate, incomplete, or unsupported, resulting in noncompliance with Federal reporting requirements. We were unable to verify the complete lists of beneficiaries of the P-EBT. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-001/2023-029. RECOMMENDATIONS We recommend that management establish an internal control process that includes having more than one person review the reports submitted to the Federal government. In addition, we recommend proper internal controls that require a structured process of compiling, reviewing and safeguarding all required data for benefits issued.

FINDING REFERENCE NUMBER 2024-023 (See Finding Reference Number 2024-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4; 241PR426S7003/4 (Federal Award Years: 10/1/2022 through 9/30/2024) 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) 2301PRTABD; 2401PRTABD (Federal Award Years: 10/1/2022 through 9/30/2026) 2201PRLIEA; 2301PRLIEA; 2401PRLIEA (Federal Award Years: 10/1/2021 through 9/30/2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2023-2024 fiscal year were observed, in which these three options represented between 25% and 18% for local offices and 38% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-004/2023-032. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.

FINDING REFERENCE NUMBER 2024-024 (See Finding Reference Number 2024-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4 (Federal Award Years: 10/01/2022 through 09/30/2023); 241PR426S7003/4 (Federal Award Years: 10/01/2023 through 09/30/2024) 2023996117 (Federal Award Years: 10/01/2022 through 09/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we requested evidence of the indirect costs transactions. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect cost’s claims. The TANF program reported three (3) transactions related to indirect costs in the amount of $569,998.55, and for the Nutrition Assistance for Puerto Rico three (3) transactions were reported in the amount of $4,815,418.41. We requested evidence of one (1) transaction for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. ADSEF does not have an internal control process that allows for proper authorization and monitoring of the claims made for indirect costs. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for claiming and documenting indirect costs claims. The process of recording indirect costs is based on an excel spreadsheet, no detail of costs indicating the class object and transactions considered are maintained. POSSIBLE ASSERTED EFFECT Indirect costs calculation may include unallowable costs and not be detected timely. ADSEF cannot provide proper audit evidence of the amounts claimed as indirect costs. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-005/2023-033. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.

FINDING REFERENCE NUMBER 2024-025 FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2203PRFPSS; 2303PRFPSC; 2202PRFPCV; 2302PRFPCV; 2302PRPKIN (Federal Award Years: 10/1/2021 through 9/30/2023) 2211PRSOSR; 2311PRSOSR (Federal Award Years: 10/1/2022 through 9/30/2024) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL – SIGNIFICANT DEFICIENCY CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-006/2023-034. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.

FINDING REFERENCE NUMBER 2024-026 (See Finding Reference Number 2024-006) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2201PRLIEA (Federal Award Year: 10/1/2021 – 9/30/2023) 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200.302, requires recipient's and subrecipient's financial management system must provide for the following: (3) maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation; (4) effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303; and (6) written procedures to implement the requirements of § 200.305. 2 CFR 200.305, Federal Payments, establishes that: (a) payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”; (b) for recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance regarding cash management, we obtained a procedures manual. We found the following deficiencies: 1. The effective date is April 2024. 2. In the section describing the LIHEAP process, the US Department of Agriculture is mentioned instead of the US Department of Health and Human Services. 3. It does not identify the personnel responsible for the processes to establish segregation of duties. 4. In our interviews it was noted that only one person is in charge of all drawdowns, and no proper supervision or review of the documentation is performed. In addition, a detail of the requests related to the program was obtained; however, this request information does not reconcile with the revenue recognized in PRIFAS. The following deficiencies were identified: 1. The document includes amounts identified as LIHEAP, which belongs to another Federal program, the Low-Income Household Water Assistance Program (ALN 93.499), in the amount of $295,354.51. 2. Three (3) deposits were included in the detail that were not recorded in PRIFA in the amount of $491,243.33. 3. Three (3) deposits were included in PRIFA that were not included in the detail in the amount of $502,901.10. From a population of fifty (50) revenue transactions, six (6) transactions were selected to ensure that the correct amounts were requested from the Federal program and that the documents indicated in the manual were included with each petition. The following deficiencies were observed: 1. The documents included do not contain signatures from the personnel who perform each process. 2. The documentation included in the manual does not match the documentation included in the documents submitted with each petition. 3. In two (2) requests, the form DF-155, “Request for Federal Funds” was not included as part of the documentation. 4. A form used, IF-8, does not have a sequence number. The document does not provide for signatures, in addition, it makes reference to the Governmental Development Bank, which closed in 2017. 5. In two (2) requests, no detail of the liquidation of benefits was included, only an Excel document. 6. We were unable to determine whether the drawdown was a reimbursement or an advance. 7. We noted that in one drawdown in the amount of $8,014,770, had a note in the documentation indicating that this request is made and pending of the final certification or closeout of the grant from the federal reporting area. 8. In another drawdown in the amount of $832,397.50, the document identified as DF-155 was completed requesting the amount of $1,515,694.80. Although, in handwriting is a comment indicating that this drawdown is partial in order to comply with Puerto Rico Treasury Department, therefore, only the amount of $1,036,663.43 is requested. This amount is also adjusted by $204,265.93, ending with a balance of $832,397.50. No evidence of the adjustment was included. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. The lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up affects this requirement. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF does not have a procedures manual that clearly establishes a segregation of duties, demonstrating compliance with the required internal control components. No standardized process is in place requiring documentation to be included, reviews and approvals of all requests for federal funds. POSSIBLE ASSERTED EFFECT The program may be requesting funds in excess of cash needs, or a reimbursement for funds not previously expended. The lack of internal controls may result in the program to be on a reimbursement basis. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-007/2023-035. RECOMMENDATIONS We recommend that management establish a written internal controls process that demonstrates compliance with cash management requirements and appropriate segregation of duties, and training to all areas regarding this compliance.

FINDING REFERENCE NUMBER 2024-027 (See Finding Reference Number 2024-007) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Years: 10/1/2022 – 9/30/ 2023) 241PR426S7003/4 (Federal Award Years: 10/1/2023 – 9/30/ 2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). Benefits authorized = benefits posted. In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, authorization release form, citizenship alien status, social security, income and resources, self-employment expenses, post-secondary student status, 5-7 years old evidence studying or home schooling, care minors/dependents with disabilities, disability status, medical expenses, age and homelessness. In Regulation to Establish Eligibility Standards for the Nutrition Assistance for Puerto Rico (8684) from ADSEF, Article 21, Verification of Information, Part A: Methods of Verification, Line 1, it is established that, prior to the initial certification of the service household, the technical staff will verify the information provided by the applicant using documents that establish its authenticity. Methods of Verification: 1. Interview - The head of the service household, spouse, or authorized representative will be interviewed as part of the benefits application process. In the Manual of Procedures, it is established that the technician is responsible for documenting the required information in the “Daily Contact Sheet” (ADSEF-106G). In the Manual of Procedures, Chapter 1, Part II, Section D states that the responsibilities of the administrative staff include providing information about rights, responsibilities, warnings, and penalties. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Two (2) participants’ contact log history was incomplete. • One (1) authorization release form, and the declaration of citizenship were not completed during the application process. • Twenty-two (22) authorization release forms were not updated during the recertification or change process. • One (1) the declaration of citizenship was not observed in the participant file. • Seven (7) NAP rights, responsibilities, warnings, and penalties were not updated during the recertification or change process. • Four (4) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • In one case, the amount of income reported in the budget detail was not documented and was based on estimates derived from Social Security income, Medicare deductions, and Cost of Living (COL) adjustments, rather than verified income records. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico (NAP), Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks adequate controls to prevent delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-008/2023-036. RECOMMENDATIONS We recommend ADSEF strengthen internal controls to ensure complete and accurate eligibility documentation. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-028 (See Finding Reference Number 2024-008) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023996117 (Federal Award Years: 10/1/2022 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 – 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses, children school attendance, cooperation with the Individual Responsibility Plan and cooperation in the establishment of paternity or in obtaining child support. In Regulation 8684 to Establish Eligibility Standards for the Temporary Assistance for Needy Families from ADFAN, Chapter IV, Article 1 and 2, establishes that the certification period will be up to a maximum of six (6) months. In Chapter III, Article 4 Section 4.24 establish the participant will receive the benefit for a maximum period of sixty (60) months in total. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Nineteen (19) cases lacked the documents requested for their initial appointment (photo ID, evidence of residency, social security and evidence of citizenship). • Eight (8) new participant files did not include supervisor approval of the eligibility determination. • Twenty (20) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • Several documents were missing from the files: • Fourteen (14) files did not include child support evidence. • Eleven (11) files without evidence of schooling for dependent minors. • Fourteen (14) files did not include signed Individual Responsibility Plan. • Twenty-one (21) files did not have the assignment of rights to Child Support. • Fifteen (15) files did not have the document stating that they had not been convicted of controlled substances. • One Category C case (disability) in which the benefit was granted to the family and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. In addition. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-010/2023-038. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-029 (See Finding Reference Number 2024-009) FEDERAL PROGRAM (ALN – 93.560) PAYMENT TO TERRITORIES – ADULTS U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G9922PT (Federal Award Years: 10/1/2022 through 9/30/2025) 2301PRTABD (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses. In Regulation 8684 to Establish Eligibility Standards for the Payments to Territories – Adults from ADFAN, Chapter III, Article 3, Section 3.5, establishes that the eligibility period is determined by the Central Level Medical Social Board. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Fifteen (15) cases lacked the documents requested for their initial appointment (photo ID, evidence of residency and evidence of citizenship). • Two (2) new participant files did not include supervisor approval of the eligibility determination. • Five (5) files submitted and no information related to our audit period was provided. • Fifty-nine (59) files showed an untimely eligibility determination based on the recertification date. • Six (6) files of Category D case in which the benefit was granted and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-011/2023-039. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-030 FEDERAL PROGRAMS (ALN – 93.489; 93.575 AND 93.596) CHILD CARE AND DEVELOPMENT FUND CLUSTER (ALN – 93.489; 93.575 AND 93.596) COVID-19 – CHILD CARE AND DEVELOPMENT FUND CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS G2301PRCCDT (Federal Award Years: 10/1/2022 through 9/30/2025) G2001PRCCC3 (Federal Award Years: 10/1/2019 through 9/30/2025), G2001PRCCDX (Federal Award Years: 01/19/2019 through 9/30/2025), G2101PRCCC5 (Federal Award Years: 12/27/2020 through 9/30/2025), G2101PRCDC6 (Federal Award Years: 10/1/2020 through 9/30/2025), G2101PRCSC6 (Federal Award Years: 10/01/2020 through 09/30/2025) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL – SIGNIFICANT DEFICIENCY CRITERIA According to the 45 CFR sections 98.20(a) state the child’s eligibility requirements for child care services as following: (a) To be eligible for services under § 98.50, a child shall, at the time of eligibility determination or redetermination: (1) Be under 13 years of age; or, (2) At the option of the Lead Agency, be under age 19 and physically or mentally incapable of caring for himself or herself, or under court supervision; (3) Reside with a family whose income does not exceed 85 percent of the State's median income (SMI), which must be based on the most recent SMI data that is published by the Bureau of the Census, for a family of the same size; and (4) Whose family assets do not exceed $1,000,000 (as certified by such family member); and (5) Reside with a parent or parents who are working or attending a job training or educational program; or (6) Receive, or need to receive, protective services, which may include specific populations of vulnerable children as identified by the Lead Agency, and reside with a parent or parents other than the parent(s) described in paragraph (a)(3)(i) of this section. (i) At grantee option, the requirements in paragraph (a)(2) of this section may be waived for families eligible for child care pursuant to this paragraph, if determined to be necessary on a case-by-case basis. (ii) At grantee option, the waiver provisions in paragraph (a)(3)(ii)(A) of this section apply to children in foster care when defined in the Plan, pursuant to § 98.16(g)(7). STATEMENT OF CONDITION For a sample selected of forty (40) items from a population size of 15,466 participants for the performance of the Eligibility Test, we found the following conditions: 1. For one (1) participant the program could not provide the Birth Certificate to support and validate the child age required for eligibility purpose. 2. For one (1) participant we found that the Eligibility Certificate issued by the program was not signed by the Technician or the Coordinator for eligibility reviewing procedures purpose. 3. For twenty-three (23) participants which were beneficiaries of the Child Care through the Cares Act funds, we noted that the Eligibility Certificate issued does not provide to include the Coordinator signature for eligibility reviewing procedures purpose. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency in internal controls. During the participant eligibility determination test, which consisted to verifying the participants compliance with eligibility requirements, and the verification of the eligibility internal control in place for the assurance of the participants eligibility compliance, we noted the deficiencies established in the condition section. The sample was statistically valid. STATEMENT OF CAUSE 1. The program coordinator indicated that due to the data migration from the CIMA system to the ACUDEN Digital platform and the lack filing documentation, the Birth Certificate was missing to be provided. 2. For missing signatures in the Eligibility Certificate, the program indicated that there was no verification procedure performed for this case. 3. For the Coordinator reviewer signature exclusion in the Eligibility Certificate for the Child Care service through the Cares Act funds, the program indicated to us that this occurred due to the rapid spending funds procedure implementation. The program started to spend the funds as soon as possible and this reviewing signature was not incorporated as part of the Eligibility Certificate. POSSIBLE ASSERTED EFFECT The poor internal controls implementation could result in improper eligibility determination, increasing the risk of noncompliance and that may result in an improper use of funds. In addition, potential recipients of CARES Act funds may also be affected. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-009/2023-037. RECOMMENDATIONS We recommend ACUDEN strengthen internal controls to ensure complete and accurate eligibility determination considering all the participant information at all eligibility determination stages of the process.

FINDING REFERENCE NUMBER 2024-031 (See Finding Reference Number 2024-010) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2201PRLIEA (Federal Award Year: 10/1/2021 – 9/30/2023) 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. In addition, the State Plan indicates the documentation that should be provided in order to determine eligibility, which included: evidence of ID of the participant, evidence of low income, evidence of electricity bill. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 166,441 who received the benefits of the program. In relation to those participants that the benefit was not based on eligibility for PAN or TANF programs, we found the following deficiencies: 1. In thirteen (13) participants the ID was not included in the file provided. 2. In accordance with SAIC one (1) participant, the benefit was determined for $893.54, although, in accordance with the file provided, the benefit should have been $607.39. 3. In one (1) participant file, no evidence of the electricity bill was provided, no evidence of eligibility determination nor approved benefit. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. The sample was statistically valid sample. STATEMENT OF CAUSE ADSEF does not have appropriate internal controls over the records retention, eligibility determination and documentation requirements. POSSIBLE ASSERTED EFFECT Participants that do not comply with the criteria to be eligible, might have received the benefits. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-012/2023-040. RECOMMENDATIONS We recommend management to implement appropriate internal controls over the record retention, eligibility determination, and required documentation in the participant’s files.

FINDING REFERENCE NUMBER 2024-032 (See Finding Reference Number 2024-011) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with the Compliance Supplement every fiscal year, a state must maintain an amount of “qualified state expenditures” (as defined in 42 USC 609(a)(7)(B) and 45 CFR section 263.2) for eligible families (as defined in 42 USC 609(a)(7)(B)(i)(IV) and 45 CFR section 263.2(b)) at least at the applicable percentage of the state’s historic state expenditures. In addition, it states that the applicable percentage for each fiscal year is 80 percent of the amount of non-Federal funds the state spent in FY 1994 on AFDC or 75 percent if the state meets the TANF work participation rate requirements (42 USC 607(a)) for the fiscal year. This is termed “basic MOE”, and the requirement is based on the Federal fiscal year. Any MOE expenditures above this required amount are referred to as “excess MOE”. In accordance with the regulation, the amount of MOE required for Puerto Rico is $21,185,453. 2 CFR section 200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our internal controls and compliance procedures for compliance with the MOE requirement, we requested the Grant Award report for 2023, covering the period from July 1, 2022, to September 30, 2023, to verify compliance with the MOE. The report covering this period reflects an MOE of $11,779,885, a deficiency of $9,405,568. Additionally, the reported expense amounts could not be validated against the PRIFAS database. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systematic. Puerto Rico government agencies fail to demonstrate that they maintain constant communication and follow up on information requests to ensure that all required documentation is available to complete reports. In ADSEF no one has been assigned with the responsibility of monitoring compliance with the Level of Effort requirement. Additionally, procedures and internal controls manuals should provide for and ensure the segregation of duties and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare the financial statement and SEFA. STATEMENT OF CAUSE According to discussions with ADSEF personnel, since 2018, another agency of the Government of Puerto Rico, the Health Insurance Administration (ASES, by its Spanish Acronym), has not provided information to comply with the spending levels of other state programs. In addition, during our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, and no one is assigned the responsibility of monitoring compliance with the Level of Effort requirement. POSSIBLE ASSERTED EFFECT ADSEF is not in compliance with reporting state program expenditure levels, as required by program regulations. Additionally, ADSEF is not ensuring that the reports are accurate and traceable to the accounting database used to prepare their financial reports. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-014/2023-042. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported. Puerto Rico government agencies must maintain constant communication and follow-up on information requests to ensure that all required documentation is available to complete reports. In addition, ADSEF should implement internal controls procedures that ensure continuous monitoring of the required level of effort.

FINDING REFERENCE NUMBER 2024-033 (See Finding Reference Number 2024-012) FEDERAL PROGRAM (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2101PRFPSS (Federal Award Year: 10/1/2021 – 9/30-2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA The 45 CFR section 1357.32(d) establishes that the program contains assurances that not more than 10 percent of expenditures under the plan for any fiscal year with respect to which the State is eligible for payment under section 629d of this title for the fiscal year shall be for administrative costs, and that the remaining expenditures shall be for programs of family preservation services, community-based family support services, family reunification services, and adoption promotion and support services, with significant portions of such expenditures for each such program. According to the Compliance Supplement, the portion established for expenses by category is 20%. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with earmarking requirements, we selected the Grant Award 2203PRFPSS, which closed within the audit period from July 1, 2023, to June 30, 2024, to assess the allocation and use of funds across the required program categories. Based on our evaluation of the documentation provided by ADFAN, we found that expenditures in each of the following categories: family preservation services, community-based family support services, time-limited family reunification services, and adoption promotion and support services did not meet the 20% minimum allocation. Additionally, we noted that administrative expenditure related to training exceeded the 10% cap. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. ADFAN does not have written internal control and compliance procedures that clearly identify the process to monitor this requirement and the person responsible. STATEMENT OF CAUSE ADFAN lacks adequate internal controls to effectively monitor whether expenditures within each category align with allocated funding and comply with applicable program requirements. POSSIBLE ASSERTED EFFECT ADFAN’s failure to adhere to program requirements may adversely impact its ability to receive full Federal funding under the program. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-015/2023-043. RECOMMENDATIONS We recommend ADFAN establish written internal control procedures that provide for the monitoring of the expenditure of allocated funds of each category, and the person responsible for executing this process in order to comply with the corresponding earmarking requirement.

FINDING REFERENCE NUMBER 2024-034 (See Finding Reference Number 2024-013) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT PERIOD OF PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 45 CFR Subtitle A, Subchapter A, Part 96, section 96.14, establishes that the time period for obligation and expenditure of grant funds, a maximum of 10 percent of the amount payable to a grantee may be held available for the next fiscal year. No funds may be obligated after the end of the fiscal year following the fiscal year for which they were allotted. STATEMENT OF CONDITION As part of our audit procedures over the period of performance requirement, we obtained the reports SF-425 for FY2301 for LIEA, LIEE and LIEI for the quarter ended September 30, 2023. In relation to the LIEA grant, the amount of $10,297,734.58 was reported as unobligated balance, representing the 57% of the grant. For the LIEE and LIEI grants, the 100% ($9,014,770 and $450,147) were reported as unobligated balance. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. We interviewed the person responsible for submitting the reports in relation to this deficiency, she provided evidence of all reports amended and submitted on April 11, 2024. She indicated that the federal liaison allowed the amendments, because at September 30, 2023, she had no evidence of funds obligated in order to comply with the requirement of the program. We requested evidence of communication with the Federal agency, but no evidence was provided. STATEMENT OF CAUSE Although the person responsible for submitting the reports monitors the activities related to this requirement, there are no processes in place to communicate potential non-compliance with the requirement, and no action plans to follow to ensure that the funds are properly obligated before the end of the first year of the grants. POSSIBLE ASSERTED EFFECT ADSEF is not in compliance with the requirements related to the period of performance. The noncompliance may result in a decrease in funds allocated to the program. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish appropriate internal controls to ensure that funds are being obligated within the required time period, and in the event of any anticipated noncompliance with this requirement, notify the federal government in writing and maintain documentation regarding approvals.

FINDING REFERENCE NUMBER 2024-035 (See Finding Reference Number 2024-014) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR §200.510 Financial Statements, (b) states that the auditee must prepare a Schedule of Expenditures of Federal Awards for the period covered by the auditee's financial statements which must include the total Federal awards expended. At a minimum, the schedule must: (1) list individual Federal Programs by Federal agency, (2) for Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included, (3) provide total Federal awards expended for each individual Federal program and the ALN number or other identifying number when the ALN information is not available, (4) Include the total amount provided to subrecipients from each Federal program, (5) for loan or loan guarantee programs identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. STATEMENT OF CONDITION During our audit procedures of the Schedule of Expenditures of Federal Awards (SEFA) prepared by the PRDF, we noted significant deficiencies related to the schedule preparation as follows: • The expenditures for some Federal programs were not accurately reported. To reconcile amounts in the SEFA with the audited financial accounts, the PRDF agree with the suggested auditor adjustments and posted them to the SEFA. • The PRDF Management does not have an adequate internal control system in place to quickly detect and accurately document the expenditures incurred under each Federal programs. This situation led to delays and errors in the preparation of the schedule and the amounts initially submitted for the SEFA. • The initial SEFA submitted for audit procedures contained the following deficiencies because of inadequate internal controls: o There are no safeguards in place to keep an accurate and comprehensive list of Notice of Agreements (NOAs). As a result, the different versions of the SEFA that were received contain incorrect and incomplete information. o Expenditures related to COVID-19 appropriations for different Federal programs were not separately disclosed in the SEFA. For ALN 14.231 the amount of $3,119,131.54 was not separately presented, in addition for ALN 93.671 the distribution between COVID and regular funds was incorrectly presented by $2,075,855.34. o For ALN 93.558 expenditures were included that do not correspond to the program as follows: a total amount of $20,364,480 of programs expenditures correspond to ALN 93.560 and a total amount of $9,140,245.62 corresponds to ALN 93.667. The incorrect presentation of these amounts could affect the correct identification of the programs as Type A and Type B for major program determination. o For ALN 93.671 a total amount of $712,602.44 were included as program expenditure but those expenditures correspond to ALN 93.497. o During the fiscal year, reimbursements of expenses incurred related to ALN 97.036 were received in the amount of $2,828,481.01; however, for the initial SEFA submitted, no validation was performed on the amount of expenses of those reimbursements that should be included in the schedule. After the validation is completed, all the amounts should be included in the schedule as expenditure. PERSPECTIVE INFORMATION This is a systemic deficiency. The PRDF was unable to provide an accurate Schedule of Expenditures of Federal Awards (SEFA), and related supporting documentation in order to apply required audit procedures. The PRDF is composed of five (5) Administrations that manage federal funds. The Office of Secretariat is responsible for coordinating the work of the administrations, but there are no established procedures for coordinating the collection of information when preparing the SEFA for audit purposes. STATEMENT OF CAUSE The PRDF does not have an adequate procedure established to collect, organize, and validate the information necessary for the preparation of the SEFA in accordance with Federal regulations. POSSIBLE ASSERTED EFFECT The PRDF may fail to include all Federal programs and total expenditures in the SEFA causing misstatements in the SEFA submitted to Auditors. It also leads to inaccurate Major Program Determination multiple times made by the auditors because of the different versions of the SEFA submitted, affecting the execution of the Single Audit in a reasonable time. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-019/2023-047. RECOMMENDATIONS We recommend the PRDF establish adequate procedures to coordinate the collection, organization, and validation of the required information to prepare the SEFA from each of the Administrations in a timely manner to ensure that all Federal programs/transactions are properly recorded and included in the schedule.

FINDING REFERENCE NUMBER 2024-036 FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBERS ALL MAJOR PROGRAMS COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR § 200.512 Report Submission, (a) (1) The audit must be completed and the data collection form described in paragraph (b) of this Section and reporting package described in paragraph (c) of this Section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. STATEMENT OF CONDITION The PRDF did not submit the Data Collection Form and Reporting Package to the Federal Audit Clearinghouse of fiscal year ending June 30, 2024 during the required period. QUESTIONED COSTS None PERSPECTIVE INFORMATION This is a systemic deficiency. The PRDF was unable to provide a timely financial statement and the Schedule of Expenditures of Federal Awards (SEFA), and related supporting documentation in order to apply required audit procedures. STATEMENT OF CAUSE The PRDF does not have an effective accounting system and procedures to assure that the required financial statement and SEFA, and supporting documentation was made available for audit purposes within the required period established to comply with the Federal regulations. POSSIBLE ASSERTED EFFECT The PRDF did not comply with the submission date required for the Data Collection Form and Reporting Package; this could affect the continuance and new approvals of Federal funds. IDENTIFICATION AS A REPEAT FINDING This is a repeat finding (Finding Number 2023-048). RECOMMENDATION We recommend the PRDF maintain adequate accounting records related to the non-Federal and Federal funds in order to properly prepare the financial statement and SEFA accurately, and in a timely manner. In addition, PRDF needs to implement adequate internal controls procedures in order to ensure that the supporting documentation is available in a timely manner.

FINDING REFERENCE NUMBER 2024-037 (See Finding Reference Number 2024-015) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 231PR426S7003/4 and 241PR426S7003/4 we noted the following deficiencies: 1) The PRDF was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. 2) In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-020/2023-049. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.

FINDING REFERENCE NUMBER 2024-038 FEDERAL PROGRAMS (ALN – 93.489; 93.575 AND 93.596) CHILD CARE AND DEVELOPMENT FUND CLUSTER (ALN – 93.575) COVID-19 – CHILD CARE AND DEVELOPMENT FUND CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS G1901PRCCDD; G2001PRCCC3, G2001PRCCDD, G2001PRCCDX, G2101PRCCC5, G2101PRCCDD, G2101PRCDC6, G2101PRCSC6, G2201PRCCDD, G2201PRCCDD-SUB, G2201PRCCDT, G2301PRCCDD, G2301PRCCDD-SUB, G2301PRCCDT, G2301PRCCDX, G2401PRCCDD and G2401PRCCDT (Federal Award Years: 2019 through 2024) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTS FOR FFATA TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 2 CFR Part 170, establishes that recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The non-Federal entity or Federal agency must report each obligating action to http://www.fsrs.gov. For subaward information, report no later than the end of the month following the month in which the obligation was made. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirements, we interviewed staff responsible for the Child Care Cluster Program, and we were told that they did not submit the required Federal Funding Accountability and Transparency Act (FFATA) reports during the 2023-2024 fiscal year. Transactions Tested Subaward Not Reported Dollar Amount of Tested Transactions Subaward Not Reported 127 127 $100,523,797.00 $100,523,797.00 QUESTIONED COSTS None. PERSPECTIVE INFORMATION During an interview with the ACUDEN’s Management about the internal control and compliance with this FFATA requirement, they indicated to us that ACUDEN did not have the person assigned to assure the compliance with this requirement. STATEMENT OF CAUSE The ACUDEN’s Management does not have human resources assigned to perform duties related to the compliance with the requirements FFATA applicable to the Child Care Cluster Program’s funds they manage. POSSIBLE ASSERTED EFFECT The ACUDEN‘s non-compliance with the requirements to report through the FFATA Subaward Reporting System (FSRS) platform did not allow the transparency that this report requires for these funds. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-050. RECOMMENDATIONS We recommend management to assign the necessary human resources and to provide training and technical assistance to the personnel they designate to monitor all the funds delegation contracts that meet the requirements to be reported on the FSRS portal, and to be able to keep track of when they had to be reported, the date in which they submitted the information to the portal, and all the elements required to be submitted on the platform.

FINDING REFERENCE NUMBER 2024-039 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTS FOR FFATA TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 2 CFR Part 170, establishes that recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The non-Federal entity or Federal agency must report each obligating action to http://www.fsrs.gov. For subaward information, report no later than the end of the month following the month in which the obligation was made. STATEMENT OF CONDITION During our testing of reporting compliance requirements applicable to the TANF program, we noted that Administration for Socioeconomic Development of the Family (ADSEF) did not submit the required FFATA reports for applicable first-tier subawards equal to or exceeding $30,000 to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Based on the amounts reported in the SEFA, certain entities receiving TANF funds were identified as subrecipients as defined in 2 CFR 200.1. However, ADSEF does not have appropriate internal control procedures related to reporting requirements and, as a result, did not identify the related payments as reportable subawards under 2 CFR Part 170. Consequently, ADSEF could not provide evidence that the required FFATA subaward reports were submitted accurately and within the required reporting timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION ADSEF consultants identified entities for which they understand are subrecipients. There were a total of twenty (20) agreements/contracts executed during fiscal year 2023-2024 that could be subject to FFATA reporting requirements, however, ADSEF cannot certify if all are subrecipients. According to the audit procedures performed, the agency did not have an established process for identifying first-tier subawards subjects to reporting or for submitting the corresponding FFATA notification through the FSRS. The deficiency is systemic, since the situation stemmed from ADSEF's general process and methodology for classifying entities that receive TANF funds and determining the applicability of FFATA reports. STATEMENT OF CAUSE ADSEF did not establish adequate policies, procedures, and internal controls to properly evaluate and determine whether entities receiving TANF funds should be classified as subrecipients or contractors in accordance with 2 CFR 200.331. As a result, applicable subawards subject to FFATA reporting requirements were not identified and reported to FSRS. POSSIBLE ASSERTED EFFECT Failure to report first-tier subawards in FSRS results in noncompliance with Federal transparency and reporting requirements established under 2 CFR Part 170 and may impair public transparency and accountability over the use of Federal funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF strengthen its internal control procedures over FFATA compliance to ensure that all applicable first-tier subawards equal to or exceeding $30,000 are identified, monitored, and reported timely and accurately in FSRS in accordance with 2 CFR Part 170 requirements.

FINDING REFERENCE NUMBER 2024-040 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, each State's quarterly reports (the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report) must be complete and accurate and filed by the due date. (d) For the TANF Financial Report (or, as applicable, the Territorial Financial Report), “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) All expenditures have been made in accordance with 2 CFR 200.302(a). (f) We will review the data filed in the quarterly reports to determine if they meet these standards. In addition, we will use audits and reviews to verify the accuracy of the data filed by the States. In addition, 2 CFR § 200.302(a) establishes 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 funds. Financial management systems must be sufficient to permit the preparation of required reports and ensure tracking of expenditures so that funds can be properly reconciled and reported in accordance with Federal statutes, regulations, and award terms. STATEMENT OF CONDITION As part of our procedures for understanding the preparation and reconciliation of TANF financial and programmatic reports, we compared the Maintenance-of-Effort (MOE) expenditures reported in the ACF-204 Annual Report with the amounts reported in the ACF-196TR TANF Financial Report for the same fiscal year. Our review identified that the MOE expenditures reported in the ACF-204 do not reconcile with the corresponding amounts reported in the ACF-196TR. Specifically, the totals reported in both reports contained differences that were not supported by documented reconciliation procedures. In addition, ADSEF did not provide evidence of a formal reconciliation process or supporting documentation demonstrating that the differences between both reports were identified, analyzed, and resolved prior to submission. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic internal control deficiency over the reconciliation and validation of Maintenance-of-Effort (MOE) expenditures reported in Federal TANF reporting processes. The deficiency is considered systemic because ADSEF did not demonstrate that adequate controls were in place to ensure consistent reconciliation between the ACF-204 Annual Report and the ACF-196-TR Financial Report prior to submission. In addition, the lack of formalized procedures and effective oversight over the preparation and validation of Federal reports indicates a broader weakness in the internal control structure governing financial and programmatic reporting. STATEMENT OF CAUSE ADSEF did not establish and implement written policies and procedures governing the reconciliation, preparation, and validation of Maintenance-of-Effort (MOE) expenditures reported in the ACF-204 Annual Report and the ACF-196TR TANF Financial Report. In addition, management did not implement adequate internal controls to ensure that reported amounts between both reports were reviewed, reconciled, and verified for consistency prior to submission. Furthermore, there was insufficient monitoring to ensure that financial and programmatic reporting data were properly compared and validated against supporting financial records, resulting in discrepancies between the reports not being identified or corrected opportunely. POSSIBLE ASSERTED EFFECT As a result of the condition, the Maintenance-of-Effort (MOE) expenditures reported in the ACF-204 Annual Report and the ACF-196TR TANF Financial Report are not reliable or fully reconcilable, which may affect the accuracy and integrity of federal reporting. This condition increases the risk that reported financial information may be misstated and that inconsistencies between required federal reports may not be detected in a timely manner. In addition, the lack of reconciliation between reports may result in noncompliance with federal reporting requirements and could lead to questions regarding the accuracy and allowability of reported MOE expenditures. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend should establish formal procedures to ensure the reconciliation, review, and validation of Maintenance-of-Effort (MOE) expenditures reported in the ACF-204 and ACF-196-TR prior to submission. These procedures should ensure that reported amounts are consistent with supporting financial records. In addition, ADSEF should strengthen internal controls to ensure proper supervisory review and monitoring of Federal reporting to prevent and detect discrepancies between required reports.

FINDING REFERENCE NUMBER 2024-041 FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. LlHEAP Performance Data Form (OMB No 0970-0449) – State grant recipients must submit this report by January 3lst regarding the prior Federal fiscal year. The first section of the report is the Grant recipient Survey that collects and reports data on sources and uses of LIHEAP funds. The Grant recipient Survey includes Section III: Estimated Sources of Funds and Section IV: Estimated Use of LIHEAP Funds. Note: that these are referencing obligated not expended funding. The rest of the report is regarding performance metrics, mostly related to home energy burden targeting and reduction, as well as the continuity of home energy service. The Grantee Survey obligation amounts should be compared with the Carryover and Reallotment and FFR-425 reports. This reconciliation is needed to make sure the obligated balances for the program year being tested are accurate. Annual Report on Households Assisted by LIHEAP (OMB No. 0970-0060) https://omb.report/icr/202211-0970-005 – As part of the application for block grant funds each year, a report is required for the preceding fiscal year of (1) the number and income levels of the households assisted for each component and any type of LHEAP assistance (heating, cooling, crisis, and weatherization); and (2) the number of households served that contained young children, elderly, or persons with disabilities, or any vulnerable household for each component. Quarterly Performance and Management Report (OMB No. 0970-0589) https://omb.report/icr/202205-0970-017/doc/121847100 – Grant recipients must submit data and information about LIHEAP during the current FY, including success, challenges, needs and innovations. The quarterly reports focus on assisted households, performance management, obligation of funding, changes made due to anticipated increase in energy bills, collaboration with other utility programs, training and technical assistance needs. STATEMENT OF CONDITION As part of our audit procedures over the financial reporting requirements for LIHEAP program, we selected three reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, there are no written procedures describing internal controls over this requirement. We requested the LIHEAP Performance Data (OMB No 0970-0449), but no evidence of the report was provided. We obtained a copy of the Annual Report on Households Assisted by LlHEAP (OMB No. 0970-0060), but no supporting documentation regarding the information reported was provided. We requested two quarterly reports for the Quarterly Performance and Management Report (OMB No. 0970-0589) for the 2301LIEA grant, but no documentation was provided. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. In relation to Special and Performance Reports, there are no proper controls over the data reported and the supporting information. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. In relation to the Special and Performance Reports, the lack of written procedures and proper safeguarding of documentation does not allow for demonstrating compliance with the requirements of these reports. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. We were unable to evaluate internal controls and compliance over the Special and Performance Reports. ADSEF might not comply with the requirements of the program and not report it on time to the regulatory agencies. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-021/2023-051. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. In addition, in relation to the Special and Performance Reports create internal controls that provide for obtaining information, preparing reports, and filing evidence of reports.

FINDING REFERENCE NUMBER 2024-042 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, states that: (a) Each State's quarterly reports [the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report] must be complete and accurate and filed by the due date. (b) For a disaggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems, and includes correction of the quarterly data by the end of the fiscal year reporting period; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data for all required elements (i.e., no data is missing); (4) (i) The State provides data on all families; or (ii) If the State opts to use sampling, the State reports data on all families selected in a sample that meets the specification and procedures in the TANF Sampling Manual (except for families listed in error); and (5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates. (c) For an aggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts). In addition, 2 CFR § 200.302 (a) establishes 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b) the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our procedures for understanding internal controls for the preparation of ACF-199 reports, we request a procedures manual on how these reports are processed and the personnel responsible for each process. ADSEF did not provide us with a manual describing the data collection process, how the information provided by the regions is validated, and the individuals responsible for submitting the reports. Also, they should have completed the ACF-209 report for the quarters of December 2023 and June 2024 and no evidence was provided. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. Following the sample selection, ADSEF failed to demonstrate a control structure, as it was unable to provide a formal procedures manual for the reporting process. The sampling was a statistically valid sample. STATEMENT OF CAUSE ADSEF did not establish and implement written policies and procedures governing the preparation, review, validation, and submission of TANF reports. In addition, management did not implement adequate monitoring controls to ensure that required reports were prepared, reviewed, and submitted timely in accordance with Federal requirements. POSSIBLE ASSERTED EFFECT As a result, ADSEF was unable to demonstrate that adequate controls existed to ensure the completeness, accuracy, and timeliness of TANF reporting. This condition resulted in the failure to submit the required ACF-209 reports for the quarters ended December 31, 2023, and June 30, 2024, and increases the risk that Federal reports may contain incomplete or inaccurate information, thereby affecting Federal oversight and decision-making. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Number is 2023-052. RECOMMENDATIONS We recommend that management establish internal control procedures manuals that clearly outline the processes to be followed for data collection, recording, and reporting. Additionally, standardize the way documents related to participant files are filed.

FINDING REFERENCE NUMBER 2024-043 FEDERAL PROGRAM (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2211PRSOSR (Federal Award Years: 101/2021 through 9/30/2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 42 U.S. Code §1397e and the requirements of the Post-Expenditure Report (OMB #0970-0234), states and territories must submit an annual Post-Expenditure Report to the Office of Community Services no later than six months following the end of the fiscal year. The report must include, among other elements, clearly defined eligibility criteria for program beneficiaries and an accurate accounting of expenditures, including the amount of Temporary Assistance for Needy Families (TANF) funds transferred to the Social Services Block Grant (SSBG). The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION During our review of the submitted Post-Expenditure Report and supporting documentation, we identified the following deficiencies: 1) The eligibility criteria for beneficiaries were not established or documented within the report and, 2) The reported amounts of TANF funds transferred to SSBG do not reconcile with the data provided in the PRDF’s internal database. Although the report specifies that expenditure should be based on current balances rather than budgeted amounts, the transfer in question was based on the approved budget. 3) In addition, internal control interviews revealed that there is no designated individual responsible for reviewing the information entered to the report by the preparer, increasing the risk of reporting errors. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and segregation of duties when reporting (preparer and reviewer not being the same person). STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered in the Post-Expenditure Report. POSSIBLE ASSERTED EFFECT Failure to meet the reporting requirements may lead to noncompliance with Federal regulations, reduced transparency and accountability in the use of Federal funds, and potential implications for future funding or audit findings. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-022/2023-053. RECOMMENDATIONS We recommend ADFAN to establish and document eligibility criteria in accordance with Federal reporting requirements. Reconcile TANF transfers with internal records to ensure accurate reporting and ensure that all expenditures reported are based on actual balances rather than budgeted projections. ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.

FINDING REFERENCE NUMBER 2024-044 (See Finding Reference Number 2024-016) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2203PRFPSS (Federal Award Years: 10/1/2021 through 9/30/2023); 2202PRFPCV (Federal Award Years: 10/1/2021 through 9/30/2023) 2211PRSOSR (Federal Award Years: 10/1/2021 through 9/30/2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Awards 2203PRFPSS and 2202PRFPCV, which closes in the audit period from July 2023 to June 2024, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2203PRFPSS, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The matching expenditure on line (j) does not match the database provided by the PRDF. 4) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on July 8, 2024. 5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Award 2211PRSOSR, which closes in the audit period from July 1, 2023 to June 30, 2024, to validate the recorded amounts. Upon evaluating the report, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on June 10, 2024. 4) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-023/2023-054. RECOMMENDATIONS We recommend that ADFAN ensures the SF-425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.

FINDING REFERENCE NUMBER 2024-045 (See Finding Reference Number 2024-017) FEDERAL PROGRAM (ALN – 96.001) SOCIAL SECURITY – DISABILITY INSURANCE U.S. SOCIAL SECURITY ADMINISTRATION AWARD NUMBERS 1804RQD100 (Federal Award Year: 10/1/2017 – 9/30/2018) 1904RQD100 (Federal Award Year: 10/1/2018 – 9/30/2019) 2004RQD100 (Federal Award Year: 10/1/2019 – 9/30/2020) 2104RQD100 (Federal Award Year: 10/1/2020 – 9/30/2021) 2204RQD100 (Federal Award Year: 10/1/2021 – 9/30/2022) 2304RQD100 (Federal Award Year: 10/1/2022 – 9/30/2023) 2404RQD100 (Federal Award Year: 10/1/2023 – 9/30/2024) ADMINISTRATION OFFICE OF THE SECRETARIAT COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA According to the Program Operations Manual (POMS) DI 39506.203-Updating and Reconciling Unliquidated Obligations published by the Social Security Administration (SSA), legitimate unliquidated obligations must be backed up by records or papers that explain the nature of the obligations and provide evidence for the amounts reported. It is also crucial that the agency's reported unliquidated obligations reflect any modifications or cancellations of Consultative Examinations (CE) and Medical Evidence of Record (MER) authorizations. State authorities should check CE authorizations to see if the unliquidated obligation is an authorization that is still in existence and evaluate unliquidated obligations at least once a month to cancel those that are no longer valid. POMS 39506.210 Preparations Instructions for Form SSA-4513 instructs the State Agency to check the appropriate box in the report to indicate the attachment of Form-871. Uniform Guidance at 2 CFR §200.302 Financial Management Section (a) establish the administrative requirements for the program, which include the requirement that state and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. STATEMENT OF CONDITION The State Agency Report of Obligations for SSA Disability Programs, Form Report SSA-4513, was incomplete and inaccurate. During the audit procedures the following deficiencies were noted by us: 1) It was not specified in the Puerto Rico Disability Determination Services (PR-DDS) Accounting Department's Form SSA-4513 for September 2023 and June 2024 if Form SSA-871, State Agency Schedule for Equipment Purchases for SSA Disability Programs, had to be included with Form SSA-4513 for FYs 2024, 2023, 2022, 2021, 2020, 2019, and 2018. Whether this was necessary or not is unknown. 2) For the September 2023 Forms SSA-4513, the support for unliquidated obligations for FYs 2023, 2022, 2021 and 2020 were absent, incomplete or had differences. For FY 2023, there was a difference of $560,158 between the amount included in the report and the support provided for review. For FY 2022, there was a difference of $7,795 between the amount included in the report and the support provided for review. For FY 2021, there was a difference of $580,750 between the amount included in the report and the support provided for review. For FY 2020, there was a difference of $518,630 between the amount included in the report and the support provided for review and no support was provided for unliquidated obligations. 3) For the June 2024 Forms SSA-4513, the support for unliquidated obligations for FYs 2024, 2023 and 2022 were absent, incomplete or had differences. For FY 2024, there was a difference of $1,402,319 between the amount included in the report and the support provided for review. For FY 2023, there was a difference of $236,152 between the amount included in the report and the support provided for review. For FY 2012, there was a difference of $199,043 between the amount included in the report and the support provided for review. 4) There were discrepancies between the accounting system and the total amount of disbursements on Form SSA-4513 for June 2024 and September 2023, and no observations were submitted in the report remarks section and personnel were unable to provide explanations during the audit process. Following are the discrepancies: (1) September 2023 Form SSA-4513: a. $925 discrepancy in FY 2022 b. $24,806 discrepancy in FY 2021 c. $9,251 discrepancy in FY 2020 d. $8,682 discrepancy in FY 2019 e. $49 discrepancy in FY 2018 (2) June 2024 Form SSA-4513: a. ($156,693) discrepancy in FY 2024 b. $101,737 discrepancy in FY 2023 c. $925 discrepancy in FY 2022 d. $39,656 discrepancy in FY 2021 e. $63,275 discrepancy in FY 2020 5) The PR-DDS paid back $539,771 to the grantor for indirect costs charged in excess according to the Form 4513 for FY 2020. Because an expense is reported at the time a request is registered by the PR-DDS Accounting Department Special Payer, this resulted in an overstatement in previous Schedule of Expenditures of Federal Awards and in quarterly reports. 6) The PR-DDS Accounting Department submitted Form SSA-4513 for FY 2020 on July 16, 2024. This form was revised on July 19, 2024. We reviewed the revised form, but the report does not identify the updated form as revised. 7) The database submitted to support financial statements amounts, presents a difference of $192,759 between the accounting system (PRIFAS) and the database for FY 2024. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Information needed to effectively generate financial reports should be available through the financial management system. STATEMENT OF CAUSE Internal controls is not in place in the PR-DDS Accounting Department to ensure that vendor payments are processed on schedule. Furthermore, as mandated by DI 39506.203, the PR-DDS Accounting Department has not put monitoring measures in place to routinely assess unliquidated commitments. Furthermore, the PR-DDS Accounting Department lacks internal procedures for recording discrepancies between financial reporting and accounting systems. POSSIBLE ASSERTED EFFECT The PR-DDS raises the possibility of incurred costs without the option to obtain reimbursement from the Federal grant if appropriate procedures are not in place to pay suppliers on time and liquidate obligations on time. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-024/2023-055. RECOMMENDATIONS We recommend the Accounting Department of PR-DDS establish procedures to make sure Form SSA-4513 is properly examined, recorded, and compliant with POMS DI 39506.203. To cancel commitments that are no longer valid, we advise the PR-DDS Accounting Department to check unliquidated obligations at least once a month. Furthermore, we recommend a formal reconciliation between the quarterly reports and the accounting system-documented disbursements, with an explanation of any discrepancies included in remarks of the Form SSA-4513.

FINDING REFERENCE NUMBER 2024-046 (See Finding Reference Number 2024-018) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) 2022G9922PT (Federal Award Years: 10/1/2022 through 9/30/2025) 2301PRTABD (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirements for the Temporary Assistance for Needy Families (TANF) and Payment to Territories – Adult (PTTA) programs, we reviewed two ACF-196TR reports submitted during the fiscal year under audit. Our review disclosed deficiencies related to the accuracy, support, reconciliation, and timeliness of reported expenditures. Specifically, we noted the following: • Administrative expenditures for both TANF and PTTA are recorded under the same accounting account number and Assistance Listing Number associated with TANF. As a result, the PRIFA accounting system does not segregate administrative expenditures by federal award or Assistance Listing Number, limiting the ability to identify and track expenditures attributable to each program. • Amounts reported in the ACF-196TR reports could not be reconciled to the PRIFA accounting records, particularly for administrative expenditures. Upon request, management was unable to provide supporting schedules, reconciliations, or documentation demonstrating how the reported amounts were derived. Supporting information was prepared only after it was requested during the audit. • For grant award 2023G996117, reported expenditures in the quarterly report of September 30, 2023, that did not agree with the underlying accounting records. We identified differences of $7,266.40 in Line 6A (Work-Related Activities and Expenses), $1,745,668.00 in Line 5A (Basic Assistance), $1,645,366.55 in Line 6J (Administration), $2,007,611.62 in Line 3 (Transfer to SSBG), and $103,052.41 in Line 10 (Total Expenditures). In addition, the report was submitted after the applicable due date. • For grant award 2401PRTANF, reported expenditures in the June 30, 2024 quarterly report that also differed from the accounting records. We identified differences of $12,312.07 in Line 6A (Work-Related Activities and Expenses), $1,898,639.95 in Line 6J (Administration), $3,786,696.14 in Line 3 (Transfer to SSBG), and $1,902,297.08 in Line 10 (Total Expenditures). Furthermore, the report maintained by ADSEF did not contain evidence of the submission date; therefore, we were unable to determine whether the report was submitted within the required timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult programs to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-025/2023-056. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.

FINDING REFERENCE NUMBER 2024-047 (See Finding Reference Number 2024-019) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – EBT RECONCILIATION TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with Compliance Supplement and the State Plan, the EBT services provider makes payments to authorized retailers, network, third party providers, and financial institutions on behalf of the Government of Puerto Rico for benefits accessed and distributed to recipients daily. The EBT services provider is reimbursed as authorized by the Popular Bank of Puerto Rico (PBPR). Payments are recorded and compared to the Daily Activity File and Daily Payments Summary File prepared by the EBT services provider for the Department of the Family. EBT system reports provide these and other standardized computer reports as well as ad hoc access to EBT system data to perform the following key reconciliation: 1) Benefits authorized = benefits posted. 2) Benefits accessed by recipients (net EBT account debits/credits) = benefit amount transactions approved by the EBT services provider. 3) Net EBT account debits/credits = amount paid to merchants and financial institutions, “+/-” authorized adjustments. 4) Amount paid to merchants and financial institutions = funds requested by the EBT services provider, “+/-” authorized adjustments. The 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit of compliance with the EBT reconciliation requirements for the fiscal year ended June 30, 2024, we identified the following deficiencies: • ADSEF was unable to provide updated written reconciliation procedures or manuals. They provided a manual from 2012, which was not updated with the data currently used. • No evidence was provided to show that EBT benefits were reconciled or matched to Federal drawdowns (SF-425 or PMS). QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records. STATEMENT OF CAUSE ADSEF deficiencies stem from the absence of formal updated written reconciliation procedures, inadequate internal controls over EBT operations, lack of staff training, and unclear assignment of responsibilities related to reconciliation and oversight. POSSIBLE ASSERTED EFFECT ADSEF lack of updated written reconciliation process increases the risk of undetected errors or irregularities in EBT transactions, potential misstatements in Federal financial reports, and unaccounted variances between Federal funding and benefit disbursements. It also limits the agency’s ability to monitor program performance and meet audit and compliance obligations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-026/2023-057. RECOMMENDATIONS We recommend ADSEF develop and implement updated formal, written reconciliation procedures, clearly outlining roles, responsibilities, and the frequency of reconciliations. Additionally, we advise providing staff with comprehensive training on reconciliation protocols and internal control requirements to ensure consistency and compliance.

FINDING REFERENCE NUMBER 2024-048 FEDERAL PROGRAMS (ALN – 93.489; 93.575; AND 93.596) CHILD CARE AND DEVELOPMENT FUND CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS G2101PRCCDD, G2201PRCCDD, G2201PRCCDT & G2301PRCCDT (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – HEALTH AND SAFETY REQUIREMENTS TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – SIGNIFICANT DEFICIENCY AND NONCOMPLIANCE CRITERIA According to the 2 CFR Part 200, Appendix XI, as part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address eleven specific areas-including first aid and CPR, safe sleeping practices, and administration of medication-and child care workers must be trained in these areas (42 USC 9858c(c)(2)(1); 45 CFR section 98.41). STATEMENT OF CONDITION In order to assess the compliance and internal control in place to ensure the compliance with Special Test and Provision – Health and Safety Requirements, we selected a sample of thirteen (13) subawards from a population of one hundred twenty-seven (127) subawards. Then for one subrecipient we noted that it did not have the Eligibility Certificate issued by ACUDEN indicating that the subrecipient is in compliance with the health and safety requirements. Also, there was no evidence of visit binnacle form indicating that ACUDEN has been visiting the subrecipient in order to validate the compliance with the health and safety requirements. QUESTIONED COSTS None. PERSPECTIVE INFORMATION ACUDEN has an internal regulations known as "Manual of Procedures for Determination of Eligibility of the Care Service Provider" and “Regulation No. 8687” establishing in the Article 4.14 Inspection of Suppliers indicating that prior to the issuance of the CCDF Certification of Compliance, all providers will be required to comply with the orientation and training process offered by the Child Care Program. For the granting of the CCDF Certification of Compliance, it will be a requirement that they meet the quality, health, and safety standards established by the Child Care Program. An evaluation sheet will be used during supplier inspections and their findings and recommendations will be documented. The scope of the inspections will be as follows: A. Health and Safety Aspects – 1. Current license from the Licensing Office of the Department of Family. 2. Current certification from the Fire Prevention Division of the Puerto Rico Fire Department. 3. Permit for use by the Permit Management Office (OGPe), the Regulation and Permits Administration (ARPE) or the Urban Permits Office (OPU). 4. Valid license, issued by the Department of Health's Division of Environmental Health. 5. Certification from the Public Service Commission, if applicable Also, in these internal regulations are established other documentation required by ACUDEN to be provided by the service provider as part of the Health and Safety determination. In addition, according to Monitoring performed by the US Department of Health and Human Services (HHS) on February 12-16, 2024 to determine compliance with Child Care and Development Fund (CCDF), this finding was detected and reported by the Federal agency. CCDF regulations require Lead Agencies to maintain compliance with all provisions of the Child Care and Development Block Grant Act, regulations, and the Territory's approved CCDF Plan during the administration of their program. STATEMENT OF CAUSE ACUDEN did not perform the required visits to the service provider’s facilities in order to make an inspection and request documentation to verify that the service provider was in compliance with the health and safety requirements. POSSIBLE ASSERTED EFFECT The not performance by ACUDEN of the required visits to the services provider to validate its compliance with the health and safety requirements could provoke this service provider could perform an unsafe and dangerous services to the participants. Also, this eligibility determination not performed could increase the risk of noncompliance and may result in improper use of funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ACUDEN to strengthen internal controls related to the Health and Safety Certification of Compliance awards. ACUDEN should have all the human resources necessary to performs all the inspections required for consideration and the implementation of the internal regulation “Manual of Procedures for Determination of Eligibility of the Care Service Provider" and “Regulation No. 8687” to ensure that the participant be able to receive a safe childcare service.

FINDING REFERENCE NUMBER 2024-049 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – INCOME ELIGIBILITY AND VERIFICATION SYSTEM TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Each state shall participate in the Income Eligibility and Verification System (IEVS) required by Section 1137 of the Social Security Act as amended. Under the State Plan the state is required to coordinate data exchanges with other federally assisted benefit programs, request and use income and benefit information when making eligibility determinations and adhere to standardized formats and procedures in exchanging information with other programs and agencies. Specifically, the state is required to request and obtain information as follows (42 USC 1320b-7; 45 CFR section 205.55): a. Wage information from the state Wage Information Collection Agency (SWICA) should be obtained for all applicants at the first opportunity following receipt of the application, and for all recipients on a quarterly basis. b. Unemployment Compensation (UC) information should be obtained for all applicants at the first opportunity, and in each of the first three months in which the individual receives aid. This information should also be obtained in each of the first three months following any recipient-reported loss of employment. If an individual is found to be receiving UC, the information should be requested until benefits are exhausted. c. All available information from the Social Security Administration (SSA) for all applicants at the first opportunity. In addition, in accordance with the State Plan, other internal controls applied by TANF staff to identify employment status and earnings of individuals are the: State Wage Information Collection Agency (SWICA) and the Beneficiary and Earnings Data Exchange (BENDEX). Through our Office of Information System, TANF caseload is cross checked with their database to identify participants that may be working. These systems create a list of participants which is reviewed by the eligibility determination technician. STATEMENT OF CONDITION During our process of understanding internal controls regarding compliance with this requirement, in the interviews conducted with the regions they indicated that they received the SWICA and BENDEX lists monthly. However, ADSEF headquarters indicated that they did not have a memorandum of understanding with the relevant state agencies for the 2023-2024 fiscal year. In all regions, we were told that the income reported by participants was validated only with a sworn statement. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. According to interviews conducted with technicians in different regions, we identified a lack of uniformity in the income validation processes and a lack of awareness of what the current regulations establish. STATEMENT OF CAUSE ADSEF does not have a memorandum of understanding that allows access to participants' income validation. Additionally, they do not have agreements with the relevant agencies to verify this requirement. POSSIBLE ASSERTED EFFECT ADSEF does not have sufficient mechanisms to validate the entry of participants requesting the benefit and does not allow compliance with this requirement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-027/2023-058. RECOMMENDATIONS We recommend that management coordinate the signing of the memorandum of understanding with the relevant agencies. Additionally, establish processes and training aligned with the procedures and documentation currently in use.

FINDING REFERENCE NUMBER 2024-050 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – CHILD SUPPORT NON-COOPERATION TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 45 CFR sections 264.30 and 264.31 establishes that (a): (1) The State agency must refer all appropriate individuals in the family of a child, for whom paternity has not been established or for whom a child support order needs to be established, modified or enforced, to the child support enforcement agency (i.e., the IV- D agency). (2) Referred individuals must cooperate in establishing paternity and in establishing, modifying, or enforcing a support order with respect to the child. (b) If the IV-D agency determines that an individual is not cooperating, and the individual does not qualify for a good cause or other exception established by the State agency responsible for making good cause determinations in accordance with section 454(29) of the Act or for a good cause domestic violence waiver granted in accordance with § 260.52 of this chapter, then the IV-D agency must notify the IV-A agency promptly. (c) The IV-A agency must then take appropriate action by: (1) Deducting from the assistance that would otherwise be provided to the family of the individual an amount equal to not less than 25 percent of the amount of such assistance; or (2) Denying the family any assistance under the program. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance related to this requirement, we requested a list from the Case Management and Information System (SAIC) that would identify participants who did not meet this requirement. From a population of seven participants, two were selected to validate compliance with this requirement. We were not provided with any file. Additionally, according to our eligibility testing, we were unable to identify child support evidence in 14 files (see finding 2024-028). QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systematic. ADSEF lacks an adequate process for archiving files and the information each file should contain. This is a statistically valid sample. STATEMENT OF CAUSE ADSEF does not have an adequate archiving process that allows for the identification of files in a reasonable timeframe. Additionally, there is no formal training or archive process for all regions and local authorities for the personnel involved in determining eligibility and the required evidence that should be kept for the audit process. POSSIBLE ASSERTED EFFECT ADSEF was unable to provide the requested information for auditing within a reasonable timeframe. Furthermore, the lack of a uniform archiving process prevents the information contained in the files from being properly identified and reviewed. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Number 2023-059. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that provides for the archiving of information in participant files and the identification of files within a reasonable timeframe.

FINDING REFERENCE NUMBER 2024-051 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – PENALTY FOR REFUSAL TO WORK / LACK OF CHILD CARE FOR SINGLE CUSTODIAL PARENT OF CHILD UNDER AGE SIX / PENALTY FOR FAILURE TO COMPLY WITH WORK VERIFICATION PLAN TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures related to tests and special provisions, we selected the following samples: a. Five (5) participants from a population of 23 individuals who were sanctioned for non-compliance with the employment requirement. b. Twenty-five (25) files from a population of 294 participants who were sanctioned for non-compliance with the employment verification plan. c. Twenty-five (25) files from a population of 285 participants who had documented just cause for not having childcare responsibilities. During our review of the selected files, we identified the following deficiencies: a. Just Cause for Not Having Childcare Responsibilities 1. Five (5) files were not provided for audit review. b. Sanctioned for Non-Compliance with the Employment Requirement 1. One (1) file did not contain information for the audit period under review. 2. One (1) file was in the process of being digitized and was therefore unavailable for evaluation. c. Non-Cooperation with the PRI 1. Five (5) files were not provided for audit review. 2. Three (3) files did not indicate the sanction period. 3. Three (3) files lacked documentation for the audit period under review. 4. One (1) file did not contain the required forms necessary to evaluate the sanction. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systematic. ADSEF lacks an adequate process for archiving files and the information each file should contain. This is a statistically valid sample. STATEMENT OF CAUSE ADSEF does not have an adequate archiving process that allows for the identification of files in a reasonable timeframe. Additionally, there is no formal training or archive process for all regions and local authorities for the personnel involved in determining eligibility and the required evidence that should be kept for the audit process. Further, the information related to any sanction should be clearly identified in the participant’s file, so a follow up can be performed adequately and timely. POSSIBLE ASSERTED EFFECT ADSEF was unable to provide the requested information for auditing within a reasonable timeframe. Furthermore, the lack of a uniform archiving process prevents the information contained in the files from being properly identified and reviewed. In addition, these deficiencies in the documentation, do not allow proper follow-up of the sanction period, this could allow payments to participants who are not in compliance with the regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-060. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that provides for the archiving of information in participant files and the identification of files within a reasonable timeframe. In addition, a structure for follow up on the sanctions should be in place in order to properly monitor compliance with this requirement.

FINDING REFERENCE NUMBER 2024-052 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SUBRECIPIENT MONITORING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 2 CFR 200.332, a Pass-Through Entity must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with § 180.300. Verification methods are provided in § 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information provided below. A pass-through entity must provide the best available information when some of the information below is unavailable. A pass-through entity must provide the unavailable information when it is obtained. Required information includes: (1) Federal award identification. (i) Subrecipient's name (must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated in the subaward; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity, including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; (xiii) Identification of whether the Federal award is for research and development. (2) All requirements of the subaward, including requirements imposed by Federal statutes, regulations, and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient for the pass-through entity to meet its responsibilities under the Federal award. This includes information and certifications (see § 200.415) required for submitting financial and performance reports that the pass-through entity must provide to the Federal agency; … (5) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient's records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (6) Appropriate terms and conditions concerning the closeout of the subaward. (c) Evaluate each subrecipient's fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraph (f) of this section. When evaluating a subrecipient's risk, a pass-through entity should consider the following: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). (d) If appropriate, consider implementing specific conditions in a subaward as described in § 200.208 and notify the Federal agency of the specific conditions. (e) Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must: (1) Review financial and performance reports. (2) Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward. Significant developments include Single Audit findings related to the subaward, other audit findings, site visits, and written notifications from a subrecipient of adverse conditions which will impact their ability to meet the milestones or the objectives of a subaward. When significant developments negatively impact the subaward, a subrecipient must provide the pass-through entity with information on their plan for corrective action and any assistance needed to resolve the situation. (3) Issue a management decision for audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) Resolve audit findings specifically related to the subaward. However, the pass-through entity is not responsible for resolving cross-cutting audit findings that apply to the subaward and other Federal awards or subawards. If a subrecipient has a current Single Audit report and has not been excluded from receiving Federal funding (meaning, has not been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant agency for audit or oversight agency for audit to perform audit follow-up and make management decisions related to cross-cutting audit findings in accordance with section § 200.513(a)(4)(viii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Depending upon the pass-through entity's assessment of the risk posed by the subrecipient (as described in paragraph (c) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; (2) Performing site visits to review the subrecipient's program operations; and (3) Arranging for agreed-upon-procedures engagements as described in § 200.425. (g) Verify that a subrecipient is audited as required by subpart F of this part. (h) Consider whether the results of a subrecipient's audit, site visits, or other monitoring necessitate adjustments to the pass-through entity's records. (i) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 and in program regulations. STATEMENT OF CONDITION The SEFA provided identified transactions as pass-through to subrecipients. As part of our audit procedures we interviewed the personnel in charge of the program, and we noted that ADSEF does not formally recognize as subrecipients the entities that receive TANF funds to carry out programmatic activities on behalf of the agency. As a result, ADSEF did not establish subaward agreements that included the elements required by 2 CFR §200.332(a), nor did it implement adequate subrecipient risk assessment and monitoring procedures. During the audit, it was observed that: (1) The signed agreements do not identify the entities as subrecipients; (2) The agreements do not contain the minimum elements required by 2 CFR §200.332(a) including, ▪ FAIN, Assistance Listing Number, Federal performance period, and total amount of Federal funds obligated; ▪ ADSEF did not conduct documented assessments of fraud risk or non-compliance risk; ▪ There was no evidence of ongoing monitoring of financial and programmatic performance; ▪ There was no documentation of a review of Single Audits or follow-up on related findings; ▪ Formal corrective action or enforcement mechanisms were not established for non-compliant entities. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem related to ADSEF's inability to adequately identify entities receiving TANF funds as subrecipients and to implement the required monitoring procedures. STATEMENT OF CAUSE The situation is attributed to ADSEF incorrectly classifying recipient entities as suppliers or contractors, rather than subrecipients, and failing to develop policies and procedures aligned with the requirements of 2 CFR §200.332 for administration and monitoring of Federal subawards. POSSIBLE ASSERTED EFFECT Failure to properly identify and monitor subrecipients increases the risk of: • Noncompliance with applicable Federal laws and regulations; • Failure to detect programmatic and financial deficiencies in a timely manner; • Inability to demonstrate compliance with Federal fund management requirements; • Potential cost challenges and Federal penalties. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF provide adequate training to program staff responsible for subrecipient monitoring to ensure compliance with Federal requirements, including the proper identification of subrecipients, performance of on-site monitoring visits, evaluation of audit reports, assessment of subrecipient risk, and documentation of monitoring activities.

FINDING REFERENCE NUMBER 2023-029 (See Finding Reference Number 2023-001) FEDERAL PROGRAM (ALN – 10.542) PANDEMIC EBT FOOD BENEFITS (P-EBT) U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR456S9032; 2301PR456S9032 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our internal control procedures for the financial management system, allowable activities and reporting requirements, we found the following deficiencies: • Of ten (10) expenditure accounting transactions, three (3) were selected for documentation review. It was found that a transaction posted in August 2022 for $193,642,697.32 included $54,195,406.92, corresponding to benefit payrolls for May 2022, which had previously been claimed in June 2022. They subsequently adjusted the expenditure reported for this amount. • All expenditure transactions are coded under the ID number PANDEMICEBT-B22; although, in the SF-778 report for the quarter ended June 30, 2023, for the grant award period for 2023, expenditures in the amount of $29,606,939 were reported as incurred. This data does not agree with the accounting information of PRIFAS. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. After conducting several interviews, we were able to identify the staff responsible for validating the benefit payrolls. This person told us these benefit payrolls were processed via email, which indicated that the information submitted was preliminary. However, the finance staff proceeded with the adjustment in the accounting system. We conducted interviews to determine if anything had been modified in the benefit payroll processing process. To prevent this situation from happening again, they told us it wasn't necessary because it hasn't happened again. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE ADSEF has not established an adequate control procedure to identify duplicate claims before they are filed and recorded. During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF-425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT The failure to have an internal control procedure that identifies standard documentation or forms, personnel responsible for validating the information included, and controls payroll and benefit expenses and other previously claimed expenses allowed for the recognition and claim of an expense incurred twice. ADSEF is not ensuring that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statements. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that identifies documentation, personnel responsible, authorizations, and validations that can prevent this situation from recurring. In addition, we recommend management to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.

FINDING REFERENCE NUMBER 2023-030 (See Finding Reference Number 2023-002) FEDERAL PROGRAM (ALN – 93.489; 93.575 AND 93.596) CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER G2101PRCDC6 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR Section 200.302 (b)(4) establishes that the financial management system of each non-Federal entity must provide effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes. In 2 CFR 200.405 (a)(1) establishes that a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: is incurred specifically for the Federal award. In addition, 34 CFR 76.702 establishes that a State and a subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with the allowable activities’ requirement, we selected a sample of forty-four (44) disbursements to suppliers made during the fiscal year under audit of a total population of 2,534. In one (1) instance, we found that the ACUDEN issued an advance payment to a supplier who in turn subcontracted with other suppliers for professional services or consumer education advertising campaign, media plan, and event coordination not performed, and that they had been invoiced in advance as of the invoice date. QUESTIONED COSTS $208,823.33. PERSPECTIVE INFORMATION This deficiency is a systemic problem. When the invoices reach the ACUDEN finance personnel in charge of the payment issuance process, they must review the invoice in all its parts, ensuring that the billed services are received accordingly, identifying the period of service performed. However, a supplier issued an invoice dated March 21, 2023, which included professional services of marketing for a consumer education campaign, media planning, and event coordination for the ACUDEN Child Care Program and PDG-B-5 programs. These services had been invoiced in advance for the period from April 1, 2023 through September 30, 2023 and during the payment process this situation was not detected and the payment for these services invoiced in advance was incorrectly issued on May 2, 2023, according to the disbursement voucher. During our inspection of the disbursement voucher, we noted the voucher had a note from de Finance Director indicating her refusing to authorize the disbursement voucher. However, although the disbursement voucher had this note, the Administrator signed the disbursement voucher and authorized the payment. STATEMENT OF CAUSE The lack of proper training and controls that requires standard evaluation and approval of expenditures incurred, in accordance with the state and Federal regulation. POSSIBLE ASSERTED EFFECT ACUDEN incurred in overpayments to suppliers for services not rendered to ACUDEN. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.

FINDING REFERENCE NUMBER 2023-031 (See Finding Reference Number 2023-003) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our audit procedures over allowable costs requirements for TANF program, we selected seven (7) voucher payments related to activities of prevention. We found the following deficiencies: (a) When we obtained the vouchers related to payments of a contractor, we also requested the contract and the proposal, we noted that the Entity is a subrecipient and not a contractor. The transactions related to this contract were not identified as subrecipient in the SEFA (see Finding Reference Number 2023-058). We audited three (3) vouchers of this subrecipient, in each one, this Entity claimed reimbursement for utilities, supplies, and materials. When we observed documentation in the file, we noted that the entity administers other Federal awards; and no evidence was observed in the voucher that proper distribution of administrative costs is made among all Federal awards. In addition, the contract required a certification indicating absence of duplication of services provided, and it was not included in the invoice or supporting documentation. (b) In the other four (4) vouchers evaluated related to payments to contractors, reimbursement claimed by the contractors included the purchase of laptops and digital screens. No evidence was provided that indicated who is responsible for this equipment, where it is located, and how it is safeguarded. These suppliers were contracted to provide training and workshops for participants of TANF. In the invoices evaluated we noted that ADSEF is paying for all costs of the entity, including supplies, maintenance of vehicles, mileage for some personnel, telephone charges, internet, and other utilities. In the final draft of the SEFA submitted for audit procedures, ADSEF reported the amount of $2,411,184, which included all transactions related to preventive services. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. Total transactions related to prevention services were one-hundred seven (107), amounting to $2,411,184. ADSEF does not have internal guidance and procedures establishing how transactions with sub-recipients will be handled and how they are accounted for. Furthermore, there are no internal controls documenting the evaluation of the operational costs of suppliers contracted to provide a service, and their operational expenses must be covered by them and not claimed directly from the program. STATEMENT OF CAUSE ADSEF does not have a work plan and internal control guidance that clearly defines permissible activities and describes the activities that will be carried out to meet program requirements through the contracting of suppliers and sub-recipients. POSSIBLE ASSERTED EFFECT ADSEF may be incurring non-allowable costs by reimbursing expenses not properly stipulated in the allowable cost regulations for program administration. Furthermore, the expenses incurred by the sub-recipient are not identified in the database in a manner that allows them to be identified for the preparation of the SEFA. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to establish internal control processes consistent with the requirements of 2 CFR 200. In addition, design and implement internal control processes to meet the requirements of subrecipient monitoring and procurement standards.

FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.

FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G990229 (TANF – COVID-19) (Federal Award Year: 2021) 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.” STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies: i. An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage. ii. An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000. iii. An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs. STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions. POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.

FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.

FINDING REFERENCE NUMBER 2023-035 (See Finding Reference Number 2023-007) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.302, requires recipient's and subrecipient's financial management system must provide for the following: (3) maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation; (4) effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303; and (6) written procedures to implement the requirements of § 200.305. 2 CFR 200.305, Federal Payments, establishes that: (a) payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”; (b) for recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance regarding cash management, we obtained a procedures manual. We found the following deficiencies: 1. The effective date is April 2024. 2. In the section describing the LIHEAP process, the US Department of Agriculture is mentioned instead of the US Department of Health and Human Services. 3. It does not identify the personnel responsible for the processes to establish segregation of duties. 4. In our interviews it was noted that only one person is in charge of all drawdowns, and no proper supervision or review of the documentation is performed. In addition, a detail of the requests related to the program was obtained; however, this request information does not reconcile with the revenue recognized in PRIFAS. The following deficiencies were identified: 1. The document includes amounts identified as LIHEAP, which belong to another Federal program, the Low-Income Household Water Assistance Program (ALN 93.499), in the amount of $4,590,528. 2. The amount of $306,483.12 is presented twice and is only recognized in PRIFAS once. 3. PRIFAS includes revenue of $3,900,000 related to the COVID-19 portion of funds, which is not included in the breakdown. From a population of fifty-seven (57) revenue transactions, six (6) transactions were selected to ensure that the correct amounts were requested from the Federal program and that the documents indicated in the manual were included with each petition. The following deficiencies were observed: 1. The documents included do not contain signatures from the personnel who perform each process. 2. The documentation included in the manual does not match the documentation included in the documents submitted with each petition. 3. In an emission of ARPA funding through LUMA, part of the documentation provided was document EMISM210, which stated that the authorized amount was $16,014,374. In a recap made in the document (not signed), the amount of $4,181 was adjusted in the petition, indicating that this amount was rejected by LUMA. In a letter from LUMA, they certified that the total cases reported were 327,499 for a total amount of $16,010,193. A detail of participants was provided, and the total was 327,498, although the benefits were $16,010,193. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF does not have a procedures manual that clearly establishes a segregation of duties, demonstrating compliance with the required internal control components. POSSIBLE ASSERTED EFFECT This is a systematic deficiency. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal controls process that demonstrates compliance with cash management requirements and appropriate segregation of duties.

FINDING REFERENCE NUMBER 2023-036 (See Finding Reference Number 2023-008) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, authorization release form, citizenship alien status, social security, income and resources, self-employment expenses, post-secondary student status, 5-7 years old evidence studying or home schooling, care minors/dependents with disabilities, disability status, medical expenses, age and homelessness. In Regulation to Establish Eligibility Standards for the Nutrition Assistance for Puerto Rico (8684) from ADSEF, Article 27 (A) establishes that: School Requirement established that the person responsible for the service unit, their spouse, or authorized representative must provide evidence that the children between the ages of five (5) and seventeen (17) who are part of the service unit are enrolled in school. In Article 45 establish that: Income deductions, Part C, Special deductions, Line number 4 established that a deduction of one hundred dollars ($100.00) will be applied to the income for each student who is part of the service unit and is enrolled full-time in a university or post-secondary educational institution. In the Manual of Procedures, Chapter 2, Part A, Line number 2 established that the student deduction is granted to any individual up to the age of 59. In Article 60 establish that: Recertification Process, Part C established that a new certification period shall not be assigned unless an interview is conducted, the information provided is verified, and the eligibility of the service unit is determined. In Article 74 establish that: Establishment of the Claim and Collection Procedures, Part F established in cases where the claim arises from benefits being used after the date of death of the sole beneficiary, collection efforts may be directed toward the beneficiary’s estate, authorized representative, or the individual who accessed the benefits. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Eight (8) authorization release form without date. • Nine (9) new participant files did not include supervisor approval of the eligibility determination. • Four (4) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • One (1) file showed an untimely eligibility determination based on the recertification date. • One (1) file was missing documentation verifying family composition and evidence of schooling for dependent minors. • One (1) student income deduction was incorrectly applied to a participant who did not meet the age and full-time student criteria. • One (1) participant died on August 1, 2022. Death was confirmed on January 27, 2023, and benefits were not terminated until February 17, 2023. The participant had no authorized representative, and recovery of funds is not feasible, as it is unknown who accessed the benefits posthumously. • In one case, the amount of income reported in the budget detail was not documented and was based on estimates derived from Social Security income, Medicare deductions, and Cost of Living (COL) adjustments, rather than verified income records. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING Similar missing documentation was reported in the prior year audit Finding Number 2022-01. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications and participant terminations upon death notification. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2023-037 (See Finding Reference Number 2023-009) FEDERAL PROGRAMS (ALN – 93.489; 93.575 AND 93.596) COVID-19 – CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS G2101PRCDC6, G2101PRCSC6 (Federal Award Years: March 11, 2021 through September 30, 2026) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Reference according to 2 CFR PART 200, APPENDIX XI (E) (1) (a), for state Lead Agencies and territory Lead Agencies, and for those tribal Lead Agencies with Grant Year 2016 allocations of at least $250,000, children must be under age 13 (or up to age 19, if incapable of self-care or under court supervision), who reside with a family whose income does not exceed 85 percent of state/territorial/tribal median income for a family of the same size, and reside with a parent (or parents) who is working or attending a job-training or education program; or are in need of, or are receiving, protective services. Lead Agencies may choose to provide services during periods of job search. Tribal Lead Agencies may elect to use state or tribal median income (42 USC 9858n(4); 45 CFR sections 98.20(a) and 98.81(b)). Tribal Lead Agencies also have the option for categorical eligibility (considering any Indian child within the service area eligible for services) if the tribe’s median income is below 85 percent of the state median income, provided that services go to those with the highest need. State, territory, and tribal Lead Agencies may use supplemental funds appropriated by the CARES Act (Pub. L. No. 116-136), the CRRSA Act (Pub. L. No. 116-260), and the ARP Act (Pub. L. No. 117-2) to provide child care assistance to health care sector employees, emergency responders, sanitation workers, and other workers deemed essential during the response to the coronavirus, without regard to the income eligibility requirements. The Lead Agency may define which workers are considered essential in accordance with any relevant state, territorial, and tribal laws or policies. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 11,139 who were eligible for the Child Care Program. In one (1) instance, we found that ACUDEN incorrectly issued an eligibility approval to a participant. They granted eligibility for CARES Act funds by classifying the applicant as a first responder when her employment occupation is Hair Stylist based on her employment evidence. QUESTIONED COSTS $7,416 PERSPECTIVE INFORMATION During the participant eligibility determination, the applicant submitted as employment evidence the individual Income Tax Return, but the application for CARES funding services does not detail the applicant's profession. Additionally, the employment activity evaluation also failed to detail the applicant's profession or field of work. ACUDEN provided us with a communication detailing the sectors classified as first responders, but Hair Stylist was not included. The sample was statistically valid. In addition. The dollar amount approved as a benefit for this participant was $824 during the period of September 17, 2022, through July 31, 2023, according to the Certificate of Eligibility. Considering that the fiscal year 2023 ending date is 06/30/2023, then the period applicable will be from 10-31-2022 through 06-30-2023 and this represent nine (9) months of services paid to the service provider amounting of $7,416 (9 months X $824). In addition, as stated in the payments detail provided, the month of July 2023 was also paid. Then, considering that the total participant’s population was 11,139 and the sample selected was forty (40) participants, this only one (1) mistake found represents 2.5% of the sample of forty (40) participants (1 divided by 40 (1/40) = 2.5%). For misstatement extrapolation purpose to the population, this would represent an estimate of a potential misstatement of 279 cases [2.5% by 11,139 participants (2.5% x 11,139) = 278.47]. STATEMENT OF CAUSE ACUDEN lacks supervisory review, insufficient controls over eligibility verification of these funds. POSSIBLE ASSERTED EFFECT An improper eligibility determination increases the risk of noncompliance and may result in improper use of funds. In addition, potential recipients of CARES Act funds may also be affected. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend to ACUDEN to strengthen internal controls to ensure complete and accurate eligibility determination considering all the participant information at all eligibility determination stages of the process.

FINDING REFERENCE NUMBER 2023-038 (See Finding Reference Number 2023-010) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.558) COVID-19 – TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2021G990229 (Federal Award Year: 2021) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses, children school attendance, cooperation with the Individual Responsibility Plan and cooperation in the establishment of paternity or in obtaining child support. In Regulation 8684 to Establish Eligibility Standards for the Temporary Assistance for Needy Families from ADFAN, Chapter IV, Article 1 and 2, establishes that the certification period will be up to a maximum of six (6) months. In Chapter III, Article 4 Section 4.24 establish the participant will receive the benefit for a maximum period of sixty (60) months in total. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Thirty three (33) new participant files did not include supervisor approval of the eligibility determination. • Thirteen (13) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • Nine (9) files showed an untimely eligibility determination based on the recertification date. • Several documents were missing from the files: • Twenty-seven (27) files did not include child support evidence (see Finding Reference Number 2023-027). • Twenty-six (26) files without evidence of continued absence and lack of support. • Eleven (11) files without evidence of schooling for dependent minors. • Nine (9) files did not include signed Individual Responsibility Plan. • Two (2) participants that have incorrectly applied exemptions were given excessive benefits and there is no evidence of recapture of the benefit provided. • One (1) case in which the participant received the benefit for ninety-nine months when the maximum number of months to receive the benefit is sixty months. • One (1) Category C case (disability) in which the benefit was granted to the family and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. In addition. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING Similar missing documentation was reported in the prior year audit Finding Number 2022-02. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2023-039 (See Finding Reference Number 2023-011) FEDERAL PROGRAM (ALN – 93.560) PAYMENT TO TERRITORIES – ADULTS U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses. In Regulation 8684 to Establish Eligibility Standards for the Payments to Territories – Adults from ADFAN, Chapter III, Article 3, Section 3.5, establishes that the eligibility period is determined by the Central Level Medical Social Board. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Seven (7) cases lacked the documents requested for their initial appointment (photo ID, evidence of residency and evidence of citizenship). • Thirty-three (33) new participant files did not include supervisor approval of the eligibility determination. • Four (4) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • Fifty-three (53) files showed an untimely eligibility determination based on the recertification date. • Six (6) files of Category D case in which the benefit was granted and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. • One (1) participant died on March 2022. Death reported in April 2022, they issued the payment the day after his death. The benefit was spent, and there was no recovery process. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2023-040 (See Finding Reference Number 2023-012) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 27,038 who were eligible for the crisis subsidy program. Of the sample of participants, only eight (8) files were submitted to us for evaluation. This represents a scope limitation. In relation to the requirement of Performance Reporting and Special reporting, we requested the applicable reports submitted during the fiscal year 2022-2023, the reports submitted for our review were applicable for the fiscal year 2023-2024. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. In addition, ADSEF does not have adequate controls and safeguards over the reports submitted to the Federal government. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with the eligibility and reporting requirements because the information in the files and applicable reports was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time. In addition, improve its system for filing reports submitted to the Federal government.

FINDING REFERENCE NUMBER 2023-041 (See Finding Reference Number 2023-013) FEDERAL PROGRAM (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2101PRFPSS (Federal Award Year: 2021) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 45 CFR section 1357.32(d) establishes that funds used to provide services in FY 1994 and in subsequent years will be federally reimbursed at 75 percent of allowable expenditures. (This is the same Federal financial participation rate as Title IV-B, Subpart 1.) Federal funds, however, will not exceed the amount of the State's allotment. (1) The State's contribution may be in cash, donated funds, and non-public third party in-kind contributions. (2) Except as provided by Federal statute, other Federal funds may not be used to meet the matching requirement. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with matching requirements, we selected the Grant Award 2101PRFPSS, which closed during the audit period from July 1, 2022, to June 30, 2023. ADFAN reported matching expenditures of $876,556.68. However, based on our review of the supporting database, actual matching expenditures amounted to only $808,043.75. This indicates that the required 25% match was not met. Additionally, according to the internal controls interviews and the information provided, the employees are not up to date with the program's Federal regulations. In the interview, they indicated that the percentage they used was 70% and 30% because they had always calculated it that way; they had not consulted the NOA, which indicates it is 75% and 25%. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Written internal control procedures should include proper training and that the notice of awards be discussed with the personnel in charge of working with all requirements, and monitoring compliance. ADFAN did not comply with the required matching for the 2101PRFPSS in the amount of $68,514.93. STATEMENT OF CAUSE ADFAN does not have written internal controls procedures to ensure expenditure is monitored and aligned with the required matching percentage specified in the grant award. POSSIBLE ASSERTED EFFECT ADFAN may be subject to a reduction in Federal funding if it fails to comply with program requirements. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN establish written internal control procedures and implement them, to monitor the expenditure of allocated funds to ensure compliance with the required matching contribution.

FINDING REFERENCE NUMBER 2023-042 (See Finding Reference Number 2023-014) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2022G996117 (Federal Award Year: 2022) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with the Compliance Supplement every fiscal year, a state must maintain an amount of “qualified state expenditures” (as defined in 42 USC 609(a)(7)(B) and 45 CFR section 263.2) for eligible families (as defined in 42 USC 609(a)(7)(B)(i)(IV) and 45 CFR section 263.2(b)) at least at the applicable percentage of the state’s historic state expenditures. In addition, it states that the applicable percentage for each fiscal year is 80 percent of the amount of non-Federal funds the state spent in FY 1994 on AFDC or 75 percent if the state meets the TANF work participation rate requirements (42 USC 607(a)) for the fiscal year. This is termed “basic MOE”, and the requirement is based on the Federal fiscal year. Any MOE expenditures above this required amount are referred to as “excess MOE”. In accordance with the regulation, the amount of MOE required for Puerto Rico is $21,185,453. STATEMENT OF CONDITION As part of our internal controls and compliance procedures for compliance with the MOE requirement, we requested the Grant Award report for 2022, covering the period from October 1, 2021, to September 30, 2022, to verify compliance with the MOE. The report covering this period reflects an MOE of $17,686,285, a deficiency of $3,499,168. Additionally, the reported expense amounts could not be validated against the PRIFAS database, except for line 5(a) for Basic Assistance, reported in column B. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is systematic. Puerto Rico government agencies fail to demonstrate that they maintain constant communication and follow up on information requests to ensure that all required documentation is available to complete reports. Additionally, procedures and internal controls manuals should provide for and ensure the segregation of duties and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare the financial statement and SEFA. ADSEF's failure to support reported amounts with verifiable documentation and the absence of independent review increase the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE According to discussions with ADSEF personnel, since 2018, another agency of the Government of Puerto Rico, the Health Insurance Administration (ASES, by its Spanish Acronym), has not provided information to comply with the spending levels of other state programs. In addition, during our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. POSSIBLE ASSERTED EFFECT ADSEF is not in compliance with reporting state program expenditure levels, as required by program regulations. Additionally, ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported. Puerto Rico government agencies must maintain constant communication and follow-up on information requests to ensure that all required documentation is available to complete reports

FINDING REFERENCE NUMBER 2023-043 (See Finding Reference Number 2023-015) FEDERAL PROGRAM (ALN – 93.558) COVID-19 – TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2021G9990229 (Federal Award Year: 2021) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In relation to the Pandemic Emergency Assistance Fund, States, tribes and territories (grantees) may use funds to provide certain non-recurrent, short term (NRST) benefits (described in section A. 3. a. 2.). Additionally, they may use funds for administrative costs (up to a 15-percent cap for states and territories and up to the negotiated cap for tribes). All grantees must use funds to supplement, and not supplant, other Federal, state, tribal, territorial, or local funds. In addition, for the purposes of PEAF, NRST benefits mean cash payments or other benefits that meet the regulatory definition (45 CFR 260.31(b)(1)) but are limited to those that fall into the specific expenditure reporting category mentioned in the legislation (line 15 of the ACF-196R (PDF), the state financial reporting form for the TANF program). In other words, for this fund, NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training. 2 CFR section 200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures on internal controls and compliance related to the Level of Effort – Supplement not Supplant requirement, ADSEF staff were asked to indicate how the amount of the benefit to be granted was determined, the identified need for granting the benefit, and how the use of these benefits would be monitored. This information was not provided; in interviews, they indicated that the benefit was granted to provide an additional benefit and without restrictions. Additionally, a list of participants who benefited from this assistance was requested but was not provided. This represents a scope limitation. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This deficiency is systematic. ADSEF does not maintain an internal control structure that allows for the communication of additional funds or modifications to the terms and conditions of grant awards to those responsible for program administration, so that they can adequately document the processes for granting benefits under each program. STATEMENT OF CAUSE ADSEF did not maintain an adequate internal controls process that documented the justification for issuing the benefit with these funds, validated that this issuance of benefits was to supplement and not supplant the aid provided by regular TANF funds, created and distributed staff guidance on supplement-not-supplant, and maintained evidence of a final reconciliation of expenses incurred with these funds with the PRIFAS accounting system used for the preparation of the financial statement and SEFA. POSSIBLE ASSERTED EFFECT ADSEF was unable to provide evidence of internal controls created and documented regarding how these funds were processed, the criteria used, the needs identified, and the personnel responsible for each process executed with these funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF establish written adequate internal controls process that documented the justification for issuing the benefit with these funds, validated that this issuance of benefits was to supplement and not supplant the aid provided by other Federal funds, created and distributed staff guidance on supplement-not-supplant, and maintained evidence of a final reconciliation of expenses incurred with these funds with the PRIFAS accounting system used for the preparation of the financial statement and SEFA.

FINDING REFERENCE NUMBER 2023-044 (See Finding Reference Number 2023-016) FEDERAL PROGRAM (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2101PRFPSS (Federal Award Year: 2021) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 45 CFR section 1357.32(d) establishes that the program contains assurances that not more than 10 percent of expenditures under the plan for any fiscal year with respect to which the State is eligible for payment under section 629d of this title for the fiscal year shall be for administrative costs, and that the remaining expenditures shall be for programs of family preservation services, community-based family support services, family reunification services, and adoption promotion and support services, with significant portions of such expenditures for each such program. According to the Compliance Supplement, the portion established for expenses by category is 20%. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance with earmarking requirements, we selected the Grant Award 2101PRFPSS, which closed within our audit period from July 1, 2022, to June 30, 2023, to assess the allocation and use of funds across the required program categories. Based on our evaluation of the documentation provided by ADFAN, we found that expenditures in each of the following categories: family preservation services, community-based family support services, time-limited family reunification services, and adoption promotion and support services did not meet the 20% minimum allocation. Additionally, we noted that administrative expenditures related to caseworker payroll exceeded the 10% cap. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This deficiency is a systemic problem. ADFAN does not have written internal control and compliance procedures that clearly identify the process to monitor this requirement and the person responsible. STATEMENT OF CAUSE ADFAN lacks adequate internal controls to effectively monitor whether expenditures within each category align with allocated funding and comply with applicable program requirements. POSSIBLE ASSERTED EFFECT ADFAN’s failure to adhere to program requirements may adversely impact its ability to receive full Federal funding under the program. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADFAN establish written internal control procedures that provide for the monitoring of the expenditure of allocated funds of each category, and the person responsible for executing this process in order to comply with the corresponding earmarking requirement.

FINDING REFERENCE NUMBER 2023-045 (See Finding Reference Number 2023-017) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 45 CFR sections 264.1(c) and (e)) and 42 USC 608(a)(7)(C)(ii) establishes that the average monthly number of families that include an adult or minor child head of household, or the spouse of the head of household, who has received assistance under any state program funded by Federal TANF funds for more than 60 countable months (whether or not consecutive) may not exceed 20 percent of the average monthly number of all families to which the state provided assistance during the fiscal year or the immediately preceding fiscal year (but not both), as the state may elect. To make this determination for a fiscal year, the average monthly number of families with a head of household or spouse of a head of household who received assistance for more than 60 months would be divided by the average monthly number of families that received assistance in that fiscal year, or, if the state chooses, in the previous fiscal year. STATEMENT OF CONDITION As part of our understanding and testing of internal controls and compliance, we requested evidence of how compliance with this requirement is monitored. In the interviews conducted, we were told that no participant could receive program assistance for more than 60 months. However, in our participant eligibility test, out of a sample of one hundred (100) beneficiaries, we found that one (1) participant had received TANF benefits for a total of 99 months. Additionally, we were not provided with any procedures manual that they have implemented that demonstrate compliance with this requirement. We requested a list of participants that could be generated by the Case Management and Information System (SAIC, by its Spanish Acronym), but this information was not provided. This represents a scope limitation. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. ADSEF could not provide clear evidence of how it monitors compliance with this requirement. STATEMENT OF CAUSE ADSEF does not have an internal control structure that provides compliance with the earmarking requirement, related to the maximum benefit period. POSSIBLE ASSERTED EFFECT ADSEF has not established an adequate internal control procedure that provides an adequate structure for documenting compliance with this requirement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF management establish written procedures that clearly identify how compliance with this requirement will be monitored.

FINDING REFERENCE NUMBER 2023-046 (See Finding Reference Number 2023-018) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – FINANCIAL STATEMENT ACCOUNTING RECORDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state that: (a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (b) The recipient's and subrecipient's financial management system must provide for the following: (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION Internal controls for creating financial reports about state and Federal funds received and spent through the Puerto Rico Integrated Financial System (PRIFAS) have not been put in place by the PRDF. The PRDF lacks an adequate system of internal controls to stop, identify, and fix errors. There was no supervision or review procedure in place to identify and allow for the correction of errors before submission and before the financial data was entered into PRIFAS. There was a delay in getting timely and correct financial information for the year under audit, and the PRDF staff had difficulties preparing and presenting the cash receipt and disbursement report, which included the schedule of federal spending for the audit. The following weaknesses were discovered when the PRDF's initial Financial Statement was reviewed: • Transactions that weren't related to the fiscal year being reported were included in the initial financial data. • The Office of the Secretariat and the four Programmatic Administrations lack uniform policies and procedures to guarantee that the amounts and disclosures in the PRDF's financial reports, financial statement notes, and necessary supplemental information are correctly recognized and reported. • Reports for several significant programs were prepared informally and, in some instances, only by one person, which resulted in significant mistakes in some of the programs. As a result, errors in the reports across the programs were not investigated or fixed. Additionally, we saw that for various financial reports, the PRIFAS data was not considered in the reconciliation process. • Several significant transactions were not entered into the PRIFAS by the Administration for Families and Children (ADFAN, by its Spanish Acronym) Finance Department, they were recorded as encumbrances, and not actual expenditures. This led to an understatement of expenditures in the PRDF's general fund of about $52,300,494. Additionally, Federal spending in one of the major programs was understated by $6,886,156. PERSPECTIVE INFORMATION The PRDF failed to properly registered in its accounting system all transactions needed to prepared the financial statement and to produce accurate financial reports for Federal grants that they received and expended during the fiscal year. No reconciliation procedures are performed regularly to identified errors in recording transactions in PRIFAS. This cause that when the PRDF prepared cash received and disbursement financial statement and the SEFA for audit purposes was incomplete and misstated (see Finding Reference Number 2023-017). STATEMENT OF CAUSE To make sure that all the PRDF's transactions had been accurately documented and reported, the PRDF did not thoroughly examine the financial data that was created and submitted in PRIFAS and used to prepare the financial statement and supplementary information. Due to lack of supervision or a review procedure to identify errors prior to submission, the ADFAN Finance Director recorded transactions as encumbrances, instead of actual expenditures. POSSIBLE ASSERTED EFFECT The PRDF is unable to provide accurate, up-to-date, and comprehensive disclosure of state and Federal funds activities in compliance with the agreement's requirements due to inadequate and inconsistent financial accounting reporting methods. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS To comply with the requirements of state and local agreements and enable the PRDF to monitor trustworthy financial data for use within the agency and for upcoming audits, we recommend the PRDF update its accounting practices and policies to provide for an accurate, comprehensive, and timely financial reporting system. Implementing an accounting and financial management system that enables the creation of financial data and reports needed by the various oversight organizations. The process should involve defining precise procedures for the creation and evaluation of financial reports, with different roles allocated to various people.

FINDING REFERENCE NUMBER 2023-047 (See Finding Reference Number 2023-019) FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBER ALL AWARDS COMPLIANCE REQUIREMENT REPORTING – SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR §200.510 Financial Statements, (b) states that the auditee must prepare a schedule of expenditures of federal awards for the period covered by the auditee's financial statements which must include the total Federal awards expended. At a minimum, the schedule must: (1) list individual Federal Programs by Federal agency, (2) for Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included, (3) provide total Federal awards expended for each individual Federal program and the ALN number or other identifying number when the ALN information is not available, (4) Include the total amount provided to subrecipients from each Federal program, (5) for loan or loan guarantee programs identify in the notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule. STATEMENT OF CONDITION During our audit procedures of the Schedule of Expenditures of Federal Awards (SEFA) prepared by the PRDF, we noted significant misstatements pertaining to the program and expenses listed in the PRDF's SEFA throughout our audit procedures. • The expenditures for some Federal programs were not accurately reported. To reconcile the correct amounts contained in the SEFA with the audited financial accounts, the PRDF suggested and posted adjustments. • The PRDF Management does not have an adequate internal control system in place to quickly detect and accurately document the expenditures incurred under each Federal award programs. This led to delays and errors in the amounts initially submitted for the SEFA. • Internal controls over the Federal award data entered the Financial Statement through the PRIFAS, which provided the PRDF’s SEFA and other financial reports, had not been put in place by the PRDF. The SEFA that was submitted for audit procedures contained the following mistakes because of inadequate internal controls: • There are no safeguards in place to keep an accurate and comprehensive list of Notice of Agreements (NOAs). As a result, the different versions received of the SEFA amounts and identification of the programs were reported in an incomplete or erroneous manner. • Expenditures related to COVID-19 appropriations for different Federal programs were not separately disclosed in the SEFA. • Initially, $27,371,670 in expenditures for the Payment to Territories – Adult program (ALN 93.560) was recorded under the Temporary Assistance for Needy Families (TANF) (ALN 93.558). • Due to transactions that were not recorded in PRIFAS, the Social Services Block Grant (ALN 93.667) program expenditures were understated by $7,132,636. Without an appropriate review procedure in place to identify and permit the rectification of errors prior to submission, the ADFAN Finance Department recorded this transactions as encumbrances. PERSPECTIVE INFORMATION The PRDF failed to identify properly in its records and/or accounting records the Federal grants that they received and expended during the fiscal year, this cause that when the PRDF prepared the SEFA with the financial statement and for audit purposes the SEFA was incomplete and misstated. STATEMENT OF CAUSE The PRDF failed to identify the Federal grants expended during the fiscal year and to keep records of the transactions related to the Federal programs in order to properly identify the Federal programs and transactions when the SEFA is prepared causing the preparation of an incomplete and misstated SEFA. POSSIBLE ASSERTED EFFECT The PRDF may fail to include all Federal programs and total expenditures in the SEFA causing misstatements in the SEFA submitted to Auditors. It also leads to an inaccurate Major Program Determination multiple times made by the auditors, affecting the execution of the Single Audit in a reasonable time. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend the PRDF to maintain adequate records related to the Federal programs in order to properly identify the Federal programs/transactions when the SEFA is prepared. Once a Federal award is granted or received, the information must be shared with all personnel involved in the financial statement and SEFA preparation to provide assurance that all required program activities / expenditures are included on the SEFA. In addition, the PRDF must perform a regular fiscal monitoring over the Federal programs transactions in order to provide reasonable assurance that all Federal programs/transactions are properly recorded and included on the SEFA.

FINDING REFERENCE NUMBER 2023-048 FEDERAL PROGRAM ALL FEDERAL PROGRAMS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AWARD NUMBERS ALL MAJOR PROGRAMS COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR § 200.512 Report Submission, (a) (1) The audit must be completed and the data collection form described in paragraph (b) of this Section and reporting package described in paragraph (c) of this Section must be submitted within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. STATEMENT OF CONDITION The PRDF did not submit the Data Collection Form and Reporting Package to the Federal Audit Clearinghouse of fiscal year ending June 30, 2023 during the required period. QUESTIONED COSTS None PERSPECTIVE INFORMATION The PRDF was unable to provide a timely financial statement and the Schedule of Expenditures of Federal Awards (SEFA), and related supporting documentation in order to apply required audit procedures. STATEMENT OF CAUSE The PRDF did not have an effective accounting system and procedures to assure that the required financial statement and SEFA, and supporting documentation was made available for audit purposes within the required period established to comply with the Federal regulations. POSSIBLE ASSERTED EFFECT The PRDF did not comply with the submission date required for the Data Collection Form and Reporting Package; this could affect the continuance and new approvals of Federal funds. IDENTIFICATION AS A REPEAT FINDING This is a repeat finding (Finding Number 2022-04). RECOMMENDATION We recommend the PRDF maintain adequate accounting records related to the non-Federal and Federal funds in order to properly prepare the financial statement and SEFA accurately, and in a timely manner. In addition, PRDF needs to implement adequate internal controls procedures in order to ensure that the supporting documentation is available in a timely manner.

FINDING REFERENCE NUMBER 2023-049 (See Finding Reference Number 2023-020) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 221PR426S7003 and 221PR426S7004 we noted the following deficiency: • The auditee was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. • In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.

FINDING REFERENCE NUMBER 2023-050 FEDERAL PROGRAMS (ALN – 93.489; 93.575 AND 93.596) CHILD CARE CLUSTER (ALN – 93.489; 93.575 AND 93.596) COVID-19 – CHILD CARE CLUSTER U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS G1801PRCCDF; G1901PRCCDD; G2001PRCCC3; G2001PRCCDD; G2001PRCCDX; G2101PRCCC5; G2101PRCCDD; G2101PRCCDD-SUB; G2101PRCCDT; G2201PRCCDD; G2201PRCCDD-SUB; G2201PRCCDT; G2301PRCCDD; G2301PRCCDT (Federal Award Years: 2018 through 2023) G2101PRCDC6, G2101PRCSC6 (Federal Award Years: March 11, 2021 through September 30, 2026) ADMINISTRATION ADMINISTRATION FOR THE CARE AND COMPREHENSIVE DEVELOPMENT OF CHILDREN (ACUDEN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTS FOR FFATA TYPE OF FINDING NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY CRITERIA In accordance with 2 CFR Part 170, establishes that recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The non-Federal entity or Federal agency must report each obligating action to http://www.fsrs.gov. For subaward information, report no later than the end of the month following the month in which the obligation was made. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirements, we interviewed staff responsible for the Child Care Cluster Program, and we were told that they did not submit the required Federal Funding Accountability and Transparency Act (FFATA) reports during the 2022-2023 fiscal year. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION ACUDEN provided details of those awards or contracts with their amendments totalizing 1,165 items (between Subawards and their amendments) that could be subject to the FFATA requirements. However, although ACUDEN had available the data related to the Subawards and their amendments issued during the fiscal year 2022-2023, they did not perform the special reporting related to FFATA compliance requirement. STATEMENT OF CAUSE ACUDEN staff were unaware of the requirements related to the FFATA applicable to the Child Care Cluster Program’s funds they manage. POSSIBLE ASSERTED EFFECT ACUDEN is in non-compliance with the requirements to report through the FFATA Subaward Reporting System (FSRS) platform. This condition does not allow for the transparency that this report requires. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend management to provide training and technical assistance to the personnel they designate to monitor all the funds delegation contracts that meet the requirements to be reported on the FSRS portal, and to be able to keep track of when they had to be reported, the date in which they submitted the information to the portal, and all the elements required to be submitted on the platform.

FINDING REFERENCE NUMBER 2023-051 (See Finding Reference Number 2023-021) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for LIHEAP program, we selected two reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, for the amount of encumbrances of $11,032,784.51, the amount of $9,943,769.52 was not supported by a detail. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.

FINDING REFERENCE NUMBER 2023-052 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, states that: (a) Each State's quarterly reports [the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report] must be complete and accurate and filed by the due date. (b) For a disaggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems, and includes correction of the quarterly data by the end of the fiscal year reporting period; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data for all required elements (i.e., no data is missing); (4) (i) The State provides data on all families; or (ii) If the State opts to use sampling, the State reports data on all families selected in a sample that meets the specification and procedures in the TANF Sampling Manual (except for families listed in error); and (5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates. (c) For an aggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts). In addition, 2 CFR § 200.302 (a) establishes 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b) the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our procedures for understanding internal controls for the preparation of ACF-199 reports, we request a procedures manual on how these reports are processed and the personnel responsible for each process. ADSEF did not provide us with a manual describing the data collection process, how the information provided by the regions is validated, and the individuals responsible for submitting the reports. To evaluate compliance with the reported data, the quarter ending June 2023 was selected. From this period, forty (40) participants were selected. ADSEF was required to provide us with the corresponding participant worksheet appendix and the physical file to corroborate the information included in the report. ADSEF provided us with evidence of the hand-completed forms; however, we were not provided with the physical files to validate the information included in each document. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. After sample selection, ADSEF did not demonstrate a control structure that would allow the files to be located within a reasonable period of time. STATEMENT OF CAUSE ADSEF does not maintain an internal control structure for participant files that allows each file to be located within a reasonable period of time. Additionally, they do not have internal control procedure manuals that allow for the validation of the process they carry out and the individuals responsible for compiling, validating, and submitting this report. POSSIBLE ASSERTED EFFECT ADSEF may be including data in this report that has not been corroborated with the participants' physical records. The lack of a uniform process for archiving participant records prevented them from providing us with evidence of the requested records. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control procedures manuals that clearly outline the processes to be followed for data collection, recording, and reporting. Additionally, standardize the way documents related to participant files are filed.

FINDING REFERENCE NUMBER 2023-053 (See Finding Reference Number 2023-022) FEDERAL PROGRAM (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2211PRSOSR (Federal Award Year: 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 42 U.S. Code §1397e and the requirements of the Post-Expenditure Report (OMB #0970-0234), states and territories must submit an annual Post-Expenditure Report to the Office of Community Services no later than six months following the end of the fiscal year. The report must include, among other elements, clearly defined eligibility criteria for program beneficiaries and an accurate accounting of expenditures, including the amount of Temporary Assistance for Needy Families (TANF) funds transferred to the Social Services Block Grant (SSBG). The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION During our review of the submitted Post-Expenditure Report and supporting documentation, we identified the following deficiencies: (1) The eligibility criteria for beneficiaries were not established or documented within the report and, (2) The reported amounts of TANF funds transferred to SSBG do not reconcile with the data provided in the PRDF’s internal database. Although the report specifies that expenditure should be based on current balances rather than budgeted amounts, the transfer in question was based on the approved budget. (3) In the database used to prepare the financial statement and SEFA, the expense related to the transfer of funds from TANF to SSBG reflected an expense of $136,958.70. This database includes credits that eliminate the program expense in the expense account identified as E9050. Subsequently, the ADFAN Finance Director included other transactions in the database that adjusted the expense, reflecting a total balance of $6,798,836.38 (see Finding 2023-016). (4) In addition, internal control interviews revealed that there is no designated individual responsible for reviewing the information entered to the report by the preparer, increasing the risk of reporting errors. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and segregation of duties when reporting (preparer and reviewer not being the same person). STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered in the Post-Expenditure Report. POSSIBLE ASSERTED EFFECT Failure to meet the reporting requirements may lead to noncompliance with Federal regulations, reduced transparency and accountability in the use of Federal funds, and potential implications for future funding or audit findings. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADFAN to establish and document eligibility criteria in accordance with Federal reporting requirements. Reconcile TANF transfers with internal records to ensure accurate reporting and ensure that all expenditures reported are based on actual balances rather than budgeted projections. ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with federal reporting requirements.

FINDING REFERENCE NUMBER 2023-054 (See Finding Reference Number 2023-023) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis. (5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the statement of condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN ensures the SF– 425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.

FINDING REFERENCE NUMBER 2023-055 (See Finding Reference Number 2023-024) FEDERAL PROGRAM (ALN – 96.001) SOCIAL SECURITY–DISABILITY INSURANCE U.S. SOCIAL SECURITY ADMINISTRATION AWARD NUMBERS 1804RQD100; 1904RQD100; 2004RQD100; 2104RQD100; 2204RQD100; 2304RQD100 (Federal Award Years: 2018 through 2023) ADMINISTRATION OFFICE OF THE SECRETARIAT COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA According to the Program Operations Manual (POMS) DI 39506.203-Updating and Reconciling Unliquidated Obligations published by the Social Security Administration (SSA), legitimate unliquidated obligations must be backed up by records or papers that explain the nature of the obligations and provide evidence for the amounts reported. It is also crucial that the agency's reported unliquidated obligations reflect any modifications or cancellations of Consultative Examinations (CE) and Medical Evidence of Record (MER) authorizations. State authorities should check CE authorizations to see if the unliquidated obligation is an authorization that is still in existence and evaluate unliquidated obligations at least once a month to cancel those that are no longer valid. POMS 39506.210 Preparations Instructions for Form SSA-4513 instructs the State Agency to check the appropriate box in the report to indicate the attachment of Form-871. Uniform Guidance at 2 CFR §200.302 Financial Management Section (a) establish the administrative requirements for the program, which include the requirement that state and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. STATEMENT OF CONDITION The State Agency Report of Obligations for SSA Disability Programs, Form Report SSA-4513, was incomplete and inaccurate. During the audit procedures the following deficiencies were noted by us: i. It was not specified in the Puerto Rico Disability Determination Services (PR-DDS) Accounting Department's Form SSA-4513 for September 2022 and June 2023 if Form SSA-871, State Agency Schedule for Equipment Purchases for SSA Disability Programs, had to be included with Form SSA-4513 for FYs 2023, 2022, 2021, 2020, 2019, and 2018. Whether this was necessary or not is unknown. ii. Information about unliquidated obligations for FYs 2023, 2022, 2021, 2020, 2019, and 2018 were absent from September 2022 Form SSA-4513. iii. Information regarding Unliquidated Obligations for each of the specified reporting periods was absent from June 2023 Form SSA-4513. 1) FY 2023's unliquidated obligations are not detailed. In its Form SSA-4513, the PR-DDS included unliquidated commitments, which accounted for 20% of the overall obligation balances. 2) The reported balances of unliquidated commitments for FY 2022 are not supported by any information. In its Form SSA-4513, the PR-DDS included unliquidated commitments, which accounted for 8% of the overall obligation balances. 3) Reported balances of unliquidated debts for FYs 2021, 2020, and 2019 are not supported by any information. iv. There were discrepancies between the accounting system and the total amount of disbursements on Form SSA-4513 for June 2023, and no observations were submitted in the report remarks section. 1) $237,231 discrepancy in FY 2022 2) $40,907 discrepancy in FY 2021 3) $8,800 discrepancy in FY 2020 4) $33,458 discrepancy in FY 2019 5) $49,179 discrepancy in FY 2018 v. The PR-DDS paid back $112,443 to the Puerto Rico Treasury Department in fiscal year 2023 to offset FY 2018 expenses that were not fully utilized in prior years. Because an expense is reported at the time a request is registered by the PR-DDS Accounting Department Special Payer, this resulted in an overstatement in the Schedule of Expenditures of Federal Awards and in the quarterly reports. vi. The PR-DDS Accounting Department received a request refund of $1,242,212 from the SSA for fiscal years 2019, 2020, and 2021 during March 2023 SSA-4513. Because there was not enough evidence in the March report to warrant an increase in obligations, the request was based on excess withdrawals exceeding total commitments recorded in FORM SSA-4513 for March 2023. In fiscal year 2023, $397,740 was repaid by the PR-DDS Accounting Department. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Information needed to effectively generate financial reports should be available through the financial management system. STATEMENT OF CAUSE Internal controls is not in place in the PR-DDS Accounting Department to ensure that vendor payments are processed on schedule. Furthermore, as mandated by DI 39506.203, the PR-DDS Accounting Department has not put monitoring measures in place to routinely assess unliquidated commitments. Furthermore, the PR-DDS Accounting Department lacks internal procedures for recording discrepancies between financial reporting and accounting systems. POSSIBLE ASSERTED EFFECT The PR-DDS raises the possibility of incurred costs without the option to obtain reimbursement from the Federal grant if appropriate procedures are not in place to pay suppliers on time and liquidate obligations on time. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend the Accounting Department of PR-DDS establish procedures to make sure Form SSA-4513 is properly examined, recorded, and compliant with POMS DI 39506.203. To cancel commitments that are no longer valid, we advise the PR-DDS Accounting Department to check unliquidated obligations at least once a month. For FYs 2020 and 2021, we advise the PR-DDS to ascertain the number of disbursements, restrict the reimbursement to that sum prior to deducting money, and repay SSA for any overdrafts that remain. Furthermore, we recommend a formal reconciliation between the quarterly reports and the accounting system-documented disbursements, with an explanation of any discrepancies included in remarks of the Form SSA-4513.

FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) 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 funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult program to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.

FINDING REFERENCE NUMBER 2023-057 (See Finding Reference Number 2023-026) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – EBT RECONCILIATION TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with Compliance Supplement and the State Plan, the EBT services provider makes payments to authorized retailers, network, third party providers, and financial institutions on behalf of the Government of Puerto Rico for benefits accessed and distributed to recipients daily. The EBT services provider is reimbursed as authorized by the Popular Bank of Puerto Rico (PBPR). Payments are recorded and compared to the Daily Activity File and Daily Payments Summary File prepared by the EBT services provider for the Department of the Family. EBT system reports provide these and other standardized computer reports as well as ad hoc access to EBT system data to perform the following key reconciliation: 1 Benefits authorized = benefits posted. 2 Benefits accessed by recipients (net EBT account debits/credits) = benefit amount transactions approved by the EBT services provider. 3 Net EBT account debits/credits = amount paid to merchants and financial institutions, “+/-” authorized adjustments. 4 Amount paid to merchants and financial institutions = funds requested by the EBT services provider, “+/-” authorized adjustments. 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). STATEMENT OF CONDITION As part of our audit of compliance with the EBT reconciliation requirements for the fiscal year ended June 30, 2023, we identified the following deficiencies: • ADSEF was unable to provide updated written reconciliation procedures or manuals. • No evidence was provided to show that EBT benefits were reconciled or matched to Federal drawdowns (SF-425 or PMS). • When asked about the assessment of SOC reports or vendor reviews, staff were unaware that such reports were required. The report was requested to EBT processor when we asked for it. Additionally, written procedure manuals were requested; however, management indicated that no such manuals were in place at the time. A procedure manual was subsequently created for January 2025, but it lacks clarity regarding specific employee roles and responsibilities. After multiple interviews, we were able to identify the area in charge of the reconciliation process, they provided with a manual from 2012, which was not updated with the data currently used. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem, the evidence provided to support the EBT reconciliation consisted solely of the receipt of the FIN-052 report and the manual entry of its data into Excel spreadsheets, and the SOC report from EBT provider. After multiple attempts to gain a comprehensive understanding of the reconciliation process, we were able to identify the people involved in the reconciliation process and the documents used. They finally provided with a written manual procedure, but was from 2012, which does not comply with Uniform Guidance requirements and documentation actually used. STATEMENT OF CAUSE ADSEF deficiencies stem from the absence of formal updated written reconciliation procedures, inadequate internal controls over EBT operations, lack of staff training, and unclear assignment of responsibilities related to reconciliation and oversight. POSSIBLE ASSERTED EFFECT ADSEF lack of updated written reconciliation process increases the risk of undetected errors or irregularities in EBT transactions, potential misstatements in Federal financial reports, and unaccounted variances between Federal funding and benefit disbursements. It also limits the agency’s ability to monitor program performance and meet audit and compliance obligations. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF develop and implement updated formal, written reconciliation procedures, clearly outlining roles, responsibilities, and the frequency of reconciliations. Additionally, we advise providing staff with comprehensive training on reconciliation protocols and internal control requirements to ensure consistency and compliance.

FINDING REFERENCE NUMBER 2023-058 (See Finding Reference Number 2023-027) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – INCOME ELIGIBILITY AND VERIFICATION SYSTEM TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Each state shall participate in the Income Eligibility and Verification System (IEVS) required by Section 1137 of the Social Security Act as amended. Under the State Plan the state is required to coordinate data exchanges with other federally assisted benefit programs, request and use income and benefit information when making eligibility determinations and adhere to standardized formats and procedures in exchanging information with other programs and agencies. Specifically, the state is required to request and obtain information as follows (42 USC 1320b-7; 45 CFR section 205.55): a. Wage information from the state Wage Information Collection Agency (SWICA) should be obtained for all applicants at the first opportunity following receipt of the application, and for all recipients on a quarterly basis. b. Unemployment Compensation (UC) information should be obtained for all applicants at the first opportunity, and in each of the first three months in which the individual receives aid. This information should also be obtained in each of the first three months following any recipient-reported loss of employment. If an individual is found to be receiving UC, the information should be requested until benefits are exhausted. c. All available information from the Social Security Administration (SSA) for all applicants at the first opportunity. In addition, in accordance with the State Plan, other internal controls applied by TANF staff to identify employment status and earnings of individuals are the: State Wage Information Collection Agency (SWICA) and the Beneficiary and Earnings Data Exchange (BENDEX). Through our Office of Information System, TANF caseload is cross checked with their database to identify participants that may be working. These systems create a list of participants which is reviewed by the eligibility determination technician. STATEMENT OF CONDITION During our process of understanding internal controls regarding compliance with this requirement, in the interviews conducted with the regions and local authorities, only one of the five regions visited indicated that they received the SWICA and BENDEX lists monthly. However, ADSEF headquarters indicated that they did not have a memorandum of understanding with the relevant state agencies for the 2022-2023 fiscal year. In the other regions, we were told that the income reported by participants was validated only with a sworn statement. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. According to interviews conducted with technicians in different regions, we identified a lack of uniformity in the income validation processes and a lack of awareness of what the current regulations establish. STATEMENT OF CAUSE ADSEF does not have a memorandum of understanding that allows access to participants' income validation. Additionally, the PRDF's processes manual dates back to 2008, which is not consistent with the reality of the information and processes carried out at the local level. POSSIBLE ASSERTED EFFECT ADSEF does not have sufficient mechanisms to validate the entry of participants requesting the benefit, and does not allow compliance with this requirement. IDENTIFICATION OF REPEAT FINDING Similar missing documentation was reported in the prior year audit Finding Number 2022-03. RECOMMENDATIONS We recommend that management coordinate the signing of the memorandum of understanding with the relevant agencies. Additionally, establish processes and training aligned with the procedures and documentation currently in use.

FINDING REFERENCE NUMBER 2023-059 (See Finding Reference Number 2023-028) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – CHILD SUPPORT NON-COOPERATION TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 45 CFR sections 264.30 and 264.31 establishes that (a): (1) The State agency must refer all appropriate individuals in the family of a child, for whom paternity has not been established or for whom a child support order needs to be established, modified or enforced, to the child support enforcement agency (i.e., the IV-D agency). (2) Referred individuals must cooperate in establishing paternity and in establishing, modifying, or enforcing a support order with respect to the child. (b) If the IV-D agency determines that an individual is not cooperating, and the individual does not qualify for a good cause or other exception established by the State agency responsible for making good cause determinations in accordance with section 454(29) of the Act or for a good cause domestic violence waiver granted in accordance with § 260.52 of this chapter, then the IV-D agency must notify the IV-A agency promptly. (c) The IV-A agency must then take appropriate action by: (1) Deducting from the assistance that would otherwise be provided to the family of the individual an amount equal to not less than 25 percent of the amount of such assistance; or (2) Denying the family any assistance under the program. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance related to this requirement, we requested a list from the Case Management and Information System (SAIC) that would identify participants who did not meet this requirement. From a population of six (6) participants, two (2) were selected to validate compliance with this requirement. We were only provided with one of the two requested files. The submitted file complied with the three-month sanction, and the case was subsequently closed for failure to cooperate with the Administration for Child Support Enforcement (ASUME, by its Spanish Acronym). Additionally, according to our eligibility testing, we were unable to identify child support evidence in twenty-seven (27) files (see Finding Reference Number 2023-058). QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is systematic. ADSEF lacks an adequate process for archiving files and the information each file should contain. STATEMENT OF CAUSE ADSEF does not have an adequate archiving process that allows for the identification of files in a reasonable timeframe. Additionally, there is no formal training or archive process for all regions and local authorities for the personnel involved in determining eligibility and the required evidence that should be kept for the audit process. POSSIBLE ASSERTED EFFECT ADSEF was unable to provide the requested information for auditing within a reasonable timeframe. Furthermore, the lack of a uniform archiving process prevents the information contained in the files from being properly identified and reviewed. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that provides for the archiving of information in participant files and the identification of files within a reasonable timeframe.

FINDING REFERENCE NUMBER 2023-060 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – PENALTY FOR REFUSAL TO WORK / LACK OF CHILD CARE FOR SINGLE CUSTODIAL PARENT OF CHILD UNDER AGE SIX / PENALTY FOR FAILURE TO COMPLY WITH WORK VERIFICATION PLAN TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for special tests and provisions, we selected twenty-five (25) participants from a population of 475 who had been penalized for failing to meet the work requirement or complying with the work verification plan. Of the sample of participants, only ten (10) files were submitted to us for evaluation. Related to the Lack of Child Care requirement for single Custodial Parent of Child Under Age Six, from a population of seven (7) participants identified with this requirement, we requested three (3) files for evaluation, however, we were only given one (1) file. This is a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with this compliance requirement. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with these Special Tests and Provisions because the information in the files was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time.

FINDING REFERENCE NUMBER 2023-061 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SUBRECIPIENT MONITORING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 2 CFR 200.332, a pass-through entity must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with § 180.300. Verification methods are provided in § 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information provided below. A pass-through entity must provide the best available information when some of the information below is unavailable. A pass-through entity must provide the unavailable information when it is obtained. Required information includes: (1) Federal award identification. (i) Subrecipient's name (must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated in the subaward; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity, including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required by the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of the Federal agency, pass-through entity, and contact information for awarding official of the pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at the time of disbursement; (xiii) Identification of whether the Federal award is for research and development; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is used in accordance with § 200.414). (2) All requirements of the subaward, including requirements imposed by Federal statutes, regulations, and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient for the pass-through entity to meet its responsibilities under the Federal award. This includes information and certifications (see § 200.415) required for submitting financial and performance reports that the pass-through entity must provide to the Federal agency; … (5) A requirement that the subrecipient permit the pass-through entity and auditors to access the subrecipient's records and financial statements for the pass-through entity to fulfill its monitoring requirements; and (6) Appropriate terms and conditions concerning the closeout of the subaward. (c) Evaluate each subrecipient's fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraph (f) of this section. When evaluating a subrecipient's risk, a pass-through entity should consider the following: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with subpart F and the extent to which the same or similar subawards have been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of any Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). (d) If appropriate, consider implementing specific conditions in a subaward as described in § 200.208 and notify the Federal agency of the specific conditions. (e) Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must: (1) Review financial and performance reports. (2) Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward. Significant developments include Single Audit findings related to the subaward, other audit findings, site visits, and written notifications from a subrecipient of adverse conditions which will impact their ability to meet the milestones or the objectives of a subaward. When significant developments negatively impact the subaward, a subrecipient must provide the pass-through entity with information on their plan for corrective action and any assistance needed to resolve the situation. (3) Issue a management decision for audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by § 200.521. (4) Resolve audit findings specifically related to the subaward. However, the pass-through entity is not responsible for resolving cross-cutting audit findings that apply to the subaward and other Federal awards or subawards. If a subrecipient has a current Single Audit report and has not been excluded from receiving Federal funding (meaning, has not been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant agency for audit or oversight agency for audit to perform audit follow-up and make management decisions related to cross-cutting audit findings in accordance with section § 200.513(a)(4)(viii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. (f) Depending upon the pass-through entity's assessment of the risk posed by the subrecipient (as described in paragraph (c) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: (1) Providing subrecipients with training and technical assistance on program-related matters; (2) Performing site visits to review the subrecipient's program operations; and (3) Arranging for agreed-upon-procedures engagements as described in § 200.425. (g) Verify that a subrecipient is audited as required by subpart F of this part. (h) Consider whether the results of a subrecipient's audit, site visits, or other monitoring necessitate adjustments to the pass-through entity's records. (i) Consider taking enforcement action against noncompliant subrecipients as described in § 200.339 and in program regulations. STATEMENT OF CONDITION As part of our understanding of the program, program staff were interviewed regarding the existence of subrecipients. None of the staff interviewed identified any transactions involving subrecipients. However, in our testing of internal controls and compliance with the allowable costs/cost principles requirement, transactions were selected to assess compliance with this requirement. Upon receiving documentation from a contractor, we realized that the transactions with this supplier were in the capacity of a subrecipient. In addition, the SEFA submitted by the PRDF does not identify any transaction under a subrecipient related to this program. In the final draft of the SEFA submitted for audit procedures, ADSEF reported the amount of $2,411,184, which included all transactions related to preventive services. We examined four (4) vouchers related to these services; the contract, proposal and invoices do not indicate information related to subrecipients. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. The staff in charge of administering TANF funds were unaware of the factors required to properly identify subrecipient transactions. The total expenditure reflected in the database related to subrecipient activities totaled $686,052.17 for the audited fiscal year. After providing the requirements for a subrecipient, staff were interviewed again to verify whether other providers met the subrecipient requirements, but no other entities were identified. From our testing, we identified no other subrecipients. Although, in the final draft of the SEFA submitted for audit procedures, all expenditures related to preventive services were included as pass-through expenditures. STATEMENT OF CAUSE The staff in charge of administering the program were unaware of the factors that determine whether a contractor is a subrecipient or a contractor. ADSEF has not established an adequate procedures manual that demonstrates compliance with all requirements for subrecipient activities. POSSIBLE ASSERTED EFFECT ADSEF does not have internal controls related to the identification, management, and reporting of subrecipient activities. This situation prevents compliance with all compliance requirements related to subrecipient monitoring. This situation prevented the proper presentation of Federal expenditures incurred under this program in the SEFA or other financial reports required by Federal agencies. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS The PRDF must provide training to ADSEF personnel on the requirements and regulations related to subrecipient monitoring. We recommend that management establish internal controls and compliance measures that allow for the identification, reporting, and monitoring of subrecipient activities.

Criteria: The Department is required to identity in its annual plan the population eligible for NAP benefits, In testing the propriety of eligibility determinations and disbursements for NAP benefits, the auditor shall apply the eligibility criteria established by the Department and identified in the annual plan (7 CFR section 285.3(b)(2)). 7 CFR Part 285 Section 3 - Plan of Operation. states (b) the plan of operation shall include the following, information: ( 2) A description of the needy persons residing in the Commonwealth of Puerto Rico and an assessment of the food and nutrition needs of these persons, The description and assessment shall demonstrate that the Nutrition Assistance Program is directed toward the neediest persons in the Commonwealth of Puerto Rico. We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participantlbeneficiary was eligible. as required by the Department procedures and federal law. As a result. we could not conclude participants reviewed were eligible to receive benefits as required by the federal award. Perspective We selected a sample of forty (40) participant files as part of compliance testing regarding eligibility. Auditors noted several cases in which the following documentation was not present in participants' tiles as follows: • (2) Verification of valid ID • (2) Evidence of residence • (3) Release of information form • (2) USA Citizenship or Verification of Alien Status form • (2) No copy of Social Security ID or SAID.' verification form of participants • (2) Resource Verification Form ($5k-$15k) • (2) Determination form • (2) Notification Advice form The above documentation is required as part of the eligibility controls established in the program's state plan to prove the existence of participants. Effect: The Department may be qualifying participants who do not meet the eligibility requirements established by federal regulations. T his may ultimately result in sanctions, reduced funding. having to return monies to the federal agency. or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion over the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance \kith federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible. need to be obtained and evidenced in the participant's file. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks. responsibilities_ and supervision and approval tasks for each employee within the eligibility verification process. In case any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters, pandemic, etc.) the Department should formally communicate the provisions of the temporary waiver. obtain approval of the federal awarding agency, and formal communication should be included in the participant's file. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan_

Criteria: The Department as an eligible State has submitted to the Secretary of the t U.S. Treasury a State Plan that outlines the way the State intends to conduct the TANF program as requested by 42 U.S.C. Part 602 Section (a)( I )(A)(i). The State Plan shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment. including an explanation of how the State will provide opportunities for recipients who have been adversely affected to be heard in a State administrative or appeal process as required by 42 U.S.C. Part 602 Section (a) (I) (B) (iii). The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2021 through 2023 of the Government of Puerto Rico (the State Plan). Chapter IV-Application Process. establishes financial and non-financial eligibility requirements for applications and redeterminations; the assistance unit that will be considered for benefits and services; supportive evidence of eligibility requirements; and other eligibility factors and criteria. Condition: We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participant/beneficiary was eligible, as required by the Department procedures and federal law. As a result. we could not conclude participants reviewed were eligible to receive benefits as required by the federal award. Perspective - We selected a sample of fifteen (15) participant tiles as part of compliance testing regarding eligibility. Auditors noted several cases in which the following documentation was not present in participants' files as follows: • (1) Participant file was not provided. • (2) Evidence of residence verification • (2) USA Citizenship or Verification of Alien Status form • (2) No copy of Social Security ID or SAIC verification form of participant • (2) Verification of valid ID The above documentation is required as part of the eligibility controls established in the program's state plan to prove the existence of participants. Effect: fhe Department may be qualifying participants who do not meet the eligibility requirements established by federal regulations. This may ultimately result in sanctions. reduced funding. having to return monies to the federal agency. or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion regarding the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible, need to be obtained and evidenced in the participant's file. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks. responsibilities, and supervision and approval tasks for each employee within the eligibility verification process. In case. any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters. pandemic. etc.) the Department should formally communicate the provisions of the temporary waiver, obtain approval of the federal awarding agency. and formal communication should be included in the participant's file. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan.

Criteria: Each state shall participate in the Income ligibility and Verification System (IEVS) required by Section 1137 of the Social Security Act as amended. Under the state plan the state is required to coordinate data exchanges with other federally assisted benefit programs. request and use income and benefit information when making eligibility determinations and adhere to standardized forniat•,, and procedures in exchanging information with other programs and agencies. The Departments Local Office Procedure Manual (the -Manual."). establishes the following procedures for the exchange of information of persons receiving Social Security Benefits (BENDEX): (a) The BENDEX list is issued monthly to the Director of each Region. (b) The Regional Director sends it to the corresponding local office. (c) The list is assigned and delivered to the technicians to crosscheck the information of the list with the participants' file. (d) The technicians will make a note on the Daily Contact Form (ADSEF-106G) including the finding, date of crosscheck. and name. In the BENDEX list the technicians must write their initials and the date on which the evaluation was made. Condition: We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participantbeneficiary vvas eligible. as required by the Department procedures and federal law. As a result. we could not conclude participants rev loved were eligible to receive benefits as required by the federal award. Perspective - We selected a sample of fifteen (15) participant files as part of compliance testing regarding eligibility. We noted several cases in which the following documentation was not present in participants" files as follows: • (2) Child Support Cooperation Agreement for non-custodial parents. (Cat. C) • (1) Evidence of' residence. (Cat. A) • (2) Verification of Valid ID. (Cat. A) • (1) Medical Certification From Specialist Form (TANF-34). (Cat. D) • (1) Participant file was not available for our review (Cat. C) The Child Support Cooperation Agreement for non-custodial parents is an eligibility requirement for all Category C participants as evidence of custodial parent's cooperation with the ASUME, administration in identifying the minor's father and establishing an alimony. The Valid Identification is an eligibility control established in the program's state plan to prove the existence of participants. The Medical Certification From Specialist Form (TANF-34) is an eligibility requirement that must be provided by applicants under category D to certify that they are incapable of compliance with work, study. or training requirements due to their mental or physical health. Effect: The Department may be qualifying participants that do not meet the eligibility requirements established by federal regulations. This may ultimately result in sanctions. reduced funding. having to return monies to the federal agency. or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion over the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible. need to be obtained and evidenced in the participant's tile. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks. responsibilities. and supervision and approval tasks for each employee within the eligibility verification process. In case any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters, pandemic, etc.) the Department should formally communicate the provisions of the temporary waiver, obtain approval from the federal awarding agency. and formal communication should be included in the participant's file. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan.

Criteria: Uniform Administrative Requirements. Cost Principles, and Audit Requirements for Federal Awards. Part 200.512, Report Submission. (a) General. (1) states that the audit must be completed, and the data collection form and reporting package must be submitted wiithin the earlier of 30 calendar days after receipt of the auditors' report(s). or nine months after the end of the audit period. Condition: The Department did not comply with the required due date for the submission of the Single Audit Report Package as a result of-systematic issues which hay e led to delays in the receipt and processing of information required as part of the Single Audit. Effect: The Department will be considered delinquent in the submission of the Single Audit Report Package and if it does not respond to follow-up procedures from federal agencies. may face sanctions such as: • Draw-Down Restrictions • Reimbursable Draw Down • Withholding a Percentage of Federal Funds • Suspension of Federal Funds • Termination of Grant Cause: During March 2020, the government of Puerto Rico declared a general lockdovvn as a result of the COVID-19 Pandemic which had a significant impact in governmental agencies and businesses across Puerto Rico. delaying operations on an island-wide scale. This resulted in significant delays in the completion of the Single audits for the past fiscal periods which in turn has resulted in complications regarding filing within required deadlines. Recommendation: The Department must designate work teams amongst all relevant administrations which serve as liaisons vvith auditors and be responsible for the delivery of information and documentation to ensure compliance with due dates. The Department should maintain a clear line of communication throughout its administrations and follow up accordingly to maintain a continuous flow of information during audit procedures. In addition, the Department should request periodic follovv-up meetings with auditors to address any audit issues encountered which may affect meeting established deadlines. Questioned Costs: None Management's Response: Refer to Grantee's Corrective Action Plan.

Criteria 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state that (a) 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 addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award, (b) The financial management system of each non- Federal entity must provide for the following: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§200.327 Financial reporting and 200.328 Monitoring and reporting program performance. (3) Records that identifies adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets, and (5) Comparison of expenditures with budget amounts for each Federal award. Act Number 230 of July 23, 1974, Puerto Rico Government Accounting Law, as amended, states that the accounting system of the instrumentalities of the Commonwealth of Puerto Rico should be designed to reflect or provide complete and clear information related to their financial results of operations. Condition The Department has a weakened financial reporting system, brought on by several deficiencies related to the accounting and financial reporting practices of the Department. The deficiencies noted as part of our procedures are summarized as follows: • The Department's procedure manuals contain outdated procedures which do not necessarily reflect the current tasks and operations of the Department. • The Department does not prepare monthly closings on a recurring and periodic basis. • The Single Audit Report has not been submitted in a timely manner and audit procedures are significantly delayed due to a lack of reconciliations and monthly closing procedures. • Multiple transactions are recognized retroactively several months after occurring, as a result of the significant delays brought forth by a weak financial reporting system. • The Department does not have adequate procedures to reconcile, in a timely manner, financial transactions recorded in the accounting system of the Puerto Rico Treasury Department with the accounting records maintained by the Department. Effect Deficiencies in the financial reporting and accounting practices of the Department may result in the following: • Financial Reports which are required as part of compliance with federal programs may be prepared with inaccurate or incomplete financial information and may not be submitted in a timely and compliant manner. • Sanctions, reduced funding, return of monies to federal agencies, cancellation of grants, among other potential sanctions. • Inconsistency between the financial information registered in the Department with financial transactions recognized in the records of the Puerto Rico Treasury Department. • Difficulties in accurately assessing program performance and monitoring of expenses in line with budgeted amounts to actual amounts expended as part of program activities. Inefficiencies and additional effort incurred by employee's part as a result of outdated or inaccurate procedure manuals. This also results in confusion as to the proper procedures to follow and the relevant approval and revision tasks to be performed. • Non-compliance with federal program requirements brought forth as a result of financial information which is inaccurate. Cause The Department has not implemented a uniform internal accounting process that allows all the Department's administrations (5) to consolidate accounting information for both fiscal and program periods and reconcile with financial information with the Treasury Department. In addition, the Department lacks uniform internal accounting software and applications between the administrations of the Department, which precludes them from timely and accurate consolidation of financial information. Recommendation The Department needs to implement a formal monthly closing of its accounting records and financial reporting with the purpose of ensuring accurate and timely financial information. Monthly closing procedures would be carried out most efficiently by developing a logical order for closing procedures and assigning responsibility for completing the procedures to specific personnel. As the Department is composed of various administrations, a task force should be assigned to develop procedures which detail the data-gathering information process to accumulate financial data of the administrations in a consistent manner. In addition, financial information should be consolidated at the Department level in order to reconcile with the financial records of the Treasury Department. Procedures should include, at a minimum, the following: the month-end period, a list of monthly closing tasks (post sub ledger balances to general ledgers, post journal entries, reconcile financial records with those of the Treasury Department, etc.), and the due date of each task (2 weeks after month end, etc.) It is recommended that the closing and reconciliation procedures be documented in a checklist that indicates the responsible individual who will perform each procedure and when completion of each procedure is due. Following are recommendations regarding the required closing procedures and suggestions to improve the financial reporting system: • Determine that all transactions have been recorded and posted. Transactions should be reviewed for completeness by scanning accounts to determine any unusual balances or fluctuations from expectations. • Reconcile general ledger accounts to underlying records and compareireconcile this information with the records of the Puerto Rico Treasury Department. Any differences observed during this process should be followed up in a timely manner in order to clarify and clear any reconciling items between the two sets of financial records. • Accumulate pertinent information necessary for the preparation of federal reports (financial and performance reports). In addition, a proper flowchart of procedures and revisions should be prepared to ensure that federal reports are filed and certified within established deadlines. • Perform a budgetary analysis by comparing expected amounts of expenditure with actual results. This will provide a more accurate measure of performance for federal programs and the overall efficiency in the use of funds of the Department. This will enhance the monitoring of program performance to ensure compliance with federal regulations and State Plan objectives. • Proper storage and backup of Department data files as part of the closing procedure. All files should be properly backed up before monthly closing is determined to be complete. • Differences observed during the reconciliation and closing procedure need to be discussed with the management personnel responsible for providing oversight over each respective area of the financial reporting cycle. Any adjustments necessary as a result of these procedures should be posted in a timely manner and before the closing is completed. Internal control manuals should be evaluated to ensure that they provide a clear and descriptive flowchart which details personnel involved, flow of information, estimated time frames for deliverables, and other control procedures relevant to the Department's operations. The Department should also evaluate its existing manuals to determine if they are updated and accurately reflect the procedures the Department currently carries out and ensure that these are in compliance with federal requirements. Updated written procedures and instructions will prevent or reduce misunderstandings, errors, inefficiencies or wasted efforts, enhancing the efficiency of the operations of the Department. Questioned Costs None Management's Response Refer to Grantee's Corrective Action Plan.

Criteria: The Department is required to identify in its annual plan the population eligible for NAP benefits. In testing the propriety of eligibility determinations and disbursements for NAP benefits, the auditor shall apply the eligibility criteria established by the Department and identified in the annual plan (7 CFR section 285.3(b)(2)). 7 CFR Part 285 Section 3 Plan of Operation, states (b) The plan of operation shall include the following information: (2) A description of the needy persons residing in the Commonwealth of Puerto Rico and an assessment of the food and nutrition needs of these persons. The description and assessment shall demonstrate that the Nutrition Assistance Program is directed toward the neediest persons in the Commonwealth of Puerto Rico. Condition: We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participant/beneficiary was eligible, as required by the Department procedures and federal law. As a result, we could not conclude participants reviewed were eligible to receive benefits as required by the federal award. Perspective — We selected a sample of forty (40) participant files as part of compliance testing regarding eligibility, auditors noted several cases in which the following documentation was not present in participants' files as follows: • (6) Valid ID • (7) Evidence of Residency The ID verification of participants is the control established by the administration in its state plan to confirm the existence of the participants receiving benefits. Evidence of residency is a control placed by the administration in its state plan to confirm participants' physical addresses to prevent participants from receiving benefits from two distinct locations (states) or multiple participants receiving benefits from the same address without being considered as a familiar unit. Effect: The Department may be qualifying participants who do not meet the eligibility requirements established by federal regulations. This may ultimately result in sanctions, reduced funding, having to return monies to the federal agency, or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion over the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible, need to be obtained and evidenced in the participant's file. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks, responsibilities, and supervision and approval tasks for each employee within the eligibility verification process. In case, any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters, pandemic, etc.) the Department should formally communicate the provisions of the temporary waiver, obtain approval of the federal awarding agency, and formal communication should be included in the participant's file. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan.

Criteria: Eligibility- Individual Material Weakness and Noncompliance The Department as an eligible State has submitted to the Secretary of the U.S. Treasury a State Plan that outlines the way the State intends to conduct the TANF program as requested by 42 U.S.C. Part 602 Section (a)(1)(A)(i). The State Plan shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, including an explanation of how the State will provide opportunities for recipients who have been adversely affected to be heard in a State administrative or appeal process as required by 42 U.S.C. Part 602 Section (a) (1) (B) (iii). The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan), Chapter IV-Application Process, establishes financial and non-financial eligibility requirements for applications and redeterminations; the assistance unit that will be considered for benefits and services; supportive evidence of eligibility requirements; and other eligibility factors and criteria Condition: We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participant/beneficiary was eligible, as required by the Department procedures and federal law. As a result, we could not conclude participants reviewed were eligible to receive benefits as required by the federal award. Perspective - We selected a sample of fifteen (15) participant files as part of compliance testing regarding eligibility, auditors noted several cases in which the following documentation was not present in participants' files as follows: • (4) Verification of Valid ID. • (7) Income Verification Form for audited period. • (2) Information Verification Form. • (1) Participant file was not available for our review. The valid identification is an eligibility control established in the program's state plan to prove the existence of participants. The Income Verification Form is a document completed by the TSAF (evaluators) to determine if the applicant's net income, for a given period, does not exceed the Maximum Monthly Income for compliance with the 150°0 poverty threshold. Information Verification Forms must be completed during initial and re-evaluation processes to track any change on the participants' attributes (whether income or Non income attributes). Effect: The Department may be qualifying participants who do not meet the eligibility requirements established by federal regulations. This may ultimately result in sanctions, reduced funding, having to return monies to the federal agency, or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion regarding the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible, need to be obtained and evidenced in the participant's file. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks, responsibilities, and supervision and approval tasks for each employee within the eligibility verification process. In case, any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters, pandemic, etc.) the Department should formally communicate the provisions of the temporary waiver, obtain approval of the federal awarding agency, and formal communication should be included in the participant's file. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's corrective action plan

Criteria Any family that includes an adult or minor child head of household or a spouse of the head of household who has received assistance under any state program funded by federal TANF funds for 60 months (whether or not consecutive) is ineligible for additionally federally funded TANF assistance. However, the state may extend assistance to a family on the basis of hardship, as defined by the state, or if a family member has been battered or subjected to extreme cruelty. (42 USC 608(a)(7); 45 CFR sections 264.1(a), (b), and (c)) The TANF State Plan Section V Special Provisions, Point 2 states: Puerto Rico's eligibility and payment standards will be utilized for families who arrive from another state or territory, rather than using the latter's standards. Periods of cash assistance received under the TANF Program in another state or territory will count towards TANF participant's lifetime limit of consecutive or nonconsecutive 60 months of assistance. Condition We noted the Department concluded a participant was eligible to be a beneficiary of the federal award when it did not comply with the requirement established for eligibility. The participant received benefits during a period that exceeded 60 months. Perspective We selected a sample of fifteen (15) participant files as part of compliance testing regarding the eligibility requirement. Auditors observed one (1) instance in which a participant continued to receive program benefits after exceeding the 60-month period established for Category C (head of household) participants without approval or justification. The Participant exceeded the maximum participation period by a total of six (6) months. Effect: As a result, the Department has disbursed federal program benefits to ineligible participants. This may ultimately result in sanctions, reduced funding, having to return monies to the federal agency, or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion over the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. Emphasis and efforts should be directed towards minimizing the time elapsed between the evaluation of eligibility technicians and corresponding supervisors to properly detect any potential errors before disbursement of funds occurs. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks, responsibilities, and supervision and approval tasks for each employee within the eligibility verification process. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan

Criteria: Each state shall participate in the Income Eligibility and Verification System (IEVS) required by Section 1137 of the Social Security Act as amended. Under the state plan the state is required to coordinate data exchanges with other federally assisted benefit programs, request and use income and benefit information when making eligibility determinations and adhere to standardized formats and procedures in exchanging information with other programs and agencies. The Department's Local Office Procedure Manual (the "Manual"), establishes the following procedures for the exchange of information of persons receiving Social Security Benefits (BENDEX): (a) The BENDEX list is issued monthly to the Director of each Region. (b) The Regional Director sends it to the corresponding local office. (c) The list is assigned and delivered to the technicians to crosscheck the information of the list with the participants' file. (d) The technicians will make a note on the Daily Contact Form (ADSEF-106G) including the finding, date of crosscheck, and name. In the BENDEX list the technicians must write their initials and the date on which the evaluation was made. Condition: We noted several files for participants of the referenced federal award were not complete to evaluate properly and conclude participant/beneficiary was eligible, as required by the Department procedures and federal law. As a result, we could not conclude participants reviewed were eligible to receive benefits as required by the federal award. Perspective - We selected a sample of 15 participant files as part of compliance testing regarding eligibility, auditors noted several cases in which the following documentation was not present in participants' files as follows: • (4) Period of Participation Form. (Cat. C) • (3) Verification of eligible age of all minors within familiar unit. (Cat. C) • (1) Child Support Agreement for non-custodial parents. (Cat. C) • (2) Verification of Valid ID. (Cat. A & D) • (2) Medical Cert cation From Specialist Form (TANF-34). (Cat. D) • (7) Benefit Determination Worksheet for audited period. (All Cat.) • (1) Participant file was not available for our review. The Participation Verification Form is a form completed by TSAF when reevaluating a case to ascertain that a participant has not exceeded the 60-month period established by the program for category C participants. The Child Support Cooperation Agreement for non-custodial parents is an eligibility requirement for all Category C participants as evidence of custodial parent's cooperation with the ASUME administration in identifying the minor's father and establishing an alimony. The Valid Identification is an eligibility control established in the program's state plan to prove the existence of participants. The Medical Certification From Specialist Form (TANF-34) is an eligibility requirement that must be provided by applicants under category D to certify that they are incapable of compliance with work, study, or training requirements due to their mental or physical health. The Benefit Determination Worksheet is a form completed on an annual basis for the determination and communication of the amount of benefits a participant is eligible to receive during an established period. Effect: The Department may be qualifying participants that do not meet the eligibility requirements established by federal regulations. This may ultimately result in sanctions, reduced funding, having to return monies to the federal agency, or cancellation of grants. Cause: The Department is not adhering to the established internal control procedures and not adequately documenting its evaluation and conclusion over the eligibility of participants. Recommendation: The Department must adhere to its existing internal control procedures to properly document eligibility verification procedures performed and to ensure compliance with federal regulations and the State Plan. All documents established by the Department to evaluate and conclude participants are eligible, need to be obtained and evidenced in the participant's file. The Department should also properly communicate eligibility verification procedures to employees and provide a clear outline as to the tasks, responsibilities, and supervision and approval tasks for each employee within the eligibility verification process. In case, any document established for verification of eligibility is temporarily waived due to specific reasons (natural disasters, pandemic, etc.) the Department should formally communicate the provisions of the temporary waiver, obtain approval from the federal awarding agency, and formal communication should be included in the participant's fi le. Questioned Costs: Could not be determined. Management's Response: Refer to Grantee's Corrective Action Plan

Criteria Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Part 200.512, Report Submission, (a) General, (I) states that the audit must be completed, and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditors' report(s), or nine months after the end of the audit period. Condition The Department did not comply with the required due date for the submission of the Single Audit Report Package as a result of systematic issues which have led to delays in the receipt and processing of information required as part of the Single Audit. Effect The Department will be considered delinquent in the submission of the Single Audit Report Package and if it does not respond to follow-up procedures from federal agencies, may face sanctions such as: • Draw-Down Restrictions • Reimbursable Draw Down • Withholding a Percentage of Federal Funds • Suspension of Federal Funds • Termination of Grant Cause During March 2020, the government of Puerto Rico declared a general lockdown as a result of the COVID-19 Pandemic which had a significant impact in governmental agencies and businesses across Puerto Rico, delaying operations on an island-wide scale. This resulted in significant delays in the completion of the Single audits for the past fiscal periods which in turn has resulted in complications regarding filing within required deadlines. In addition, the Department experienced a high rate of turnover in personnel, in addition to the observations regarding reconciliation of financial information as mentioned in audit finding 2021-01 and 2021-02, which resulted in additional efforts to properly organize information, therefor causing significant delays in the flow of information and completion of the 2021 audit. Recommendation The Department must designate work teams amongst all relevant administrations which serve as liaisons with auditors and be responsible for the delivery of information and documentation to ensure compliance with due dates. The Department should maintain a clear line of communication throughout its administrations and follow up accordingly to maintain a continuous flow of information during audit procedures. In addition, the Department should request periodic follow-up meetings with auditors to address any audit issues encountered which may affect meeting established deadlines. Questioned Costs None Management's Response Refer to Grantee's Corrective Action Plan

Finding Number: 2020-001 Agency: U.S. Department of Agriculture, U.S. Department of Health and Human Services Federal Program: Nutrition Assistance Program for Puerto Rico, Emergency Food Assistance Program, Temporary Assistance for Needy Families, Family Support Payment to State Assistance Payment , Low-Income Home Energy Assistance CFDA: 10.566, 10.568, 93.558, 93.560, 93.568 Grant Number: 1PR400426, 1PR810826, 1PR430446 1901PRTANF, 2001PRTANF, G-1901PRLIEA Grant Period: October 1, 2018 through September 30, 2019 October 1, 2019 through September 30, 2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Financial Administration ? Standards for Financial Management System Category: Financial-Material Weakness and Noncompliance Criteria 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state that (a) 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 addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been us according to the Federal statutes, regulations, and the terms and conditions of the Federal award, (b) The financial management system of each non-Federal entity must provide for the following: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets, and (5) Comparison of expenditures with budget amounts for each Federal award. Act Number 230 of July 23, 1974, Puerto Rico Government Accounting Law, as amended, states that the accounting system of the instrumentalities of the Commonwealth of Puerto Rico should be designed to reflect or provide complete and clear information related to their financial results of operations. Condition During our audit procedures for the year ended June 30, 2020, we noted the following deficiencies related to the accounting policies, procedures, and financial reporting practices of the PRDF: ? Many transactions are posted months after the applicable closing, with a retroactive effect. ? The PRDF does not have adequate procedures in place for the reconciliation of financial transactions recorded in the Department of Treasury?s accounting system (PRIFAS) with the accounting records maintained by the accountants of the federal programs. Effect The lack of adequate accounting and financial reporting practices and policies causes the PRDF to be unable to prepare accurate and complete financial reports. The lack of submission of adequate reports to management and federal agencies does not allow the performance of the following procedures: ? Detection of irregularities or instances of fraud on a timely basis; ? Preparation of a timely comparison of actual expenditures to budget; ? Discussion of reports with corresponding personnel and explanation for significant variations from budget. ? The PRDF?s reports related to state and federal funding may be misleading for internal management decision making and for reliability of external financial reporting; and ? Inadequate control over the accounting process may cause non-compliance with federal regulations and the awarding agencies could reduce or recapture the federal program funds. Cause This situation is caused by the lack of analysis, reconciliations of the financial transactions recorded during the fiscal year and the lack of monitoring and supervision of the PRDF?s management. Prior Year Audit Finding 2019-001 Recommendation The PRDF shall enhance its accounting and financial reporting practices and policies to provide accurate and complete financial information. In coordination with the Department of Treasury of the Commonwealth of Puerto Rico (PRDT), the PRDF should implement an accounting and financial reporting system that permits the preparation of financial reports required by the different oversight entities including the need to supply information to the Commonwealth of Puerto Rico for its government-wide reporting. The PRDF should perform monthly reconciliations of transactions recorded in the general ledger (PRIFAS) with the transactions recorded in the subsidiary ledger. Any reconciling item should be investigated and disposed of as deemed necessary, on a timely basis. In addition, the PRDF should provide training to the accounting personnel in charge of financial reporting regarding state and federal laws requirements and regulations. Questioned Costs None Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2020-002 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families, Family Support Payment to State Assistance_Payment CFDA: 93.558, 93.560 Grant Number: 1801PRTANF,1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Material Weakness and Noncompliance Criteria The PRDF as an eligible State has submitted to the Secretary of the U.S. Treasury a State Plan that outlines the way the State intends to conduct the TANF program as requested by 42 U.S.C. Part 602 Section (a)(1)(A)(i). The State Plan shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, including an explanation of how the State will provide opportunities for recipients who have been adversely affected to be heard in a State administrative or appeal process as required by 42 U.S.C. Part 602 Section (a) (1) (B) (iii). The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan), Chapter IV-Application Process, establishes financial and non-financial eligibility requirements for applications and redeterminations; the assistance unit that will be considered for benefits and services; supportive evidence of eligibility requirements; and other eligibility factors and criteria. 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 were not provided for review or did not correspond to our audit period. Effect The PRDF does not adhere to the established internal controls and does not adequately document participants? eligibility. The PRDF may be qualifying participants that do not meet the eligibility requirements established by the federal regulations. The PRDF should reimburse the Federal agency for benefits awarded to erroneously determined eligible participants. Cause The PRDF 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. Context From a population of 65,535 participants from office selected in each of the regions, we selected 40 samples. From the test the following exceptions were found: ? Ten files for evaluation did not correspond to the audit period. ? Two files not provided for audit review. Our sample was a statistically valid sample. Prior Year Audit Finding 2019-004 Recommendation The PRDF should enforce existing internal control procedures to manage, review, and monitor and safeguard of participants? files and to ensure that they contain all documentation required by the federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost Could not be determined Management Response See Grantee's Corrective Action Plan

Finding Number: 2020-003 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families CFDA: 93.558 Grant Number: 1801PRTANF,1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Penalty for Refusal to Work Category: Significant Deficiency and Noncompliance Criteria 45 CFR 261.14 (a)(c) What is the penalty if an individual refuses to engage in work, establishes that if an individual refuses to engage in work required under section 407 of the Act, the State must reduce or terminate the amount of assistance payable to the family, subject to any good cause or other exceptions the State may establish. (c) A State that fails to impose penalties on individuals in accordance with the provisions of Section 407 (e) of the Act may be subject to the State penalty specified at 261.54. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter VII (B), establishes a sanction policy to participants who do not comply with the Individual Responsibility Plan. An individual who refuses to engage in work activities as established in his Individual Responsibility Plan, will be penalized. The penalties will be applied as follow: ? First penalty ? if an individual refuses to participate in work activities without a good cause, as established in our policy, his cash assistance benefit will be reduced. The reduction consists in not including the adult portion in the total amount of the benefit. This action will last 3 months. ? Second penalty ? if the individual refuses to engage in work activities after being advised to participate and the first penalty has been applied, the cash assistance payment to the family is terminated for the next three months, and the case will be closed. The individual must comply with the penalty term in order to be able to re-apply for benefits. ? Third penalty ? if the individual refuses to participate as required and the second penalty has been applied, the cash assistance benefits will be terminated for the next six months and the case will be closed. The participant must comply with the penalty term, after this period he is able to re-apply. If the individual subsequently fails to cooperate this penalty will be re- applied. Compliance with work activities and participation hours will be defined by the Individual Responsibility Plan. The eligibility technician and the case manager will make continuous contact with the individual to encourage him to engage in work activities. Condition For the participants with codification of NOAC (?Refusal to work?) or ABJU (?Abandono de Empleo sin Justa Causa PTRA) in their Individual Responsibility Plan. From the test the following exceptions were found: ? Four files provided with incorrect codification. Effect The PRDF is not in compliance with the Program?s procedures regarding participants who do not comply with the Individual Responsibility Plan requirements and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the Individual Responsibility Plan requirements established by state regulations. Also, statistics used for the calculation of the work participation rate are not accurate due to incorrect participant codification. Cause This situation is caused by the lack of adherence to and enforcement of internal control procedures already established by the PRDF in the State Plan for the Individual Responsibility Plan compliance requirements. Context A sample of seven participants with codification of NOAC-Refusal to work was selected for audit from a population of twenty for the fiscal year 2019-2020 provided by the Office of Information System. The test revealed the following exceptions: ? one case the file was not provided for audit review. ? three case the codification of the participants was incorrect. Prior Year Audit Finding 2019-005 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technician or the case manager to assure compliance with the Individual Responsibility Plan and filing of documents in accordance with the Program?s procedures and state and federal regulations. The PRDF should strengthen the internal controls over its computer applications to reduce or avoid data entry errors. Also, the PRDF should enforce existing internal control procedures to manage, review, monitor and safeguard participants? files. Questioned Cost None Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2020-004 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families CFDA: 93.558 Grant Number: 1801PRTANF,1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Adult Custodial Parent of Child Under Six When Child Care Not Available Category: Material Weakness and Noncompliance Criteria 45 CFR 261.14 (a)(c) What is the penalty if an individual refuses to engage in work, establishes that if an individual refuses to engage in work required under section 407 of the Act, the State must reduce or terminate the amount of assistance payable to the family, subject to any good cause or other exceptions the State may establish. (c) A State that fails to impose penalties on individuals in accordance with the provisions of Section 407 (e) of the Act may be subject to the State penalty specified at 261.54. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter VII (B), establishes a sanction policy to participants who do not comply with the Individual Responsibility Plan. An individual who refuses to engage in work activities as established in his Individual Responsibility Plan, will be penalized. The penalties will be applied as follow: ? First penalty ? if an individual refuses to participate in work activities without a good cause, as established in our policy, his cash assistance benefit will be reduced. The reduction. ? consists in not including the adult portion in the total amount of the benefit. This action will last 3 months. ? Second penalty ? if the individual refuses to engage in work activities after being advised to participate and the first penalty has been applied, the cash assistance payment to the family is terminated for the next three months, and the case will be closed. The individual must comply with the penalty term in order to be able to re-apply for benefits. ? Third penalty ? if the individual refuses to participate as required and the second penalty has been applied, the cash assistance benefits will be terminated for the next six months and the case will be closed. The participant must comply with the penalty term, after this period he is able to re-apply. If the individual subsequently fails to cooperate this penalty will be re- applied. Compliance with work activities and participation hours will be defined by the Individual Responsibility Plan. The eligibility technician and the case manager will make continuous contact with the individual to encourage him to engage in work activities. Condition For the participants with codification of JC06, Adult Custodial Parent of Child under Six When Child Care not available without any good cause in their Individual Responsibility Plan, the PRDF failed to provide file for audit review and codify correctly the good cause according to procedures established in the State Plan. Effect The PRDF is not in compliance with the Program?s procedures regarding participants who do not comply with the Individual Responsibility Plan requirements and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the Individual Responsibility Plan requirements established by state regulations. The PRDF should strengthen the internal controls over its computer applications to reduce or avoid data entry errors. Also, statistics used for the calculation of the work participation rate are not accurate due to incorrect participant codification. Cause This situation is caused by the lack of adherence to and enforcement of the internal control procedures already established by the PRDF in the State Plan for the Individual Responsibility Plan compliance requirements. Context A sample of twenty participants with codification of JC06, Adult Custodial Parent of Child under Six When Child Care not available without any good cause, was selected for audit from a population of 1,070 for the fiscal year 2019-2020 provided by the Office of Information System and noted the following: ? One file does not provide for audit review. ? twenty case the codifications of the participant were incorrect. Prior Year Audit Finding 2019-006 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technician or the case manager to assure compliance with Individual Responsibility Plan and filing of documents in accordance with the Program?s procedures and state and federal regulations. The PRDF should strengthen the internal controls over its computer applications to reduce or avoid data entry errors. Also, the PRDF should enforce existing internal control procedures to manage, review, monitor and safeguard participants? files. Questioned Cost None Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2020-005 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families, Family CFDA: 93.558 Grant Number: 1801PRTANF /1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Income Eligibility and Verification System Category: Material Weakness and Noncompliance Criteria As required by Section 1137 of the Social Security Act, each State shall participate in the Income and Verification System (IEVS) to request and obtain income and benefit information when making eligibility determinations. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter XI (A), establishes that through the Office of Information System TANF caseload is crosscheck with the data base of IEVS to identify participants that may have income. The system creates a list of participants which should be reviewed by eligibility technicians. The technician is responsible to interview the participant to verify the information and to take actions over those cases. PRDF Local Office Procedure Manual (the Manual), establishes the following procedures for the exchange of information of persons receiving Social Security Benefits (BENDEX): (a) The BENDEX list is issued monthly to the Director of each Region. (b) The Regional Director sends it to the corresponding local office. (c) The list is assigned and delivered to the technicians to crosscheck the information of the list with the participants? file. (d) The technicians will make a note on the Daily Contact Form (ADSEF-106G) including the finding, date of crosscheck, and name. In the BENDEX list the technicians must write their initials and the date in which the evaluation was made. Condition The PRDF failed to provide file for audit review and in some cases provide correct codification of population requested. Effect The PRDF is not in compliance with the Program?s procedures regarding Income and Verification System when making the eligibility determinations and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the income range established by the State regulations. Cause This situation is caused by the lack of adherence to and enforcement of the internal control procedures already established by the PRDF. Context A sample of thirty-five participant was selected for audit from the List of Participants receiving Social Security Benefits (BENDEX) and with the identification code (SWICA) for the fiscal year 2019-2020 provided by the Office of Information System noted the following: ? Four files do not provide for audit review. ? Twenty-six cases the codifications of the participant were incorrect. Prior Year Audit Finding 2019-007 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technicians to assure compliance with Income and Verification System and filing of documents in accordance with the program procedures and state and federal regulations. The PRDF should strengthen the internal controls over its computer applications to reduce or avoid data entry errors. Also, the PRDF should enforce existing internal control procedures to manage, review, monitor and safeguard participants? files. Questioned Cost Not applicable Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2020-006 Agency: U.S. Department of Agriculture Federal Program: Nutrition Assistance Program for Puerto Rico CFDA: 10.566 Grant Number: IPR400436, 1PR400426 Grant Period: 07/03/2019-9/30/2020 10-1-2019 to 9-30-2020 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Material Weakness and Noncompliance Criteria 7 CFR Part 285 Section 3 - Plan of Operation, states (b) The plan of operation shall include the following information: (2) A description of the needy persons residing in the Commonwealth of Puerto Rico and an assessment of the food and nutrition needs of these persons. The description and assessment shall demonstrate that the Nutrition Assistance Program is directed toward the neediest persons in the Commonwealth of Puerto Rico. The PR Department of the Family is required to identify in its annual plan the population eligible for NAP benefits. In testing the propriety of eligibility determinations and disbursements for NAP benefits, the auditor shall apply the eligibility criteria established by the PR Department of the Family and identified in the annual plan (7 CFR section 285.3(b)(2)). 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 The PRDF failed to provide files for audit review. Effect The PRDF is not adhering to the established internal controls procedures and not adequately documenting the eligibility of participants. The PRDF may be qualifying participants that do not meet the eligibility requirements established by federal regulations. The PRDF should reimburse the Federal agency benefits awarded to erroneously determined eligible participants. Cause The PRDF did not have adequate internal control procedures over the process of evaluating the eligibility of participants, employees were not adhering to the established internal control procedures and the enforcement remedies were not adequately implemented. Context A sample of 40 participant?s files was selected for audit from a population of 654,651. The selection was made by one office for each region selected. The test revealed the following deficiencies: ? Two files do not provide for audit review. Prior Year Audit Finding 2019-008 Recommendation The PRDF should enforce existing internal control procedures to manage, review, monitor and safeguard participants? files and to ensure that they contain all documentation required by federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Costs Could not be determined Management?s Response See Grantee's Corrective Action Plan

Finding Number: 2020-007 Agency: U.S. Department of Health and Human Service Federal Program: Low-Income Home Energy Assistance Program CFDA: 93.568 Grant Number: G1801PRLIEA/ G1901PRLIEA Grant Period: October 1, 2016-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Material Weakness and Noncompliance Criteria Grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the State?s established poverty level, or 60 percent of the State median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the State?s poverty level. Grantees may give priority to those households with the highest home energy costs or needs in relation to income (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). 45 CFR Part 75 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 statutes, 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. Condition The PRDF fail to provide two files for audit review and internal control deficiency have permitted that participants? file does not include required documentation for the eligibility determination purpose. Effect The PRDF is not in compliance with the eligibility requirements set forth by federal regulations, which could affect the future award of its federal grants. Cause The PRDF did not have adequate internal control procedures over the process of evaluating the eligibility of participants, employees did not adhere to established internal control procedures and the enforcement remedies were not adequately implemented. Context A sample of sixty participants? files was selected for audit from a population of 12,365. The selection was made by one office for each region selected. The test found the following exceptions; ? Two files were not provided for our review. ? Seven files that do not correspond to the program selected for our test (LICE 1, LICE 2, LIC3 3 and LICE 4). ? Four files that do not correspond to our audit period. ? Six files we do not observe payment evidence. Prior Year Audit Finding 2019-009 Recommendation The PRDF should enforce existing internal control procedures to manage, review, monitor and safeguard participants? files and to ensure that they contain all documentation required by the federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost Could not be determined Management?s Response See Grantee's Corrective Action Plan

Finding Number: 2020-008 Agency: U.S. Department of Agriculture, U.S. Department of Health and Human Services, U.S. Social Security Administration Federal Program: All Major Federal programs in the SEFA Administration: The Office of the Secretary, Administration for Children and Families, Child Support Enforcement Administration, Administration for Socioeconomic Development of the Family, Administration for Child Care and the Integrated Development of Childhood Compliance Requirement: Reporting Category: Noncompliance Criteria Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal, Part 200.512, Report Submission, (a) General, (1) states that the audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Condition PRDF did not comply with the required due date for the submission of the Single Audit Report. Effect The PRDF could be sanctioned by the Federal Government for the noncompliance of this requirement. Cause As of December 2020, the island was hit by several earthquakes. During March 2020, due the Coronavirus pandemic the government declared a lock down. These events caused the interruption of services and business activities which resulted in economic hardship. These disasters affected the operations of the Department and the services provided. Prior Year Audit Finding 2019-010 Recommendation The PRDF should designate work teams among all administrations which serve as liaisons with the auditors and be responsible for the delivery of information and documentation to ensure compliance with due dates. In addition, shall establish controls and procedures to enable compliance with completion and submitting of the Single Audit Report of PRDF to the Federal Clearinghouse before the 9 months deadline. Questioned Costs None Management?s Response Refer to Grantee?s Corrective Action Plan

Section II- FINDINGS FINANCIAL AUDIT Financial findings comprise Finding 2019-001. Refer to Section III-Federal Award Findings and Questioned Costs, for a detailed description of the findings. Finding Number: 2019-001 Agency: U.S. Department of Agriculture, U.S. Department of Health and Human Services Federal Program: Nutrition Assistance Program for Puerto Rico, Emergency Food Assistance Program, Temporary Assistance for Needy Families, Family Support Payment to State_Assistance Payment , Low-Income Home Energy Assistance CFDA: 10.566, 10.568, 93.558, 93.560, 93.568 Grant Number: 1PR400426, 1PR810826, 1PR430446 1901PRTANF,G-1901PRLIEA Grant Period: October 1, 2018 through September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Financial Administration ? Standards for Financial Management System Category: Financial, Internal Control Weakness and Noncompliance Criteria 2 CFR Part 200, Section 302 and 45 CFR Part 75, Section 302- Financial management and standards for financial management systems state that (a) 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 addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award, (b) The financial management system of each non-Federal entity must provide for the following: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining Federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets, and (5) Comparison of expenditures with budget amounts for each Federal award. Act Number 230 of July 23, 1974, Puerto Rico Government Accounting Law, as amended, states that the accounting system of the instrumentalities of the Commonwealth of Puerto Rico should be designed to reflect or provide complete and clear information related to their financial results of operations. Condition During our audit procedures for the year ended June 30, 2019, we noted the following deficiencies related to the accounting policies, procedures, and financial reporting practices of the PRDF: ? Many transactions are posted months after the applicable closing, with a retroactive effect. ? The PRDF does not have adequate procedures in place for the reconciliation of financial transactions recorded in the Department of Treasury?s accounting system (PRIFAS) with the accounting records maintained by the accountants of the federal programs. Effect The lack of adequate accounting and financial reporting practices and policies causes the PRDF to be unable to prepare accurate and complete financial reports. The lack of submission of adequate reports to management and federal agencies does not allow the performance of the following procedures: ? Detection of irregularities or instances of fraud on a timely basis; ? Preparation of a timely comparison of actual expenditures to budget; ? Discussion of reports with corresponding personnel and explanation for significant variations from budget; ? The PRDF?s reports related to state and federal funding may be misleading for internal management decision making and for reliability of external financial reporting; and ? Inadequate control over the accounting process may cause non-compliance with federal regulations and the awarding agencies could reduce or recapture the federal program funds. Cause This situation is caused by the lack of analysis, reconciliations of the financial transactions recorded during the fiscal year and the lack of monitoring and supervision of the PRDF?s management. Prior Year Audit Finding 2018-001 Recommendation The PRDF shall enhance its accounting and financial reporting practices and policies to provide for accurate and complete financial information. In coordination with the Department of Treasury of the Commonwealth of Puerto Rico (PRDT), the PRDF should implement an accounting and financial reporting system that permits the preparation of financial reports required by the different oversight entities including the need to supply information to the Commonwealth of Puerto Rico for its government-wide reporting. The PRDF should perform monthly reconciliations of transactions recorded in the general ledger (PRIFAS) with the transactions recorded in the subsidiary ledger. Any reconciling item should be investigated and disposed of as deemed necessary, on a timely basis. In addition, the PRDF should provide training to the accounting personnel in charge of financial reporting regarding state and federal laws requirements and regulations. Questioned Costs None Management?s Response Refer to Grantee?s Corrective Action Plan

Section III- FINDINGS-MAJOR FEDERAL AWARDS PROGRAM AUDIT Finding Number: 2019-002 Agency: U.S. Department of Agriculture Federal Program: Emergency Food Assistance Program(Administrative Cost) CFDA: 10.568 Grant Number: 1PR810826, 1PR430446 Grant Period: 2017-2018, 2018-2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Cash Management Category: Internal Control Weakness and Noncompliance Criteria 31 CFR, Part 205 (Subpart B), Section 205.33 (a) How are funds transfers processed? establishes that (a) 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 timing and amount of funds transfers must be as close as is administratively feasible to a State's actual cash outlay for direct program costs and the proportionate share of any allowable indirect costs. 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 The PRDF failed to minimize the time elapsing between the transfer of funds and the related disbursements. In forty-nine (49) instances the period fluctuated between nine (9) to sixty-nine days (69). Effect The PRDF is not in compliance with federal regulations on cash management. The PRDF could be exposed to administrative sanctions by the grantor, including the assessment of interest cost on funds that were not disbursed within the required time Cause This situation was a primarily caused by the lack of effective internal control over cash management procedures. The PRDF does not maintain a regular monitoring over the cash requisitions, the payments supporting documents, and the accounting records. Prior Year Audit Finding 2018-003 Recommendation The PRDF should enforce internal control procedures to comply with cash management requirements established by the federal regulations. The PRDF should establish written policies and procedures for the proper review and authorization of request of federal drawdowns and the related disbursements supporting documentation. Questioned Costs None Management?s Response: See Grantee?s Corrective Action Plan

Finding Number: 2019-003 Agency: U.S. Department of Agriculture Federal Program: Emergency Food Assistance Program (Administrative and Food Commodities) CFDA: 10.568,10.569 Grant Number: 1PR810826, 1PR430446 Grant Period: 2017-2018, 2018-2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Internal Control Weakness and Noncompliance Criteria 7 CFR Part 251.5(b)- Eligibility determination, (a)(1) Agencies distribution to households, establishes that Organizations distributing commodities to households for home consumption must limit the distribution of commodities provided under this part those household which meet the eligibility criteria established by the State agency in accordance with paragraph (b) of this section. (b) Criteria for determining recipient eligibility- Each agency must establish uniform Statewide criteria for determining the eligibility of households to receive commodities provide under this part for home consumption. The criteria must: (1) Enable the State agency to ensure that only households which are in need of food assistance because of inadequate income receive TEFAP commodities; (2) Include income based standards and the methods by which households may demonstrate eligibility under such standards; and (3) Include a requirement that the household reside in the geographic location served by the State agency at the time of applying for assistance, but length of residency shall not be used as an eligibility criterion. Eligibility for Individuals-Receipt of USDA Foods for Household Use ? An ERA certifies households eligible to receive USDA Foods for household consumption by applying income eligibility criteria established by the State agency (7 CFR section 251.5(b)). These criteria are approved in advance by FNS as part of the State agency?s distribution plan (7 CFR section 251.6(a)). Eligibility for Subrecipients a. A recipient agency must be either a public agency or a private entity possessing tax-exempt status under the Internal Revenue Code and must enter into a written agreement with the state agency, or with another recipient agency where permitted, binding it to perform the duties of a recipient agency (7 CFR sections 247.4, 247.7(a), 251.3(d), and 251.5(a)). b. For TEFAP, the state agency?s distribution plan identifies the classes of organizations with which it will enter into such agreements (7 CFR section 251.6). c. For TEFAP, recipient agencies providing prepared meals must have demonstrated, to the satisfaction of the state agency, or ERA to which they have applied for USDA Foods or administrative funds, that they serve predominantly needy persons (7 CFR section 251.5(a)(2)). 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 Required ERA file for eligibility determination could not be provide for our evaluation. Effect The PRDF is not in compliance with the federal regulations and internal control procedures. The PRDF may be qualifying ERA that do not meet the eligibility requirement of the Program. Cause This situation is caused by the lack of adherence and enforcement to the internal control procedures included in the federal regulations and the state agency?s distribution plan. Context As part of our audit procedures over ERA?s eligibility requirements, we evaluated twenty-three participants and found two that PRDF not provide to us the file for evaluation. Prior Year Audit Finding 2018-004 Recommendation We recommend management to strengthen internal control procedures over the evaluation process of the participants to assure that individuals selected comply with Program?s objectives and procedures and that all supporting documentation for eligibility determination is evaluated and maintained on file. Questioned Cost Could not be determined Management Response: See Grantee?s Corrective Action Plan

Finding Number: 2019-004 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families, Family Support Payment to State Assistance_Payment CFDA: 93.558, 93.560 Grant Number: 1801PRTANF /1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Internal Control Weakness and Noncompliance Criteria The PRDF as an eligible State has submitted to the Secretary of the U.S. Treasury a State Plan that outlines the way the State intends to conduct the TANF program as requested by 42 U.S.C. Part 602 Section (a)(1)(A)(i). The State Plan shall set forth objective criteria for the delivery of benefits and the determination of eligibility and for fair and equitable treatment, including an explanation of how the State will provide opportunities for recipients who have been adversely affected to be heard in a State administrative or appeal process as required by 42 U.S.C. Part 602 Section (a) (1) (B) (iii). The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan), Chapter IV-Application Process, establishes financial and non-financial eligibility requirements for applications and redeterminations; the assistance unit that will be considered for benefits and services; supportive evidence of eligibility requirements; and other eligibility factors and criteria. 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. Effect The PRDF is not adhering to the established internal controls and is not adequately documenting participants? eligibility. The PRDF may be qualifying participants that do not meet the eligibility requirements established by the federal regulations. The PRDF should reimburse the Federal agency for benefits awarded to erroneously determined eligible participants. Cause The PRDF 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. Context A sample of forty participants? files from an office in each region from a population of 17,416 participants. The test found the following exceptions: ? Three files not provided for our revision. ? Document for assignment of right to food and commitments of cooperation with ASUME (ADSEF 106.B.1) not found in one participant file. Our sample was a statistically valid sample. Prior Year Audit Finding 2018-006 Recommendation The PRDF should enforce existing internal control procedures to manage, review, and monitor and safeguard of participants? files to ensure that they contain all documentation required by the federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost Could not be determined Management Response See Grantee's Corrective Action Plan

Finding Number: 2019-005 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families CFDA: 93.558 Grant Number: 1801PRTANF /1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Penalty for Refusal to Work Category: Internal Control Weakness and Compliance Criteria 45 CFR 261.14 (a)(c) What is the penalty if an individual refuses to engage in work, establishes that if an individual refuses to engage in work required under section 407 of the Act, the State must reduce or terminate the amount of assistance payable to the family, subject to any good cause or other exceptions the State may establish. (c) A State that fails to impose penalties on individuals in accordance with the provisions of Section 407 (e) of the Act may be subject to the State penalty specified at 261.54. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter VII (B), establishes a sanction policy to participants who do not comply with the Individual Responsibility Plan. An individual who refuses to engage in work activities as established in his Individual Responsibility Plan, will be penalized. The penalties will be applied as follow: ? First penalty ? if an individual refuses to participate in work activities without a good cause, as established in our policy, his cash assistance benefit will be reduced. The reduction consists in not including the adult portion in the total amount of the benefit. This action will last 3 months. ? Second penalty ? if the individual refuses to engage in work activities after being advised to participate and the first penalty has been applied, the cash assistance payment to the family is terminated for the next three months, and the case will be closed. The individual must comply with the penalty term in order to be able to re-apply for benefits. ? Third penalty ? if the individual refuses to participate as required and the second penalty has been applied, the cash assistance benefits will be terminated for the next six months and the case will be closed. The participant must comply with the penalty term, after this period he is able to re-apply. If the individual subsequently fails to cooperate this penalty will be re- applied. Compliance with work activities and participation hours will be defined by the Individual Responsibility Plan. The eligibility technician and the case manager will make continuous contact with the individual to encourage him to engage in work activities. Condition For the participants with codification of ABEN (?Abandono de Empleo sin Justa Causa?) or ABJU (?Abandono de Empleo sin Justa Causa PTRA) in their Individual Responsibility Plan, the PRDF failed to provided file for audit review and in some cases provide correct codification of population requested. Effect The PRDF is not in compliance with the Program?s procedures regarding participants who do not comply with the Individual Responsibility Plan requirements and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the Individual Responsibility Plan requirements established by state regulations. Also, statistics used for the calculation of the work participation rate are not accurate due to incorrect participant codification. Cause This situation is caused by the lack of adherence to and enforcement of internal control procedures already established by the PRDF in the State Plan for the Individual Responsibility Plan compliance requirements. Context A sample of six participants with codification of NOAC-Refusal to work was selected for audit from a population of Eighteen for the fiscal year 2018-2019 provided by the Office of Information System. The test revealed the following exceptions: ? one case the file was not provided for revision. ? three case the codification of the participants was incorrect. Prior Year Audit Finding 2018-008 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technician or the case manager to assure compliance with the Individual Responsibility Plan and filing of documents in accordance with the Program?s procedures and state and federal regulations. Questioned Cost None Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2019-006 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families CFDA: 93.558 Grant Number: 1801PRTANF /1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Adult Custodial Parent of Child Under Six When Child Care Not Available Category: Internal Control Weakness Criteria 45 CFR 261.14 (a)(c) What is the penalty if an individual refuses to engage in work, establishes that if an individual refuses to engage in work required under section 407 of the Act, the State must reduce or terminate the amount of assistance payable to the family, subject to any good cause or other exceptions the State may establish. (c) A State that fails to impose penalties on individuals in accordance with the provisions of Section 407 (e) of the Act may be subject to the State penalty specified at 261.54. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter VII (B), establishes a sanction policy to participants who do not comply with the Individual Responsibility Plan. An individual who refuses to engage in work activities as established in his Individual Responsibility Plan, will be penalized. The penalties will be applied as follow: ? First penalty ? if an individual refuses to participate in work activities without a good cause, as established in our policy, his cash assistance benefit will be reduced. The reduction. ? consists in not including the adult portion in the total amount of the benefit. This action will last 3 months. ? Second penalty ? if the individual refuses to engage in work activities after being advised to participate and the first penalty has been applied, the cash assistance payment to the family is terminated for the next three months, and the case will be closed. The individual must comply with the penalty term in order to be able to re-apply for benefits. ? Third penalty ? if the individual refuses to participate as required and the second penalty has been applied, the cash assistance benefits will be terminated for the next six months and the case will be closed. The participant must comply with the penalty term, after this period he is able to re-apply. If the individual subsequently fails to cooperate this penalty will be re- applied. Compliance with work activities and participation hours will be defined by the Individual Responsibility Plan. The eligibility technician and the case manager will make continuous contact with the individual to encourage him to engage in work activities. Condition For the participants with codification of JC06, Adult Custodial Parent of Child under Six When Child Care not available without any good cause in their Individual Responsibility Plan, the PRDF failed to provide file for audit review and codify correctly the good cause according to procedures established in the State Plan. Effect The PRDF is not in compliance with the Program?s procedures regarding participants who do not comply with the Individual Responsibility Plan requirements and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the Individual Responsibility Plan requirements established by state regulations. Also, statistics used for the calculation of the work participation rate are not accurate due to incorrect participant codification. Cause This situation is caused by the lack of adherence to and enforcement of the internal control procedures already established by the PRDF in the State Plan for the Individual Responsibility Plan compliance requirements. Context A sample of twenty participants with codification of JC06, Adult Custodial Parent of Child under Six When Child Care not available without any good cause, was selected for audit from a population of 1,399 for the fiscal year 2018-2019 provided by the Office of Information System and noted the following: ? One files not provide for audit review ? fourteen case the codifications of the participant were incorrect. Prior Year Audit Finding 2018-009 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technician or the case manager to assure compliance with Individual Responsibility Plan and filing of documents in accordance with the Program?s procedures and state and federal regulations. The PRDF should strengthen the internal controls over its computer applications to reduce or avoid data entry errors. Questioned Cost None Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2019-007 Agency: U.S. Department of Health and Human Services Federal Program: Temporary Assistance for Needy Families, Family CFDA: 93.558 Grant Number: 1801PRTANF /1901PRTANF Grant Period: October 1, 2017-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Special Test- Income Eligibility and Verification System Category: Internal Control Weakness and Compliance Criteria As required by Section 1137 of the Social Security Act, each State shall participate in the Income and Verification System (IEVS) to request and obtain income and benefit information when making eligibility determinations. The Temporary Assistance for Needy Families Program State Plan of Operation for fiscal years 2018 through 2020 of the Government of Puerto Rico (the State Plan) Chapter XI (A), establishes that through the Office of Information System TANF caseload is crosscheck with the data base of IEVS to identify participants that may have income. The system creates a list of participants which should be reviewed by eligibility technicians. The technician is responsible to interview the participant to verify the information and to take actions over those cases. PRDF Local Office Procedure Manual (the Manual), establishes the following procedures for the exchange of information of persons receiving Social Security Benefits (BENDEX): (a) The BENDEX list is issued monthly to the Director of each Region. (b) The Regional Director sends it to the corresponding local office. (c) The list is assigned and delivered to the technicians to crosscheck the information of the list with the participants? file. (d) The technicians will make a note on the Daily Contact Form (ADSEF-106G) including the finding, date of crosscheck, and name. In the BENDEX list the technicians must write their initials and the date in which the evaluation was made. Condition The PRDF failed to provide file for audit review and in some cases provide correct codification of population requested. Effect The PRDF is not in compliance with the Program?s procedures regarding Income and Verification System when making the eligibility determinations and may be exposed to HHS penalties. The PRDF may be providing benefits to participants that do not meet the income range established by the State regulations. Cause This situation is caused by the lack of adherence to and enforcement of the internal control procedures already established by the PRDF. Context A sample of twelve participant was selected for audit from the List of Participants receiving Social Security Benefits (BENDEX) and with the identification code (SWICA) for the fiscal year 2018-2019 provided by the Office of Information System noted the following: ? Two files not provide for audit review ? Five cases the codifications of the participant were incorrect. Prior Year Audit Finding 2018-010 Recommendation We recommend management to enforce compliance with internal control procedures over the process performed by the eligibility technicians to assure compliance with Income and Verification System and filing of documents in accordance with the program procedures and state and federal regulations. Questioned Cost Not applicable Management?s Response Refer to Grantee?s Corrective Action Plan

Finding Number: 2019-008 Agency: U.S. Department of Agriculture Federal Program: Nutrition Assistance Program for Puerto Rico CFDA: 10.566 Grant Number: 1PR400426 Grant Period: 10-1-2017 to 9-30-2018 10-1-2018 to 9-30-2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Significant deficiency and Noncompliance Criteria 7 CFR Part 285 Section 3 - Plan of Operation, states (b) The plan of operation shall include the following information: (2) A description of the needy persons residing in the Commonwealth of Puerto Rico and an assessment of the food and nutrition needs of these persons. The description and assessment shall demonstrate that the Nutrition Assistance Program is directed toward the neediest persons in the Commonwealth of Puerto Rico. The PR Department of the Family is required to identify in its annual plan the population eligible for NAP benefits. In testing the propriety of eligibility determinations and disbursements for NAP benefits, the auditor shall apply the eligibility criteria established by the PR Department of the Family and identified in the annual plan (7 CFR section 285.3(b)(2)). 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. Effect The PRDF is not adhering to the established internal controls procedures and not adequately documenting the eligibility of participants. The PRDF may be qualifying participants that do not meet the eligibility requirements established by federal regulations. The PRDF should reimburse the Federal agency benefits awarded to erroneously determined eligible participants. Cause The PRDF did not have adequate internal control procedures over the process of evaluating the eligibility of participants, employees were not adhering to the established internal control procedures and the enforcement remedies were not adequately implemented. Context A sample of 40 participant?s files was a selected for audit from a population of 654,651. The selection was made by one office for each region selected. The test revealed the following deficiencies: ? Two files not provide for audit review. ? One participant file did not include the Notification of Action Taken (DSS-109). ? One participant file did not include Identification card. ? Three participants that we do not observe school assistance certification (ADSEF-147) in the participant file. Prior Year Audit Finding 2018-011 Recommendation The PRDF should enforce existing internal control procedures to manage, review and monitor participants? files to ensure that they contain all documentation required by federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Costs Could not be determined Management?s Response See Grantee's Corrective Action Plan

Finding Number: 2019-009 Agency: U.S. Department of Health and Human Service Federal Program: Low-Income Home Energy Assistance Program CFDA: 93.568 Grant Number: G1801PRLIEA/ G1901PRLIEA Grant Period: October 1, 2016-September 30, 2018 October 1, 2018-September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Eligibility Category: Internal Control Weakness and Noncompliance Criteria Grantees may provide assistance to (a) households in which one or more individuals are receiving Temporary Assistance for Needy Families (TANF), Supplemental Security Income (SSI), Supplemental Nutrition Assistance Program (SNAP) benefits, or certain needs-tested veterans benefits; or (b) households with incomes which do not exceed the greater of 150 percent of the State?s established poverty level, or 60 percent of the State median income. Grantees may establish lower income eligibility criteria, but no household may be excluded solely on the basis of income if the household income is less than 110 percent of the State?s poverty level. Grantees may give priority to those households with the highest home energy costs or needs in relation to income (42 USC 8624(b)(2)). Grantees must give priority to those households with the highest home energy costs or needs in relation to income and household size (42 USC 8624(b)(5)). 45 CFR Part 75 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 statutes, 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. Condition The PRDF fail to provide one file for audit review and internal control deficiency have permitted that participants? file does not include required documentation for the eligibility determination purpose. Effect The PRDF is not in compliance with the eligibility requirements set forth by federal regulations, which could affect the future award of its federal grants. Cause The PRDF did not have adequate internal control procedures over the process of evaluating the eligibility of participants, employees did not adhere to established internal control procedures and the enforcement remedies were not adequately implemented. Context A sample of forty participants? files was a selected for audit from a population of 9,623. The selection was made by one office for each region selected. The test found the following exception ? One file was not provided for our revision ? For one participant we do not observe the Notification of Action Taken, Certified Medical Reason, Quotation and Invoice. Prior Year Audit Finding Not applicable Recommendation The PRDF should enforce existing internal control procedures to manage, review, and monitor participants? files to ensure that they contain all documentation required by the federal regulations and State Plan. Internal controls should also provide remedies for appropriate enforcement and disciplinary actions, if necessary. Questioned Cost Could not be determined Management?s Response See Grantee's Corrective Action Plan

Finding Number: 2019-010 Agency: All Federal Agencies in the SEFA Federal Program: All Federal Agencies in the SEFA CFDA: All Federal Agencies in the SEFA Grant Number: All Federal Agencies in the SEFA Grant Period: October 1, 2017 through September 30, 2019 Administration: Administration for Socioeconomic Development of the Family Compliance Requirement: Reporting Category: Noncompliance Criteria Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal, Part 200.512, Report Submission, (a) General, (1) states that the audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period. Condition PRDF did not comply with the required due date for the submission of the Single Audit Report. Effect The PRDF could be sanctioned by the Federal Government for the noncompliance of this requirement. Cause As of December 2019, the island was hit by several earthquakes. During March 2020, due the Coronavirus pandemic the government declared a lock down. These events caused the interruption of services and business activities which resulted in economic hardship. These disasters affected the operations of the Department and the services provided. Prior Year Audit Finding 2018-013 Recommendation The PRDF must should designate work teams among all administration which serve as liaisons with the auditors and be responsible for the delivery of information and documentation to ensure compliance with due dates. In addition, shall establish controls and procedures to enable compliance with completion and submitting of the Single Audit Report of PRDF to the Federal Clearinghouse before the 9 months deadline. Questioned Costs None Management?s Response Refer to Grantee?s Corrective Action Plan

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