oversight

Puerto Rico Department of Education's Administration of Contracts Awarded to Excellence in Education, Inc. and the University of Puerto Rico's Cayey Campus

Published by the Department of Education, Office of Inspector General on 2008-05-20.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                     UNITED STATES DEPARTMENT OF EDUCATION
                                            OFFICE OF INSPECTOR GENERAL
                                                                                                                              Audit Services
                                                                                                                                 Region IV

                                                                              May 20, 2008

                                                                                                                   Control Number
                                                                                                                 ED-OIG/A04H0011

Honorable Rafael Aragunde-Torres
Secretary
Puerto Rico Department of Education
P.O. Box 190759
San Juan, Puerto Rico 00919-0759

Dear Secretary Aragunde-Torres:

This Final Audit Report, entitled Puerto Rico Department of Education’s Administration of
Contracts Awarded to Excellence in Education, Inc. and the University of Puerto Rico’s Cayey
Campus, presents the results of our audit. The purpose of the audit was to determine whether the
Puerto Rico Department of Education (PRDE) (1) followed Federal and State laws in procuring
services and awarding contracts to Excellence in Education, Inc. (EIE) and the University of
Puerto Rico’s Cayey campus (UPR-Cayey), and (2) ensured that contract requirements were met
prior to paying the contractors’ invoices.




                                                         BACKGROUND 



EIE is a private, for-profit corporation located in Caguas, Puerto Rico. The mother of the former
Under Director of PRDE’s Office of Federal Affairs (OFA) owns the corporation.

UPR-Cayey is one of eleven campuses that compose the UPR educational system. According to
Puerto Rico (PR) Law 174,1 approved on August 31, 1996, the faculty members of the UPR are
allowed to submit proposals through the UPR to provide services to different institutions and
government agencies in PR. If a contract is awarded, the faculty members act as Project
Directors,2 and become responsible for coordinating all stages of the agreed-upon project. The
owner of EIE was also a faculty member of UPR-Cayey and submitted proposals to PRDE
through UPR-Cayey.


1
  Law 174, amended Law 1 of January 20, 1966, with the objective of authorizing the UPR to establish the
Intramural Practice Plan, which allows professors to offer services to individuals and public and private institutions.
2
  Project Directors can receive up to 80 percent of the net proceeds of the awarded contracts.
    The Department of Education's mission is to promote student achievement and preparation for global competitiveness by fostering educational
                                                      excellence and ensuring equal access.
Final Report
ED-OIG/A04H0011                                                                                       Page 2 of 16

On August 16, 2005, PRDE awarded UPR-Cayey a professional services contract in the amount
of $154,530 under the Title II, Part A, Teacher and Principal Training and Recruiting Fund, to
provide training to teachers and directors from public and private schools with the objective of
enhancing teaching strategies. Under the contract, the mother of the former OFA Under Director
acted as Project Director. According to the proposal, entitled “Innovative Strategies to Diversify
Teaching,” and identified as Attachment 1 in the contract, UPR-Cayey would bill PRDE
$130,050 for training related services, and $24,480 for professional services. The training
consisted of 64 workshops billed at a rate of $60 per participant.

On July 31, 2006, PRDE awarded EIE a professional services contract in the amount of $542,800
under the Title V, Part A, Innovative Program, to provide training on photojournalism strategies
to students from 4th through 12th grade. According to the proposal, entitled “I am a
Photojournalist, I Can Communicate Effectively,” and identified as Attachment 1 in the contract,
EIE would bill PRDE $28,000 for professional services, and $514,800 for training. The training
consisted of a total of 396 workshops3 that would be provided to 33 schools (12 workshops per
school), billed at a rate of $1,300 per workshop.




                                            AUDIT RESULTS 



We found that PRDE did not comply with Federal and State laws in procuring services and
awarding contracts to EIE and UPR-Cayey due to the existence of a conflict of interest between
the contractors and a PRDE official. Further, we found that PRDE did not ensure that contract
requirements were met prior to paying EIE and UPR/Cayey’s invoices. In our review of two
contracts, we identified questioned costs of $189,011 ($175,536 of excessive charges and
$13,475 of unsupported charges).

In its comments to the draft report, PRDE did not concur with our findings and requested that the
draft’s findings and recommendations be reconsidered. In response to PRDE’s comments, we
revised Finding No. 1 to exclude the conflict of interest finding related to the former Director of
OFA’s April 2002 notarization of EIE’s Corporate Annual Report to the PR Department of State,
which was done prior to her appointment as PRDE’s Director of OFA. However, PRDE did not
provide any additional information that would require a change to the conflict of interest finding
related to the former Under Director of OFA’s family relationship with the owner of EIE;
Finding No. 2; or any of the related recommendations. PRDE’s comments are summarized after
the recommendations section of each finding. The full text of its comments to the draft report is
included as an Attachment to the report.




3
 According to the proposal, workshops consisted of 11 training sessions of four days and one training session of
two days to be provided to the students, with the objective of improving their Spanish language skills through the
use of photojournalism techniques.
Final Report
ED-OIG/A04H0011                                                                         Page 3 of 16

FINDING No. 1 – Conflict of Interest in the Procurement and Contracting Processes

A high level PRDE official had a conflict of interest when procuring services and awarding
contracts to EIE and UPR-Cayey during her tenure, until she resigned in July 2007. Specifically,
the former Under Director of OFA is the daughter of EIE’s owner. EIE’s owner was also a
faculty member of UPR-Cayey and, as such, acted as Project Director for contracts PRDE
awarded to UPR-Cayey related to proposals she submitted through the University. The conflict
of interest occurred because PRDE did not have an effective recusal process in place for
employees and contractors prior to participating in the procurement and administration of
contracts awarded with Federal funds once a conflicting situation was discovered. As a result of
the conflict of interest, PRDE did not comply with Federal and State laws in procuring services
and awarding contracts to EIE and UPR-Cayey and did not maintain independence in
contracting, which is necessary to instill contractors’ confidence in receiving an equal
opportunity to do business with PRDE. In December 2006, PRDE received a complaint from a
competing contractor alleging a serious conflict of interest and violations of the Government
Ethics Law regarding a UPR-Cayey proposal submitted by the former OFA Under Director’s
mother.

According to 34 CFR § 80.36(a) —

       When procuring property and services under a grant, a State will follow 

       the same policies and procedures it uses for procurements from its non-

       Federal funds. The State will ensure that every purchase order or other 

       contract includes any clauses required by Federal statutes and executive 

       orders and their implementing regulations. 


According to Article 6(A) of the Government of Puerto Rico Ethics Law —

       All public servants must avoid taking any action, whether or not 

       specifically prohibited by the Regulations that could result in or create the

       appearance of 

               ƒ     Using the powers of the position, or public funds or
                     property for private ends;
               ƒ     Giving preferential treatment to any person, without just
                     cause;
               ƒ     Impeding or hampering the governmental efficiency and
                     economy;
               ƒ     Losing complete independence or impartiality;
               ƒ     Making decisions outside the official channels;
               ƒ     Adversely affecting public confidence in the integrity and
                     honesty of government institutions; and
               ƒ     Promoting an official action without observing established
                     procedures.

In addition, Article 1.2(s) of the Government of Puerto Rico Ethics Law defines conflict of
interest as those situations in which the personal or economic interest of an employee or persons
related to him could be in conflict with the public interest. Accordingly, the relationship
Final Report
ED-OIG/A04H0011                                                                                        Page 4 of 16

between PRDE and the two entities (EIE and UPR-Cayey) violates Puerto Rico’s conflict of
interest laws, which is described in the Ethics Law as a situation that must be avoided.

During the period of August 2005 through August 2006, PRDE awarded six contracts to EIE and
UPR-Cayey totaling $1,478,783. Two of the contracts were awarded to EIE and four were
awarded to UPR-Cayey4 (including two amendments). Our review was limited to two contracts,
one with EIE and one with UPR-Cayey. We found that the former OFA Under Director
participated in the procurement and contracting processes for the EIE contract reviewed prior to
resigning from her position. Although we did not review the remaining four contracts, based on
our analysis of the position description detailing the responsibilities5 of the Under Director of
OFA, it appeared that she had, at a minimum, oversight in the administration of all six contracts.

Our review of two other project proposals6 – EIE’s proposal for School Transformation (ST), and
UPR-Cayey’s proposal for Systemic Initiative for School Transformation (SIST) with EIE’s
owner as Project Director – provides detail that demonstrates the level of the Under Director’s
involvement in procurement activities related to EIE’s and UPR-Cayey’s proposals submitted by
the OFA Under Director’s mother. We found that, despite the conflict of interest, the former
Under Director of OFA participated in the procurement process for both projects prior to her
resignation, including the coordination and administration of the evaluation process, and signing
procurement documents.

Specifically, after the EIE proposal for ST did not receive the minimum required score to be
considered for selection, PRDE canceled the project stating that the requirements established in
the Request for Proposal (RFP) needed to be modified. Six days after cancelling the project,
PRDE published a new RFP for the SIST project, essentially for the same project as the ST
proposal. This time, the former OFA Under Director’s mother submitted a proposal through
UPR-Cayey acting as Project Director, and her proposal was selected. However, in December
2006, PRDE received a complaint from a faculty member of UPR-Cayey, whose proposal had
not been selected. The complainant alleged a conflict of interest and violations of the Puerto
Rico Ethics Law in the procurement process.

In January 2007, in response to the PRDE Secretary’s request for an evaluation of the complaint,
the Puerto Rico Government Ethics Office (PRGEO) issued an opinion stating that although the
two contracting parties (PRDE and UPR-Cayey) were government entities, it was necessary for
the public servant and the agency to establish a method of recusal to avoid the appearance of
improper conduct. It also stated that the former OFA Under Director should be recused in
writing from every process in which UPR-Cayey and/or her mother were involved. Finally, in
regards to the contracts awarded to EIE, the PRGOE stated that it could not express an opinion
on events that had already taken place.7 Based on PRGEO’s opinion, PRDE sent a letter to the

4
  According to the documentation provided by PRDE, the mother of the OFA Under Director acted as Project
Director of the four contracts awarded to UPR-Cayey.
5
  The position description included responsibilities for directing, organizing, coordinating, and supervising the work
conducted by the OFA employees.
6
  These two proposals were not included in the six contracts awarded to EIE and UPR-Cayey, but rather were
submitted in response to PRDE’s solicitation (Request for Proposals) as part of the procurement process.
7
  The Secretary’s request for the PRGEO opinion mentioned that since 2002, the mother of the former Under
Director of OFA had been submitting proposals to PRDE, with two proposals having been approved and converted
to contracts while the former Under Director worked for PRDE.
Final Report
ED-OIG/A04H0011                                                                          Page 5 of 16

Chancellor of UPR-Cayey, stating that to avoid the appearance of improper conduct, the award
for the SIST project had been canceled.

The participation of employees, officers, and/or agents of the grantee or subgrantee in the
administration of the procurement and/or contracting process that could result in, or create the
appearance of a possible conflict of interest, can adversely affect the public confidence in the
integrity of government institutions. In addition, the conflict of interest reported in this finding
may have resulted in special considerations given to EIE’s and UPR-Cayey’s proposals and the
excessive charges detailed in Finding No. 2.

Recommendations

We recommend that the Assistant Secretary for Elementary and Secondary Education require
PRDE to —

1.1	   Establish an effective method for employees and contractors to ensure their independence
       prior to participating in the procurement and administration of contracts awarded with
       Federal funds;

1.2	   Establish an effective recusal process for when a conflict of interest is discovered;

1.3	   Establish an effective monitoring process to ensure that the processes established for
       independence and recusal are followed; and

1.4	   Determine whether a conflict of interest existed in the procurement and administration of
       the remaining contracts with EIE and UPR-Cayey; and ensure that PRDE made no
       improper payments on those contracts.

PRDE’s Comments

PRDE did not concur with our finding. In its comments to the draft report, PRDE stated that
although the former Director of OFA notarized EIE’s Corporate Annual Report to the
Department of State in 2002, she never served as EIE’s attorney. According to PRDE, notarizing
a document several years prior does not rise to the level of creating a conflict of interest.
Accordingly, any allegations regarding the former Director of OFA’s involvement in procuring
services and awarding contracts to EIE and UPR-Cayey should be reconsidered and withdrawn.
As for the former Under Director of OFA, while PRDE recognized the potential for the
appearance of a conflict of interest due to her family relationship with the Executive Director of
EIE (also a UPR-Cayey faculty member), PRDE stated that the specific acts she may have been
involved with under the ST and SISTS projects would not create a conflict of interest. PRDE
pointed out that at early stages in preparing and issuing an RFP, it is unknown who the bidders
will be, so a conflict of interest cannot arise at that time.

PRDE stated that while it disagreed with the finding, it takes concerns of conflict of interest in
contracting extremely seriously. As such, PRDE agreed with our recommendations and stated
that it is willing to review its current procedures to ensure it has an effective method for
Final Report
ED-OIG/A04H0011                                                                                      Page 6 of 16

employees and contractors to ensure their independence prior to participating in the procurement
and administration of contracts awarded with Federal funds.

OIG’s Response

PRDE is correct that the former Director signed EIE’s Corporate Annual Report as a notary prior
to her appointment as PRDE’s Director of OFA and we revised the finding accordingly.
However, a conflict of interest remained with the Under Director of OFA and, therefore, we did
not change our recommendations. The participation of the former Under Director of OFA in the
coordination and administration of the procurement processes for the ST and SISTS projects may
have resulted in special considerations given to EIE’s and UPR-Cayey’s proposals. Although we
found that on August 3, 2005, the former Under Director sent a letter to the former Director
recusing herself from participating and signing documents related to projects in which UPR-
Cayey was involved, this recusal process was not enforced. PRDE did not submit documentation
for a recusal from the former Under Director for projects related to EIE until the December 2006
complaint8 was formally submitted. In response to the complaint, the PRGEO indicated that the
former Under Director should recuse herself from every process in which her mother was
involved.

As detailed in Finding No. 1, the former Under Director was informed of the RFP status for both
the ST and SIST projects. During the RFP conducted for the ST project, she was informed of the
RFP results, which included EIE’s proposal submitted by her mother. In addition, the former
Under Director signed the ST project cancellation letters sent to the bidders, including EIE, on
behalf of the former Director. The cancellation letters also announced that a new RFP would be
published. When the new RFP was published, the mother of the former Under Director
submitted a proposal as Project Director through UPR-Cayey. According to the documentation
we obtained, the former Under Director actively participated in the administration and
coordination of the evaluation process of the SIST project until the complaint was formally
submitted to PRDE. Such involvement constitutes a direct violation of Puerto Rico’s own
conflict of interest laws as described in the Government of Puerto Rico Ethics Law.


FINDING No. 2 – PRDE Lacked Controls in Administering Contracts


PRDE did not have adequate controls to enforce compliance with contract requirements and
Federal regulations; and, therefore, did not adequately administer contracts awarded to EIE and
UPR-Cayey. In the two contracts we reviewed, we found that PRDE paid $189,011 in excessive
and unsupported charges – $166,575 related to the contract with EIE and $22,436 related to the
contract with UPR-Cayey. For the period of our review, PRDE paid $175,536 in excessive
charges and $13,475 in unsupported charges. Payments were made on these contracts without
ensuring that the contractors met the deliverable requirements of the contracts, or submitted
proper and reliable supporting documentation for costs claimed.




8
 The complaint alleged a conflict of interest and violations of the Puerto Rico Ethics Law in the procurement
process for the SIST project.
Final Report
ED-OIG/A04H0011                                                                                        Page 7 of 16

We reviewed payments PRDE made on the two contracts9 totaling $641,649.10 Table 2.1 shows
the amount of questioned costs, including excessive and unsupported charges PRDE paid to EIE
and UPR-Cayey under both contracts. Although Table 2.1 shows as paid the second invoice
submitted by UPR-Cayey in the amount of $44,349, our review was limited to payments made as
of August 29, 2007,11 with the exception of a limited review conducted for EIE’s third invoice in
the amount of $219,767.

Table 2.1          Questioned Costs, Excessive Charges and Unsupported Charges
                                                                                                             Total
                                                              Excessive            Unsupported           Questioned
     Contractor          Invoices          Payments            Charges                Charges               Costs


                      (1) $139,700          $139,700                $47,250                  $4,550           $51,800


    EIE               (2) $176,933          $176,933                $47,833                  $8,775           $56,608

                                                                                             Not              $58,167
                      (3) $219,767          $219,767                $58,167
                                                                                       Reviewed12

    UPR-Cayey         (1) $105,249          $105,249                $22,286                    $150           $22,436


                      (2) $ 44,349           $44,349 Not Reviewed13                 Not Reviewed                 $0.00


    Total                   $685,998        $685,998               $175,536                $13,475          $189,011


According to 34 CFR § 76.702, “A State and subgrantee shall use fiscal control and fund
accounting procedures that insure proper disbursement of and accounting for Federal funds.” In
addition, 34 CFR § 80.20(b)(3) provide that “Effective control and accountability must be
maintained for all grant and subgrant cash . . . .” Further, 34 CFR § 80.20(b)(6) states that,
“Accounting records must be supported by such source documentation as cancelled checks, paid
bills, payrolls, time and attendance records, contract, subgrant award documents, etc.” Finally,
9
  The total of the two contracts was $697,330 ($542,800 on the EIE contract, and $154,530 on the UPR-Cayey
contract).
10
    Amount shown indicates the full amount of the invoices processed for payment before the appropriate
deductions.
11
    As of August 29, 2007, UPR-Cayey’s invoice in the amount of $44,349 and EIE’s third invoice had not been
paid. As of November 2007, the two invoices had been processed for payment.
12
   We reviewed the total payments made as of August 29, 2007 and conducted a limited review of EIE’s third
invoice that was processed for payment in October 2007. As of November 2007, PRDE had paid $536,400 for the
three EIE invoices. However, our review was limited to the charges for the workshops in the third invoice to
determine the overall impact of the contractor’s change in the billing rate from the contracted rate. The third invoice
in the amount of $219,767 included $5,600 billed for professional services and $214,167 billed for workshops
offered.
13
   Invoice not audited.
Final Report
ED-OIG/A04H0011                                                                                     Page 8 of 16

Clauses 11 and 12 of the contracts established that payments would be made once the invoices
were properly certified and their corresponding documentation, such as quotes, purchase orders,
invoices, cancelled checks, attendance rosters, training materials, and progress reports, were
received by PRDE.

EIE’s Contract

EIE did not provide contracted services according to the contract terms. According to the
proposal, EIE would provide a total of 396 workshops to 33 schools (12 workshops per school)
billed at a rate of $1,300 per workshop, for a total of $514,800 for training. We found that EIE
billed PRDE a total of $514,000 for training in three invoices for 279 workshops to 24 schools14
at a rate of approximately $2,040 per workshop on the first invoice, and $1,785 per workshop on
both the second and third invoices, instead of billing at the rate of $1,300 provided in the
contract. As a result, the three invoices reviewed included excessive charges of $153,250 —
$47,250 in the first invoice, $47,833 in the second, and $58,167 in the third. In addition, EIE’s
first two invoices included billing errors of $1,950 and unsupported costs of $13,325.

All three invoices EIE submitted to PRDE were confusing, and the method used by EIE to arrive
at the rate per workshop was not adequately documented. As such, PRDE paid the contractor
what was billed without adequate information/documentation to understand what the charges
included. We found that, by changing the method of calculating the rate per workshop, the
contractor ensured it would receive almost the entire contracted amount for workshops without
providing the full level of required services to the total number of schools included in the
contract – 396 workshops to 33 schools. The following paragraphs detail the $166,575 in
excessive and unsupported charges we found in our review of the two invoices PRDE had paid to
EIE as of August 29, 2007, and the charges for the workshops EIE billed on the third invoice it
had submitted to PRDE as of that date, but PRDE had not paid.

        Invoice One

        Excessive Charges of $47,250

On the first invoice, EIE billed PRDE $139,700 ($11,200 for professional services and $128,500
for workshops). We determined that the $11,200 billed for professional services was in
accordance with the contract terms. However, the $128,500 billed for workshops was excessive
because EIE billed at the increased rate of $2,040 per workshop, instead of the contracted rate of
$1,300.

The $128,500 billed for workshops on the first invoice consisted of 63 workshops provided to 21
schools at the increased rate of $2,040 per workshop. We determined that based on the
contracted rate of $1,300 per workshop, EIE should have billed PRDE $81,900 for the 63
workshops provided to the 21 schools (63 x $1,300). As a result, EIE’s invoice included
excessive charges of $46,600 ($128,500 invoiced - $81,900 contracted rate).

We also found that EIE did not provide workshops to the students of the Barinas School on
September 19 and 25, 2005, due to administrative work being done at the school. However, EIE

14
  The first invoice included the workshops at 21 schools, the second added 3 more schools, and the third included
the schools from both the first and the second invoice for a total of 24 schools served.
Final Report
ED-OIG/A04H0011                                                                                  Page 9 of 16

billed PRDE for those two days, resulting in additional excessive charges of $65015 for
workshops that were not provided.

        Unsupported Charges of $4,550

The supporting documentation EIE submitted to PRDE with the first invoice did not include
evidence of attendance rosters for three workshops offered at the Inés María Mendoza school.
As a result, EIE’s invoice included $3,900 (3 x $1,300) in unsupported charges for those three
workshops. In addition, EIE did not submit evidence for two days of workshops, one offered at
the Jorge Lucas Valdivieso school and another at the Ramón Alejandro Ayala school, resulting
in additional unsupported charges of $650 for those workshops.

        Invoice Two

        Excessive Charges of $47,833

On the second invoice, EIE billed PRDE $176,933 ($5,600 for professional services and
$171,333 for workshops). We determined that the $5,600 billed for professional services was in
accordance with the contract terms. However, the $171,333 billed for workshops was excessive
because EIE billed at the increased rate of $1,785 per workshop, instead of the contracted rate of
$1,300.

The $171,333 billed for workshops on the second invoice consisted of 96 workshops provided to
24 schools at the increased rate of $1,785. We determined that based on the contracted rate of
$1,300 per workshop, EIE should have billed PRDE $124,800 for the 96 workshops offered to
the 24 schools (96 x $1,300). As a result, EIE’s invoice included excessive charges of $46,533
($171,333 invoiced - $124,800 contracted rate).

We also found that EIE did not provide workshops to the students of the Henry Longfellow,
David Antongiorgi, Benigno Fernández, and Federico Degetau schools on October 4, 5, 11, and
16, 2005, due to administrative work being done at the schools. However, EIE billed PRDE for
those four days, resulting in additional excessive charges of $1,300 for workshops that were not
provided.

        Unsupported Charges of $8,775

We found that the supporting documentation EIE submitted to PRDE did not include evidence of
attendance rosters for six workshops (one offered at the Hipólito García school, one offered at
the Ramón Alejandro Ayala school, and four offered at the Vicente Palés Anes school). This
resulted in unsupported charges paid for workshops of $7,800 (6 x $1,300). In addition, EIE did
not submit evidence for three days of workshops offered at the Intermedia Urbana Salinas,
Jagueyes, and Hipólito García schools, resulting in additional unsupported charges of $975.




15
  The workshops lasted four days each. We estimated the cost of each workshop day to be $325, based on the
proposed rate of $1,300 per workshop and the four days duration of each workshop ($1,300 / 4 = $325).
Final Report
ED-OIG/A04H0011                                                                                  Page 10 of 16

        Invoice Three

        Excessive Charges of $58,167

On the third invoice, EIE billed PRDE $214,167 for workshops. This amount was excessive
because EIE billed at the increased rate of $1,785 per workshop instead of the contracted rate of
$1,300. The $214,167 billed for workshops on the third invoice consisted of 120 workshops
offered to 24 schools at the increased rate of $1,785. We determined that based on the
contracted rate of $1,300 per workshop, EIE should have billed PRDE $156,000 for the 120
workshops offered to the 24 schools (120 x $1,300). As a result, EIE’s invoice included
excessive charges of $58,167 ($214,167 invoiced - $156,000 contracted rate).

UPR-Cayey’s Contract

UPR-Cayey submitted to PRDE two invoices, one in the amount of $105,249, and one in the
amount of $44,349.16 As of October 2007, PRDE had paid the two invoices submitted.
However, our review was limited to the payment made as of August 29, 2007 in the amount of
$105,249. During our review we found $22,436 in questioned costs related to four items on the
first invoice PRDE paid to UPR-Cayey, as detailed in the following table.

Table 2.2                       Questioned Costs on UPR-Cayey’s Invoice
                             Questioned           Excessive                             Unsupported
        Item                   Costs               Charges                               Charges
Workshops                         $16,800                   $16,800                                      $ 0
Lunches                               338                       338                                         0
Training Materials                     48                        48                                         0
Stipends                            5,250                     5,100                                       150
Total                             $22,436                  $ 22,286                                      $150

        Excessive Charges of $22,286

According to the proposal, UPR-Cayey would bill PRDE for 64 workshops at $60 per
participant. UPR-Cayey billed PRDE $69,000 for 1,150 participants who attended 46 workshops
(1,150 participants at $60 per participant). The supporting documentation we reviewed showed
that only 870 participants attended the 46 workshops. As a result, UPR-Cayey should have
billed PRDE $52,200 for workshops (870 participants at $60 per participant). The overstatement
of 280 participants on the invoice resulted in excessive charges paid for workshops of $16,800
($69,000 invoiced - $52,200 actual costs).

According to the proposal, UPR-Cayey would bill PRDE lunch expenses17 at $8 per participant.
UPR-Cayey billed PRDE $3,906 for lunches served to 555 participants. We determined that this
amount was not based on the proposed rate of $8 per participant. In addition, the supporting
documentation we reviewed showed that 446 participants attended the morning sessions, not the
555 claimed by UPR-Cayey. As a result, UPR-Cayey should have billed PRDE $3,568 for

16
  As of August 29, 2007, this invoice had not been paid. 

17
   Based on the invoice submitted by UPR-Cayey, a total of 450 training manuals were provided to the participants

who attended the morning session of the workshops. Therefore, lunch expenses should have been invoiced based on

the 450 participants and not the 555.

Final Report
ED-OIG/A04H0011                                                                     Page 11 of 16

lunches (446 x $8). The overstatement of 109 participants on the invoice resulted in excessive
charges paid for lunches of $338 ($3,906 invoiced - $3,568 actual costs).

According to the proposal, UPR-Cayey would bill PRDE for training manuals at $23.75 each.
Our review disclosed that UPR-Cayey invoiced PRDE $10,688 for 450 training manuals, but
according to the documentation provided, only 448 were distributed. As a result, UPR-Cayey
should have billed PRDE $10,640 for the 448 training manuals (448 manuals at $23.75 each).
The overstatement of two training manuals on the invoice resulted in excessive charges paid for
training materials of $48 ($10,688 invoiced - $10,640 actual costs).

The proposal established that UPR-Cayey would pay teachers a stipend of $25 for each
workshop they attended on Saturdays. According to the supporting documentation, UPR-Cayey
issued checks to 74 participants totaling $6,350, but billed PRDE $6,300 ($50 less than the
documentation supported). We found that as of May 16, 2006, when the invoice was submitted
to PRDE for payment, UPR-Cayey had not disbursed any of the checks, although copies of the
checks18 were submitted as proof of the expense incurred. On August 3, 2007, we visited UPR-
Cayey to review the documentation and found that of the 74 checks that had been issued, only
14, totaling $1,200, had been disbursed, and two in the amount of $200 ($100 each) had been
claimed twice. The remaining 58 checks, totaling $4,950, had not been disbursed. According to
a UPR-Cayey official, the remaining 58 checks had not been disbursed because they had not
been able to locate the teachers. The official also stated that the 58 checks that had not been
disbursed had not expired, although the institution’s policy was to cancel all checks that had not
been disbursed within three months of being issued. Since UPR-Cayey had not disbursed the
funds for 58 of the participants, it should not have invoiced PRDE for that expense, nor for the
two checks claimed twice. As a result, UPR-Cayey’s invoice included excessive charges, and
PRDE paid $5,100 in excess of what should have been paid for stipends ($6,300 invoiced –
$1,200 actual costs).

           Unsupported Charges of $150

We found that for 3 of the 14 checks that had been disbursed, there was no evidence showing
that the teachers had attended the workshops. The three checks included attendance to more than
one workshop (participants were to be paid $25 per workshop). As a result, we determined that
PRDE paid UPR-Cayey $150 in unsupported charges for stipends.

General Noncompliance with Contract Requirements

During our review, we noted that the attendance rosters submitted by EIE as supporting
documentation had the following deficiencies.




18
     Copies of the front of the 74 checks were submitted.
Final Report
ED-OIG/A04H0011                                                                      Page 12 of 16

    •	 None of the attendance rosters included the proper legal citation of the Federal program
       funding the project. The attendance rosters had written on the header “Promoted by Title
       IV, Part A,” when the project was being funded with Title V funds. In addition, the
       attendance rosters with the EIE logo did not include PRDE’s name. According to Clause
       24 of the contract, all written documentation prepared as part of the project had to have
       the name of the Federal program funding the project, as well as PRDE’s name.

    •	 The teachers’ roll books were used as attendance rosters for some of the workshops,
       instead of an original document from EIE.

    •	 Some of the attendance rosters were not certified by the person who offered the workshop.

    •	 None of the attendance rosters included the name of the workshop offered. In addition,
       for one school where EIE claimed that a workshop was offered, the attendance roster
       included only the names of the students who attended the workshop. It did not include
       the company’s logo, the signature of the certifying official, the name of the school, or the
       name of the person who offered the workshop.

During our review, we noted that the attendance rosters submitted by UPR-Cayey as supporting
documentation had the following deficiencies.

    •	 The attendance rosters did not include the date workshops were conducted; instead they
       were identified as AM and PM sessions.

    •	 The invoice submitted and its supporting documentation were confusing and inconsistent.
       The documentation submitted showed participants attending more than one workshop on
       the same day and time. UPR-Cayey submitted with the first invoice attendance rosters
       for the following Saturdays – September 3, 10, 17 and 24. A total of eight workshops
       were offered each of the four Saturdays, and each attendance roster submitted showed the
       same participants attending all eight workshops.

    •	 An appropriate official was not certifying attendance rosters to determine if the 

       information provided was relevant and sufficient to support the services provided. 


Recommendations

We recommend that the Assistant Secretary for Elementary and Secondary Education require
PRDE to —

2.1	   Return to the Department $175,536 in excessive charges paid;

2.2	   Return to the Department $13,475 in unsupported charges paid, or provide supporting
       documentation for the unsupported charges;

2.3	   Review the second UPR-Cayey invoice and ensure that the payment was made based on
       the contracted rate;
Final Report
ED-OIG/A04H0011                                                                      Page 13 of 16

2.4	    Establish adequate controls to ensure compliance with contract requirements and Federal
        regulations, and ensure that payments are made only after
           •	 Proper documentation is obtained from contractors; and
           •	 Supervisory review and approval of payments and supporting documentation is
                conducted;

2.5 	   Provide training and continuously monitor the staff responsible for overseeing the
        administration of contracts to ensure that they are capable and qualified to administer the
        Department’s programs; and

2.6 	   Instruct its Internal Audit Division to audit the remaining contracts awarded to EIE and
        UPR-Cayey.

PRDE’s Comments

PRDE did not concur with our finding. In its comments, PRDE stated that it had not had the
opportunity to complete its review of the payments made under the EIE contract, but that it had
determined that the proposed terms of the contract included a total of $514,800 for 12
workshops, which would be offered to a variety of groups of varying sizes. In addition, PRDE
stated that the invoice clearly supported that EIE offered the 12 workshops and did not bill
PRDE above the amount allotted under the contract for the 12 workshops.

Regarding UPR-Cayey’s contract, PRDE stated that the draft misinterpreted the proposal’s terms
related to workshop costs. According to PRDE, the proposal charted the costs for the workshops
to be offered under the contract at a total cost of $12,000 and, while the proposal may have
included details based on the contractor’s projections for arriving at this cost, the proposal’s
terms clearly listed the “total cost” for each workshop series at $12,000.

For meal costs (lunch expenses), PRDE stated that the draft claimed excessive charges based on
the number of participants who attended the morning sessions of workshops, as opposed to the
total number of participants attending workshops on a given day. The proposal’s terms allowed
for a total of $4,800 in lunch expenses, which was based on participant projections, averaged out
to $8 per participant. PRDE added that the draft failed to address a Program Change–
Justification for Transfer of Funds form that UPR-Cayey submitted, which PRDE approved
allowing for an additional $1,508 to be used for lunch expenses.

For training manuals, PRDE stated that it was not clear as to what documentation the draft was
pointing to, or the reasons that existed to question the $48 in manual costs.

Regarding stipends, PRDE stated that it had not yet had the opportunity to conduct a thorough
review of the questioned costs related to stipends. PRDE added that it was going to work with
UPR-Cayey to review the questioned costs and ensure that any excessive or unsupported charges
related to stipends under the contract were returned.
Final Report
ED-OIG/A04H0011                                                                     Page 14 of 16

OIG’s Response

We considered PRDE’s comments, but there was no additional information provided that would
warrant a change to our finding or recommendations. Regarding EIE’s contract, we maintain
that EIE did not provide contracted services according to the contract terms. All three invoices
EIE submitted to PRDE were confusing, and the method used by EIE to arrive at the rate per
workshop was not adequately documented. As such, PRDE paid the contractor what was billed
without adequate information/documentation to understand what the charges included.

Regarding UPR-Cayey’s contract, we agree with PRDE’s statement that the proposal included
details based on the contractor’s projections for arriving at the cost per workshop. However, as
stated in the finding, the proposal established the cost for the workshops based on a rate per
participant and not on a “total cost” per workshop series.

For lunch expenses, PRDE did not provide any documentation to support a change to our finding
or recommendations. We maintain that a contract was signed based on the costs proposed by
UPR-Cayey in the proposal of $8 per participant for meals. The workshops consisted of morning
and afternoon sessions and, according to the attendance rosters submitted by UPR-Cayey as
supporting documentation, not all participants attended the entire day of training. In addition,
the Program Change–Justification for Transfer of Funds form that UPR-Cayey submitted to
PRDE was included as part of the supporting documentation for expenses incurred under the
second invoice, not for the invoice we reviewed. According to the documentation provided,
UPR-Cayey submitted two Justifications for Transfer of Funds, one dated May 30, 2006, and the
other dated June 9, 2006, eight days after the contract period expired. The contract period
expired on June 1, 2006.

Regarding training manuals, the attendance rosters submitted by UPR-Cayey as evidence to
document the distribution of training materials to the participants did not correspond to the
amount of training materials billed by UPR-Cayey in the first invoice.

Regarding stipends, as of May 16, 2006, when the invoice was submitted to PRDE for payment,
UPR-Cayey had not disbursed any of the checks, although copies of the checks were submitted
as proof of the expense incurred. As such, the questioned costs related to stipends remain the
same based on documentation provided by UPR-Cayey officials on August 3, 2007.




                 OBJECTIVES, SCOPE, AND METHODOLOGY 



Our audit objectives were to determine whether PRDE (1) followed Federal and State laws in
procuring services and awarding contracts to EIE and UPR-Cayey; and (2) ensured that contract
requirements were met prior to paying the contractors’ invoices.

To accomplish our audit objectives, we reviewed the process followed by PRDE-OFA in
procuring services under competitive proposals and awarding contracts to EIE and UPR-Cayey.
We randomly selected two contracts for detailed testing; one awarded to UPR-Cayey and one
Final Report
ED-OIG/A04H0011                                                                    Page 15 of 16

awarded to EIE. We also reviewed two project proposals, one submitted by EIE, and another
submitted by UPR-Cayey with EIE’s owner acting as Project Director. We reviewed the
procurement and contract award processes PRDE followed based on PR laws, PRDE-OFA’s
established guidelines, and pertinent Federal regulations. We also reviewed the participation of
the former PRDE-OFA Director and Under Director in the procurement and contract award
processes.

We interviewed officials from PRDE-OFA’s Proposal Unit, the Title II, Title V, and Spanish
Program Offices, school teachers, other PRDE officials, and participants of the services provided
under the contracts. We also reviewed supporting documentation to determine if PRDE followed
the established guidelines in procuring services and ensured that contract requirements were met
prior to paying the contractors’ submitted invoices.

To test compliance with contract requirements, we reviewed proposals submitted by the
contractors, the contracts awarded, invoices with supporting documentation, and payments made
to the contractors.

We reviewed four paid invoices under the two contracts – three from EIE, one for $139,700, one
for $176,933, and one for $219,767; and one for UPR-Cayey for $105,249.

We selected random samples of participants who received services under the two contracts, to
determine if the services were provided according to the contract terms. Our samples consisted
of 25 teachers from a universe of 210 for UPR-Cayey’s contract and 10 schools from a universe
of 21 for EIE’s contract.

The scope of our audit was contract activities from September 1, 2004, through December 31,
2006. We performed our fieldwork at PRDE-OFA from May 29, 2007, through November 6,
2007, the date we held the exit conference with PRDE officials. Our audit was performed in
accordance with generally accepted government auditing standards appropriate to the scope of
the review described above.

We conducted this performance audit in accordance with generally accepted government
auditing standards. Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions
based on our audit objectives. We believe that the evidence obtained provides a reasonable basis
for our findings and conclusions based on our audit objectives.




                            ADMINISTRATIVE MATTERS



Statements that managerial practices need improvements, as well as other conclusions and
recommendations in this report, represent the opinion of the Office of Inspector General.
Determinations of corrective actions to be taken, including the recovery of funds, will be made
by the appropriate Department of Education officials in accordance with the General Education
Provisions Act.
Final Report
ED-OIG/A04H0011                                                                     Page 16 of 16

If you have any additional comments or information that you believe may have a bearing on the
resolution of this audit, you should send them directly to the following Education Department
official, who will consider them before taking final Departmental action on this audit:

                              Kerry L. Briggs
                              Assistant Secretary
                              Office of Elementary and Secondary Education
                              U.S. Department of Education
                              400 Maryland Avenue, SW
                              Washington, D.C. 20202

It is the policy of the U.S. Department of Education to expedite the resolution of audits by
initiating timely action on the findings and recommendations contained therein. Therefore,
receipt of your comments within 30 days would be appreciated.

In accordance with the Freedom of Information Act (5 U.S.C. § 552), reports issued by the
Office of Inspector General are available to members of the press and general public to the extent
information contained therein is not subject to exemptions in the Act.

                                             Sincerely,

                                             /s/
                                             Denise M. Wempe
                                             Regional Inspector General
                                             for Audit
                                                 Attachment




                               Pu erto Rico Departmellt
                               Puerto        Department of Educat
                                                               Edu catiion
                                                                        on
                         esponse
                        Respo nse to Dra
                                     Draft    uditt Re por
                                         ft A udi          t: ED"OlG/A
                                                       port:   D·OlG/A 04HO  OlI lI
                                                                         04HOO

                                             Submitted 10:
                                                        to:
                                           Denise M. Wempe
                                  Regional Inspector General for Audit
                                     U.S. Departmcnt of Education
                                      Ollice of Inspector Gcm:ral
                                      Officc              Gem:ral
                                     61 Forsyth SW, Room 18171
                                          Atlanta, GA 30303
                                        Denise. Wemp¥led.goY
                                                Wempe@ed.gov




         Thc Puerto Rico Department of Education ("PRDE") herein suhmiis  submits its response
                                                                                      resJXlnse to the
Uni ted
Unit C1l States Department of Education's Office oflheofthe Inspector General Draft Audit Report (the
"Dmft") entitled Puerto Rico Department a/Education's (PRDE's) Administration o/Contracts
"Draft")                                                                                     o/Colltracts
Awarded to Excellence ill               Inc. (EIE) alld the University 0/ Prlerto
                        in Education, Illc.                                 PI/erto Rico
                                                                                    Rico'':;s Cayey
Campus                         Dmfi includes two lindings.
Cumpus (UPR "· Cayey). The Draft                                                 conflict ofinlcrcsl
                                                     [indings. The lirst alleges eonflict   of intcrest in
the procurement and contrac
                      contractti ng processes
                                    processes,, lind the second alleges lack of controls in contrac
                                                                                               contractt
administration.

         I'RDE
         PRDE takes al1egalions
                      llegations of this nature very seriously and we have carefully reviewed the
                                      issue.. We are further undertaking a review of other
specific contracts and procedures at issue
cont
contracts
     racts referenced but not analyzed. Based on the results of our review to date, PRRDE
                                                                                        DE
respectfully disagrees with the Draft's findings and requests that the Draft's findings and
recommcndatiions he
recommendat        be reconsidered. Each finding is discussed
                                                      discllssed in tum.

    T.
    I.   Co nflict of In
         Conflict     Intte rest C on cernss
                                   oncern

          11Je
          l1Jc first finding
                     fi nding erroneous
                              erroneously
                                        ly claims that two high lcvcl
                                                                  level PRDE officia
                                                                               officialls had a contliet
                                                                                                conflict of
interest when procuring services and awarding contracts to ElE and UPR·Cayey UPR-Cayey during their
tenure within the PRDE Office
tcnurc                        Officc of
                                     ofFedcrai
                                        Federal Aff
                                                Affairs
                                                    airs ("OF A"). The conflict       intcr~ l allegations
                                                                          contlict of intercst
                            uversight and administration, a particular contract issued 10
regard general acts of oversight                                                             EIE entitled "I
                                                                                          \0 £IE
am !ItI Photojournalist, I Can Communicate Eff(..'Clivcly"
                                                Eflcctivcly" ("LAP"),
                                                               ("fAP"), and the
                                                                              Lhe procurement processes
lor
tor the School Tran      stormation ("ST") and Systemic Initiativ
                   Transformation                                                 Tran~tomlation
                                                           Initiativee tor School Transtomluti   on
("SIST") projects.
("SIST'')

         A. T he Officials
                 O fficials Alleged to Have Conflicts of In teres
                                                         Inter estt

                          official~ are the former
       The two identified officials         fonner Director of the OFA and the fonner Under
Director of the OFA
                OFA.. The mothe
                          motherr of the fomler Under Director of OF A is the Executive Director
                                                                                        Dircetor
ofEIE
of                                              several UPR-Cayey
   EIE and has served as a Project Director for several      "Cayey contracts with PRDE.
                                                                                   PRDB.
        The Draft a!Jeges that the fonner Dircr;tor of OF A had a confliCl ofinteresl based on the
mistaken assertion thai she had a business relationship with ElE by fonnerl y serving as EIE's
attorney. Although the fornler Direetcc of OF A notarized mE's Corporate Annual Report 10 the
PR Department of State in 2002, she nev!.,.r served as ElE's attorncy. Notarizing a document
several ycar~ prior doe~ not rise to the level of creating a conflict of interest. The Draft's basis
for alleging II contlict of interest between the former Director of OrA and ElE is simply
incorrect. Accordingly, any allegations regarding the former Director of OF A 's involvement in
procuring services and awarding contracts to EIE and UPR-Cayey should be reconsidercd and
withdrawn. Additionally, the Draft alleges that because the form.:.:r Under Director's mother was
project director on contracts awarded by PRDE there was a conflict of interest. While we
recogni ze the potential for the appearance of a conflict nf interest due to this family relationship,
we disagrec that there was any conflict of inlt:n:st present in this ca$e.

        B. The Acts Alleged to Involve Conflicts of Interest

       The Draft alleges conflicts of interest due to general acls of or participation in overs.ight
and administration of the procurement of contracts where EIE andlor UPR-Caycy competed for a
contract with PRDE. This finding spccifically addresses acts related to the lAP contract and the
ST and SIST projects.

        1. lAP

        The Draft mistakenly alleg;:s th,,-rc was a conflict of interest in thc procurement and
administration of the lAP contract. The alleged incidents of conflict of interest related to this
contract consist of benign acts removed from the evaluation an d selection proce.~s by an
individual who did not llaVe a connict of interest with the contractor, EIE. Specifically, the Draft
finds that

           ... the form er OFA Director participated ill the procurement and
           contracting processes ... Her participation included subm itting the
           evaluating panel's recommended Jist of vendors to PRDE's
           Secretary for approval, notifying EIE's President that the proposal
           had been approved, accepting EIE's propo~al modifications, and
           approving funds for the contract.

Draft, pp. 3-4.

        As e~tabl ishcd abovc, thc fonner Dinx.:tor of OF A did not havc a conflict ofintl'fCst with
EIE bccausc she had no relationship other than having notarized a document years before.
Moreover, even if she had had such a telationship that could constitute a confli ct of interest, the
allcged a,,1::1 arc min isterial and removed from the actual evaluation and selection processes.
None of the acts relate to the actual selection of ErE to be the contractor. Rather, the ciled acts
all OCCUlTed following the completely independent cvaluation and rccomm(..'Odation of EIE 10 win
the lAP contract. Because the former Director of OF A had no conflict o f interest with EIE and
because the alleged acts are removed from the evaluation and selection process, there was no
conflict of interest present in the lAP contract.



                                                                                                     2
       2. T he ST and SIST ProjectJ

        The Draft alleges that both the former Director and the fonner Under Director of OF A
panicipsted in the procurement plOCC:S3CS ofthc ST and SIST projec15 in a manner that may have
created a real or apparent conflict of interest. The Draft cites their participation in the
procurement process for both projttts prior to their resignation " including the coordination and
administnUion of the evaluation process, and signing procuremenl documents." As al read y
diSC\Wcd, the fonner Director of OF A had no conflict of interest with ElE or UPR-Cayey. As
for the (oTOlI:r Under Director, what specific acts she may have been involved in Wlder this
project Ihal would create II conflict of ml(:rcst arc unclear. At early stages of preparing and
issuing an RFP, it is unknown who the bidders wi!! be so It conflict cannot arisc at that time. Tnt
evaluBlion und selection process is th e part of the process wlu:rc a conflict could be most
dam agins. Howevcr neither of these individ LUd s was involved in any way in thut part o f the
process. Once selection has occurred, many if nOI most o f the rt.main in8 ucti ons urc ministerial
actions related to procurement and adminiSlr.!.ti on of contracts and would nol be such that would
create conflicts of interest. Contrary to the Draft's suggestions, the ST proposal Will withdrawn
and the SIST projoct was announced for legitimate reasons free of any connict of in terest.

         The Draft's elaim that the SIST project was "esscntially... the same project"as the S"I'
project is not an accurate portrayal While there may have been superficial similarities between
the two RfPs, there were important differences between the two proposals and these differences
caused PRDE to cancel the ST RFP     am      issue the SIST RFP . First, the ST project was for work
with schools that were in at least tbetr third year of school improvement. The 5 1ST project,
howevt:r, was to work with schools th~t were in at least their fourth year of school improvement.
·Ibis is a significant differencc. Under the relevantlllw, the No Child Left Behind Act, a school
in its thinl year of improvement Dlust implement certain specified corrective actions. I-lowcvCT,
if the school enters the following year of failing to meet its A YP I3rgets il must begin the
fC3truc,;turinS pr(>C4;:M, a much more far reaching overhaul of tbe school. Scwnd. the: SIST ru:p
targets successful bidders to work with ten schools in improvemenL ST, however, was less
specific saying each project would wolk with 8-10 schools. Overall, the SIST RFP Will far more
detailed in explanation and process of selection, a requirement for any good COnlmct
management. The SIST RFP was a much better RFl' for a project thaI superficially rtlScmbled
ST but WIl5 different in important material respects, as well as providin8 a higher level of
specifi city. And again, any involvement the fonller Director or Under Dircctor may havt had
with th ese projOCls did not include the cvaluntion or selection processes.

        Nonetheless, upon receipt o f a w mpllLi nt from II UPR-Coycy fllcu lty member whose
proposal for the S IST project had not been selccted, PROE took said complaint very serio usly.
Upon receipt of the complaint, PRDE Secretary of [!.dueation Rafael Aragundc immediately
requested a legal opinion fonn the Puerto Rico Oovcnuncnt Ethics Offiu(" PRGEO',) on the
matter. TIle fonner Under Director of OF A thereafter recused herself from participaling in
projects related 10 EIE and/or EIE's owner. The fonner Dircctor ofOFA immediatelynotificd
all OFA staff regard ing thc fonner Under Director', recusal and requested that staff immed iately
notify the Under Director as soon as it becomes apparent that any of these parties may be




                                                                                                   3
involved in anymattcr. And finally, PRDE chose \.0 tenninate the SIST contract with UPR-
Caycy in order to avoid any appearances of a conflict of interest.

        While there was no conflict ofintcrcst involvcd in thc ST and SIST projects, following
the complaint, PRDE took immediate actions to eliminate any possible appearance ofa conflict
of interest.

        c.   PRDE's Response to the Draft's Recommendatiolls under FiDding No. I

         Wh ile PRDE disagrees with the finding, PRDE takes concerns of conflict of interest in
contracting extremely seriously. As such, PRDE is willing to review its current procedures to
ensurc it ha~ an effective method for employees and contractors 10 ensure their indcp<:ndence
prior to participating in the procurement and administration of contracts awarded with Federal
Funds (Recommendation 1.1), an effective recusals process for when a conflict of interest is
discovered (Recommendation 1.2), and an effective monitoring process to ensure thai PRDE
made no improper payments on those contracts (Recommendation 1.3). In addition, PRDE is
will ing to review the remaining contracts addressed in Recommendation 1.410 detcnninc
whether a confl ict of interest occurred.

    II. C ontrols in Administering Contracts

        The auditors reviewed payrm.:nts PRDE made und!'"T two contracts--one with UPR-Cayey
and one with EIE. While PRDE has nDt yet completed its review of the paymt.:nts outlined in the
Draft, PROE has identified several significant errors with this finding. The payments questioned
under each contract are addressed in tum.

   A. Cont r act witb UPR-Ca yey

        The Draft questioned .;:osts under this coiltract within four scpurate categories;
workshops, meal costs, manuals, and ~tipends. As described below, FRDE disagrees with the
Draft's findings under each category.

        I.   Workshop Cost s

         PRDE djsagre~ with the Draft's findings regarding workshop costs under the UPR-
Cayey contract because the Draft mistakenly misinterprets the proposal terms relating to
workshop costs. The proposal charts the costs for tht;: workshops to be offered under the contract
at a total cost of$12,000 per workshop series. While the proposal may include details based on
the contractors projections for arriving al this cost, the proposal tenns clearly list the "tolal cost"
for each workshop series at $12,00Q. For e}l;ample, the proposal suggests Ihere will be 8
workshops per workshop series. This results in the value 01'$1 ,500 per workshop.

        In the invoice reviewed by the auditors, UPR-Cayey properly billed PRDE for workshop~
at the cost of $ 1,500 per workshop as established under the tenn~ of the proposal . The Dran
suggests the proposal terms required UPR-Cayey to bill PROE by participant. How the Dralt
comes to that conclusion is unclear.



                                                                                                      4
       2. Meal Custs

         Regarding meal costs, the Draft finds there to be excessive charges by looking at the
number of participants who attendcd the morning sessions of workshops as opposed to the total
numbcr of participants attending workshops on the given day. The proposal tcnns allowed for a
total of $4,800 in meal costs, which based on participant projections, averaged out to
$8/partidpant.

          The Draft fails to address a Program Changt>-Justificalion for Transfer of Funds fonn
tllal UPR-Cayey submitted and which PROE approved allowing for an additional $ 1,507.75
under the contract to be used for meal costs. In its justification, UPR-Cayey explained that they
w,:rc unable to find caterer.; in certain occasions who wcre ablc to mcet the $8/participant tar);\Cl
rale for supplying meals to workshop participants. This request and Justification was approved
in a k1tf..1" signed by the Title II-A Coordinator within OFA. As the charges in the invoice fall
within the amount appropriated for meal costs under thc contract, PRDE respectfu1Jy di~ab'Tees
with the Draft's finding of excessive charges

       3. Manual Costs

        Thc proposaltcrms for manual costs include a total of $14,250. This figure is reached by
the projection of needing 600 manuals at the cost of$23.75/manual. The Draft questions $48 in
manual costs on the grounds that UPR-Cayey billed PRDE for 450 manuals "but according to the
documentation provided, only 448 were distributed." It is unclear what documentation thc Draft
is pointing to or what reason exists to question the $48 charge.

       4. Stipends

        PRDE hll$not had the 0p}XIrtunity to conduct it thorough review of the questioned cosl~
related to stipends. PROE will work with UPR-Cayey to review the que~tioned costs relating to
stipends under this contract lind cnsure any cxeessive or unsupported charges related to stipends
under this contract are returned.

   B. Contract with EIE (lAP)

         PRDE has not yet hud thc opportunity to complete il~ review of the payments made under
tllis contracl. Whal PRDE has been able to detennine is that the proposal tenns of this contract
included a total of$514,800 for 12 workshops which would be offered to a variety of groups of
varying sizcs. What is clear from the invoice is lhllt EIE did in fact offer the 12 workshops and
did not bill PRDE above the amount allotted under the contract for the 12 workshops. As such,
PROE wou ld ask that the que.~lioning of costs under this contract be reconsidered as well.

   C. PRDE's Response to the Draft 's R ecommendations Under Finding No.2

      For the reasons c;>;plaincd above, PROE disugret:S with this finding and asks that the
recommendations be reconsidf..'Ted. Specifically, PRDE respectfully asks that all monctary



                                                                                                        5
recommendations (Reconunendations 2.1 and 2.2) be withdrawn. PRDE is requesting that its
irllemai Audit Offiee audit the remaimng contrads awarded to EIE and UPR-Caycy (as
suggested in Recommendation 2.6) as well as the second UPR-Cayey invoice (as suggested in
Recommendation 2.3).

   til . Conclusion

        In closing, PRDE respl.'Ctfu lly requests the Draft, its findings, and its rccQmmendations
be reconsidered. There was no conflict of interest in the selection or awarding o f the contracts
discussed therein. MurcoVl."I", whcn concerns of the appearance of a conflict ofintcrcst were
raised, PRDE immediately took swift and serious action in reviewing the siruation. PROE even
cancelled a contract in order to avoid any appearance of a conflict of interest. In regards to the
~ecomllinding, the monl.iary findings rcgarding the two contracts arc simply mistaken. For all
the reasons established herein, PROE respectfully requests the reconsideration of the Draft in
whole.




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