2021 Economic Outlook

December 2020 Public Meeting - Update from Executive Director

2 December 2020 Public Meeting - Update from Executive Director Various forecasts suggest a partial recovery in 2021 for US, Latin America, and the Caribbean

Forecasts US and Latin America Outlook

• A wide variety of forecasts have been Outlook for US and Latin America & the Caribbean produced by international organizations (Real GDP Annual % Change) 2020 & 2021 such as the UN, World Bank, and IMF.

3.9% 4.0% 3.6% 3.1% 3.1% • Most forecasts suggest US, Latin 2.8% America, and the Caribbean will see some recovery in 2021.

• However, none expect a swift and complete recovery. Expected growth rates in 2021 -4.3% would not return these economies -4.8% -5.4% to their Pre-pandemic levels. -6.1%

-7.2% -8.1%

UN (May 2020) WB (Jun 20) IMF (Oct 20) UN (May 2020) WB (Jun 20) IMF (Oct 20) 2020 2021

Latin America and the Caribbean US

3 December 2020 Public Meeting - Update from Executive Director

July CBO forecast suggested a stronger US recovery; however, this was produced prior to rise in confirmed cases

CBO Forecast US Real GDP

• The Certified Fiscal Plan uses the CBO’s forecast as an input in its macroeconomic projections. US Real GDP Annual % Change • Under the assumption that growth in the US economy is one of several 4.0% factors that impacts growth in the PR 2.8% economy.

• The 2020 CFP used the CBO’s April forecast. However, since then CBO has released multiple updates.

• The latest update suggests a stronger -5.6% -5.8% recovery in 2021. • However, this forecast was CBO April CBO July produced prior to the latest rise in 2020 2021 deaths per day of close to 3,000.

• The next CBO release is in January.

4 December 2020 Public Meeting - Update from Executive Director

2020 Certified Fiscal Plan Forecast

Fiscal Plan Forecast Puerto Rico Real GNP and EDB Economic Activity Index

Puerto Rico Real GNP Growth Rate

• The Fiscal Plan’s baseline scenario FY20 FY21 FY20 FY21 assumed that the pandemic would recede 0.5% during the second half of 2020 and continue a modest recovery into 2021.

• The Fiscal Plan’s downside scenario was -3.4% intended to reflect the possibility of the virus -4.0% not receding during this period, which might -5.8% be accompanied with additional restrictions or Baseline Downside lockdowns. Puerto Rico EDB Economic Activity Index, Jan. 2019 – Sept. 2020

• The economy has shown some signs of recovery starting in July, though as of September we were still below Pre-pandemic levels (-6% relative to January).

• The absence of additional federal stimulus, combined with the recent spike in cases and additional restrictions, suggest a slower pace of recovery may already be underway.

5 December 2020 Public Meeting - Update from Executive Director

Inflation expected to remain low

Low Inflation Fiscal Plan Inflation Forecast

• In line with the reduction in economic activity, the Annual Puerto Rico Inflation Rate expectation is that prices 1.2% will remain relatively low. 1.1% 1.0% 1.0% • Fiscal Year 2020 closed

with a 0% inflation rate. 0.8%

• The Fiscal Plan forecast 0.6% expects inflation to remain 0.4% close to zero in FY2021 0.3% (0.3%). 0.2% • Fiscal Years 2022 & 2023, 0.0% are expected to continue 2021 2022 2023 seeing low inflation of ~1%.

6 December 2020 Public Meeting - Update from Executive Director

Uncertainty in the short term

Uncertainty Puerto Rico Real GDP • The key takeaway is that the short term is characterized by much uncertainty. Puerto Rico Real GNP Growth Rate • However, the Fiscal Plan’s baseline and downside scenarios still provide a good sense of the range of possibilities. FY20 FY21 FY20 FY21 0.5% • A variety of factors may push the economy anywhere within this range, including:

• Availability of vaccines for general population and effectiveness of distribution logistics. -3.4% -4.0% • Whether there is incremental federal stimulus approved in Congress. -5.8% • Citizen cooperation with CDC- guidelines and the government’s Baseline Downside Executive Order

• Extent of scarring in the Puerto Rican economy

7 December 2020 Public Meeting - Update from Executive Director Potential scarring in the Puerto Rican economy; particularly on its youth

“The COVID-19 pandemic will likely leave deep scars on productivity and output via a dislocation of labor, a tightening of credit.” -Alistair Dieppe, World Bank.

“Beyond its short-term impact, deep recessions triggered by the pandemic are likely to leave lasting scars through multiple channels, including lower investment, erosion of the human capital of the unemployed, and a retreat from global trade and supply linkages.” –World Bank Report Taking Stock, July 2020

“Evidence from past business cycles indicates that those who enter the labor market during downturns are “scarred” for many years thereafter, with lower employment and wages than similar individuals from cohorts that entered at better times” -Jesse Rothstein, UC Berkeley, NBER,

8 December 2020 Public Meeting - Update from Executive Director

Slower job recovery in key sectors in Puerto Rico suggests deeper scarring

∑ On average, the job recovery for Puerto Rico has been slower than for the mainland United States ∑ In Puerto Rico, 46% of the jobs lost in April were recovered by October, compared to 67% in the United States. ∑ Leisure and hospitality is one of the hardest hit sectors in Puerto Rico, with 43% of employment lost in April (~35,000 jobs). Roughly 41% of the lost jobs were recovered by October. During the same timeframe, the US has recovered about 67% of lost jobs. ∑ Trade, transportation, and utilities lost about 42,000 jobs in April and recovered 69% of these by October. This compares to a recovery of 82% of the lost jobs in the mainland U.S. ∑ Construction lost about 10,000 jobs in April and recovered 54% of the jobs by October. This compares to 126% recovery in the mainland United States. ∑ The Puerto Rico Restaurant Association’s (ASORE) internal surveys and estimates suggest 25% of restaurants will permanently close due to the pandemic, which may represent the loss of up to 30,000 jobs 1

Change in employment (non-farm) in Puerto Rico, March 2020 – October 2020 Change in employment (non-farm) in US, March 2020 – October 2020 (in 000s, not seasonally adjusted) (in 000s, not seasonally adjusted)

Source: Bureau of Labor Statistics (BLS) Note: Lost jobs are calculated by subtracting the employment level in April from that in March 2020. ‘*’ For the government industry in Puerto Rico, lost jobs are calculated by subtracting the employment level in June from that in March 2020. Data are counts of jobs by place of work. All data are considered preliminary according to the BLS. The employment estimates are subject to survey error. Data for US are calculated by taking the sum of employment for all states as provided in the state employment and unemployment data. Mining and logging is combined with construction for Delaware, District of Columbia, Virgin Islands and Hawaii.

1. https://www.elnuevodia.com/negocios/empresas-comercios/notas/restaurantes-piden-al-gobierno-abrir-los-salones-comedores-los-domingos/

9 December 2020 Public Meeting - Update from Executive Director

Younger workers were in a more vulnerable position prior to pandemic

Impact in Young Workers Unemployment by Age Groups

• Unemployment is structurally higher for younger workers in Puerto Rico. Unemployment Rate by Age (January 2020) • Yet percentage of population 40.00% (25 or above) with a bachelor's 35.80% 35.00% degree or higher increased from 21% in 2010 to 26% in 2019 30.00% 27.10% (American Community Survey) 25.00%

20.00% • A higher proportion of younger 16.20% Puerto Ricans are seeking and 15.00%

obtaining college degrees but 10.00% 5.60% will face a labor market further 4% 4.40% weakened by the pandemic. 5.00% • Research shows this may 0.00% have long lasting impacts 16-19 20-24 25-34 35-44 45-54 55-64 in their career development and income. • This may also further accelerate outmigration of Puerto Rican youth.

10 December 2020 Public Meeting - Update from Executive Director

Long term prospect is a continuation of the economy’s secular decline

Puerto Rico EDB Economic Activity Index, Sept. 2003 – Sept. 2020 Long term 165.0

Expectations 155.0

145.0

• Despite the 135.0 uncertain short term, the long- 125.0 term prospect 115.0 Hurricane María COVID remains the 105.0 same for Puerto 95.0 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9

Rico: M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M M 3 4 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 0 0 0 1 1 1 2 2 2 3 3 3 4 4 4 5 5 5 6 6 6 7 7 7 8 8 8 9 9 9 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 • A shrinking economy and Annual Births, Deaths, and Natural Increase in Population, 2000 – 2019 population 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 -10,000 -20,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Births Deaths Natural Increase

11 December 2020 Public Meeting - Update from Executive Director

Long term prospect is a continuation of the economy’s secular decline

• This is also reflected in the Fiscal Plan’s long-term projections, which show deficits returning in the 2030s.

• There is still much that could be done to change this trajectory, such as: • Focusing on improving: • Ease of doing business, • K-12 education, • Energy Reliability, • Workforce Development, • Infrastructure

• Also, important to focus on institutional capacity issues (e.g., civil service reform) that may increase government effectiveness in implementing reforms.

12 December 2020 Public Meeting - Update from Executive Director

FOMB Ease of Doing Business Survey Responses Analysis December 18, 2020

SOURCE: FOMB, “EODB survey,” November 12, 2020

13 December 2020 Public Meeting - Update from Executive Director

Contents

Overview of Respondents

Impact of COVID-19

Ease of Doing Business

Experience with Specific Processes

Future Expectations

SOURCE: FOMB, “EODB survey,” November 12, 2020

14 December 2020 Public Meeting - Update from Executive Director

649 Businesses participated in FOMB’s recent Ease of Doing Business Survey, with particularly strong representation of LLCs

45%

28% 24% Corporate Structure

Limited liability companies Sole proprietorship Corporation Partnership

Executive Level

67%

Business Roles 19% 8% 6%

Majority owner Senior executive Middle-level executive Board member

SOURCE: FOMB, “EODB survey,” November 12, 2020

15 December 2020 Public Meeting - Update from Executive Director

551 Small businesses participated in FOMB’s recent Ease of Doing Business Survey, only 16% of respondents have sales over $10MM

40%

20% 19% Company Size 8% 8% 5%

$10,000,000- $0 $1-49,999 $50,000-999,999 $1,000,000-9,999,999 $50,000,000+ 49,999,999 2019 5% 20% 40% 19% 8% 8%

Professional, scientific, and technical services 29% Retail… 8% Manufacturing 8% Agriculture 7% Finance and insurance 6% Industry Health care and social assistance 6% Accommodation and food services 6% Construction 5% Wholesale trade 3% Others 21%

SOURCE: FOMB, “EODB survey,” November 12, 2020

16 December 2020 Public Meeting - Update from Executive Director

Contents

Overview of Respondents

Impact of COVID-19

Ease of Doing Business

Experience with Specific Processes

Future Expectations

SOURCE: FOMB, “EODB survey,” November 12, 2020

17 December 2020 Public Meeting - Update from Executive Director

Given its devastating effects around the world, we’d like to understand how the COVID-19 pandemic affected businesses

Due to COVID-19 your company or employer had to: 45%

After 22% COVID-19 20%

7% 6%

Workforce did not change Laid off employees Reduced work shifts Furloughed employees Hired employees

35%

23% Quality of 20% life after lockdown 13% March 16 6% 3%

Very low (1) Low (2) Somewhat Low (3) Somewhat high (4) High (5) Very high (6)

SOURCE: FOMB, “EODB survey,” November 12, 2020

18 December 2020 Public Meeting - Update from Executive Director

The COVID-19 pandemic direct impact on respondent businesses

Reduced demand for my business’s goods and services 57% Increased my business’s operating costs 48% The Required my business to shut down temporarily 44% COVID-19 Diminished my business’s access to key markets 33% pandemic Required my business to expand its digital footprint 30% has… Required my business to reduce its workforce 27% Not changed my business 7% Increased my sales 7% Opened a new business/division in my company 6% Expanded my business operations 5%

Financing (e.g. loans, grants) 50% A healthier climate (e.g. fewer COVID-19 cases, lower rate of infection) 45% Additional time to pay obligations (e.g. debts to suppliers, taxes) 33% To re-open Stronger Government health and safety support (e.g. additional health… 32% or recover, my Reduction in regulatory restrictions (e.g. to improve ability to trade with… 28% business Easing of stay-at-home orders and curfew to regain access to key consumers 25% needs… Re-design the logistic of my business to deliver my product to my customers 22% Technical expertise to help my business adjust (e.g. digitalization strategies) 20% Not applicable 13%

SOURCE: FOMB, “EODB survey,” November 12, 2020

19 December 2020 Public Meeting - Update from Executive Director

Impact on revenue after the pandemic lockdowns

Impact Revenues Average % of revenues by Industry

Arts, entertainment, and recreation 18.42% Accommodation and food services 28.38% Public administration 31.25% Educational services 46.05% Agriculture 48.86% Real estate rental and leasing 51.56% Utilities 52.94% Management of companies and enterprises 63.33% Professional, scientific, and technical services 64.53% Retail trade 64.90% Health care and social assistance 67.11% Administrative, support, waste management, and remediation services 67.19% Information 69.12% Finance and insurance 75.60% Construction 76.43% Transportation and warehousing 79.17% Manufacturing 84.80% Mining 87.50% Wholesale trade 90.91% Criteria: 100% (Total Closure), 75% (Considerable reduction), 50% (Medium reduction, 25% (Slight reduction), 0% (No impact on revenues), 125% (slight increase), 150% (medium increase), 175% + (Considerable increase) SOURCE: FOMB, “EODB survey,” November 12, 2020

SOURCE: FOMB, “EODB survey,” November 12, 2020

20 December 2020 Public Meeting - Update from Executive Director

503 Respondents needed or requested services from a Commonwealth agency in the last six months

Economic Development and Commerce 31% Treasury 30% Labor and Human Resources 29% Permits Office 26% Government Transportation and Public Works 16% Agencies Property Register Office 12% Health 11% State 11% Justice 6% Agriculture 6%

22%

16% 16%

10% Service 9% Experience 4%

Very bad (1) Bad (2) Somewhat bad (3) Somewhat good Good (5) Very good (6) (4)

SOURCE: FOMB, “EODB survey,” November 12, 2020

21 December 2020 Public Meeting - Update from Executive Director

Contents

Overview of Respondents

Impact of COVID-19

Ease of Doing Business

Experience with Specific Processes

Future Expectations

SOURCE: FOMB, “EODB survey,” November 12, 2020

22 December 2020 Public Meeting - Update from Executive Director

Essential factors that are more relevant

34%

26% Operating a 14% business in 12% Puerto Rico 6% 8% is currently:

Very easy (1) Easy (2) Somewhat easy Somewhat Difficult (5) Very diffficult (6) (3) difficult (4)

High Speed Internet Connectivity 90% Energy reliability and costs 86% Corporate tax rate 78% Incentives (e.g. tax credits for your business) 77% Essential Filing corporate taxes 75% factors that Availability of skilled labor 74% are more Cost of labor 73% relevant for Quality of life relative to other jurisdictions in the… 71% your Obtaining financing (e.g. bank loans for your business) 66% business: Obtaining construction and business permits 63% Proximity to your business’s major markets 60% Occupancy and construction costs (i.e. cost to lease or… 55% Registering property 45% Availability of real estate to meet your business’s needs 36% SOURCE: FOMB, “EODB survey,” November 12, 2020

23 December 2020 Public Meeting - Update from Executive Director

Labor force and Corporate Tax Rate

47% of respondents consider the Labor Force to be Competently skilled or Easily trained and/or adapted to support their business.

Labor Force 22% of respondents indicated that the labor force must be continuously developed and trained to fulfill business needs.

22% of respondents considered it is difficult to find skilled employees.

39% of respondents agreed that labor cost in Puerto Rico is adequate for their business.

32% spend more than expected in labor costs while 12% of respondents affirmed that the current labor Cost of Labor costs threaten their business continuity.

Only 6% of respondents depend on government programs to subsidize their labor.

58% of respondents indicated that the corporate tax rate is very expensive

Corporate tax rate 16% of the businesses claim that if the corporate tax rate increases their business continuity is threatened

3.7% of respondents are evaluating to establish operations in another territory with a lower tax rate.

SOURCE: FOMB, “EODB survey,” November 12, 2020

24 December 2020 Public Meeting - Update from Executive Director

Logistics and infrastructure for Ease of Doing Business

33% of respondents indicated that the condition of highways and ports support their business needs. Highways and ports 11% of respondents mentioned that the highways are in better condition than the ports. 21% of the respondents answered, “neither ports nor highways support business needs”.

29% 33% 19% Logistics/ 12% 4% transportation costs 3% Very low (1) Low (2) Somewhat Low (3) Somewhat high (4) High (5) Very high (6)

25% 20% 21% 20% Logistics/infrastructure 10% conditions 5%

Very bad (1) Bad (2) Somewhat bad (3) Somewhat good (4) Good (5) Very good (6)

23% respondents indicated that Real Estate is adequate to support their businesses.

Real Estate 20% pointed out it needs some investment. 18% said it needs substantial investment.

SOURCE: FOMB, “EODB survey,” November 12, 2020 8% expressed is inadequate and prefer new construction.

25 December 2020 Public Meeting - Update from Executive Director

Ease of Doing Business in Puerto Rico

Company Incentive 25% of the respondents received incentives

Preferential Tax Rate: 33% Tax credit: 32% Type of Incentive Labor: 23% Infrastructure: 13%

Don’t have any knowledge of incentives available 26.35% Reasons Companies Do Not Not applicable 24.04% It is too complex to apply for incentives 23.27% Receive Incentives Do not qualify 22.80% Prefer not to apply even though may qualify 3.54% Current Reliability and Cost of 85% of respondents consider energy supply to be unreliable and too costly Energy Supplies in Puerto Rico

Renewable Energy and / or 45% plan to invest in renewable energy and/or other systems to lower costs to operate Other Systems

79% alternative energy Invested System 21% independent microgrid

Financing 67% claim that there are not enough financing options in Puerto Rico

Respondents Somewhat agree, with 3.9 in a scale of 1 to 6, with the statement of Major Markets “proximity to major markets fully supports my business’s operating needs” (Puerto

SOURCE: FOMB, “EODB survey,” November 12, 2020 Rico’s Geographical Location)

26 December 2020 Public Meeting - Update from Executive Director

Contents

Overview of respondents

Impact of COVID-19

Ease of Doing Business

Experience with Specific processes

Future Expectations

SOURCE: FOMB, “EODB survey,” November 12, 2020

27 December 2020 Public Meeting - Update from Executive Director

37% Attempted to obtain a Construction or business permit in Puerto Rico in the last six months

55%

Construction or business permits in 22% terms of difficulty 11% 6% 3% 4%

Substantially easier (1) Easier (2) Somewhat easier (3) Somewhat difficult (4) Difficult (5) Substantially more difficult (6)

The multiple agencies that need to be consulted 28%

Most Lack of clarity in requirements 23% significant difficulties to obtain a Lack of interest in permitting officials 22% construction or business Unclear allocation of responsibilities between municipalities and the 19% permit Central Government

Other 7%

SOURCE: FOMB, “EODB survey,” November 12, 2020

28 December 2020 Public Meeting - Update from Executive Director

Construction Permits and Registering Property

29%

23% 20% 16% Single Business Portal 6% 6% (SBP)

Substantially easier (1) Easier (2) Somewhat easier (3) Somewhat difficult (4) Difficult (5) Substantially more difficult (6)

29%

20% 14% 15% 12% 10% Registering Property

Substantially easier Easier (2) Somewhat easier (3) Somewhat difficult (4) Difficult (5) Substantially more (1) difficult (6)

SOURCE: FOMB, “EODB survey,” November 12, 2020

29 December 2020 Public Meeting - Update from Executive Director

76% Filed corporate taxes (e.g. corporate income tax, IVU, form 480) in Puerto Rico the last six months

23% 23%

17% 16% Filing 14% corporate taxes in 7% Puerto Rico

Substantially easier Easier (2) Somewhat easier (3) Somewhat difficult (4) Difficult (5) Substantially more (1) difficult (6)

51% 44% 46%

Difficulties 18%

Other Complexity of the Unified Filling Frequency The tax code complexity Internal Revenue System (SURI)

SOURCE: FOMB, “EODB survey,” November 12, 2020

30 December 2020 Public Meeting - Update from Executive Director

Contents

Overview of Respondents

Impact of COVID-19

Ease of Doing Business

Experience with Specific Processes

Future Expectations

SOURCE: FOMB, “EODB survey,” November 12, 2020

31 December 2020 Public Meeting - Update from Executive Director

Future Expectations (next 12 months)

46% 45% 35% 27% Expects to 20% benefit 14% directly or 5% indirectly SBA loans CARES Act Other sources of CDBG-DR funds Not applicable FEMA funds Other COVID relief funding Expectations for the next 12 Months

Acquire another business or start a subsidiary in the next 12 months 16% likely to start

Make capital investments (e.g. equipment) in the next 12 months 37% likely to make investments

Revenues in the next 12 months across the industry in which your business 28% will likely grow operates

Your business’s revenues in the next 12 months 28% will likely grow

My business’s workforce in the next 12 months 8% will likely grow

Business’s real estate footprint in the next 12 month 15% will likely grow SOURCE: FOMB, “EODB survey,” November 12, 2020

32 Update from the Executive Director December 18, 2020

Privileged & Confidential Draft | Analysis Subject to Material Change Going into 2021, we are closely tracking the progress on many important topics

1 2 3 4 5

Audited Structural Fiscal Disaster COVID and Financial Reforms Measures Recovery CARES Act Statements

• Status of FY18, • Structural reform • Fiscal measure • Status of disaster • Coronavirus relief FY19 and FY20 priorities for priorities for aid rollout funds Audited Financial implementation in implementation in Statements calendar year calendar year 2021 • FEMA 428 funding • Emergency relief 2021 funds • FOMB • CDBG-DR recommendations • Healthcare • Earthquake relief investments

2 Status update of Audited Financial Statement (CAFR) issuance 1

Key takeaways Oversight Board sent multiple Communications on CAFRs:

• Finalizing the CAFRs is a priority for the Oversight Board to ensure adequate reporting and transparency of financials

• The Oversight Board continues to emphasize the importance of publishing CAFRs in a timely manner for budgetary compliance and capital market access

• In two separate public hearings held this past Summer, the Oversight Board affirmed the Commonwealth’s CAFR issuance timeline was unacceptable and inconsistent with the requirements under PROMESA Current issuance for FY18 and future CAFRs: • The Oversight Board directed the Commonwealth Oversight Oversight CW Expected CW’s to utilize external resources to finalize the Fiscal Fiscal Year- Board Rec. Board Publication Months FY18 and FY19 CAFRs and Hacienda employee Year End (FYE) Timeline of Months of CAFR after FYE internal resources for FY20 and beyond CAFR after FYE FY2017 Jun ’17 Aug ’20 Aug ’20 - 38 • Best practices call for audited financial FY20181 Jun ’18 Nov ’20 Apr ’21 29 34 statements to be published no later than 180 1 days after the end of each fiscal year FY2019 Jun ’19 Dec ’20 May ’22 18 35 FY2020 Jun ’20 Mar ’21 May ’22 9 23 FY2021 Jun ’21 Dec ’21 Apr ’23 6 22 FY2022 Jun ’22 Dec ’22 Apr ’23 6 10 FY2023 Jun ‘23 Dec ‘23 Mar ’24 6 9 1. The FY2018 and FY2019 CAFRs have not yet been published.

3 Root causes of delay in the CAFR issuance 1

General causes of CAFR issuance delay FY18 CAFR Issuance Update1

• Over 26 audit firms providing services to • Issuance of FY18 audit financials is under way, component units affects coordination first draft delayed by 1 month to February 2021

• Manual process of outputs that feed into the • As of December 4th, 46 of 75 (61%) of component financial statements preparation units are pending financial statement issuance

• Different accounting systems within • Further delays could be caused by: Commonwealth agencies − GASB 68 and 75 review procedures and • Timeliness and reliability of financial data for delays in pension liability reports have component units and agencies not concluded, further postponing financial issuance of many component • Reliance on contractor support with limited units coordination/oversight by Treasury − Revenue reports from SURI have not been • Lack of appropriate staffing and technical able to generate the necessary data to capacity at instrumentalities and within Treasury perform revenue analyses − Discrepancies in the accounting • Technical deficiencies identified by auditors, generated by GENTAX; Hacienda is but unresolved by management investigating to correct the reports

− Police agency delay in receiving employee files could affect the due date of December 23rd

1.Source: Hacienda provided updates on the FY18 CAFR progress to the FOMB on November 13th and December 4th, 2020

4 Going into 2021, we are closely tracking the progress on many important topics

1 2 3 4 5

Audited Structural Fiscal Disaster COVID and Financial Reforms Measures Recovery CARES Act Statements

5 2021 actionable structural reforms 2

Structural Reforms 2021 Actionable Items

Publicize Earned Income • Launch new EITC promotional campaign Tax Credit (EITC) • Prepare performance report and share with Oversight Board

Human Introduce Nutritional • Retain third-party firm to oversee implementation Capital and Assistance Program (NAP) • Complete a review of all NAP participants Welfare work/volunteer requirement • Implement a full year work/volunteer requirement Reform

Create workforce • Operationalize the program office development programs • Select the program office executive director

• Defining KPIs, targets, and milestones Designing 2022-27 • Identify a COO strategic plan • Segment schools by student outcomes to guide reforms

• Launch evidence-based curriculum reforms Launching evidence-based • Launch innovation school competition and promotion for improved processes curriculum reforms • Design curriculum reform to support virtual learning strategy • Develop plans and protocols to deliver remote instruction Create post-COVID back- • Provide professional development for educators to-school plan and stand up • Identify gaps and effectiveness in IT systems and technology tools K-12 distance learning capability Education • Distribute necessary technology tools and Invest in online learning infrastructure Reform Improve professional • Launch NGO partnerships to hire and train high quality instructors development opportunities • Introduce student screenings alongside a Multi-Tiered System of Support (MTSS) framework • Train staff to leverage such MTSS network

Investments to boost family • Leverage non-digital/digital tools, proven engagement strategies, surveys, and other viable engagement interventions

• Define KPIs and ideal technical future data management system state Leverage data for better • Design roadmap and assessments to develop a viable DMS system through a pilot program decision-making • Develop template and methodology to establish school-level scorecards and implementation plan • Implement time and attendance policy tracking system through Kronos Source: May 2020 Fiscal Plan

6 2021 actionable structural reforms (continued) 2

Structural Reforms 2021 Actionable Items

• Implement administrative/legislative changes to support procedural streamlining Streamline permits to • Digitize all procedures to start a business promote business activity • Launch publicly available Permitting Performance Dashboard • Design protocol to incorporate informal housing stock into uniform parcel registry Overhaul property • Map unregistered properties or those with outdated ownership registration • Finalize necessary administrative/legislative changes to introduce hybrid registration system • Assess operational needs across all department to facilitate personnel reallocation Simplify paying taxes • Design tax administration reform by digitizing tax payments & consolidating number of tax filings • Finalize administrative/legislative changes required to implement tax administration reforms Ease of Doing Reduce occupational • Finalize administrative/legislative changes required to implement occupational licensing Business licensing requirements

Eliminate inefficient on- • Issue administrative order eliminating the minimum land freight charge across Puerto Rico Island freight regulations

Strengthen offshore • Require DDEC's government managed property team to be transferred to IPR investment attraction efforts

Prime tourism attraction • Transfer marketing responsibilities/associated funding from Tourism Company to Discover efforts for success Puerto Rico

Implementing regulatory • PREB is required to reduce its trust employees to 15% of its total employees reform

Transitioning PREPA’s • Commence service by incoming transmission and distribution operator (LUMA Energy) Power Sector electricity grid and • Selection of proponent to manage and operate PREPA’s existing generation assets (GenCo) Reform generation assets to private and transition services to GenCo. operators

Restructuring legacy debt • Address PREPA's debt and pension obligations via progression of the Title III case obligations

Source: May 2020 Fiscal Plan

7 2021 actionable structural reforms (continued) 2

Structural Reforms 2021 Actionable Items

Develop long-term • Analyze projects and rank them according to their promotion of the prioritized criteria strategic infrastructure plan

Accelerate pre-construction • Conduct diagnostic of pre-construction process, identifying potential bottlenecks process • Identify best practices to overcome potential bottlenecks to accelerate pre-construction process Infrastructure Reform Build sustainable funding • Evaluate external funding opportunities and pursue with a robust FDI promotion strategy model • Compile list of regulatory barriers to funding opportunities and remove with legislative action

Promote delivery of best • Determine opportunities to make contracting strategies more cost-effective practices

Source: May 2020 Fiscal Plan

8 Going into 2021, we are closely tracking the progress on many important topics

1 2 3 4 5

Audited Structural Fiscal Disaster COVID and Financial Reforms Measures Recovery CARES Act Statements

9 2021 actionable fiscal measures 3

Fiscal Measures 2021 Actionable Items

Agency operational • Finalization of the 15 pending consolidations that are yet to be completed of the 19 outlined in the Fiscal Plan efficiencies and • Transfer of ownership or change in legal status of WIPR to a not-for-profit organization improvements

• Right-size resources to align w/ declining student enrollment by improving 18.7 student-teacher ratio in FY21 • Reduce procurement spend by 10-15% by FY23 in professional fees, transportation and facilities Department of Education • Digitize Special Education IEP records (May 2021) • Establish transition for students from Remedio Provisional back to PRDE Spec Ed program (December 2020) • Implement Kronos time and attendance reporting policy (May 2021)

Department of Health • Enact Legislation to consolidate DOH & ASES and launch consolidation implementation efforts (March 2021)

• Move ~1K sworn officers out of administrative roles between FY20-FY25 and fill with ~900 civilian personnel • Operationalize consolidated back-office for shared services/functions across all DPS bureau Department of Public • Launch recruitment drives to fill specialized front-office roles; 160-200 firefighters, 40+ EMS first responders and 50+ in Forensics Safety • Outline implementation plan to achieve overtime savings • Scale up rollout of automated time and attendance system Kronos across bureaus with front-line personnel Agency • Consolidate purchasing for all DPS bureau and report procurement efficiency gains (June 2021) Efficiency • Implement back-office process re-design to achieve headcount targets Reform Department of Corrections • Publish facility footprint and consolidation assessment study (March 2021) and Rehabilitation • Implement plan to consolidate additional facilities and improve habitability of spaces (March 2021) • Outline initiatives to reduce total headcount by ~400 to achieve headcount target of ~5,604 (March 2021) • Conduct assessment of consolidated entities to identify reduction in front and back office personnel • Finalize the consolidation of the physical footprint of all DDEC agencies • Reduce excess front and back off headcount across all DDEC agencies (excluding Tourism and Planning Board) (March 2021) Department of Economic • Execute administrative actions (e.g. systems integration) to consolidate Tourism Company/Planning Board Development and (March 2021) Commerce • Reduce excess front and back office headcount from Tourism Company and back-office personnel from Planning Board in line with September 2020 operational needs assessment • Consolidate Planning Board´s key back-office personnel into DDEC back office (June 2021) • Finalize procurement contract renegotiations (June 2021)

• Develop strategy to consolidate Cloud services and on premise data-centers with detailed migration plan Puerto Rico Innovation and • Provide list of digital initiatives prioritizing by impact, feasibility, and relevance Technology Services • Ensure cybersecurity infrastructure, processes, and control systems are in place and adopted by agencies • Consolidate personnel spending by identifying personnel in gov’t agencies to be centralized (June 2021)

Source: May 2020 Fiscal Plan 10 2021 actionable fiscal measures (continued) 3

Fiscal Measures 2021 Actionable Items

State • Achieve a more efficient organizational structure through personnel and non-personnel savings within the State Elections Elections covenants of the existing requirements on electoral balance and minimum staffing Commission Commission • Reduce steady state (non-election year) spend by 32% by FY22, leading to $8 million in savings by FY2021 • Complete Phase II of development of the Puerto Rico Medicaid Management Information System (MMIS) and migrate financial and enrollment processes to the platform to improve Medicaid program integrity (June 2021) Medicaid • Draft plans to receive CMS approval for Payment Error Rate Measurement (PERM) and Medicaid Eligibility Investments Medicaid Reform Quality Control (MEQC) requirements in order to strengthen enrollment verification (June 2021) and Reform • Launch Diagnosis Related Group (DRG) based payment model, as under development by ASES, to incentivize providers to deliver cost-effective care without sacrificing quality (July 2021)

Tax • Continue efforts to achieve a target of 5% net uplift in annual revenues due to enhanced compliance across Compliance major tax lines by reducing the cost of compliance while simultaneously raising the cost of non-compliance. Tax Compliance and Right- • Develop a resource plan to implement the next phase as needed to be able to drive progress against the key and right-rate rate other taxes and fees initiatives (including the identified personnel, IT and others needed) (March 2021) other taxes • Implement a process to be able to estimate the impact of compliance efforts on revenue collections, which and fees will inform future program priorities (June 2021)

Reductions in • Finalize application/selection process for scholarship program for medical students and execute awareness Reduction of campaign by March 2021 Appropriation Commonwealth subsidies • Launch application and selection process to be completed by June 2021 to UPR • Execute loan forgiveness program for eligible students and residents • Consolidate services across municipalities to improve and optimize services for residents and reduce costs especially in garbage disposal and maint of municipal buildings & roads given population decline & resources Municipal • Implement property tax collections reforms (e.g., appraisals, collections, verifications, and investigations) to improve compliance and collection rates alongside CRIM Services • Submit requests for demolition and debris removal projects for municipalities that have suffered from the Reform earthquake to the Oversight Board for approval • Develop integrated & comprehensive plan for the long-term economic reconstruction of the southwest region affected by impacts, focusing on rebuilding with resiliency in coordination with FEMA and other agencies • Freeze the JRS and remaining TRS benefit accruals (July 1, 2021) Implementation actions for Pension • Enroll teachers and judges under 45 and new hires in Social Security which when combined with freezing pension reform (pending TRS and JRS plans results in mandatory enrollment (July 2021). At future date, consider steps to provide the Reform POA confirmation) option for teachers and judges over the age of 45 to be covered under social security • Implement fully pension reform measures by December 31, 2021 Ensuring Fiscal controls per the • Implement controls and reporting requirements such as reporting on: projected revenues, unused Successful control language of the appropriations, select monthly program spend, milestone achievements, quarterly GF revenue and expense Implementation projections, and certifying no prior year appropriations were used & Fiscal Controls certified budget

Source: May 2020 Fiscal Plan 11 Going into 2021, we are closely tracking the progress on many important topics

1 2 3 4 5

Audited Structural Fiscal Disaster COVID and Financial Reforms Measures Recovery CARES Act Statements

12 The rollout of disaster aid funding will reach important milestones in 2021 4

FEMA funding CDBG-DR funding Other funding

• Disaster relief fund spending has seen a • Of the $10B authorized, $3.2B of CDBG-DR • Other Federal agencies have disbursed very modest increase in the pace of funding is obligated. Contracts have been ~$3B in disaster funding, as of disbursements since January 2020 awarded for ~$1.3B. $144M disbursed to date September 2020 – Approximately $144M disbursed in – Most disbursements relate to R3 Housing permanent work categories, driven by Program. Number of houses impacted is • Federal Communications Commission approval of small projects in still relatively small (less than 200 homes) making ~$750M of funding available to municipalities for roads & bridges, support Puerto Rico restoration efforts public buildings, and parks and • HUD to review the CDBG-MIT Action Plan, – An immediate infusion of $51M for recreational facilities which would obligate an additional $8.3B restoration was approved in 2018 – Upon approval, next step is to finalize grant • Disaster relief funding obligations were – $445M would be made available over agreement between HUD and PRDOH slower than projected in FY20 a 10-year term for fixed voice and broadband – FEMA obligated $0.9B in FY20, down • The 5th amendment of the CDBG-DR Action from their original forecast of ~$3B1 Plan proposes to increase the amount – About $254M would be made available available for Non Federal Match Program by over a 3-year term for mobile voice and broadband • On September 18, FEMA announced $0.7B to $1.7B $12.8B in agreements for the fixed cost – Amendment was sent to HUD for review Section 428 estimates for Puerto Rico on December 4th, expecting approval or – $10.5B approved for PREPA request for modifications in the next 45 days restoration of the electrical grid, and $2.3B for the Department of Education

– Cost share of 90% Federal ($11.5B) / 10% local share ($1.3B) applies

1. Using COR3 July 3rd 2019 to July 1st 2020

13 FEMA recently announced $12.8 billion in Section 428 capped grants 4 for Puerto Rico

• $10.5 billion agreement • $2.3 billion agreement

• Repair and replace transmission • Restoring school buildings and and distribution, electrical educational facilities across the island substations, power generation, and other grid improvements

Progress Update In Process Next Steps

• PREPA submitted its 10-year • Procurement for PREPA related • FEMA’s independent panel to work plan to FEMA on December architectural and engineering review PRASA’s scope and cost 7th detailing use of $10.5B repairs work have begun of projects to determine final funding obligation amount • PRDE procurement to begin with • PRDE to submit detailed work a focus on establishing a project • Coordinate on housing sector plan by December 22nd management office related work with both the Housing Authority and Public • Government working with FEMA • Projects are most likely to take 10 Housing Authority to gain to evaluate and prioritize projects years for completion, therefore, agreement on specific projects to as well as scope of work an extension from FEMA has obligate monies quicker been requested

14 Certain Action Plans for the CDBG-DR and CDBG-MIT are positioned for 4 review and approval early in 2021

Supplemental 2018 Cont. Apprps Bipartisan Budget Act of 2018 (Pub. L. 115-123) Appropriation Act (P.L. 115-56) (Pub. L. 116-20)

$1.5B $8.2B $8.3B $1.9B $277.9M Appropriation Housing & Economy Infrastructure Mitigation Electric Power Infrastructure1 September 8, 2017 February 9, 2018 February 9, 2018 February 9, 2018 June 6, 2019

Federal Published Published Published Published --- Register Notice February 9, 2018 August 14, 2018 January 27, 2020 January 27, 2020

1st Amendment 4th Amendment Submitted submitted Nov 16, 2018 July 9, 2020 (Approved Nov 18, 2018) Submitted to Action Plan (Approved Aug 17, Action Plan HUD for approval submitted to HUD 2020) 2nd Amendment submitted December 3, 2020 and June 14, 2018 Aug. 15, 2019 --- Action Plan (Approved Aug 23, 2019) Amendments Approved by HUD FOMB review 5th Amendment of Action Plan July 29, 2018 3rd Amendment submitted submitted December 17, 2020 December 4, 2020 February 24, 2020 (Pending approval) (Approved Feb 24, 2020)

Partially Executed Executed Divided in 4 disbursements Grant Agreement --- September 20, 2018 with first being $1.7B ------February 4, 2020

--- 19 programs --- (Adds 8 programs, ------being rolled out so 27 total)

Source: Multiple. CDBG Report: ”QPR 3 2019-2020”

15 33 municipalities are eligible to receive federal funding to respond to and recover from the earthquakes 4

Beginning on December 28, 2019, the first of many earthquakes struck Puerto Rico and caused significant damage, mostly in the west and southwest part of the island. There were more than 1,000 aftershocks and 3 earthquakes with a magnitude 3.0 or greater.

• Due to the significant earthquake damage, a major disaster declaration was issued by FEMA on January 16, 2020. • As a result, 33 municipalities were designated as eligible for Individual Assistance (“IA”) or Public Assistance (“PA”)

Quebradillas Hatillo Barceloneta Dorado Aguadilla Isabela Vega Cataño Camuy Toa Baja Manatí Baja Loíza Vega Arecibo Carolina Moca Alta San Juan Aguada Florida Toa Alta Río Grande Trujillo San Bayamón Luquillo Sebastián Morovis Alto Rincón Ciales Guaynabo Fajardo Lares Naranjito Canóvanas Añasco Corozal Culebra Utuado Aguas Gurabo Buenas Juncos Ceiba Las Marías Comerío Naguabo Orocovis Barranquitas Caguas Las Mayagüez Jayuya Adjuntas Cidra Piedras Maricao San Lorenzo Humacao Hormigueros Villalba Aibonito San Cayey Germán Yauco Sabana Coamo Yabucoa Grande Peñuelas Patillas Cabo Rojo Juana Díaz Vieques Lajas Guayanilla Arroyo Maunabo Ponce Salinas Guánica Santa Isabel Guayama

IA, PA, and PPDR 8 municipalities IA and PA 6 municipalities IA 19 municipalities

PPDR is private property debris removal and demolition. Five municipalities are administering and implementing the program on their own, while 3 municipalities opted for COR3 to administer and implement the program

16 The Oversight Board approved Commonwealth funds to support demolition 4 and debris removal efforts after the earthquakes

The Oversight Board approved the reapportionment of more than $66M, potentially available for FEMA reimbursement, in Commonwealth funds to support the municipalities impacted by the earthquakes

• Shortly after the earthquakes, 18 municipalities received • The Oversight Board reapportioned $51.4M from OMB custody for amounts held $14.9M of Commonwealth support from the emergency for State cost share to the Dept. of Housing for demolition and debris removal reserve to be used for their emergency response projects, which are potentially eligible for FEMA reimbursement, in Guánica, $ in thousands Guayanilla, Peñuelas, Ponce, and Yauco Municipality Authorized Adjuntas $250 • The Dept. of Housing disbursed $12.4M of the $51.4M to be used for these Cabo Rojo 250 projects Guánica 2,000 • These projects are potentially FEMA reimbursable in a 75/25 percent cost share, Guayanilla 2,000 so it is important to ensure that all documentation and federal reimbursement Hormigueros 111 requirements$ in thousands are submitted to COR3 Jayuya 250 Municipality Obligated1 Disbursed Pending Disb. Juana Díaz 250 Guánica $18,631 $5,400 $13,231 Lajas 250 Guayanilla 10,450 5,000 5,450 Lares 250 Peñuelas 9,000 - 9,000 Las Marías 250 Ponce 9,350 - 9,350 Maricao 250 Yauco 4,000 2,000 2,000 Peñuelas 2,000 Total $51,431 $12,400 $39,031 Ponce 2,000 1. $9M approved on May 19, 2020; $13.35M approved on June 5, 2020; $29.081M approved on June 29, 2020 Sabana Grande 250 San Germán 250 • An additional $2M was reapportioned from OMB custody for amounts held for State cost share to the Public-Private Partnerships Authority for the demolition Utuado 2,000 and debris removal in 11 municipalities, including Adjuntas, Jayuya, Juana Díaz, Villalba 250 Lajas, Las Marías, Mayagüez, Ponce, Sabana Grande, San German, Utuado and Yauco 2,000 Yauco Total $14,861 Next Steps

• Development of an integrated and comprehensive plan providing for capital expenditures and investments necessary for the long-term economic reconstruction of the southwest region • Over 651 permanent projects representing $275M are currently in various stages of the FEMA Public Assistance Delivery Model. $122K has been obligated and is available to applicants

17 Going into 2021, we are closely tracking the progress on many important topics

1 2 3 4 5

Audited Structural Fiscal Disaster COVID and Financial Reforms Measures Recovery CARES Act Statements

18 Spending status of Coronavirus Relief Funds 5

$ in millions Summary of Funding Categories

Category Allocated Disbursed Remaining • Business & Individual Tax Incentives: Assistance programs to small and medium businesses. Funds used for losses caused by interruption Business & Individual Tax of operations caused by COVID-19 emergency and / or for necessary $339 $325 4.1% expenditures related to COVID-19 Incentives • Private Sector Payroll Protection: reimburse private employers, up to Private Sector Payroll Protection 350 55 84.1% 50% of payroll they continued to pay to employees during COVID-19

Hospital & Healthcare 510 341 33.1% • Hospitals & Healthcare: Acquisition of Materials and PPE to be distributed in all gov’t COVID-19 Testing and Contact – 150 42 72.3% facilities Tracing – Emergency Assistance for Public and Private Hospitals: covers Unemployment-Related Funds 150 150 0.0% necessary expenditures related to COVID-19 emergency – Telemedicine Program in PR: ensures the citizens have access to Municipality Expenses 200 125 37.7% health services with limiting in-person exposure

Tourism Industry Assistance 100 23 76.7% • COVID-19 Testing and Contact Tracing: funding to continue and expand the contact tracing program to track and isolate people infected with or suspected of being infected with the virus Remote Work Program 90 50 44.5% • UI Benefits: cover disbursements to people who have applied for state unemployment benefits due to the emergency of COVID-19 Emergency Expenses in Prisons 10 7 28.3% • Municipality Expenses: For COVID-19 expenses stated in CARES Act Student Technology Solutions 90 27 69.9% • Tourism Industry: Assistance to hotels and “paradores” for necessary expenditures related to the COVID-19 emergency Homeless Assistance 5 0.1 97.3% • Remote Work Program: Implement the remote or distance work FEMA Cost Share for COVID-19 50 1 99.0% program for Government of Puerto Rico employees expenses • Emergency Expenses in Prisons: Non-budgeted expenses in prisons Administrative Expenses 50 6 88.6% • Homeless Assistance: Covers non-budgeted expenses for assistance Reserve 147 - 100.0% and care programs for the homeless population • FEMA Cost Share: Non-Federal Matching Funds Assistance Program Total $2,241 $1,151 48.6% for COVID-19 related expenses (this is not for disaster aid response) • Administrative Expenses: for Administering Puerto Rico’s Coronavirus Notes: Funding must be incurred by December 30, 2020. Disbursed funds are as of December 10, 2020 Relief Fund Source: AAFAF Strategic Disbursement Plan Funding Report, December 10, 2020

19 Percent Spend of Coronavirus Relief Fund by State 5

Coronavirus Relief Fund Data The data, originally provided by the U.S. Dept. of Treasury (with certain states updated via the Pandemic Response Accountability Committee2), represents the monies spent from the CRF funds allocated to the states and territories and is a reflection of the self-reported recipient submissions. PR: 42.9%1 as at October 2, 2020. As at December 10, 2020 3 PR has spent 51.4% Common uses of CRF funding across States • Business relief / Economic development • Healthcare – Statewide testing – Funding for PPE, equipment – Public health and safety initiatives – Contact tracing • Broadband voucher program • Education – Distribution of educational remote learning devices – Additional support for children with disabilities • Non-profit support for basic human services – Soup kitchens, homeless shelters, food banks, domestic violence shelters • Hazard pay for essential works including nurses & doctors • Support for election processes • Rent/Mortgage assistance Chart sources: The Department of the Treasury Office of Inspector General (OIG) Interim Report of Costs through June 30, 2020 report dated August 12, 2020, 1 Figure sourced from 10/2/2020 report via AAFAF 2 Figures sourced from PandemicOversight.gov represents reporting as at September 30, 2020 3 NCLS

20 The majority of the COVID-19 Emergency Measures support package has 5 already been authorized

Summary of COVID-19 Emergency Measures $ in millions Authorized Remaining

Incremental FY20 Spending 468 32 6% remaining

Reapportioned FY20 Funds 134 23 15% remaining

1 US Dept of Education Restart Funds 131 0% remaining

$ in millions Remaining Reapportioned Remaining Incremental Spending Budget Authorized Budget Authorized $ % Funds $ % Direct payment to self employed $100 $94 $6 6% Correctional Health Employees $2 $1 $0 11% Direct payment to small businesses 60 60 0 0% Support to municipalities 100 100 - 0% Public Sector Nurses 23 16 8 32% Municipal police and firefighters 12 11 1 6% Private Sector Nurses 73 73 0 0% Hacienda Internal Revenue Agents 1 0 0 0% Professional Nurses 23 14 9 38% Public safety employees 76 71 5 6% Other bonuses 6 4 2 35% Corrections employees 17 15 2 11% Public hospitals 30 25 5 16% Dept of education materials1 124 113 12 9% Total $157 $134 $23 15% Other 11 4 7 66% Total $500 $468 $32 6%

1. Spending on devices (including computers and tablets) for students and teachers Source: Information is based on AAFAF COVID-19 Emergency Measures Support Package Weekly Report updated with additional information provided directly by agencies on additional spending not yet reflected in the AAFAF report

21 Healthcare investment initiatives are designed to address improvements in 5 hospitals, health facilities, and infrastructure

• Oversight Board has worked closely with the Government to mitigate the effects of the COVID-19 pandemic. The 2020 Certified Fiscal Plan (CFP) provides additional funding for improving and upgrading the healthcare infrastructure of the island • The Budgets for FY20 and FY21 include $238M and $155M, respectively, to: − Address critical infrastructure gaps in hospital and health facilities − Increase capacity by expanding public hospitals − Invest in specific CDTs and medical facilities − Improve technology with Medicaid IT and public hospital IT system • As of November 15, the government has spent $3.6M, 0.9% of the $393M total healthcare capital expenditures budget • Delays in the execution of the capital expenditures been attributed mostly to the following: − Most projects are still in the process of being revised by internal engineers from the Department of Health. The next step will be fore these projects to enter the RFQ/RFP process − Many municipalities have newly elected Mayors. This has delayed the process of signing the MOUs to disburse funds to CDT/CTS $ in thousands Capital Expenditures FY20 Budget FY21 Budget Total Budget Electronic Health Records $70,000 $- $70,000 Bayamón Regional Hospital (HURRA) 30,376 22,792 53,168 Puerto Rico Medical Services Administration (ASEM) 33,965 16,275 50,240 Comprehensive Cancer Center of Puerto Rico 40,284 - 40,284 University Pediatric Hospital (HOPU) 7,300 30,652 37,952 University District Hospital (UDH) 24,168 12,846 37,014 Medicaid Program IT - 25,000 25,000 Mental Services Administration Health and Addiction (ASSMCA) 23,000 - 23,000 Public Hospital IT - 20,000 20,000 Other Department of Health Funding 4,641 11,900 16,541 Community Health Centers (CDT / CTS) 380 9,465 9,845 Medical Facilities / Other 3,405 6,070 9,475 Total $237,519 $155,000 $392,519

22 Healthcare capital expenditures are allocated across multiple recipients for various facility and structural improvements 5

$ in Thousands Recipient Description Budget FY20 BudgetFY21 Budget Total Adjuntas CDT Structural improvements $ - $ 350 $ 350 Aguadilla CTS Facility improvements, electric generator, A/C units - 465 465 Aibonito CTS Facility and structural improvements - 350 350 Arecibo Pediatric Center Facility improvements and A/C units - 355 355 ASEM Facility and structural improvements, electric generator and A/C units, construction of the Julio A. Perez 33,965 16,275 50,240 ASSMCA Facility and structural improvements, electric generator, A/C units and alarm system 23,000 - 23,000 Autism Center Repair electrical panels and mechanical arm for access control and to replace A/C units - 150 150 Bayamon CTS Improvements to the amphitheater and replacement of A/C units - 120 120 Bayamon Demographic Registry Facility and structural improvements, electric generator - 375 375 Bayamon DSPDI Electrical improvements and bath refurbishing - 250 250 Bayamon Pediatric Center Facility and structural improvements, electric generator, A/C unit and moving expenses to HURRA hospit - 200 200 Caguas Pediatric Center Replace A/C units and install bird netting - 100 100 Caguas Regional Office - Menonite Hospital Annex Structural improvements - 100 100 Canovanas Hospital Improvements - 1,000 1,000 Cardiovascular Center Corporation of Puerto Rico and the Caribbean Elevator repairs and the purchase of new beds 1,205 - 1,205 Cataño CDT Permanent improvements and medical equipment - 600 600 Cayey CTS Facility and structural improvements - 100 100 Coamo CDT Structural improvements - 350 350 Culebra CDT Permanent improvements and medical equipment - 1,000 1,000 Demographic Registry Central Structural improvements - 100 100 DOH Administrative Buildings Facility and structural improvements to immunology lab, parking lots and electric repairs 4,641 700 5,341 DOH Administrative Buildings - Regional Offices Diagnose infrastructure needs and make improvements - 7,500 7,500 DOH Hospitals Public Hospital IT 70,000 20,000 90,000 Dorado CDT Structural improvements - 600 600 Florida CDT Moving expenses of the Hygienic Laboratory to Facilities - 1,600 1,600 Guaynabo Medical Facilities Permanent improvements and medical equipment - 1,000 1,000 HOPU Renovate and upgrade surgery, pediatric, oncology, and patient rooms, electric generator 7,300 30,652 37,952 HURRA Renovate and upgrade surgery, pediatric, patient rooms and clinical lab, replace the drainage plumbing s 30,376 22,792 53,168 Isabela CDT Structural improvements - 150 150 Lajas CDT Structural improvements - 200 200 Maricao CDT Structural improvements - 250 250 Mayaguez Pediatric Center Future relocation and for electrical substation repairs and replacement of A/C units - 400 400 Mayaguez Regional Office Structural improvements to "Casa Salud" - 200 200 Mayaguez Sanitary Lab Structural improvements and electrical repairs - 700 700 Mayaguez USP Structural Improvements - 250 250 Medicaid Program IT - 25,000 25,000 Metropolitan Pediatric Center Moving expenses - 100 100 OCASET Replacement A/C units, and the Pulmonary TB Clinics, repair the Sanitary tubes, structural repairs of the - 575 575 OIAT Replacement of A/C units, construction of electrical substation, waterproofing of the building - 2,050 2,050 Ponce Clinical Lab Electrical improvements and structural improvements - 175 175 Ponce CTS Improvements to the basketball court, dining area, pedestrian entrance and access doors - 160 160 Ponce Pediatric Center Facility improvements and replacement of A/C units - 90 90 Ponce Regional Office Structural improvements and electrical system - 650 650 Ponce Sanitary Lab Structural improvements - 150 150 Rincon CDT Structural improvements - 300 300 Rio Grande Purchase a chiller system 380 - 380 Rio Grande CDT Structural improvements and chiller replacement - 600 600 Rio Grande CTS Facility and structural improvements - 520 520 Rio Piedras USP Structural improvements - 200 200 SARAF Structural improvements - 600 600 UDH Facility and structural reinforcement to hospital 24,168 12,846 37,014 University of Puerto Rico Comprehensive Cancer Center Purchase equipment and systems 40,284 - 40,284 University of Puerto Rico Recinto de Ciencias Medicas Renovate the laboratory area to be able to install new equipment 2,200 - 2,200 Vega Baja CDT Structural improvements - 450 450 Vega Baja CTS Facility and structural improvements - 300 300 Vieques CDT Permanent improvements and medical equipment - 1,000 1,000 Total $ 237,519 $ 155,000 $ 392,519

23 December 2020 Public Meeting - Section 204(c): Reapportionment/Reprogramming

FY21 Reapportionments Requests

As of December 2020

33 December 2020 Public Meeting - Section 204(c): Reapportionment/Reprogramming Budgetary Reprogramming Requests

Gov Request Number # Entity Resolution Approved Amount Request Description (PP)

Approve request for a fund recognition to deposit 35% of the Net Balance of Assignments under the custody of the the distribution of the Lottery Additional to the Municipal Income Equalization 1 17902 Approve 17,000,000 Department of the Treasury Fund payable to the Municipal Property Tax Revenue Collection Center (CRIM, as its Spanish acronym) by provision of Law 10 -1989 as amended.

Approve a Special Revenue Fund increase for Maintenance & Repairs budget 2 18227 Convention Center of District Authority Approve 107,000 of the Convention Center. Approve request to reapportion funds to the Professional Services and 3 18871 Convention Center of District Authority Approve 290,000 Consultants line-item of the Certified Budget to comply with contracts. Corporation for the Supervision and Approve request to carryforward & transfer funds to adjust the budget line 4 COSSEC-002 Insurance of Cooperatives of PR Approve 29,600 “other operating expenses.” (COSSEC) Department of Correction and Approve request to reapportion from Payroll to Other Expenses to cover the 5 18539 Approve 85,000 Rehabilitation stipend of uniforms for nurses. Approve request to reapportion from payroll of the adult program to Department of Correction and purchased services to cover the deficit in central office lease costs, increased 6 18359 Approve 5,991,000 Rehabilitation PRIMAS payments, food costs, per diem of community programs and other services. Approve requests to release funds of encumbered funds from prior year funds Department of Correction and 7 18534 Approve 2,318,000 to pay for vehicle fleet, inmate uniforms, mattress materials and fabrics for Rehabilitation inmate programs in correctional facilities. Deny request to use prior year funds to cover two lawsuits filed against the 8 16865 Department of Health Deny - Department. One lawsuit is subject to Tittle III process and the other should result in an adjustment to PayGo. Approve request to reapportion within the Purchased Services concept to amend the contract that provides support in ICD9 and ICD10 diagnostic and 9 17861 Department of Health Approve 24,000 procedure coding for admitted cases and for clerical personnel in Medical records. Approve request to a reapportionment from Equipment to Facilities, purchase 10 17900 Department of Health Approve 3,188,000 services transportation and professional services to cover University Pediatric Hospital operational needs.

34 December 2020 Public Meeting - Section 204(c): Reapportionment/Reprogramming Budgetary Reprogramming Requests

Gov Request Number # Entity Resolution Approved Amount Request Description (PP) Partially approve a Special Revenue Funds (SRF) budget increase for FY21 in 11 18243 Department of Health Partially Approve 8,800,000 order to cover operating costs. If, as the FY2021 continues, revenues exceed these projections, they may request another SRF increase. Deny request for the creation of an account and an budget increase for the School Lunch program for FY2021. There is no revenue to utilize for FY2021 at 12 7521 Department of Health Deny - the time of the PP submission. DOH informed that from August 2020 - December 2020, no inspections were completed thus there will be no revenues for that period. Approve request for a Prior Year Fund Release to cover two months of 13 19220 Government Board of the 911 Service Approve 41,605 pending debt regarding use of facilities for the Government Board of the 3-1-1 service. Legislative Assembly of the Approve request for an interagency transfer from Assignments under the 14 0004M2 Approve 874,000 Commonwealth custody of the Treasury-PayGo to reimburse FY21 Christmas bonus expenses.

Approve request to use prior year funds from insurance proceeds to finish Mental Health and Drug Addiction 15 18492 Approve 466,004 repairs works in Villa 14 - Bayamon Central Office Amphitheatre as a result of Services Administration damages from Hurricane María. Approve requests to release prior year funds to liquidate pending FY20 16 18306 Municipal Finance Corporation Approve 4,133,000 balances between COFIM and certain municipalities.

Approve request to reapportion from Non-Governmental appropriation 17 17411 Musical Arts Corporation Approve 772,000 (Symphony Orchestra) and other Operational concepts into payroll, PRIMAS and other professional fees to cover musicians’ salaries.

Approve request to reapportion into purchased services and media/advertising; agency is shifting its operations to have virtual events with 18 17463 Musical Arts Corporation Approve 201,000 the Symphonic Orchestra as COVID has continued to impact their ability to have live events. Approve request to reapportion from Purchased Services to Prior year debts 19 18834 Office of Management and Budget Approve 13,000 to cover the costs of various invoices of FY18, FY19 and FY20. Agency identified sources within its current budget. Approve request to reapportion between objects within Payroll to pay 20 004M2 Office of the Inspector General Approve 4,000 Christmas bonus of employees who were not included in OMB's Christmas Bonus request.

35 December 2020 Public Meeting - Section 204(c): Reapportionment/Reprogramming Budgetary Reprogramming Requests

Gov Request Number # Entity Resolution Approved Amount Request Description (PP) Partially approve requests for a Fund Release of the remaining account 21 15962 Puerto Rico Department of Justice Partially Approve 936,815 balances related for the Department of Justice Property Registry Modernization project. Approve a Fund Release to pay prior year debts and for park improvements. Puerto Rico Department of Natural and Agency is also requesting a fund recognition as funds correspond to National 22 15172 Approve 1,618,708 Environmental Resources Parks program which was previously part of Department of Recreation and Sports.

Approve request for an Interagency transfer from the Puerto Rico's Office of 23 16235 Puerto Rico Department of the Treasury Approve 326,000 the Inspector General (OIG) payroll to the Department of Treasury's payroll budget to reimburse Treasury for paying OIG employees payroll.

Puerto Rico Department of Approve request for Weeding and Maintenance of Green Areas around the 24 18437 Approve 6,700,000 Transportation and Public Works highways throughout Puerto Rico.

Puerto Rico Department of Approve a fund release to extend up to June 30, 2021 for the Acervo Office 25 18794 Approve 1,716,722 Transportation and Public Works considering there have been procurement delays due to the pandemic.

Puerto Rico Health Insurance Approve request to reapportion funds to cover expenses related to the 26 19077 Approve 114,000 Administration maintenance and updates of IT licenses, services, and computer security.

Approve a reprograming request of $3,321 from the "“Non-Federal Highway Construction Program Costs (soft costs for Abriendo Caminos Projects”) line item to “Non-Federal Highway Construction Program Costs (soft costs for other non-federal highway construction projects)” in the Certified Budget for Puerto Rico Highways and Transportation FY21. The request has been approved with the following conditions: 27 HTA-FY21-03 Approve 3,321,000 Authority ("HTA") 1) HTA commits to providing project-level detail for soft cost spend in the FY21 Fiscal Plan, with sufficient detail to map planned soft cost spend against related and project-specific hard cost disbursements. 2) HTA’s commitment to identify $188,515 in capital expense savings from the FY21 fiscal plan and budget.

Partially approve request. Approve the reapportionment of $10K for PRIMAS, $50K to Maintenance & Repairs and $10K to Other Purchased Services. Payroll 28 18431 Puerto Rico Institute of Statistics Partially Approve 70,000 distribution would not be approved since the Certified Budget does not have a Salaries for Transition Employees line-item.

36 December 2020 Public Meeting - Section 204(c): Reapportionment/Reprogramming Budgetary Reprogramming Requests

Gov Request Number # Entity Resolution Approved Amount Request Description (PP)

Approve request for a Fund Extension of fund 218, which was assigned to respond to the Hurricane Maria disaster until December 31, 2020. Fund 218 29 18821 Puerto Rico National Guard Approve 31,180 correspond to the FY18 emergency reserve. Request approved, however, source of funds approved must be the FY21 Emergency Reserve.

Approve a FY20 Fund Release until March 31, 2021 to provide scholarships for 30 18373 Puerto Rico Police Department Approve 21,501 the children of fallen/deceased members of the Puerto Rico Police force.

Partially approve request to transfer funds from Maintenance and Repairs to Other Purchased Services. Approve the $93K in the transfer within Purchased Services (Maintenance & Repairs to Other Purchased Services) for the purpose Redevelopment Authority of Naval 31 18408 Partially Approve 93,000 of security in the facilities. The transfer of the $941K from Station Roosevelt Roads Construction/Infrastructure to Study & Design is not necessary as Construction/Infrastructure covers the entire construction process (including design).

Approve request for a fund release of fund 218 until March 2021 to be able to State Historic Preservation Office of pay the tree grate services that were provided in June 2020. These funds 32 10759 Approve 63,000 Puerto Rico correspond to FY18 emergency reserve. Request approved, however, source of funds approved is the FY21 Emergency Reserve.

Partially approve UPR Fund Release from Prior Years Trainings & Seminars Fund in order for UPR to recognize earned revenue and disburse related 33 UPR-005 University of Puerto Rico Partially Approve 3,016,035 operating expenses to execute three initiatives in compliance with Ease of Doing Business Policy, which include; Technical Services to the Planning Board, Permits Management Office, and Property Registry.

Partially approve UPR Contract Bargaining Agreement with HEEND Union 34 UPR-006 University of Puerto Rico Partially Approve 4,905,000 Workers retroactive pay-outs negotiated in contract renewal for the period of 2018 through 2020 and partial benefit for 2021. Partially approve request. Original reapportionment request contemplated a more expensive medical plan and an 8-month period from Nov. ‘20 to June 35 UPR-007 University of Puerto Rico Partially Approve 4,469,000 ’21. Upon review, the request was recalculated and adjusted amounts to reflect the savings of the new contract for a 7-month period beginning Dec. ’20. Total 35 $ 71,739,170

37 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Certification of CDBG-MIT Action Plan

38 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Background on CDBG Funding in Puerto Rico

Background CDBG-DR & CDBG-MIT Funds

• Congress appropriated $20.2 billion in CDBG-DR & CDBG-MIT funds Pending FOMB FOMB Certification Certification Approval of Proposed • 2018 Cont. Apprps Act (P.L. 115-56) and Action Plan Being • Bipartisan Budget Act of 2018 (Pub. L. 115-123) HUD Approval Discussed Today • Supplemental Appropriation (Pub. L. 116-20) CDBG- • As part of the special conditions imposed on Puerto MIT Rico to access these funds, the Puerto Rico $8.3 Department of Housing: Billion

• “Shall request and submit to HUD any certification, observations, and Total recommendations by the Financial Oversight and Management Board (FOMB), […] that the $20.2 Action Plan and any related budgets are Billion consistent with any reasonably related CDBG-DR provisions of the applicable FOMB-certified (Energy) CDBG-DR budgets and fiscal plans” $1.9 $10 Billion Billion

Pending notice publication Action Plan Certified by FOMB in Federal Register and approved by HUD

Only $3.2 B currently available to Puerto Rico, of which ~5% has been disbursed

39 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

CDBG-MIT Action Plan submitted to FOMB for review and certification

Background

• Between the months of May and November 2020 PRDOH conducted stakeholder engagement efforts to consult with municipalities, academia, NGOs, and other government agencies to gain a community-driven understanding of Puerto Rico’s mitigation needs and use this understanding to design the Action Plan.

• On December 3rd, 2020 FOMB received from PRDOH the CDBG-MIT Action Plan for formal review and certification, in compliance with HUD requirements contained in Federal Register Notice Vol. 85 No. 17 (January 27, 2020), 85 FR 4676.

40 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Mitigation and Resiliency

The objective of the Action Plan is to increase Puerto Rico’s resiliency to disasters:

• Enhancing the ability of communities to prepare and plan for, absorb, recover from, and more successfully adapt to actual or potential adverse events in a timely and efficient manner, including the restoration and improvement of basic functions and structures.

• In sum, the point of mitigation is to avoid the loss of life, the destruction of property and land, and the exorbitant cost of rebuilding what was torn apart.

41 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Risk-based mitigation needs assessment guided Program Design

Risk Assessment Risk Assessment Results by Hex Grid at Island-Wide Level Methodology

• PRDOH evaluated 18 possible threats using historical data to determine likelihood of occurrence in the Caribbean.

• The Risk Assessment was also conducted at the municipal level using the most granular data available to determine top risks in different regions.

42 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Incorporates FEMA Lifelines framework

• The “FEMA Lifelines” framework recognizes that communities depend on a network of interdependent systems that involve public and private entities, including everything from utilities to hospitals or supermarkets.

• At any point along a lifeline, a failure can result in cascading failures in other directions.

43 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Proposed CDBG-MIT Program Budget

Key takeaways Program Budget

• CDBG-MIT funds will be distributed through seven programs (excluding administration) grouped in four categories:

• Planning • Infrastructure • Housing • Multi-Sector Support

• Entities eligible to apply for funding vary by program; eligible entities include:

• Units of general local government/ municipalities • Government of Puerto Rico Agencies, Authorities, Trusts and Boards • Community-Based Development Organizations and private non-profits • Non-governmental organization (501c(3)) or other non-profit entities • For-Profit Businesses

• A summary of each program is included in the appendix

44 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Consistency with Fiscal Plan and Budget

The proposed CDBG-MIT Action Plan is generally consistent with the Fiscal Plan and Budget.

• The Action Plan’s Planning Programs will provide support for the CDBG-DR GeoFrame program, which is consistent with the Property reform sections of the CFP’s Ease of Doing Business Structural Reform.

• The Fiscal Plan assumes these funds will be fully utilized and their impact has already been incorporated into macroeconomic and financial projections.

• The Fiscal Plan’s 30-year macroeconomic and financial projections do not incorporate the potential impact of future hurricanes; even though the island will most likely be impacted my major storms during this period.

• Therefore, increasing the island’s resiliency to natural disasters gains even more importance.

• It is critical to minimize the socioeconomic impact of disasters to avoid significant fiscal challenges in the future.

45 December 2020 Public Meeting - Decision: CDBG-DR-MIT Action Plan Certification

Recommendations

Recommendations Disbursements

• There has been concern over the pace of disbursements in CDBG-DR funds. CDBG-DR Disbursements (as of December 10, 2020) • The past months have seen a slight acceleration. $160,000,000 $144,630,584 $140,000,000 • It might still not be the pace many were $120,000,000 expecting, but it is a sign of progress. $100,000,000 • Going forward, the team is recommending PRDOH $80,000,000 $60,000,000 publish a CDBG-DR/MIT Transparency Portal First Grant similar to COR3’s Transparency Portal. $40,000,000 Agreement Signed $20,000,000 • Such a portal should provide citizens and $0 stakeholders with visibility into progress

being made, where funds are flowing (e.g. Jul-19 Jul-20 Jan-19 Jan-20 Mar-19 Mar-20 Sep-18 Nov-18 Sep-19 Nov-19 Sep-20 Nov-20 which Programs or Subrecipients), and May-19 May-20 where pace of disbursements is lagging. Average Monthly • This would promote transparency and Time Period Disbursements accountability. Feb '19- Oct '19 $339,146

Nov '19 - Apr '20 $4,748,595

May ‘20 - Nov '20 $15,335,259

46 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

COMMONWEALTH OF PUERTO RICO – BDO PR CONTRACT ASSESSMENT REPORT – PHASE II

Friday December 18, 2020 Jack Reagan, CPA UHY LLP

The next level of service

An independent member of UHY International

47 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

AGENDA

• About UHY Advisors • Scope of Work • Contracts Reviewed • Results • Future Considerations

48 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

ABOUT UHY ADVISORS

• International professional services firm – Audit – Tax – Consulting • Approximately 90 partners • Approximately 1000 employees • Affiliate in San Juan – Not affiliated with the work in any way

49 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

SCOPE OF WORK

• Review contracts with original contract value of at least $500,000. • Evaluate accounting, consulting, and other services, excluding auditing services, performed by BDO Puerto Rico (“BDO”) during fiscal years 2016 through 2019 for each of the Government Entities' selected contracts in order to ensure services rendered were executed in accordance with contract scope, expected deliverables, timeliness, milestones, and corresponding professional standards. • Evaluate BDO’s performance with respect to expected deliverables, progress, timeliness, milestones, and other requirements within selected contracts.

50 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

SCOPE OF WORK

• Determine whether the integrity of the services provided by BDO was impaired or otherwise affected by alleged fraudulent or illegal activities of the firm’s former managing partner, as recently charged by federal authorities. • Any other tasks mutually agreed upon.

51 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

CONTRACTS REVIEWED

Entity Contract # Contract $ Description Education 2018-AF0019 4,770,330 Technical and consulting services Education 2019-AF0022 6,363,000 Technical and consulting services Treasury 2017-000223 2,298,000 Accounting services Treasury 2018-000098 6,532,500 Accounting services Treasury 2019-000025 6,664,000 Accounting services Treasury 2019-000026 2,550,000 Accounting services Fiscal Agency & Financial Advisory Authority 2019-000019 1,000,000 Financial consulting services Health Insurance Administration 2017-000033 1,375,000 Compliance review services Health Insurance Administration 2019-000062 800,000 Information systems services

Office of Management and Budget 2018-000030 500,000 Administrative services PREPA 2019-P00016 960,000 Accounting services

52 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

RESULTS

• We did not find any matters indicating that BDO Puerto Rico’s integrity in any of the services rendered was impaired or otherwise affected by the alleged activities of its former managing partner or the Commonwealth government’s subsequent actions. • We also did not find any instances where the services rendered were not executed in accordance with contract scope, expected deliverables, timeliness, milestones, and corresponding professional standards.

53 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

FUTURE CONSIDERATIONS

• For four out of four contracts, the Department of Treasury made monthly invoice payments in excess of the monthly maximum amount allowed per the contract. • Two BDO invoices sent to PREPA contained duplicate hours for two employees. • Due to the turnover at some entities, we were unable to obtain an understanding of how the contract was managed, including recurring status meetings or other methods of monitoring the services which were rendered.

54 December 2020 Public Meeting - Discussion: UHY Presentation on BDO Phase II Investigation

CONTACT INFORMATION

Jack Reagan Partner UHY LLP 8601 Robert Fulton Drive, Suite 210 Columbia, MD 21046 410-423-4832 [email protected]

55 December 2020 Public Meeting - Appendix

MINUTES VERSION

Financial Oversight and Management Board for Puerto Rico

Event: Twenty-Second Public Meeting Date: Friday, November 20, 2020 Place: Video Conference Time: 10:00 am AST

Open the Public Meeting

David Skeel: Introduced himself as a Chairman of the Board and welcomed all persons present to this public meeting of the Financial Oversight and Management Board for Puerto Rico, which is being held by video conference.

Mr. Skeel asked for those connected to the video conference to cooperate on conducting a productive meeting, including keeping themselves on mute during the video conference.

Mr. Skeel conducted roll call to determine which members are present in the video conference.

∑ Andrew G. Biggs [Answered “Present”] ∑ Ana J. Matosantos [Answered “Present”] ∑ Justin Peterson [Answered “Present”] ∑ Ex Officio Member and Governor Vázquez-Garced’s representative, Omar J. Marrero Diaz [Answered “Present”]

The Chair determined that a quorum was present and called the meeting to order.

The Chair asked Mr. Jaime El Koury, General Counsel of the Board, to act as Secretary for the meeting.

73 December 2020 Public Meeting - Appendix

MINUTES VERSION

The Chair thanked all persons in attendance at the public meeting being held by video conference and those watching the live stream of the meeting via the Board’s website: www.oversightboard.pr.gov. The Chair announced that the audio of the meeting via the webcast was available in English and a simultaneous Spanish translation, as well as being translated in sign language.

The Chair announced that the Board was handling the public’s questions and comments through a form available on the Board’s website, by clicking the webcast page and filling the form, including name and any questions or comments, and that the Board would answer them during the assigned time period.

The Chair announced that the public would have from the time that the meeting starts to up to 15 mins prior the Public Comments period starts to share their questions or comments on this form and that questions that cannot be answered during the meeting due to time constraints will be later answered and published on the website.

The Chair announced the agenda of the meeting:

1. Approval of Minutes of Public Meeting of the Board 2. Update from Executive Director 3. Section 204 (c) Reapportionments/reprogramming 4. Section 204 (b) Contract Review 5. Section 207 PRASA Refunding/DRA Settlement 6. Section 207 Municipal Debt, Gurabo 7. Section 204(a) Laws 80-81-82 8. Section 313 Commonwealth Plan of Adjustment modification 9. Public Comment Period 10. Other Matters

1. Approval of Minutes

The Chair announced the first order of business was to approve the minutes of the Board’s last public meeting held on October 30, 2020, attached as Appendix A, and asked if there were any questions from Board members regarding said minutes included in the Board members’ meeting materials.

74 December 2020 Public Meeting - Appendix

MINUTES VERSION

The Chair announced that there were no questions and asked for a motion to approve the minutes. Andrew Biggs moved to “Approve the minutes of the Board’s public meeting held on October 30, 2020, in the form presented to the meeting.” Justin Peterson seconded the motion. The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the minutes were approved.

2. Update from Executive Director

The Chair asked Ms. Natalie Jaresko, Executive Director of the Board, to provide an update of the Board’s activities.

Ms. Jaresko made the following remarks:

“Thank you, Mr. Chairman,

During the Board’s last meeting, I focused on the steps Congress laid out in PROMESA for the board to go away. That included access to the capital markets and four years of balanced budgets.

Today, having recently passed the fourth anniversary since the Board’s first meeting in Fajardo, I would like to reflect on the accomplishments the Board has achieved on behalf of the residents of Puerto Rico.

Puerto Rico’s fiscal position before PROMESA

It is important to understand the environment that existed when the board was conceived.

At the time, Puerto Rico had amassed an unsustainable debt of more than $70 billion and more than $50 billion in unfunded pension liabilities, triple the level from the decade before.

The economy was in structural decline and more than 10% of the population had already left in search of greater economic opportunity.

75 December 2020 Public Meeting - Appendix

MINUTES VERSION

Despite those challenges, government spending remained bloated, lacked transparency, and the provision of services to the people were inefficient.

Importantly, all of the overspending drew down the government’s bank balances leading to dangerously low liquidity levels and revenue shortfalls that impaired strategic decision making. In fact, at one point, the government’s TSA bank balance fell to as little as $15 million.

I mention all that because the Government’s situation was unstable and highly tenuous when the Oversight Board was established and the automatic stay on debt service was enacted.

The Oversight Board is guided by key provisions in PROMESA

As you know, all of the board’s work is guided by Congressional intent as identified in key provisions in the law.

One key provision is section 405, which requires us to take a comprehensive approach to the fiscal, management, and structural problems and adjustments on the Island. No part of the government is exempted.

FOMB progress on key requirements under PROMESA

While more work remains, there are four main categories of progress I would like to highlight for you today.

First, our significant progress on achieving consensual debt restructurings

Second, fiscal accountability

Third, financial transparency

And finally, economic development

Maximizing creditor recoveries must be done in the context of the guardrails laid out by PROMESA

76 December 2020 Public Meeting - Appendix

MINUTES VERSION

Part of the board’s role is to facilitate and negotiate consensual restructurings with creditors, many of whom have invested in Puerto Rico for a very long time.

Importantly, however, those negotiations must be done in the context of the guardrails laid out by PROMESA.

Towards that end, one of the most important provisions of the law is Section 201, which requires any certified fiscal plan to provide a method to achieve fiscal responsibility and access to the capital markets.

Section 201 also lays out a careful balance of 14 criteria that must be followed for the board to be able to certify the plan and have confidence it meets both the fiscal responsibility and capital market tests.

In addition to respecting the relative lawful priorities or lawful liens, some of those other criteria under the law require the fiscal plan to (1) ensure the funding of essential public services, (2) provide adequate funding for public pension systems, (3) provide for the elimination of structural deficits enable the achievement of fiscal targets, and (4) provide for capital expenditures and investments necessary to promote economic growth.

I would now like to turn to some of the Board’s accomplishments under each of the four categories.

Considerable success and progress has been made on achieving consensual, feasible and reasonable debt restructuring agreements that benefit the people of Puerto Rico

First, the board, working closely with the Government, has achieved considerable success and progress on achieving consensual debt restructuring agreements that benefit the people of Puerto Rico. In aggregate, we have facilitated the successful, consensual restructuring of more than 30% of Puerto Rico’s debt and have already filed proposed agreements for another 55% of the debt. Here are a few of the most critical highlights:

First, we have successfully restructured COFINA’s debt. The net result reduced total debt service by more than $17 billion and freed up 46% of the sales tax revenue collected for the general fund. This was a critically important milestone that shows consensual restructurings can occur.

77 December 2020 Public Meeting - Appendix

MINUTES VERSION

Second, we have restructured the GDB’s debts, reducing principal outstanding by 45% and, just as importantly, structured the new debt such that it is non-recourse to the Commonwealth

Third, we have completed the reprofiling of federal government debt at PRASA. By significantly reducing the interest costs, PRASA was able to save nearly $380 million over the first 10 years. It also enabled PRASA to unlock $400 million in new federal funding from the EPA and USDA. All of which can now be invested back into the water system in desperate need of improvement.

Finally, the board has entered into restructuring agreements on another $9 billion of debt at PREPA and $35 billion of collective claims at the central government. As part of those restructurings, important agreements have already been reached with the official retiree committee and certain labor unions. Both agreements have substantial consensual agreement of stakeholders.

The Government and the FOMB have shown the willingness and ability to reach consensual deals, having restructured over $23 billion of existing debt through the various mechanisms available under PROMESA, resulting in ~30% reduction in debt

Here you can see more clearly the value created for the benefit of the people of Puerto Rico. While more work is needed, these principal and total debt service reductions have started to set the government on a path toward financial stability.

While negotiations are continuing, considerable progress has been made in the proposed RSAs and plan of adjustments for other pending debt restructurings

When looking at the two pending restructurings, for PREPA and the Central Government debts, there are also a few key points worth mentioning.

As it relates to PREPA:

∑ Since charges are fixed the cash flows to RSA bonds will rise or fall based on actual electricity demand

∑ To the extent electricity load underperforms projections, the RSA savings will be greater given reduced cash flow to RSA Bonds

78 December 2020 Public Meeting - Appendix

MINUTES VERSION

∑ In fact, a portion of the debt may receive full payment or no payment at all depending on future load

As it relates to the Commonwealth, we are going to discuss that proposal more later today

Financial transparency and fiscal accountability are required to balance the budget and stop the historical pattern of overestimating revenue

Financial transparency and fiscal accountability are two areas where considerable progress has been made because of the Board’s steadfast efforts.

On the financial transparency front, there are now 19 multi-year, detailed fiscal plans that include reforms to government operations and create the framework for debt negotiations and provide a strategic plan for the operations and development of the relevant entities.

The government is also producing and publishing more than 30 reports on cash, budget, tax expenditures, and PayGo costs among others.

Spending is prioritized and the budget resolutions are much more transparent and detailed to enable the legislature and the public to see how taxpayer dollars are spent

The same transparency has extended to liquidity. Because of the board’s efforts, the government has compiled and is tracking more than 2,700 bank accounts. This also helped identify the $6 billion in cash consideration being offered to Commonwealth creditors in the latest proposal.

On the fiscal accountability front, the Board is holding the government accountable for the implementation of more than 120 reform plans, is monitoring quarterly budget to actuals and has placed strict controls on spending and reapportionments.

Unlike the past, where the government used prior year appropriations to fund current expenses, often when the cash was already gone, the Board has positioned the government to start living within its means, including an emergency reserve to be available at the most difficult moments.

79 December 2020 Public Meeting - Appendix

MINUTES VERSION

Similar accountability extends to the contract review and procurement policies, both of which have been reformed to increase transparency under the Board’s watch.

It also extends to tax expenditures, with the government publishing its first comprehensive tax expenditures report, showing, for the first time, the level of lost revenue awarded to various industries on the Island. The 302 reported tax expenditures cost the government more than $21 billion in lost revenue in 2017, a level that is more than 2 times the share of total tax receipts relative to other states.

None of these things existed prior to the Oversight Board’s establishment.

Historical Budget to Actual General Fund Revenue Projections

In fact this transparency and accountability are critical to avoid the mistakes of the past that have landed Puerto Rico in bankruptcy, emptied the coffers of the pension funds, and led to the adoption of PROMESA. Key elements of past financial practices that the Board has put to an end include the overforecasting of revenues. Here we can see visually the government’s history of over forecasting revenues relative to actuals by an average 5.5% in nearly every year since 2007.

Historical General Fund Revenues to Budgeted Expenses

Similarly, here we can see actual revenues were also considerably lower than budgeted expenses. The gap was filled by one time transfers and additional debt borrowings. And deferral of critical expenses, required pension contributions and a

Consolidated Governmental Funds Surplus / (Deficit)

Finally, this recurring overbudgeting of expenses generated significant structural deficits that led Puerto Rico into severe fiscal crisis, which through the Board’s efforts, the government is able to correct.

Despite the uncertainty caused by the hurricanes, earthquakes and the COVID-19 pandemic, the Oversight Board has underestimated revenue by 1.2% on average

It is critical to understand this context as we hear often about the Board’s revenue forecasts. We need to stop the practice of overforecasting revenues and spending more than actual revenues. So, I would now like to spend a minute on that topic.

80 December 2020 Public Meeting - Appendix

MINUTES VERSION

Since formation of the Oversight Board, Puerto Rico has faced uncertainty caused by hurricanes, earthquakes and the COVID-19 pandemic.

This has made revenue forecasting challenging, but, as shown in this chart, despite all this uncertainty and the volatility of the environment, the Oversight Board has only underestimated revenue by 1.2% on average when using the most relevant Fiscal Plan for each year.

The one set of forecasts where the Board does appear to have been very conservative were in the April and June 2018 fiscal plans. These fiscal plans, however, were prepared in an environment of high uncertainty following two devasting hurricanes which resulted in mass exodus of people and before we had any clarity about the amount and pace of federal disaster funding the Island would receive.

Due to the uncertainty, the Board made a strong effort to prevent overspending in the Government and immediately corrected the forecast once additional information became available.

And still, important to note, the revenues were significantly increased as a result of that exact federal funding which played an important stimulus role in the economy. Without those funds, the original estimates would have proven more telling.

With the volatility subsiding and more clear information on federal recovery funds, more recent fiscal plans were not materially different from actual results.

In general, however, the public should know the fiscal plans are living documents. As time passes and new information becomes available, they will be updated. They will also be updated to reflect and incorporate new priorities of the governor and government over time.

YTD collections are 17% above revised Hacienda forecasts; mainly explained by outperformance in Motor Vehicles, other GF Revenue, and Rum cover over

This slide shows revenue performance fiscal year to date relative to Hacienda’s expectations.

It generally shows certain categories of revenues are performing better than initially forecast.

81 December 2020 Public Meeting - Appendix

MINUTES VERSION

The Board sets annual revenue estimates the government uses to translate it into a monthly forecast. We do, however, monitor Hacienda’s estimates. The outperformance seems to be consistent with what we are seeing in other states.

Given macroeconomic trends of the previous months, however, we do not expect revenues to sustain the level of outperformance seen during the first quarter of this fiscal year.

State revenue forecasts tend to be conservative and underestimate actual revenues

We wanted to evaluate, however, if the Board’s average forecast error of 1.2% was in line with other states or not.

As you can see on the map, 24 states have revenue forecasts that are slightly below actuals.

At least 32 states also engage in revenue reforecasting during the fiscal year as well.

These forecasts show actual collections tend to be 2.1% higher than forecast, implying the Board’s revenue estimates are generally as accurate or more accurate than other states.

Just as important, partial year assessment of revenue forecast accuracy can be misleading. Revenue may exceed a mid-year target as the monthly forecast distribution is not accurate, while the forecast for the year may be accurate.

There are several key areas of economic development

Finally, while there is definitely more work to be done on economic development, the Board has already achieved several accomplishments in this area that promote economic growth.

This includes the promotion of structural reforms that are critical to generating a competitive environment and attracting investment. One such reform was the Board’s facilitation of PREPA’s entry into the LUMA Agreement, setting the framework for transformation of Puerto Rico’s electricity grid into a modern, efficient system.

82 December 2020 Public Meeting - Appendix

MINUTES VERSION

It also includes significant progress reforming the government’s procurement systems, improving road infrastructure, and permitting systems as well as pressing for the passage and implementation of an EITC.

The Board’s efforts to prioritize and attract investment through the Title V process, the approval of PPPs, and through the development of strategies to attract manufacturing also continue.

I would like to conclude by highlighting the government also has an incredible economic development tool available to it through the buildings and land owned by PRIDCO.

If you turn to the final page, you’ll see a snapshot of the article I recently drafted emphasizing the importance of this economic development tool to Puerto Rico’s future. These buildings are one of the key elements that can be used to attract manufacturing back to Puerto Rico, a goal we all share.

Thank you, Mr. Chairman”

The Chair proceeded to allow time for Board members to ask questions and make comments.

Justin Peterson remarked on several areas of the Board’s work, including issues relating to Medicaid assistance for future years, past revenue forecast incorporated in the fiscal plan, and the amount of professional fees paid in connection with Title III proceedings.

Ana Matosantos remarked on increased cash balances in the Government’s TSA accounts due to Board initiatives.

Finally, Andrew Biggs made some additional comments.

3. Section 204 (b) Reapportionments/reprogramming

The Chair requested that Ms. Jaresko provide a presentation on certain reapportionment requests submitted by the government pursuant to Section 204(c) of PROMESA.

Ms. Jaresko proceeded to present a series of recommendations on reapportionment requests from the Government of Puerto Rico attached as Exhibit 1 to these

83 December 2020 Public Meeting - Appendix

MINUTES VERSION minutes and explain the same.

The Chair proceeded to allow time for Board members to ask questions.

The Chair requested that a motion be made to approve the Oversight Board staff reapportionment recommendations.

Andrew Biggs moved to “Approved the recommendations on the requested reapportionments”.

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

4. Section 204 (b) Contract Review

The Chair announced that pursuant to Section 204(b) of PROMESA, which allows the Oversight Board to require prior Oversight Board approval of certain contracts, to ensure such proposed contracts promote market competition and are not inconsistent with the approved Fiscal Plan, there were three contracts for consideration by the Board.

The Chair requested Alejandro Figueroa, Infrastructure Director, to discuss the first such contract, between PREPA and PUMA for Diesel Fuel, including the contract elements and the recommendation to the Oversight Board.

Mr. Alejandro Figueroa made the following presentation:

“Good morning Board Members. We have for your consideration today a proposed 1-year extension to the existing contract between PREPA and Puma Energy Caribe LLC for the supply of diesel used for the generation of electricity. The total value of the proposed contract is approximately $225 million, of which $132 million are projected to be spent in FY21. There are no changes to the terms and conditions of the prior agreement, including the pricing structure, which ranges from $9 to $10 per barrel, depending on volume.

84 December 2020 Public Meeting - Appendix

MINUTES VERSION

The proposed contract also includes an additional 1-year automatic extension, under which, if no party communicates their intent to not extend the agreement at least 120 days prior to the expiration date (by July 2021), the contract is deemed to have been extended for an additional year. Under the agreement Puma would supply all of PREPA’s diesel burning units, including San Juan 5&6, Palo Seco, Aguirre, Mayaguez, Cambalache and the Peaking units spread throughout the Island. Accordingly, we recommend the Board approve the proposed contract as submitted by PREPA as consistent with the Certified Fiscal Plan and Certified Budget, in order to ensure a steady supply of diesel to PREPA. Going forward, we also request the Board reiterate the importance of PREPA proactively exploring opportunities to improve competitive fuel procurement and delivery practices, as required by the Certified Fiscal Plan. To that extent, the FOMB’s staff will look to work closely with PREPA’s staff to improve PREPA’s standing in the market and attract high-quality suppliers and benefit from that higher level of competition, which will ultimately benefit customers through better fuel prices.” Subsequently, Ms. Jaresko recommended the Board consider the following Resolution: Resolved, the Board authorizes the Proposed Contract between PREPA and Puma Energy Caribe LLC, for the supply of diesel fuel to PREPA’s generation plants, as such proposed contract was submitted by PREPA to the Oversight Board pursuant to Section 204(b)(2) of PROMESA. The Board further reiterates the importance of PREPA improving its fuel procurement practices and directs the Board’s staff to work collaboratively with PREPA to achieve the fuel procurement improvements objectives in PREPA’s Certified Fiscal Plan. The Chair proceeded to allow time for Board members to ask questions.

The Chair requested that a motion be made to approve the contract.

Andrew Biggs moved to “Approve the Puma Diesel Fuel Contract attached as Exhibit 2 to these minutes.”

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

85 December 2020 Public Meeting - Appendix

MINUTES VERSION

The Chair then requested Ginorly Maldonado, Fiscal Plan and Budget Director of the Board, to discuss the second contract, consisting of an amendment to the Government’s Managed Care Organization contracts.

Ms. Maldonado made the following presentation:

“Thank you, Chairman Skeel.

We have for the Board’s consideration and review, the final managed care organizations (MCOs) contract amendment, which includes (1) the proposed increase in the Puerto Rico Poverty Line as well as (2) the required renegotiated rates.

INTRODUCTION/BACKGROUND

This past October the Oversight Board met with the Governor and members of her staff in NYC to discuss the government’s proposal of a temporary expansion of the Puerto Rico Poverty Line that could potentially benefit 200 thousand additional lives into the Medicaid healthcare plan, also known as “Plan Vital”.

After that meeting the Oversight Board communicated to the Government its approval conditioned to the implementation of certain requirements given the government inability to commit the new government to taking action. The requirements were the following:

First- clearly ensuring that this expansion is temporary by using a time-bound State Plan Amendment, waiver, or other appropriate mechanism.

Second- a detailed expenditure projections and identification of commonwealth share of funds, within the existing Fiscal Year 2021 budget.

Third- the amendment of the MCO contract with language to signal the increased eligibility is temporary

And lastly, a development of a public communications campaign to provide information about the change in temporary eligibility.

Each year, the Commonwealth is required to renegotiate the rates - set on a per- member, per month (PMPM) basis subject to FOMB approval

86 December 2020 Public Meeting - Appendix

MINUTES VERSION

Over the last 3 months the Government has engaged with the Board on the amended contract were the Board has made preliminary decisions to approve two primary changes:

First, the increase in the temporary expansion of Medicaid eligibility. And

Second, a higher Per member per month (PMPM) rates relative to 2020 Certified Fiscal Plan.

– In August, the Board approved PMPM rates ~$7 higher than the CFP target, contingent on the Government identifying funds to cover any incremental cost.

The latest contract amendment has two major items for consideration: First, The PRPL increase is not certain to be temporary

Even though the MCO Contract Amendment does include language, approved by CMS, addressing the temporary eligibility for the “Emergency Medical Group” until September 30, 2021. The State Plan Amendment (SPA) as submitted to CMS is not time-bound, as previously required by the Board and agreed by the Government.

The Board agreed to a temporary expansion due to the expiration of federal funding in September 2021.

DOH has stated intent to use a regular SPA which is not time bound after CMS’ recommendation. This change would be indefinite until another SPA reverses the expansion; future administration would have to actively remove the PRPL.

Second, the Government submitted an amended blended-average PMPM that is +$8.4 above the target implied in the CFP.

Back in August, the Board agreed to a higher a PMPM of ~$7 subject to the government identifying the funds within its Fiscal Year 2021 Budget and the inclusion of language into the MCO contract that would promote value based reforms and reduce Fraud Waste and Abuse.

Revised actuarial projections reflect an incremental $1.6 PMPM -translating to $20M annually- and that is due to the PRPL expansion. The Government projects it can cover these expenditures by using projected savings associated to the shifting of the CW population into the Medicaid population.

87 December 2020 Public Meeting - Appendix

MINUTES VERSION

An important consideration for the Board is that if the contract amendment is left as is, the State Plan Amendment would be indefinite until another SPA is submitted to reverse the expansion.

This would require future administration to reverse the increase in PRPL by submitting another SPA to CMS

A permanent PRPL increase could cost as much as $300-$600 million per year for the Government, which would lead to expenditures above those in the Certified Fiscal Plan under a Federal Medical Assistance Percentage (FMAP) scenario of 55/45.

As such, the recommendation to the Oversight Board is to approve the contract with the increased PMPM of $1.60 due to the increase PRPL expansion subject to the condition of the Government re-submitting to CMS a timebound SPA to be in compliance with the requirements which were previously established by the Board and agreed by the government.

Now I will pause there and see if you have any questions.

Thank you, Mr. Chairman”

The Chair proceeded to allow time for Board members to ask questions.

The Chair requested a motion to conditionally approve the MCO contract amendment approve the contract subject to the condition of the Government re- submitting to CMS a timebound SPA to be in compliance with the requirements which were previously established by the Board and agreed by the government.

Andrew Biggs moved to conditionally approve the MCO contract amendment attached as Exhibit 3 to these minutes, contingent on the requirements previously established by the Board.

Ana Matosantos seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

88 December 2020 Public Meeting - Appendix

MINUTES VERSION

The Chair next requested James Castiglioni from Citi, as the Board’s advisor, to present the third contract before the Board, namely a settlement agreement for an outstanding loan between PRASA and the Government Development Bank that is related to a refinancing transaction for PRASA to be taken up as the next agenda item.

Mr. Castiglioni made his presentation.

The Chair proceeded to allow time for Board members to ask questions.

The Chair requested a motion to approve the Settlement Agreement.

Andrew Biggs moved to approve the Settlement Agreement, attached as Exhibit 4 to these minutes, under Section 204(b) of PROMESA and the Board’s contract review policy, subject to the subsequent approval under Section 207 of this transaction.

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

5. Section 207 PRASA Refunding/DRA Settlement

The Chair next turned to two related transactions under Section 207 of PROMESA; which provides that no territorial government shall issue debt or guarantee, exchange, modify, repurchase, redeem, or enter into similar transactions with respect to its debt without the prior approval of the Oversight Board, and requested James Castiglioni, from Citi, will provide an overview.

Mr. Castiglioni made the following presentation:

“Thank you, Mr. Chair. With this transaction, PRASA may enter the municipal market in the next month or so via a limited public offering to refund certain outstanding PRASA bonds ∑ This refunding issuance will take advantage of historically low rates in the municipal market with savings generated from the issuance used to

89 December 2020 Public Meeting - Appendix

MINUTES VERSION

supplement PRASA’s CIP program and to close financial gaps included in PRASA’s fiscal plan ∑ The refunding bonds will not extend the maturity of the bonds being refunded ∑ The savings structure will not be front-loaded and savings will be generally level on an annual basis o Additionally, the refunding will be subject to meeting minimum PV Savings percentage thresholds ∑ The refunding issuance will be sold without ratings and there will be no new money proceeds ∑ Resolution with GDB DRA o PRASA/AAFAF and the GDB DRA have reached an agreement to settle an outstanding loan for $20.5mm, representing a reduction of ~74% from the prior obligation

The Chair proceeded to allow time for Board members to ask questions.

The Chair requested a motion to approve the PRASA refunding transaction and the PRASA DRA settlement.

Andrew Biggs moved to approve the PRASA refunding and the DRA Settlement Transaction under Section 207 of PROMESA.

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

6. Section 207 – Municipal Debt, Gurabo

The Chair next turned to a proposed debt modification by the Municipality of Gurabo requiring approval under Section 207 of PROMESA, and requested German Ojeda, Municipal Affairs and Legislative Review Director, to present the transaction.

Mr. Ojeda made the following presentation:

“Thank you, Mr. Chair. The Municipality of Gurabo is requesting the modification in use of remaining proceeds from bonds issued during FY2013 pursuant to the

90 December 2020 Public Meeting - Appendix

MINUTES VERSION provisions of Section 207 of PROMESA. The proposed transaction does not involve the issuance of new debt.

The total amount of the bonds’ issuance was $12,523,475 and the current proposed transaction is for $541,773.75.

The purpose of the modification in use of remaining funds is road re-surfacing needed due to damage caused by hurricanes Irma and Maria.

Analysis demonstrates that the Municipality has sufficient re-payment capacity with CAE collections.

Thus, we propose that the transaction be approved.”

The Chair proceeded to allow time for Board members to ask questions.

The Chair requested a motion to reprogram the use of the remaining proceeds of the 2013 Series A, B and C General Obligation Bonds with First Bank in the amount of $541,773.75.

Andrew Biggs moved to approve the reprogramming proposed by the Municipality of Gurabo under Section 207 of PROMESA.

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

7. Law 80-81-82

The Chair announced that next agenda item is a discussion on Laws 80-81-82. These laws provide retirement benefits to certain public employees. The Chair requested Ms. Jaresko to make a presentation on this topic.

Ms. Jaresko made the following presentation:

91 December 2020 Public Meeting - Appendix

MINUTES VERSION

“Overview:

I would like to turn to the Board’s assessment of Acts 80, 81, and 82 as enacted by the government.

The Oversight Board performed detailed analysis on all three acts because PROMESA requires that any newly enacted law be “not significantly inconsistent” with the fiscal plan.

Maintaining cost neutrality is paramount to achieving the surpluses required in the fiscal plans and annual budgets.

Executive Summary of Acts 80, 81, and 82:

After evaluating all available information, it appears all three acts, Acts 80, 81, and 82, will likely have an incremental cost to the government.

Let me explain what each law does and why each bill it potentially very costly to the government

I would like to start with Act 80. The law provides an early retirement window for certain employees in all ERS employers.

That means, certain employees in all agencies of the central government but also those at the municipalities and several public corporations such as HTA, PRASA, COSSEC, AEELA, Ponce Muelle would be eligible to retire under this act.

There are three primary reasons the Board believe there will be a cost to this law.

First, the fiscal plan already assumes savings via a 3,200 headcount reduction through FY 2023. The government cannot double count that value as savings to pay for this act. It would be like agreeing to sell the furniture in your house to generate the cash needed to pay off your credit card bills and then saying because you’re selling your furniture you are actually earning money to go shopping. You can’t count the same cash twice.

Second, the act offers additional benefits, which I will explain further in a few minutes.

92 December 2020 Public Meeting - Appendix

MINUTES VERSION

Finally, several employers have already indicated they will not be able to reduce positions by the amounts inferred by the government, further reiterating there is likely to be a cost from this act. Analysis has not been performed by the Government to support feasibility of high level of headcount reduction required to offset costs.

Similarly, Act 81 provides enhanced retirement benefits to police, firefighters, paramedics and correctional officers that participate in Act 447 and Act 1

Act 82 is slightly different. In fact, the government’s certification falsely asserted there would be no cost to this Act.

Act 82 amends Law 26-2017 to authorize use of sick leave towards teacher retirement eligibility and pension benefits.

The incremental cost is primarily driven by the ability to buy up additional years of service and the associated pension benefits derived from those additional service credits.

The Oversight Board has several key concerns with Acts 80, 81, 82:

I would now like to explain, in detail, the Board’s key concerns with these acts. Despite repeated attempts, the Government has not provided sufficient support for the Oversight Board to conclude that the laws are consistent with the certified fiscal plan.

As you can see, the Board has several unanswered concerns, many of which were explained in letters to the government, and many of which the government has not responded to.

First, the law is just very expensive, potentially costing up to $8.3 billion

Second, as I explained on the previous slide, you cannot double count the fiscal plan savings

Third, the laws do not ensure savings

Fourth, Act 80 actually unfreezes the ERS system. This is important to note because it was the government that froze the benefits offered under the system in 2013 because they were no longer affordable and yet they are now enhancing those

93 December 2020 Public Meeting - Appendix

MINUTES VERSION benefits. This action also has implications on the Plan of Adjustment assumptions and process that must be used.

Next, it imposes a significant cost burden on employers, including municipalities and public corporations who must pay the bill for larger benefits if they cannot reduce headcounts

Sixth, it could jeopardize the ability to access federal funds at certain agencies

Finally, the whole approach to these laws would be repeating past mistakes the bankrupted the pension systems in the first place.

The Oversight Board engaged in a comprehensive and robust process under Section 204 of PROMESA to understand the fiscal impact and rectify the deficiencies:

The Oversight Board has engaged in an extensive process with the government over the past five months, including before the laws were enacted, to demonstrate our concern with the cost of these acts. Multiple opportunities have been given to the government to rectify the deficiencies.

Each law has a significant potential costs the Government has not offset:

This page clearly lays out where the costs for each act come from. In aggregate, the cost could be as large as $8.3 billion over the next thirty years

The way to pay for the enhanced benefits would be through additional reductions in personnel, but no plan to do so has been provided by the government.

The certified fiscal plan already assumes personnel savings:

Here we laid out more clearly the personnel savings amount already included in the fiscal plan and for which the government will not get additional credit as savings. Remember my analogy, the furniture is already being sold and the proceeds are accounted for elsewhere. You cannot count the cash twice.

Considerable costs are projected for Commonwealth agencies by Acts 80, 81, and 82:

94 December 2020 Public Meeting - Appendix

MINUTES VERSION

Here we lay out the potential incremental cost for each law by year. You will see the costs are more than $200 million a year in aggregate. If you count the cost to other non fiscal plan ERS employers (like the municipalities), which is the clear box, the total cost of the bills rises above $300 million per year in aggregate for more than a decade.

Remember, the municipalities and public corporations will have to find a way to pay the entire amount of their higher costs. The central government must not and cannot subsidize this cost on their behalf.

Acts 80, 81, and 82 repeat past mistakes:

Here we show how the passage of these laws continues a long-term trend of mistakes related to Puerto Rico’s pension system. In this instance, the government has promised benefits it cannot reasonably afford.

Illustrative Act 80 cost estimate using average participant statistics:

Because we have heard from some employees they do not understand how Act 80 has an incremental cost, we developed this pay to show an illustrative, simplified calculation that demonstrates the source of the significant costs associated to Act 80.

The benefit enhancements for Act 80 are projected to cost up to $4.2 billion nominally through FY 2049. This cost is not surprising, and has three primary drivers:

First: Participants are retiring earlier and as a result, receive their benefits for a longer period of time.

If we look at the first column, this represents eligible employees covered under Act 447. If we assume these employees would have worked until 65, then we have 7,180 employees who on average will receive 6 years of additional payments before they were expected to retire absent Act 80. Given that Act 80 pays 50% of pay, that is just over $17,000 per year and approximately $740 million in those 6 years alone. These payments before expected retirement total $2.3 billion across all eligible employees.

Second: Act 80 increases retirement benefits payable for life well beyond the retirement promise in the current law.

95 December 2020 Public Meeting - Appendix

MINUTES VERSION

Looking back at the first column, this increases payments by $4,725 per year for the lifetime of these employees. If an employee is expected to live for 24 years from today then this produces a $610 million cost over the 18 years the employee was expected to be retired. These increased payments total $1.7 billion across all eligible employees.

Third: Act 80 pays $100 a month until participants turn 62. This adds $100 million more dollars in cost to the law.

The Government has yet to conclusively demonstrate that this expensive $4.2 billion benefit can be paid for.

Illustrative Act 81 cost estimate using average participant statistics:

The Government provided similar data for the public safety employees covered under Act 81. While this is not a one time window like Act 80, we can look at a similar illustrative calculation to understand the magnitude of costs provided under Act 81.

The Government provided 8,640 records for police, firefighters, correctional officers and EMS personnel that are able to benefit from Act 81 upon retirement. The cost for these employees is driven by two components:

First, similar to Act 80, Act 81 increases retirement benefits well beyond the retirement promise in the current law. Act 81 provides between 45% and 55% of the salary at retirement. This average improvement of nearly $13,000 per person over 20 years adds up to $2.2 billion.

Second, Act 81 pays a medical benefit for the lifetime of the retiree, adding an additional $200 million.

The Government has communicated inconsistent interpretations of Act 82-2020:

Finally, there is likely considerable cost from Act 82 as well. As shown on the left, explanations of the cost neutrality of the act have varied considerably over the course of multiple communications with the government

The oversight board’s position, however, is clear and consistent:

96 December 2020 Public Meeting - Appendix

MINUTES VERSION

Act 82 credit of sick leave as time worked, as credited through service purchase, suggests both benefit improvement and acceleration of benefits

The Overall cost of law is as much as $1.6 billion if teachers get full credit for service using maximum service purchase outlined by the Government

Any improvement in benefit levels or timing is an increase in pension payments relative to the fiscal plan, even if future clarification lowers the cost estimate

The Government has not proposed any mechanism by which costs of Act 82 will be paid.”

Ms. Jaresko announced that the Government has sent a letter today to the Board agreeing not to implement Laws 80, 81 and 82 until an agreement is reached with the Board regarding consistency of the same with the certified fiscal plan for the Commonwealth and other applicable fiscal plans. In light of such developments, Ms. Jaresko explained that no further action will be requested from the Board at the meeting.

8. Section 313 Commonwealth Plan of Adjustment modification

The Chair announced that the next item on the agenda was continuation from the previous public meeting of a discussion of proposed modifications to the Commonwealth Plan of Adjustment, and requested William Everts from PJT partners to provide a summary of such previous discussion.

Mr. Evarts made the following presentation:

“Thank you, Mr. Chair. My name is William Evarts and I’m here with my colleague Steve Zelin, partner and the head of PJT Partner’s Restructuring and Special Situation Group.

∑ As discussed in the October 30 Public Board Meeting, the Board has evaluated the February Plan of Adjustment in light of the ongoing COVID- 19 pandemic. As a result of this ongoing review, the Board reentered formal mediation with February Plan signatories holding almost $11bn in

97 December 2020 Public Meeting - Appendix

MINUTES VERSION

Commonwealth claims in August. The resulting proposals were subsequently disclosed publicly on September 30. ∑ Since then, the Board and its advisors have worked to develop an amended plan structure that reflects the results of the deepening economic crisis post- COVID and the uncertainty that results from the ongoing pandemic. The outlines of this proposal are largely similar to the August 18th proposal that the Commonwealth disclosed publicly, with the notable exception of an additional CVI. ∑ The lower half of this page shows a comparison to the February Plan, which has been adjusted consistent with an assumed effective date of July 1, 2021. This proposal consists of: o Approximately $6 billion of cash, a slight increase from the February Plan o Approximately $5 billion of GO debt, which is approximately $4.4 billion lower than the February filed plan ß Importantly, this makes two key adjustments. ß First, maximum annual debt service inclusive of the restructured COFINA bonds have been lowered to $1.05 billion, as compared to approximately $1.5bn in the February Plan. ß Second, the proposed adjusted plan does not have a secured bond component, but consists of 100% general obligation bonds instead. o In addition, this proposal includes a CVI, which is limited to a lifetime payout of $1 billion

98 December 2020 Public Meeting - Appendix

MINUTES VERSION

o Lastly, while the pension RSAs remain in place, this proposal would increase the threshold of pensions that would remain unaffected from any cuts from $1,200 to $1,500 per month.

Moving now to further explain the CVI.

As a reminder, the CVI represents incremental potential consideration relative to the August 18 FOMB Proposal.

∑ The CVI is based on the 5.5% Sales and Use Tax, the collections of which are reported consistent with the post-restructured COFINA bonds. This instrument provides reporting transparency to the market in a structure and revenue source that the market already understands. Importantly, this CVI is structured such that it is only paid in the event of outperformance of SUT collections above the 2020 Certified Fiscal Plan projections. ∑ The structure of the CVI is set by a lifetime cap of $1 billion and a yearly cap of $50 million. This structure would continue for the same tenor as the hard debt service – in other words, through 2041. ∑ The CVI would be paid on outperformance relative to the May 2020 fiscal plan. Creditors would receive 40% of potential outperformance. In other words, if the 5.5% sales and use tax increases by $1 relative to the prior fiscal plan, the CVI would receive 40 cents of that dollar. ∑ Additionally, and importantly, the CVI obligation would also be a General Obligation of the Commonwealth. ∑ We’ve included a visualization of this structure at the bottom of the page. The red line indicates the attachment point of the instrument, which is set at the 2020 Fiscal Plan projections.

99 December 2020 Public Meeting - Appendix

MINUTES VERSION

o If collections exceed these projections, creditors would receive 40% of the outperformance up to an annual cap of $50 million. o This graph assumes a 2% outperformance on an annual basis relative to the Fiscal Plan, though that outperformance is unknown at this time. ∑ This CVI has the benefit of not creating additional required annual debt service to the Commonwealth. o Should the SUT collections outperform projections, by virtue of the sharing structure of the instrument, the Commonwealth will have incremental resources to make payments and retain incremental outperformance to invest in its future.

Thank you, Mr. Chair.”

After the presentation, the Chair requested Ms. Jaresko to make a proposal to the Board. Ms. Jaresko proposed the following motion:

“Resolved, the Board authorizes the immediate commencement of negotiations with creditors and other parties under the current mediation agreement consistent with the proposals contained in Exhibit 5 hereto with a view to the filing of an amended plan of adjustment as soon as practically possible.”

The Board members engaged in discussion on the proposed resolution, after which the Chair asked if any Board member wished to move for the approval of the same.

Andrew Biggs moved to approve the proposed resolution.

Justin Peterson seconded the motion.

The Chair asked for a vote by a voice vote and announced that all Board members having voted in favor of the motion, the motion was approved.

100 December 2020 Public Meeting - Appendix

MINUTES VERSION

9. Public Comments

The Chair proceeded to allow time for public comments and questions, which were read and answered by Ms. Jaresko.

After this segment of the meeting was concluded, the Chair asked whether there was any other matter to discuss, and there being none, the Chair moved to adjourn the meeting, which motion Justin Peterson seconded. All members having voted in favor of the motion, the meeting was adjourned at 11:52 AM AST.

101 December 2020 Public Meeting - Appendix By: LK Department of Health (71) Fund affected: SRF Request type: Fund Release (PP 2021-16865) Staff recommendation: Reject

The Department of Health is requesting to use prior year funds to cover two lawsuits filed against the Department.

Requested Use of funds: Requested Source of funds: The funds are being requested to The funds originate from a SRF pay two different cases: account with funds received as a (1) CES-1998-01-1369 ($198.4k) reimbursement for payments (2) 2010-04-3022 ($172.5k) made to the 330 centers.

Supplementary information: According to Oneill: "Case CES-1998-01-1369 is the result of a 2013 stipulation related to a 1998 layoff that affected 3 employees from the DOH. Pursuant to the 2013 stipulation, the employees were going to receive retirement benefits from ERS assuming that they contribute to the ERS for 30 years. DOH agreed to make the equivalent employer and employee contributions to ERS until 2003 to be entitled to the agreed pension. All documents indicate that this debt is with ERS which switched to Pay Go in 2017." FOMB has verified and these three employees are currently receiving their pension benefits through PayGo. It has also become aware that the retirees are being paid less than half of the pension than what was agreed upon in this case. Oneill's recommendation is to adjust the benefit paid by PayGo, however, a retroactive payment may come up.

Moreover, in Case 2010-04-3022 DOH is ordered to annul the unemployment, reinstate Doris Santos Marrero to her position, together with the payment of the salaries which she ceased to received during such unemployment. According to Oneill, this case should be covered under Title III.

Option 1: <> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Deny the portion related to Case CES-1998-01-1369 ($198.4k). Adjust the benefit paid by PayGo.

Deny portion related to Case 2010-04-3022 ($172.5k) because it should be covered under Title III.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

102 December 2020 Public Meeting - Appendix By: AL Department of Transportation and Public Works (49) Fund affected: GF Request type: interagency transfer (PP 2021-18437) Staff recommendation: Approved full amount

DTOP requests CapEx Funds for $6,700,000 for Weeding and Maintenance of Green Areas around the highways throughout Puerto Rico.

Requested Source of funds: Requested Use of funds: Agency is requesting $6.7M from the Appropriations under custody of the OMB, These funds will be used for the weeding of the areas around the highways unallocated capital expenditures account throughout Puerto Rico. These works will be carried out through private contracting and the disbursements will be made as the works are carried out.

Department of Transportation and Public Works FOMB Budget Requested Amount Certified FY21 FY21 Revise Cost FY21 Budget Requested FY21 Cost Object Code Budget As Is Transfer Budge Regional Proposed Region DTOP Investment ($000's) ($000's) ($000's) ($000's 1 San Juan 687,077 4 4 6,700 6, 3 iv.Other purchased services 2 Arecibo 1,288,269 3 Purchased Services 642 642 6,700 7, 3 Aguadilla 858,845 4 Mayaguez 944,731 Appropriations under the custody of the OMB FOMB Budget Requested Amount 5 Ponce 859,846 Certified FY21 FY21 Revised 6 Guayama 858,846 7 Humacao 1,202,385 Cost FY21 Budget Requested FY21 Cost Object Total 6,700,000 Code Budget As Is Transfer Budget ($000's) ($000's) ($000's) ($ 000's)

8 i. Unallocated capital expenditures 42,167 6,776 (6,700) 76 8 Capital Expenditures 98,667 63,276 (6,700) 56,576

Option 1: <$6.7M> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the interagency transfer from Appropriations under the No partial recommendation was identified Reject the interagency transfer from OMB to DTOP custody of the OMB to DTOP for the use of weeding and maintenance.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

103 December 2020 Public Meeting - Appendix By: AL Puerto Rico Institute of Statistics (268) Fund affected: GF Request type: reapportionment (PP 2021-18431) Staff recommendation: Approved partial amount

The Puerto Rico Institue of Statistics is requesting a reapportionment in the following accounts: Payroll & Related Items, Purchased Services and Other Expenses.

Requested Source of funds: Requested Use of funds: Agency is requesting a reallocation within Salaries of $187K and within Purchased Services Agency is requesting the creation of a new cost object under Salaries- of $10K; and a transfer of $60K from Other Expenses to Purchase Services. Budget to Actuals Salaries for transition employees , reclass from Other Expenses to provided by the agency demonstrate the availabitlity of funds to perform the transactions. maintenance & repairs line-item and create a new cost object -Training for Employees line-item.

FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Cost Object Comments Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 1 i.Salaries for full-time employees 273 376 (110) 266 - 376 Overbudgeted, transferred to transition employees 1 vii.Salaries for Trust employees 224 224 (77) 147 - 224 Overbudgeted, transferred to transition employees ix.Salaries for transition employees - - 187 187 - - Added line-item, requested by the agency 1 Payroll and Related Items 580 781 - 781 - 781 3 i.Payments for PRIMAS 12 15 10 25 10 25 Increase in insurance costs 3 ii.Leases 128 154 (10) 144 (10) 144 Overbudgeted, transferred to PRIMAS payments 3 iii.Maintenance & Repairs 28 38 50 88 50 88 Increase for higher maintenance & repairs 3 iv.Other purchased services 134 101 - 101 10 111 v.Training for employees - - 10 10 - - Added line-item, to train employees 3 Purchased Services 302 308 60 368 60 368 7 Other Expenses 236 98 (60) 38 (60) 38 Overbudgeted, transf. to maintenance & training Total 1,704 1,704 - 1,704 - 1,704

Option 1: <$257K> Approve full amount Option 2: <$70K> Approve partial amount Option 3: Reject Approve the $257K reapportionment from Payroll and Approve the reapportionment of $10K for PRIMAS, $50K to Reject the reapportionment Related items, Purchased Services and Other Expenses to Maintenance & Repairs and $10K to Other Purchased Services. Payroll & Related Items and Purchased Services Payroll distribution would not be approved since the Certified Budget does not have a Salaries for Transition Employees line-item. Training for employees will be allocated to Other Purchased Services, since the Reglamento 49 of Hacienda does not have this object line-item.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

104 December 2020 Public Meeting - Appendix By: AR Puerto Rico Police Bureau (40) Fund affected: GF Request type: Fund Extension (PP 2021-18373) Staff recommendation: Approved full amount

The Puerto Rico Police Bureau is requesting a Fund Extension until Marh 31, 2021. Fund extension is for $21,500 on account 111-0450040-1203-004-2020.

Source of Funds: funds budgeted for FY20 based on Law 111-1988. Amount pertains to second Use of funds: As per Law 111-1998, a fund was created to provide semester unpaid scholarships of children from deceased Sworn Officers. Total Adjusted Budget scholarships for the children of fallen/deceased members of the for FY20 was $43,000 under Donations and Subsidies. First payment done on November 2019 Puerto Rico Police force. The funds will be used to pay scholarships for for $21,499. Second payment was certified by PRPB's Legal team on 6/22/20 31 total children.

Requested Recommended Revenue FY of Revenue Spending Date of extension Agency Account Number Account Balance Legal Mandate Federal Mandate Transfer Amount source Collections Limit requested 40/PRPB 111-0450040-1203-004-2020 21,501.00 21,501.00 21,501.00 GF Law 111-1998 N/A N/A N/A Mar 31,2021 Total $ 21,501 $ 21,501 $ 21,501

Students Scholarship Total 20 $600 $12,000 11 $864 $9,500.92 31 $21,500.92

Supplementary information: Scholarships are paid every semester after candidates are evaluated by PRPB's Legal and Psychological team, as certain requirements are solicited to grant the scholarships. After the evaluation, the scholarships are presented to the 'Scholarhships Examinary Board' within the Department of State. Such evaluation was presented to the Board on 6/11/20 and approved on 6/22/20. A payment was not able to be submitted during the last Payroll week of FY20 due to other ongoing third-party Payroll cycles being performed within PRPB (PRPB's payroll cycle is completed via ADP). The FY21 budget for scholarships is included under the Concept of Donations, subsidies, and other distributions within the $1,247,000 certified amount, which also includes the portion budgeted for the Thomas E. Perez Consent Decree. Subsequent PP 2021-18358 approved increased the amount to $1,303,000.

Option 1: <> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve full amount of $21,501 for fund extension of Approve partially the fund extension for amount of $21,501 in Reject full amount and have the Agency identify an alternate source account 111-0450040-1203-004-2020 until March 31,2021. account 111-0450040-1203-004-2020 until December 31,2020 in of funds from their current FY21 Certified Budget, as the FY20 GF is Recommended order to pay the pending certified scholarships. closed. Not Recommended. Not Recommended.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

105 December 2020 Public Meeting - Appendix By: PR Department of Natural and Environmental Resources (50) Fund affected: SRF Request type: Fund Release & Fund Recognition (PP 2021-15172) Staff recommendation: Approved full amount

Requested description: Agency is requesting a Fund Release of $1.6M to pay $691k of prior year debt and $927k for park improvements. Agency is also requesting a fund recognition as funds correspond to National Parks program which was previously part of Department of Recreation and Sports.

Requested Source of funds: Requested Use of funds: FY20 program SRF To pay $1,618,708 distribution as follows: 1. $691,259 (264-0500000-089-2021) of prior year debt - FY20 Security Services. Agency provided invoices for the full amount. 2. $927,449 for park improvements: a. Purchased Services (264-0500000-003-2021) - $304,628 b. Materials & Supplies (264-0500000-010-2021) - $91,672 c. Equipment Purchases (264-0500000-011-2021) - $531,149

Supplementary information: Pursuant to Law No. 171-2018, the National Parks program was transferred from Department of Recreation and Sports to DRNA. Operations were transferred on FY19. On FY19, Hacienda transferred program accounts balances available except $1,618,708 in account 254-0870000-779-2016. Thus, in FY20, per DNRA's request, Hacienda created a PRIFAS account for agency to receive the $1.6M to be used for National Parks operational expenses. However, Hacienda never transferred the $1.6M to DRNA. Therefore, they are requesting the transfer of funds from account 254-0870000-779-2016 and the creation of the accounts under agency 050 DNRA, fund 264, for Prior Year Debts, Purchased Services, Materials and Supplies and Equipment Purchases. Agency anticpates they will not collect the total amount included in their SRF budget. As of November 30, agency has collected $11.4M of the $40.8 included in FY21 SRF Budget. Agency FY21 projected collections as of June 30, 2021 are $27M

Option 1: <$1.6M> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve full amount as funds correspond to National Parks No partial amount was identified Rejection is not recommended as balance available Program and were never transferred by Hacienda to DRNA corresponds to National Parks Program funds that were as required never transferred to DRNA.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

106 December 2020 Public Meeting - Appendix By: LK Puerto Rico Health Insurance Administration (187) page 1/2 Fund affected: SRF Request type: Reapportionment (PP 2021-19077) Staff recommendation: Approve full amount

ASES is requesting to reapportion funds in order to cover expenses related to the maintenance and updates of IT licences, services and computer security.

Requested Use of funds: Requested Source of funds: (1) ORACLE $86.4k ASES is requesting to use funds assigned within the Other Expenses concept to cover such The Oracle Analytics Standard Edition One and Oracle Database Enterprise Edition payments. products require a support contract.They provide the ability to mitigate risks, improve performance, protect the data and processes dependent on these applications. Supplementary information: During FY20, the payment for the maintenance of the Oracle / Citriom licenses was not (2) CITRIOM Cloud Environments $28k made . This maintenance is carried out annually but has not been updated since FY2019 on The services offered through CITRIOM are Universal Credits for use in the Oracle August 30, 2018. This request updates the service for maintenance of the Oracle / Citriom Cloud including, Infrastructure as a Service (IaaS) and Platform as a Service licenses until June 30, 2021. (PaaS). This allows to create server and platform environments for any use required by ASES, including development environments, test and / or production ASES has provided quotes for the services/products which ties to the total requested environments that facilitate the implementation of the Comprehensive Oversight amount of $114.4k. Additionally they have provided a letter from PRITS approving and Monitoring Plan (COMP) and Reporting Packages (RP) modules. recommending the contracts.

See next slide for transfer table.

Option 1: <$114k> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the request to allow the renewal of the No partial recommendation has been identified. Deny the reapportionment for the payment of the renewal of the Oracle and CITRIOM system licences. ORACLE and CITRIOM licenses. Not recommended

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

107 December 2020 Public Meeting - Appendix

Puerto Rico Health Insurance Administration (187) page 2/2 Fund affected: SRF Request type: reapportionment (PP 2021-19077) Staff recommendation: Approve full amount

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

108 December 2020 Public Meeting - Appendix By: ES Correctional Health (220) Fund affected: GF Request type: Reapportionment (PP 2021-18539) Staff recommendation: Approved full amount

Requested description: Correctional Health is requesting a Reapportionment of $85K from Payroll to Other Expenses to transfer the amount budgeted for the stipend of uniforms for nurses. FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Requested Source of funds: Cost Object Code Budget As Is Transfer Budget Transfer Budget Reapportionment from payroll ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) to other expenses. 1 i.Salaries for full-time employees 14,834 14,834 (85) 14,749 (85) 14,749 1 iv.Healthcare 779 779 - 779 - 779 1 v.Other benefits 2,147 2,147 - 2,147 - 2,147 1 vi.Early retirement benefits 530 530 - 530 - 530 Requested Use of funds: 1 Payroll and Related Items 18,290 18,290 (85) 18,205 (85) 18,205 2 Facilities and Payments for Public Services 72 72 - 72 - 72 CH is requesting to move 3 Purchased Services 20,069 20,069 - 20,069 - 20,069 $85K from payroll to other 5 Transportation and Subsistence Expenses 11 11 11 11 expenses as per AAFAF's 6 Professional Services and Consultants 3,000 3,000 - 3,000 - 3,000 recommendation, because the 7 Other Expenses 36 36 85 121 85 121 funds are used to pay for 10 Materials & Supplies 8,036 8,036 8,036 8,036 nurses uniform stipend and 30 Pension and Related 2,073 2,073 2,073 2,073 should be classified in other 89 Prior Year Debts 164 164 164 164 expenses. Total 51,751 51,751 - 51,751 - 51,751

Supplementary information: • CH provides nurses a yearly stipend of $300 as required by the collective bargaining agreement article 21, seccion 3 which states the payment must be done by January 31st. • CH provided roster data of the 283 FTE that qualify for the stipend at $300 for a total transfer of $85K to Other Expenses. • In orientation with AAFAF, the recommendation was to remove the stipend from payroll and move it to other expenses as the benefit is for uniforms. • Uniform stipend has always been paid through payroll in past fiscal years and moving forward agency will request to have the funds budgeted in other expenses

Option 1: <85k> Approve full amount Option 2: <0> Approve partial amount Option 3: Reject Approve the reapportionment of $85K from No partial recommendation was identified. Reject the reapportionment request leaving the payroll to other expenses to pay for nurses agency to pay for the uniforms through payroll. uniform stipend from the proper cost concept.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

109 December 2020 Public Meeting - Appendix By: JRAP Department of Health (71) Fund affected: GF Request type: Reapportionment (PP 2021-17861) Staff recommendation: Approved full amount

Requested description: HOPU requests a reapportionment of $24K within the Purchased Services concept.

Requested Source of funds: The requested source of Requested Use of funds: HOPU requests to use the funds for the object of Other Purchased Services. The funds is the Leasing (excluding PBA) object. requested amount would be used to amend the contract of SM & Associates, Inc, a company that provides support in ICD9 and ICD10 diagnostic and procedure coding for admitted cases. The contract also provides clerical personnel in Medical Records. …

FY21 Requested FY21 Revised FY21 Certified FY21 Budget As Code Cost Concept Transfer Budget ($ Budget ($000's) Is ($000's) ($000's) 000's)

3.i. Payments for PRIMAS - - 3.ii. Leases (excluding PBA) 50 50 (24) 26 3.iii. Maintenance & Repairs 46 46 46 3.iv. Other purchased services 2,395 2,395 24 2,419 3 Purchased Services 2,491 2,491 - 2,491

Supplementary information: HOPU states in its request that the services provided by the contracted company are necessary to bill insurance companies and that these services may not be performed by Department of Health personnel because DOH's Reclassification Plan does not have the required coders to perform these tasks.

Option 1: <$24K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve Full Amount $24K Reject

Approve full amount so HOPU will not experience Reject full amount and encourage HOPU to negotiate on the cost of interuptions in the revenue cycle. the contract.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

110 December 2020 Public Meeting - Appendix By: JRAP Mental Health and Drug Addiction Services Administration (95) Fund affected: SRF Request type: Fund Release (PP 2021-18492) Staff recommendation: Approved full amount

Requested description: ASSMCA received a payment of $719,003.67 from the insurance agency Triple S corresponding to Claim #1350048 made as a result of damages from Hurricane María in 2017. All of the funds from that claim have not yet been used. The total amount has not yet been used because ASSMCA has not yet received all of the FEMA funds that will be matched with the insurance claim funds. FY20 closed with a balance of $466,004.49 in the account. ASSMCA requests a prior year fund release of this account's balance.

Requested Use of funds: Requested Source of funds: ASSMCA requests the use of prior year SRF funds (from an insurance claim The fund source is a claim payment from Triple S insurance agency made as a result of damages payment) to finish works that were approved. from Hurricane María in 2017. The works to be finished are repairs to Villa 14 - Bayamón Central Office Amphitheatre. Works include: men and women bathroom repairs, replacememt of A/C units, replacements of doors, cleaning and decomisioning of debris, building maintenance, verification and certification of the electrical system, and insurance and policies.

Transfers 000's Transfers 000's Transfers 000's Requested Recommended Legal FY of Revenue Spending Date of extension Agency Account Number Account Balance Revenue source Federal Mandate Transfer Amount Mandate Collections Limit requested ASSMCA 174-95000-081-2019 466 466 466 Insurance N/A N/A 2019 N/A 30-Jun-21 Total $ 466 $ 466 $ 466

Supplementary information: In FY2020 FOMB approved an extension of these funds via PP 2020-12230.

Option 1: Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve Full Amount of $466,004.49 There is no partial amount approval recommendation. Reject Fund Extension

Approve full amount so ASSMCA can finish the approved Rejecting the fund extension would leave physical property in repairs using both the insurance payment and the matching disrepair. The insurance funds issued would not be used. FEMA funds.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

111 December 2020 Public Meeting - Appendix By: VDR Legislative Assembly of the Commonwealth (100) Fund affected: GF Request type: Interagency Transfer (PP 2021-004M2 -Part 2) Staff recommendation: Approved full amount

Legislative Assembly of the Commonwealth requests an interagency transfer from Assignments under the custody of the Treasury-Paygo to reimburse FY21 Christmas bonus expenses.

Appropriations under the custody of the Treasury Certified FY21 FY21 Revised Source of funds: Cost FY21 Budget Requested FY21 Cost Object Appropriations under the custody of the Treasury - FY21 Code Budget As Is Transfer Budget Payments to Paygo ($000's) ($000's) ($000's) ($ 000's) 30 Pension and Related 175,588 138,606 (874) 137,732

Legislative Assembly of the Commonwealth Use of Funds: Certified FY21 FY21 Revised To cover Christmas bonus expenses that were paid with Cost FY21 Budget Requested FY21 Cost Object their current budget. Code Budget As Is Transfer Budget ($000's) ($000's) ($000's) ($000's) Distribution: 81. i. Senate 24,901 27,224 315 27,539 81. ii. House of Representatives 32,519 35,019 339 35,358 iii. Para sufragar los gastos de funcionamiento de 81. 1,590 1,590 8 1,598 la Comisión de Impacto Comunitario Senate 314,906 iv. For the Superintendence of the Capitol for the House of Representatives 338,545 81. purchase of equipment and operation for the 8,908 8,908 129 9,037 Superintendence of the Capitol 128,948 safety of the Capitol District x. For operating expenses and information system Office of Legislative Services 80,246 81. 6,607 6,607 80 6,687 of the Office of Legislative Services CECFL 8,400 xii. For operating expenses of the Joint 81. Commission on Special Reports of the 81 258 3 261 Commission on Special Reports of the Comptroller 2,632 Comptroller Total $ 873,676 Suplementary information: Legislative Assembly of the Commonwealth did not include their request in the original Christmas bonus petition. FY20 Christmas bonus expense for Legislative Assembly of the Commonwealth was $908,552

Option 1: <$874K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve interagency transfer to cover christmas No partial recommendation is identified Reject the interagency transfer from Paygo to bonus expenses Legislative Assembly of the Commonwealth since they did not submit the information in the original request

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

112 December 2020 Public Meeting - Appendix By: AL Convention Center of District Authority (303) Fund affected: SRF Request type: budget increase (PP 2021-18227) Staff recommendation: Approved full amount

Convention Center is soliciting an SRF increase of $107K to be allocated to the Maintenance & Repairs line-item in the certified budget.

Information: 157-2014 amended Section 4050.06 of the Puerto Rico Internal Revenue Code of 2011 to provide that, with respect to every improvement project within the District whose construction begins on or after July 1, 2014, fifty percent (50%) of the State portion of the SUT collected by commercial establishments operating in the District, be available for specific uses in the District.

The collections for the Tax Increment Financing (TIF) are designated for specific purposes, such as: create reserves and provide collateral security for payments of principal and interest on the financing District Improvement Projects (DIP); grant loans for the DIP; and to enable the Authority to finance construction and maintenance works in the District. FOMB, on December 12, 2019, issued a letter stating the following:

"The diversion of the SUT, no matter how small, is a poor budgeting technique and sets a bad precedent (similar to all other special revenue funds) because it limits the authority and flexibility of future governments to determine, amend and change funding priorities over time.

The Oversight Board does, however, recognize the critical need for the maintenance of public spaces in the District, such as the provision of security, utilities, and parking, as well as the importance to attracting businesses and economic activity to the area. Consequently, the Oversight Board will authorize the diversion of SUT annually from merchants operating inside the District to the DIP exclusively for financing by the Authority of construction and maintenance works in the District. This will be reflected in the Fiscal Plans and annual budget going forward."

FOMB Budget Requested Amount Recommended Amount Requested Source of funds: Certified FY21 FY21 Revised FY21 Revised Act 157-2014 The amount of Cost FY21 Budget Requested FY21 Requested FY21 $107K for the budget increase is Cost Object Code Budget As Is Transfer Budget Transfer Budget already collected and corresponds ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) to the collections generated in FY20. 3 i.Payments for PRIMAS 2,334 2,334 - 2,334 - 2,334 3 ii.Leases 16 16 - 16 - 16 3 iii.Maintenance & Repairs 1,938 1,938 107 2,045 107 2,045 Requested Use of funds: 3 iv.Other purchased services 9,363 9,363 - 9,363 - 9,363 Funds will be allocated to the 3 Purchased Services 13,651 13,651 107 13,758 107 13,758 Maintenance & Repairs line-item Total 22,008 22,008 107 22,115 107 22,115

Option 1: <$107K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the SRF budget increase to be allocated in No partial recommendation is identified Reject the SRF budget increase. Maintenance & Repairs, income is already collected and deposited in Hacienda

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

113 December 2020 Public Meeting - Appendix By: AL Convention Center of District Authority (303) Fund affected: SRF Request type: reapportionment (PP 2021-18871) Staff recommendation: Approved full amount

Convention Center is requesting a reapportionment to fund the Professional Services and Consultants line-item of the Certified Budget. Agency states that with this reapportionment they will have sufficient funds to comply with the contracts.

Requested Source of funds: Requested Use of funds: Reapportionment from Legal Expenses and Other Expenses to the Other Professional To cover multiple servicing contracts as detailed in exhibit A. Services Fees line-item.

FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Cost Object Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 6 i.Legal expenses 295 295 (60) 235 (60) 235 6 x.Other professional service fees - - 290 290 290 290 6 Professional Services and Consultants 380 380 230 610 230 610 7 Other Expenses 244 244 (230) 14 (230) 14 Total 22,008 22,008 - 22,008 - 22,008 Exhibit A Amount Description Jorge Droz Yapur - Security Consulting 60,000 It is necessary to coordinate the security and logistics of events in the area as it attends numerous visitors The Fire and Health Department are not efficient in attending to the renewals of the certificates and licenses necessary to operate the Roig Consulting Group LLC - Permits Consulting 8,000 concessions that are within the facilities. Nor do they recognize a section of the Law that exempts the Convention Center from paying licenses. This makes the renewal process one of great difficulty and consumes many hours of management. This contractor offers expert procedures in the Treasury Department and reviews compliance with contracts. The agency's legal staff Robles & Assoc LLC - Administration & Compliance 100,000 does not have the level of expertise to address the issues assigned to the contractor. Sandra Gutierrez Davila - Marketing & Communications and press. Assistance in consulting marketing strategies. Agency does not have enough staff to attend the press and 30,000 Communication communications area After the passage of Hurricane Maria, the possibility of obtaining federal funds for the District has increased. This consultant supports us Harrison Consultant Group - Federal Funds Advisor 80,000 in claims after the Hurricane, request for CDGB funds, CARES funds and any other that may be adjusted to our operation. Reserve 12,000 Others Total $ 290,000

Option 1: <$290K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the $290K reapportionment to have the funds No partial amount identified Reject the reapportionment available for the service contracts.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

114 December 2020 Public Meeting - Appendix By: CR Puerto Rico Department of Treasury (24) page 1/2 Fund affected: GF Request type: Interagency Transfer (PP 2021-16235) Staff recommendation: Approved full amount

Requested description: Interagency request from the Puerto Rico's Office of the Inspector General (OIG) payroll to the Department of Treasury ("Treasury") for Treasury's operating FY21 payroll budget

Requested Source of funds: See slide 2 - for Transfer table request Requested Use of funds: OIG payroll budget (See supplementary information) Payroll operating expenses of the agency

Supplementary information: The $326k budget payroll transfer was determined based on the following analysis:

1. For FY21 a payroll budget transfer of $722k was made to the Office of the Inspector General (OIG) from Hacienda's GF payroll budget baseline pursuant to Act 15-2017, consolidating internal auditors to OIG. During July 2020 active employees were transferred to OIG; however, after consultation with the agencies these employees were still being paid from Hacienda's FY21 budget. As a result, ~$51k should be reimbursed back to Hacienda for the months Hacienda paid already transferred employees (July and August 15th).

2. Hacienda's FY20 budget was built with an active employee roster (excluding vacant positions). The $722k transferred amount included vacant positions for which a budget was not allocated. Therefore, the transfer to OIG was overstated by $275k, which is to be transferred back to Hacienda's GF payroll budget.

Option 1: <$326k> Approve full amount Option 2: <> Approve partial amount Option 3: Reject The agency has provided sufficient information and an analysis was performed to conclude that the $326k requested belongs to Hacienda's payroll budget.

OIG and Hacienda have both agreed to the transfer.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

115 December 2020 Public Meeting - Appendix

Puerto Rico Department of Treasury (24) page 2/2 Fund affected: GF Request type: Interagency Transfer (PP 2021-16235) Staff recommendation: Approved full amount

GF 24 Puerto Rico Department of Treasury Object

FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Cost Object Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 1 i.Salaries for full-time employees 41,550 41,550 321 41,871 321 41,871 1 ii.Overtime - - - - - 1 iii.Christmas bonus - - - - - 1 iv.Healthcare 2,501 2,501 2,501 - 2,501 1 v.Other benefits 5,766 5,766 5 5,771 5 5,771 1 vi.Early retirement benefits 6,776 6,776 6,776 - 6,776 1 vii.Salaries for Trust employees 2,723 2,723 2,723 - 2,723 1 viii.Other payroll - - - - - 1 Payroll and Related Items 59,316 59,316 326 59,642 326 59,642 Total 59,316 59,316 326 59,642 326 59,642 GF 272 Office of the Inspector General Object

FOMB Budget Requested Amount

Certified FY21 FY21 Revised Cost FY21 Budget Requested FY21 Cost Object Code Budget As Is Transfer Budget ($000's) ($000's) ($000's) ($ 000's) 1 i.Salaries for full-time employees 3,599 3,599 (321) 3,278 1 ii.Overtime - - - 1 iii.Christmas bonus - - - 1 iv.Healthcare 128 128 128 1 v.Other benefits 152 152 152 1 vi.Early retirement benefits 440 440 440 1 vii.Salaries for Trust employees 196 196 196 1 viii.Other payroll 54 54 (5) 49 1 Payroll and Related Items 4,569 4,569 (326) 4,243 Total 4,569 4,569 (326) 4,243

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

116 December 2020 Public Meeting - Appendix By: ES Musical Arts Corporation (191) page 1/2 Fund affected: GF Request type: Reapportionment (PP 2021-17411) Staff recommendation: Approved full amount

Requested description: Musical Arts Corporation is requesting reapportionments from Non-Governmental appropriation (Symphony Orchestra) and other Opex concepts into payroll, PRIMAS and other professional fees.

Requested Use of funds: Requested Source of funds: - Reapportion from appropriations to non-governmental entities into payroll to cover musicians GF appropriations salaries - Redistribute funds from different cost concepts into professional services to cover additional musicians and personnel needed for operation of the Orchestra and its virtual events

Supplementary information: • Payroll: $661K requested to be reapportioned from Non-governmental appropriation into payroll to cover the Symphonic Orchestra's musicians salaries. Appropriation to the Symphonic ORchestra is budgeted under Non Governmental entities as a one lump sum. • Professional Services: Agency claims it has adjusted its operations in alingment with reducedd budgets for the past few years relying more on professional services to contract additional personnel when needed. • Agency has shifted to virtual events which have been ongoing and are schedulled through February with the expectation of having a virtual Festival Casals in May 2021 • Purchased Services: request to move from within object code of maintanance and other purchased sercives to cover PRIMAS payments for FY21 • Agency is outside PRIFAS system

Option 1: <$772K> Approve full amount Option 2: <0> Approve partial amount Option 3: Reject Approve reapportionment to transfer funds from Rejecting reapportionment which will impact non-governmental entities, media/advertising, agency ability to pay salaries for musicians and not other expenses and transportation into payroll and be able to contract addiitonal personnel for events professional services, as well as reapportion from within object codes.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

117 December 2020 Public Meeting - Appendix

Musical Arts Corporation (191) page 2/2 Fund affected: Request type: (PP 2021-17411) Staff recommendation:

FOMB Budget Requested Amount Recommended Amount FY21 FY21 Revised FY21 Revised Certified Cost Budget Requested FY21 Requested FY21 Cost Object FY21 Budget Code As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 1 i.Salaries for full-time employees 2,313 2,313 540 2,853 540 2,853 1 iv.Healthcare 265 265 2 267 2 267 1 v.Other benefits 387 387 117 504 117 504 1 vi.Early retirement benefits 86 86 2 88 2 88 1 vii.Salaries for Trust employees 271 271 - 271 - 271 1 Payroll and Related Items 3,322 3,322 661 3,983 661 3,983 2 Facilities and Payments for Public Services 11 11 - 11 - 11 3 i.Payments for PRIMAS - - 69 69 69 69 3 ii.Leases 65 65 1 66 1 66 3 iii.Maintenance & Repairs 40 40 (40) - (40) - 3 iv.Other purchased services 30 30 (30) - (30) - 3 Purchased Services 135 135 - 135 - 135 5 Transportation and Subsistence Expenses 30 30 (30) - (30) - 6 i.Legal expenses 25 25 (25) - (25) - 6 x.Other professional service fees 154 154 136 290 136 290 6 Professional Services and Consultants 179 179 111 290 111 290 7 Other Expenses 263 263 (11) 252 (11) 252 11 Equipment Purchases 5 5 - 5 - 5 12 Ads and Media Guidelines 60 60 (50) 10 (50) 10 14 Contributions to Non-Governmental Entities 720 720 (681) 39 (681) 39 30 Pension and Related 398 398 398 398 Total 5,123 5,123 - 5,123 - 5,123

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

118 December 2020 Public Meeting - Appendix By: AR Puerto Rico Department of Justice (38) Fund affected: GF Request type: Fund Extension (PP 2021-15962) Staff recommendation: Approved partial amount

The Department of Justice is requisting a Fund Extension from 12/31/20 to 6/30/21 for accounts 111-038-0001-003-2020 & 111-038-0001-007-2020 for the Technological Modernization project.

Source of funds: Funds where approved by FOMB on January 2020 via PP 2020-17089. Total Use of funds: For the contracts and services of 4 different providers, assigned for the project was $7,748,000, coming from the Assignments under the custody of required to complete the Registry Modernization Technology Project. Total the OMB-Unallocated Capex. amount for the requested services is $936,815.

Recommended Revenue FY of Revenue Spending Date of extension Agency Account Number Account Balance Requested Transfer Legal Mandate Federal Mandate Amount source Collections Limit requested

38/DOJ 111-0380000-0001-003-2020 674,557 674,557 674,557 FY20 GF N/A N/A N/A 674,557 30-Jun-21 38/DOJ 111-0380000-0001-007-2020 275,410 275,410 262,258 FY20 GF N/A N/A N/A 275,410 30-Jun-21 Total $ 949,967 $ 949,967 $ 936,815

Service Provider Contract Detail Jose Rivera Caraballo 50,000 Consulting for maintenance of IT infrastructure Netwave Equipment 163,316 Data Storage for KARIBE property registry system Microsoft Caribbean 196,278 Service & support for Microsoft Premier technology *AT&T Business Solutions PR 527,221 Telecommunications services with DOJ for 3 years Total $ 936,815

Supplementary information: The Modernization Project of the DOJ information system includes adding capacity to the KARIBE property registry system, add appropiate storage backup and servers, and an AC Data Center. A fund extension was previously provided by FOMB from 6/30/20 to 12/31/20. After approving the $7,748m, the remaining balance as of 6/30/20 was $2,270,653. An additional $1,247,233 have been expensed or encumbered as of 9/30/20, leaving a remaing balance of $949,967. The Project should be completed by May or June 2021. *Contract for support from AT&T is cheaper under a 3 year contract ($1,023,465) vs. a one year contract ($527,221).

Option 1: <> Approve full amount Option 2: <936815> Approve partial amount Option 3: Reject Aporove fully the fund extension for account 111-0380000- Approve $936,815: $674,527 for account 111-0380000-001-003- Reject petition in full and have the DOJ find an alternate source of 001-003-2020 & 111-0380000-0001-007-2020 for the 2020 and $262,258 for account 111-0380000-0001-007-2020 until funds. Not Modernization Technology project. Approve until June 30, June 30, 2021. Recommended. 2021. Not Recommended as the Agency only provided evidence for $936,815.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change Comments /Notes:

119 December 2020 Public Meeting - Appendix By: ES Department of Correction and Rehabilitation (137) page 1/2 Fund affected: GF Request type: Reapportionment (PP 2021‐18359) Staff recommendation: Approved full amount

Requested description: Department of Corrections is requesting a reapportionment of $5,991,000 from payroll of the adult program into purchased services to cover deficit of central office lease, increased PRIMAS payments for the full year, food costs, per diem of community programs and other services/contracts

FY21 Adult Program Budget FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Cost Object Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 1 Payroll and Related Items 205,906 205,906 (5,991) 199,915 (5,991) 199,915 2 Facilities and Payments for Public Services 40,978 40,978 - 40,978 - 40,978 3 i.Payments for PRIMAS 3,174 3,174 1,026 4,200 1,026 4,200 3 ii.Leases 3,359 3,359 1,142 4,501 1,142 4,501 3 iii.Maintenance & Repairs - - - - 3 iv.Other purchased services 31,383 31,383 3,823 35,206 3,823 35,206 3 v. Healthcare services management fee 11,377 11,377 11,377 11,377 3 Purchased Services 49,293 49,293 5,991 55,284 5,991 55,284 Requested Source of funds: Reapportionment from payroll to purchsed services from the adult program, no additional funds needed and will not affect the juvenile certified budget

Option 1: <5991> Approve full amount Option 2: <0> Approve partial amount Option 3: Reject Approve the reapportionment of $5,991,000 from Reject the reapportionment request and not allow DCR payroll to purchsed services which will allow DCR to pay for leases, PRIMAS payments which could be to cover PRIMAS for the year, cover rent payments very risky for an agency that has many employees and and other needs for the agency inmates under its custody, as well as other obligations from food contracts, community program per diem among other costs

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

120 December 2020 Public Meeting - Appendix

Department of Correction and Rehabilitation (137) page 2/2 Fund affected:

Request type: (PP 2021‐18359) Staff recommendation:

Supplementary information • When comparing the number of FTE's used in the budget process (6,058) with recent monthly reporting (5,861), projected payroll savings of $6‐$7M were identified for FY21 with a reduction of 197 FTE's. • Another $4M is projected to be saved in payroll according to agency's latest projections in early retirement benefits. FY21 budget of $10.1M was allocated using ERS data in the budget FY21 DCR Projection for Contracts and process. DCR hasn't provided any explanation for the savings and a meeting will be Services for Adult Budget schedulled with ERS and DCR to discuss variances. • FY21 PRIMAS budget of $3,174,000 isn't enough to cover increased insurance payment of Service/Contract Projected $4.2M. The agency has requested to move $1,026,000 into PRIMAS payments to cover FY21 Amount umbrella policy for the agency as insurance premiums have increased drastically during the Trinity Food contract 21,193 past year. Physician HMO 11,377 • Agency original request of $571K to cover first semester rent doesn't cover full year lease of Antilles Insurance/PRIMAS 4,200 central office as required by the contract review team in order to approve renewed lease. FOMB contacted agency to discuss changes to the current request. Agency confirmed to Track Group (grilletes) 2,769 adjust recommendation by an additional $570K for a total of $1,142K in leases which will Office and facility rent 4,528 certify available funds for the approval of the new lease agreement. Ricoh contracts 822 • Community Program per diem cost tol externa programs has increased from $2.8M in FY20 to Community Programs Per Diem 4,275 $4.275M in FY21 with the inmate population being released, as courts were closed at the Kronos system 198 beginning of the pandemic, which transferred some into the community programs resulting Purchase Orders for in additional costs for the agency. No detail of FY21 per diem and participants has been provided by agency. facility/Air cond/vehicle 5,553 • For FY21, agency is projecting to spend $5.5M on purchase orders to cover repairs for Allied Waste 230 facilities, air conditioning, plumbing, electrical, roof leaks, etc. No detail has been provided Netwave Equipment 296 for FY21 or FY20. Other 2,534 Total * 57,975

* Please note amount doesn't tie to revised requested budget of $55,284, as request was to cover fist semester deficits with the exception of PRIMAS and leases which are needed to cover full

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

121 December 2020 Public Meeting - Appendix By: PP Office of Management and Budget (16) Fund affected: SRF Request type: Reapportionment (PP 2021-18834) Staff recommendation: Approved full amount

Requested description: The Office of Management and Budget (OMB) is requesting a reapportionment from Purchased Services to Prior Year Debts to cover various debts still owed.

Requested Source of funds: Requested Use of Funds: FY21 OMB SRF Budget Supplier Cantidad FY International Safe Deposit $ 28 2018 FOMB Budget Requested Amount Recommended Amount Caribe Sales $ 1,074 2019 Certified FY21 FY21 Revised FY21 Revised Infokeepers Of PR $ 415 2019 Cost FY21 Budget Requested FY21 Requested FY21 Cost Object 7 Brothers Supply $ 44 2020 Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) El encanto Restaurant $ 231 2020 3 iv.Other purchased services 259 259 (13) 246 (13) 246 Marlene Lugo Bautista $ 36 2020 3 Purchased Services 259 259 (13) 246 (13) 246 Impressiones Associates, 89 Prior Year Debts - - 13 13 13 13 Inc. $ 1,642 2020 Total 2,083 2,083 - 2,083 - 2,083 Ricoh de PR $ 56 2020 Soria LLC $ 9,045 2020 Rod Rodder $ 75 2020 Total $ 12,644

Supplementary information: - Agency provided invoices for each of the debts detailed in the Use of Funds table. Agency claims that these invoices were not encumbered by the end of the pertinent fiscal years due to involuntary circumstances such as late receipt of invoice and later ammendments to contracts. - Per B2A provided by agency, actual spend in purchased services is $5k as of October 2020 and agency is expecting underspend for this fiscal year, justifying the redistribution from this cost concept.

Option 1: <$13K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve full amount as OMB provided evidence of these past N/A Would not recommend rejection. due invoices and identified source of funds within current budget.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change Comments /Notes:

122 December 2020 Public Meeting - Appendix By: PP Municipal Finance Corporation (310) Fund affected: SRF Request type: Fund Release (PP 2021-18306) Staff recommendation: Approved full amount

Requested description: The Municipal Finance Corporation (COFIM) is requesting a prior year fund release ($4.133m) to liquidate pending FY20 balances between COFIM and certain municipalities.

Requested Source of funds: Requested Use of funds: FY20 COFIM collections from 1% of Sales and Use Tax, as provided from Law 107 2020. As dictated in Resolution 8-2020, enacted by the Board of Directors of COFIM on Sept 23 2020, the corporation intends to use these funds to liquidate pending balanced owed to various municipalities. Corporation provided breakout evidencing reconciliation and balances owed to all 78 muncipalities.

Requested Recommended Revenue Legal FY of Revenue Date of extension Agency Account Number Account Balance Transfer Amount source Mandate Collections requested 310 030020298 27,268 4,133 4,133 COFIM Law 107-2020 FY20 12/31/2020

Supplementary information: - Per Article 7.303 of Law 107-2020, COFIM collects the 1% municipal sales and use tax (COFIM Deposit) and the municipal sales and use tax in excess of COFIM deposit is transferred to the municipalities (Municipal Transfer) based on the portion collected by each municipality of the total collections. - Given that taxpayers can file and remit sales and use taxes up to 20 days after month-end, COFIM was not able to reconcile collections and relevant transfer to municipalities until August 2020, when the corporation calculated that $4.133m was owed to municipalities from this fund for FY20. After a meeting held on Sept 23 2020, the Board of Directors of COFIM certified Resolution 08-2020, authorizing COFIM to disburse funds to settle these pending balances. - Per the FY20 Certified Budget, COFIM was allocated $129m, of which the corporation collected $120.6m and has disbursed $116.5m.

Option 1: <$4.133m> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Would recommend full amount as these funds have already N/A Would not recommend rejection as these amounts are owed to been collected, are owed in FY20 and do not have fiscal municipalities. impact in FY21.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change Comments /Notes:

123 December 2020 Public Meeting - Appendix By: JRAP Department of Health (71) page 1/2 Fund affected: SRF Request type: Reapportionment (PP 2021-17900) Staff recommendation: Approve full amount

HOPU requests the transfer of $3M from Materials and Supplies and $188K from Equipment Purchase to various concepts in order to meet their operational needs.

Requested Source of funds: Requested Use of funds: $3M from Materials and Supplies Facilities and Payments for Public Services: $14K for AT&T Data internet $188K from Equipment Purchase Purchased Services: $3.101M for leases ($44K) and other purchased services ($3.057M for nursing services, respiratory therapy services, radiology, billing, security, and maintenance services) Transportation Costs: $4K for official vehicle's lease Professional Services: $69K ($1K for KRONOS technical service maintenance, $3K for sign language interpreter, $22K stipend for Medical Director, $16.8K for radiologic security officer, and $26.2K for Image Center manager)

Required Supplementary Information:

Based on conversations with HOPU, the Agency is requesting $3M to be moved from materials and supplies (which is almost half of their FY 21 SRF materials and supplies budget) because they were disbursed COVID-19 Emergency Support Package funds which covered a portion of their materials and supplies needs, leaving a surplus that could be reapportioned to other concepts.

HOPU will soon submit a PP requesting an SRF budget increase because their current SRF projections show an expectation to earn $29M, which is within the $28M - $30M range of their historic SRF actual collections.

Option 1: <$3.188M> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the full reapportionment amount requested by A partial approval is not recommended. Reject the full reapportionment amount requested by DOH- DOH-HOPU. HOPU.

Approving for the full amout will allow HOPU to cover Rejecting the full reapportionment amount will require HOPU to use all assigned funds as approved and without diviating from unbudgeted costs with funds not being used in other the approved concept. concepts.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

Comments /Notes:

124 December 2020 Public Meeting - Appendix

Department of Health (71) page 2/2 Fund affected: SRF Request type: (PP 2021-17900) Staff recommendation:

FY21 Requested FY21 Revised FY21 Certified FY21 Budget As Code Cost Concept Transfer Budget ($ Budget ($000's) Is ($000's) ($000's) 000's)

2.i. Payments to PREPA - - - - 2.ii. Payments to PRASA - - - - 2.iii. Payments to PBA - - - -

2.iv. Other facilities costs 11 11 14 25

2.v. Utility reserve - - - - 2 Facilities and utility payments 11 11 14 25 3.i. Payments for PRIMAS - - -

3.ii. Leases (excluding PBA) 384 384 44 428

3.iii. Maintenance & Repairs 1,744 1,744 1,744 3.iv. Other purchased services 5,016 5,016 3,057 8,073 3 Purchased Services 7,144 7,144 3,101 10,245

5 Transportation 12 12 4 16

6.i. Legal professional services - - - - 6.ii. Finance and accounting professional services 31 31 - 31

6.iii. Information technology (IT) professional services 34 34 1 35

6.iv. Labor and human resources professional services - - - - 6.v. Engineering and architecture professional services - - - - 6.vi. Medical professional services 2,469 2,469 - 2,469 6.vii. Training and education professional services - - - - 6.viii. Restructuring Fees - - - - 6.ix Title III professional fees - - - -

6.x. Other professional services - - 68 68

6 Professional Services 2,534 2,534 69 2,603

10 Materials and supplies 6,760 6,760 (3,000) 3,760

11 Equipment Purchases 188 188 (188) -

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change

125 December 2020 Public Meeting - Appendix By: CPR Appropriations under the custody of the Treasury (25) Fund affected: SRF Request type: Fund Recognition & Budget Increase (PP 2021-17902) Staff recommendation: Approved full amount

Requested description: Appropriations under the Custody of the Treasury (025) is requesting a fund recognition and SRF Increase to deposit 35% of the sale of Electronic Lottery tickets to the Municipal Income Equalization Fund payable to the Municipal Property Tax Revenue Collection Center (CRIM, as its spanish acronym) by provision of Law 10 -1989 as amended.

Requested Use of funds: Requested Source of funds: CRIM will use these funds for its operation and permanent improvements of the The source of funds is the projected sale of Electronic Lottery tickets in FY21. Municipalities, in accordance to Law 10 - 1989 and as amended by Law 140 -2019.

Requested Recommended Legal FY of Revenue Spending Date of extension Agency Account Number Account Balance Revenue source Federal Mandate Transfer Amount Mandate Collections Limit requested Electronic Lottery 25 278 0250000 781 2021 0 17000 17000 Act 60 Law 10 - 1989 FY21 17000 June 30,2021 Ticket Sales Supplementary information: Per Law Law 10 -1989 and amended by Law 140 - 2019, 35% of the product of the sale of Electronic Tickets will be distributed to the CRIM. PRIFAS print screens showed actuals of FY18 ($36.6M), FY19 ($55.1M) and FY20 ( $15.7) transferred from Appropriations under the custody of the Treasury to CRIM. As per the first quarter report (July 2020 to September 2020), total net revenues amounted to $11.5M out of which 35% is to be paid to the CRIM for a total of $4.1M. The fund recognition considers the average quarterly pay of $4.1M times 4 quarters for a total of $17M. We obtained the PRIFAS printscreen for FY20 and validated that the total revenue deposited and expended amounted to $15.7M.

Option 1: <$17.0M> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve the fund recognition of $17.0M, product of the sale Not recommended. Not recommended since the Appropriations under the Custody of of tickets of the Electronic Lottery in FY21, in accordance with the Treasury would be in noncompliance with the Law 10 - 1989 and Law 10 - 1989 and as amended by Law 140 - 2019. The CRIM Law 140 -2019. will use these funds for its operation and permanent improvements of the Municipalities.

Pre-Decisional | Privileged & Confidential | Analysis Subject to Material Change 126 December 2020 Public Meeting - Appendix By: PR Office of the Inspector General (272) Fund affected: SRF Request type: Reapportionment (PP 2021 ‐ 0004M2) Staff recommendation: Approved full amount

Requested description: Agency is requesting a reapportionment between objects within Payroll to pay christmas bonus, $4k of employees who were not included in OMB's Christmas Bonus request.

Requested Source of funds: Requested Use of funds: Other payroll expenses To pay the bonus of employees who were transferred to the OIG on November 1, 2020 and were not included in the OMB Christmas Bonus request thus not included in FOMB's November 20, 2020 Christmas Bonus authorization

Supplementary information: ‐ OMB confirmed employees christmas bonus amount was not included in their respective previous agencies christmas bonus request PP 2021‐0004M, submitted to FOMB and approved on November 20, 2020.

Option 1: <$4k> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve request as agency has identified the additional $4k No partial amount was identified Rejection is not recommended as agency identified funds within agency's FY21 budget. within their FY21 budget to cover employees christmas bonus.

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

127 December 2020 Public Meeting - Appendix By: PR Department of Transportation and Public Works (49) Fund affected: SRF Request type: Fund Release (PP 2021‐18794) Staff recommendation: Approved full amount

Requested description: Department of Transportation and Public Works is requesting the extension of account 049‐443‐779‐2016 up to June 30, 2021. This account was previously extended to December 30, 2020 in PP 2020‐21627.

Requested Source of funds: Requested Use of funds: SRF ‐ account 049‐443‐779‐2016 Purchase Vehicles

Supplementary information: ‐ The Acervo Office was created under Act 96‐1950, which authorizes DTOP to establish a collection of equipment/materials to be used in the construction and conservation of public works. Hacienda holds the Acervo account, which is funded by advances from various DTOP offices. Once the existing balances are used, the account and Acervo Office will be closed. ‐ Due to COVID‐19 Emergency, projects, and auctions for the purchase of Cargo Vehicles, Tractors, Trucks, Vacuum Truck and other equipment for execution of public works have been delayed. Agency is requesting an additional extension of the account due to the limited availability of personnel and auctions. ‐ DTOP claims that not granting an additional extension will prevent fulfillment of public works mission to construct/maintain the road system and hinder compliance with federal laws/requirements. The funds are not “free balances” and would be used for specific projects through advances and purchase orders. ‐ This account was previously extended ($2M) to December 30, 2020 in PP 2020‐21627. In FY21 agency has utilized $185k and encumbbered $187k. ‐ Agency claims this projects include long procurement processes (i.e. In cases, ASG has taken 6 months in the procurement process)

Option 1: <$1.7M> Approve full amount Option 2: <> Approve partial amount Option 3:t Rejec Approve the extension of SRF balances requested for agency No partial amount was identified Deny the request to use the account balances and require spend, understanding projects may have been affected due that cost concepts remain unchanged. to Covid‐19.

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

128 December 2020 Public Meeting - Appendix By: ES Department of Correction and Rehabilitation (137) Fund affected: SRF Request type: Fund Release (PP 2021‐18534) Staff recommendation: Approved full amount

Requested description: Department of Corrections is requesting a fund release of encumbered funds in the 298 and 743 account from prior year funds to pay for vehicle fleet, inmate uniforms, mattress materials and fabrics for inmate programs in correctional facilities.

Requested Source of funds: Requested Use of funds: ‐ 743 revenue source: FY19 U.S Marshals contract ‐ The $1M in the 743 fund will be used to cover an order for a vehicle fleet of 44 with ‐ 298 revenue source: FY19 10% of commissary sales, license plate insurance that was ordered before the pandemic. manufacturing, inmate telephone service fee, waste disposal service ‐ The $1.3M in the 298 fund will be used to cover $11K for auto parts and painting equipment, $642K for inmate uniforms, $564K in fabrics for making mattresses, white fabric for sheets/covers and foam for mattresses

Supplementary information: • Revenue for the 298 and 743 funds was collected in FY19 and FOMB approved a fund release (PP‐2020‐09791) in October 2019. The agency started the procurement process but later the pandemic started, everything was delayed and the suppliers weren't able to deliver the vehicles until recently. Manufacturing was interrupted, thus local supplier's couldn't find material or fabrics for making mattresses and sheets/covers used in DCR programs where inmates learn how to make goods which are used in facilities • Agency provided purchase orders that match request of encumbered amounts with PRIFAS evidence.

Option 1: <2.3M> Approve full amount Option 2: <0> Approve partial amount Option 3: Reject Approve the fund release of the 298 and 743 Rejecting the fund release would force the accounts with $2,318,000 in encumbered funds agency to look for additional funds in FY21 for vehicle fleet, inmate uniforms, knitting budget or potentially cancel purchase orders materials, fabrics, foam and other materials for inmate programs

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

129 December 2020 Public Meeting - Appendix By: ES Musical Arts Corporation (191) page 1/2 Fund affected: SRF Request type: Reapportionment (PP 2021‐17463) Staff recommendation: Approved full amount

Requested description: Musical Arts Corporation is requesting reapportionments into purchased services and media/advertising, with additional reallocations from within object codes with agency shifting its operations to have virtual events with the Symphonic Orchestra as COVID has continued to impact its ability to have live events.

Requested Source of funds: Revenue Requested Use of funds: Agency is requesting a reapportionment to cover generated from events, tobacco tax, salaries, other purchased services and other professional services as the donations, programs pandemic has changed how the agency does its events and the symphonic orchestra transitioning into virtual events for FY21

Supplementary information: • Payroll: Reallocate $49K from other benefits and $1K from healthcare into salaries • Purchased Services: Reallocate $45K from leases to other purchased services. Costs related to this reallocation include maintenance for instruments and equipment, Ricoh printer costs, software license for Kronos and others. In addition, reallocate $5K from facilities, $2K from transportation, and $1K from donations into other purchased services to cover other purchased service needs. • Professional Services: Reallocate $88K from legal expenses into other professional services to cover contracts for second director of the orchestra, digital marketing, maintanance services and production service contracts. • Advertising: Reallocate $18K from transportation into advertising • Although revenue projections for the agency are $120K less than certified budget of $986K, the agency expects to generate more revenues from donations.

Option 1: <$201K> Approve full amount Option 2: <0> Approve partial amount Option 3: Reject Approve reapportionment from facilities, Rejecting reapportionment request would not transportation, and donations into purchased allow agency to allocate additional funds for services. As well as allow reallocations from within salaries, puchased services and professional object codes services which impacts the orchestras performance

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

130 December 2020 Public Meeting - Appendix

Musical Arts Corporation (191) page 2/2 Fund affected: Request type: (PP 2021‐17463) Staff recommendation:

FOMB Budget Requested Amount Recommended Amount Certified FY21 FY21 Revised FY21 Revised Cost FY21 Budget Requested FY21 Requested FY21 Cost Object Code Budget As Is Transfer Budget Transfer Budget ($000's) ($000's) ($000's) ($000's) ($000's) ($000's) 1 i.Salaries for full-time employees 131 131 50 181 50 181 1 iv.Healthcare 11 11 (1) 10 (1) 10 1 v.Other benefits 91 91 (49) 42 (49) 42 1 Payroll and Related Items 233 233 - 233 - 233 2 Facilities and Payments for Public Services 6 6 (5) 1 (5) 1 3 ii.Leases 79 79 (45) 34 (45) 34 3 iv.Other purchased services 95 95 53 148 53 148 3 Purchased Services 174 174 8 182 8 182 4 Donations, Subsidies and Distributions 2 2 (1) 1 (1) 1 5 Transportation and Subsistence Expenses 25 25 (20) 5 (20) 5 6 i.Legal expenses 142 142 (88) 54 (88) 54 6 x.Other professional service fees 315 315 88 403 88 403 6 Professional Services and Consultants 457 457 - 457 - 457 7 Other Expenses 30 30 30 30 10 Materials & Supplies 5 5 5 5 11 Equipment Purchases 21 21 - 21 - 21 12 Ads and Media Guidelines 33 33 18 51 18 51 Total 986 986 - 986 - 986

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

131 December 2020 Public Meeting - Appendix By: JRAP Department of Health (71) Fund affected: SRF Request type: Fund Recognition & Budget Increase (PP 2021‐07521) Staff recommendation: Reject

Requested description: DOH ‐ Environmental Health Program requests the creation of an account and an budget increase of $135K for the School Lunch program for FY2021. DOH requests increases in Other Professional Services ($100K), Other Operating Expenses ($5K), Materials and Supplies ($25K), and Equipment Purchases ($5K).

Requested Use of funds: The funds will be used for purchase of equipment, Requested Source of funds: This revenue will be sourced from a contract held with the Puerto materials, and the hiring of personnel via other professional services. Rico Department of Education for payment for school cafeteria inspections.

Supplementary information: FY21 Requested FY21 Certified FY21 Budget As FY21 Revised Code Cost Concept Transfer Budget ($000's) Is ($000's) Budget ($ 000's) ($000's) ‐The Richard B. Russell National School Act requires school cafeteria inspections. 6.i. Legal professional services ‐ ‐ ‐ ‐PRDOE contracts with PRDOH to carry out these required inspections. 6.ii. Finance and accounting professional services 8 8 8 ‐These inspections take place at least once from August ‐ December and at 6.iii. Information technology (IT) professional services 229 229 229 least once from January ‐ May each school year. 6.iv. Labor and human resources professional services 19 19 19 ‐To date in the current fiscal year, there is zero ($0) revenue as a result of 6.v. Engineering and architecture professional services ‐ ‐ ‐ this contract because services have not been performed. 6.vi. Medical professional services 8,553 8,553 8,553 6.vii. Training and education professional services ‐ ‐ ‐ 6.viii. Restructuring Fees ‐ ‐ ‐ 6.ix Title III professional fees ‐ ‐ ‐ 6.x. Other professional services ‐ ‐ 100 100 6Professional Services 8,809 8,809 100 8,909 7Other Operating Expenses 1,012 1,012 5 1,017 10 Materials and supplies 11,765 11,765 25 11,790 11 Equipment Purchases 1,077 1,077 5 1,082 Total 52,683 52,683 135 52,818 Transfers 000's Transfers 000's Transfers 000's Requested Recommended FY of Revenue Spending Date of extension Agency Account Number Account Balance Revenue source Legal Mandate Federal Mandate Transfer Amount Collections Limit requested PRDOH 245-0710000-985-2016 $156,375 135,000.00 $0 Income from school cafeteria inspectionsRichard B. Russell National School Lunch Act Section FY2021 9(h) N/A 30-Jun-21

Total $ 156,375 $ 135,000 $ -

Option 1: <$135K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve creation of new account and approve the requested Approve fund recognition (creation of new account). Reject the Reject the fund recognition and the budget increase. There is no budget increase of $135K. budget increase until there is actual revenue. Once there are revenue to recognize for FY2021 at the time of the PP siubmission. revenues to be received for this FY, the agency should submit a DOH has not provided revenue projections taking into account budget increase PP. inspection frequency change due to school closures because of COVID‐19. In conversation with DOH, the agency informed us that from August 2020 ‐ December 2020, no inspections were completed thus there will be no revenues for that period. DOH may submit a fund recognition and/or budget increase request once the revenues to be generated during Fy21 are more certain.

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

132 December 2020 Public Meeting - Appendix By: JRAP Department of Health (71) page 1/2 Fund affected: SRF Request type: Reapportionment & Budget Increase (PP 2021‐18243) Staff recommendation: Approved partial amount

Requested description: The Department of Health‐Adult's University Hospital (UDH) requests a Special Revenue Funds budget increase for FY21 of $10.5M to cover operating costs. Revenue projections are greater than the FY21 approved budget . UDH's FY21 approved SRF budget is $35.5M. UDH also requests a reapportionment within Purchased Services.

Requested Source of funds: DOH‐UDH requests this increase based on projected revenues from the following sources: commercial health insurance, Medicare Advantage (private insurers), PR Government Health Plan (Vital Plan) and government agencies. Medicare revenues are excluded from the request, as these are included in the Federal Funds budget. Annualized Actuals Actuals Actuals Actuals Actuals Projections Revenue Streams 2016‐2017 2017 ‐2018 2018 ‐2019 2019 ‐2020 July ‐Nov 2020 2020 ‐2021 Revenues ‐ Government Entities 3,534,830 2,754,029 2,760,397 3,035,681 1,097,753 2,634,608 Revenues ‐ Commercial Payers 10,169,490 10,475,449 10,009,982 9,129,590 3,940,255 9,456,612 Revenues ‐ Government Health Plan (PSG) Payers 24,999,927 26,472,426 22,008,409 21,519,934 7,317,512 17,562,028 Revenues ‐ Medicare Advantage 17,988,165 19,556,789 18,536,547 17,659,416 6,122,477 14,693,944 Total Non‐Medicare 56,692,413 59,258,693 53,315,335 51,344,621 18,477,997 44,347,192 Based on average actuals from July‐ Nov 2020 Revenues ‐ Medicare Original 11,519,268 9,630,823 10,997,059 8,760,405 3,737,309 8,969,543 Revenues ‐ Medicare Teaching 2,194,132 1,868,414 4,759,009 2,500,062 888,933 2,133,439 Total Medicare 13,713,399 11,499,237 15,756,069 11,260,467 4,626,242 11,102,982 Per the agency, these are included in the Federal Funds Budget, not part of this request. Grand Total 70,405,812 70,757,930 69,071,403 62,605,088 23,104,239 55,450,174 Requested Use of funds: DOH‐UDH Supplementary information:: requests an SRF budget increase in the ‐UDH projects a 2% increase in revenues over FY2020. According to UDH, while a 3 ‐ 4% increase in revenue is expected from commercial payers following concepts: and Medicare Advantage, there will be no percentage increase in the per diem rate from the Government Health Plan. ‐Facilities and payments for public services ($6.3M) For the period July 2020 ‐ November 2020, UDH has generated $18,477,997 for the non‐medicare segment. ‐Purchased services ($886K) ‐Transportation costs ($3K) ‐The FY21 SRF Certified Budget was significantly adjusted due to the impact of COVID‐19. Althought there was a decline in revenues after March ‐Professional services ($2.9M) 2020 due to a decrease in admissions, outpatient services, and emergency room visits, UDH presumes that the adverse impact of COVID‐19 should ‐Other Operating Costs ($399K) decrease and admissions and other services should increase so that by the end of FY2021, the number of patient days will be back to FY2020 levels (prior to COVID‐19). DOH‐UDH requests a reapportionment of $608K from Maintenance and Repairs to other concepts within Purchased Services.

Option 1: <$10.5M> Approve full amount Option 2: <$8.8M> Approve partial amount Option 3: Reject Approve $10.5 million dollars Approve partial amount of $8.8M. Reject PP. Approve this partial amount because it is the difference between FOMB was conservative in the budget allocated to UDH for FY2021 estimated amount of SRF revenues that will be earned based on based on projections made due to COVID‐19 effects on revenues. annualized projection and the current SRF budget.

Approving the full amount requested would allow UDH to spend $35.5M (current SRF budget) + $8.8M (recommended partial their agency‐generated income in accordance with prior year approval) = $44.3M (FY21 annualized revnue projection) spending. If, as the FY2021 continues, revenues exceed these projections, UDH may request another SRF increase Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

133 December 2020 Public Meeting - Appendix

Department of Health (71) page 2/2 Fund affected: SRF Request type: Reapportionment & Budget Increase (PP 2021‐18243) Staff recommendation: Approved partial amount

FY21 Requested FY21 Certified FY21 Budget As FY21 Revised Code Cost Concept Transfer Budget ($000's) Is ($000's) Budget ($ 000's) ($000's)

2.i. Payments to PREPA 237 237 ‐ 237 2.iv. Other facilities costs 40 40 17 57

2.v. Utility reserve 10,064 10,064 6,288 16,352

2 Facilities and utility payments 10,341 10,341 6,305 16,646

3.ii. Leases (excluding PBA) 392 392 90 482

3.iii. Maintenance & Repairs 783 783 ( 608) 175

3.iv. Other purchased services 7,777 7,777 1,404 9,181

3Purchased Services 8,952 8,952 886 9,838

5 Transportation 11 11 3 14

6.vi. Medical professional services 4,252 4,252 2,912 7,164 6Professional Services 4,252 4,252 2,912 7,164

7Other Operating Expenses 953 953 399 1,352

Total 34,525 34,525 10,505 45,030

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

134 December 2020 Public Meeting - Appendix By: AR 9‐1‐1 Emergency Systems Bureau (121) Fund affected: SRF Request type: Fund Release (PP 2021‐19220) Staff recommendation: Approved full amount

Requested description: The Agency is requesting a Prior Year Fund Release to cover two months of pending debt regarding use of facilities for the Government Board of the 3‐1‐1 service.

Source of Funds: Surplus of funds is related to FY20 SRF Requested Use of funds: The Agency is requesting funds for rental expenses related to a two month delay collections. As per Agency's Budget to Actuals from FY20, in the transition of 3‐1‐1 to the Department of State. Transition and change of location of 3‐1‐1 should have there is sufficient surplus to cover the use of funds. been completed as of October 2019. Months pertain to November and December 2019.

Requested Recommended Revenue Legal FY of Revenue Spending Date of extension Agency Account Number Account Balance Federal Mandate Transfer Amount source Mandate Collections Limit requested

121 041-925238 $ 29,667,989.45 $ 41,604.76 $ 41,604.76 SRF N/A N/A FY20$ 41,604.76 June 30,2021 Total $ 29,667,989 $ 41,605 $ 41,605

Supplementary information: Transition and change of location of 3‐1‐1 should have been completed as of October 2019. Even though rent contract (2012‐000053‐G) with AGM Properties Corporation was valid until 5/31/20, OMB only assigned budget of rent expenses for the months of July‐October 2019. These where the months stipulated at the beggining of FY20 that 3‐1‐1 would require to pay rent before moving to Department of State facilities. As per Agency, after communications between FAAFA & OMB, OMB requested 9‐1‐1 to submit the petition for the release of funds. FAAFA is currently in direct contact with lawyers representing AGM Properties Corporation, for purposes of avoiding litigation for the pending debt.

Option 1: <$41.6k> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Fully Approve the petition for fund release of prior year Approve partially the petition. Not Recommended. Deny petition in full and have the Agency identify an alternate surplus for an amount for $41,605. Approval is for private source of funds. Not Recommended bank account 041‐925238. Surplus pertains to FY20 SRF collections.

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

135 December 2020 Public Meeting - Appendix By: AL Redevelopment Authority of Roosevelt Roads (265) Fund affected: GF Request type: reapportionment (PP 2021‐18408) Staff recommendation: Approved partial amount

Requested description: Agency is requesting a reapportionment of $93K to transfer funds from Maintenance and Repairs to Other Purchased Services. They are also

Requested Source of funds: Requested Use of funds: The source of funds is within their own budget. Transfer to Other Purchased Services is to pay for the security guards in the Roosevelt Roads Facilities. Transfer within Capex is to start the design for the sanitary system ($12.6M in construction and repair for the sanitary system was given to the agency).

Option 1: <$1,034K> Approve full amount Option 2: <$93K> Approve partial amount Option 3: Reject Approve the full transfer of $93K in Purchased Services Approve the $93K in the transfer within Purchased Services Reject the transfers within Purchased Services and Capex and $941K in Capex. (Maintenance & Repairs to Other Purchased Services) for the purpose of security in the facilities. The transfer of the $941K from Construction/Infrastructure to Study & Design is not necesssary as Construction/Infrastructure covers the entire construction process (including design).

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

136 December 2020 Public Meeting - Appendix By: AR Puerto Rico National Guard (43) Fund affected: GF Request type: Fund Release (PP 2021‐18821) Staff recommendation: Approved full amount

Requested description: The Agency is requesting a Fund Extension of fund 218‐0430000‐780, which was assigned to respond to the Hurricane Maria disaster. Fund extension is for $31,180 until December 31, 2020.

Source of funds: Based on Executive Order 2017‐047, funds where assigned for the Requested Use of funds: The agency is requesting a Fund Extension for movilization of National Guard personnel. Account is currently frozen under the Department $31,180. Funds are for payroll payment of 2 soldiers that where mobilized and of Treasury/PRIFAS, with a balance of $1,099,275. injured during the Hurricane Maria State Mobilization, as per Executive Order 2017‐047.

Requested Recommended Revenue Legal FY of Revenue Spending Date of extension Agency Account Number Account Balance Federal Mandate Transfer Amount source Mandate Collections Limit requested

43 E1390-218-0430000-780-2018$ 1,099,276 $ 31,180.20 $ - GF N/A N/A FY18 1,099,276$ 31-Dec-20 Total $ 1,099,276 $ 31,180 $ -

Supplementary information: Based on EO 2017‐047, soldiers receiving medical treatment from the State Insurance Fund Corporation due to injuries during the State Mobilization ara entitled to regular payroll payment for the period receving the treatment. Periods of medical treatment and subsequent payroll entitlement pertain to May 2018 to March 2019. As per Agency, final certification of medical treatment and payroll associated to the treatment time was completed as of October 2019. The Agency did not submit petition until December 2020 and confirmed there is no alternate source of funds for payment to both soldiers.

Option 1: <31K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve with observations ‐ the source of funds for the No partial recommendation was identified Reject the petition in full and have the Agency identify an alternate payment of $31,180 will be the FY2021 Emergency Reserve. source of funds for the payment of $31,180 regarding payroll for 2 Fund 218 is closed as it corresponds to the FY2018 employees associated to medical treatment periods. In addition, Emergency Reserve. emergency fund 218 under the General Fund is closed for FY2018. Not recommended Recommended

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

137 December 2020 Public Meeting - Appendix By: CPR State Historic Preservation Office of Puerto Rico (155) Fund affected: SRF Request type: Fund Extension & Fund Release (PP 2021‐10759) Staff recommendation: Approved full amount

Requested description: The State Historic Preservation Office of Puerto Rico is requesting a budget release and budget extension of account 218‐1550000‐081‐2018 until March 2021. The purpose of this request is to be able to pay the tree grate installation services that were provided in June 2020.

Requested Source of funds: Source of funds is the encumbered funds ($63K) in account 218‐ Requested Use of funds: The State Historic Preservation Office is requesting to 1550000‐081‐2018. use these funds to cover the services provided for tree grates that were damaged after the passing of Huricane Maria.

Supplementary information: After the passing of Huricane Maria, emergency state funding was assigned to the State Historic Preservation Office. They contracted City Park Equipment which are the sole providers of tree grates in Puerto Rico, however, City Park Equipment was not able to provide the tree grates back in 2018 as this is a customized equipment which is ordered to manufactrer outside PR. The equipment was delivered in April 2020 and invoiced in June 2020. We confirmed with the PRIFAS printscreen that the funds (63K) were encumbered and available and confirmed with the proof of delivery that the tree gates services were provided.

Option 1: <$63K> Approve full amount Option 2: <> Approve partial amount Option 3: Reject Approve with observations ‐ the source of funds for the No partial approval was identified. The funding provided was from the Emergency State Funds for FY18, payment of $63K will be the FY2021 Emergency Reserve. and it should have been expensed prior to account closing. Fund 218 is closed as it corresponds to the FY2018 Therefore, we recommend that the agency identifies a viable source Emergency Reserve. of funding for these purposes within their current budget.

Pre‐Decisional | Privileged & Confidential | Analysis Subject to Material Change

138 December 2020 Public Meeting - Appendix 1 University of Puerto Rico (“UPR”) Line Items Affected: OpEx Request type: Letter Dated October 29, 2020 (UPR – 005) Staff recommendation: Approve Partial Amount

Fund Release Overview

Fiscal Plan Source of funds Transfer within cost concept does not go against measures and is consistent The source of funding comes from identified Savings from OpEx with the fiscal plan. line items included in Certified Budget FY21 (Purchased Services, Transportation Service, and Facilities and Public B2A Services) which combined add up to $72.1M. UPR’s identified savings in Purchased Services, Transportation Services, and Facilities and Public Services per Q1 FY21 Reporting Package show YTD positive variance of 25% or $6.9M under budget for these line items.

Concept of Spend Object Description Transfer (000’s) OpEx Medical Insurance (Expense) ($4,469) OpEx Purchased Services $3,165

OpEx Transportation Services $565 OpEx Facilities and Public Services $740

Total -

Option 1: <> Approve full amount Option 2: <> Approve partial amount Option 3: Rejection Reapportionment does not increase the agency Original reapportionment request contemplated a Deny the request and require that cost concepts spending envelope. However, change in medical more expensive medical plan and an 8-month remain unchanged. Require UPR to identify savings insurance provider shows favorable but minimal period from Nov. ‘20 to June ’21. unrelated to COVID-19 considering savings are savings which do not require reapportionment of full temporary and not a result of measures amount. Upon review, Team recalculated and adjusted implementation. FOMB could approve full amount providing cushion amounts to reflect the savings of the new contract for UPR in case their projection is inaccurate, for a 7-month period beginning Dec. ’20. expense increases due to pharmacy costs adjustments or utilization costs. 4

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change 139 December 2020 Public Meeting - Appendix 3 University of Puerto Rico (“UPR”) Line Items Affected:: Appropriations/Other Exp. Request type: Letter Dated October 15, 2020 (UPR – 005) Staff recommendation: Approve Partial Amount

Fund Release Overview Source of funds Fiscal Plan The source of funding that has been identified are Prior Year The Fund Release does not go against measures but is not consistent with Funds from the remaining unearned revenue available of the the Board policy concerning the use of previous years' unused funds. Trainings & Seminars Program of the UPR. Since FY' 18, UPR has received restricted funds from the Central Government's Joint Use of funds Resolution budgets, for the Training and Seminars Program. The Student Payroll and allowable costs associated with the Programs as well as remaining balance of the unearned revenues will be $7.65M. transfer from unearned to earned revenue recognizing 60% of approved total amount. Other Considerations FOMB participated as an intermediary so that both UPR and B2A Government Agencies coordinated meetings and helped the Approval would include periodic implementation reporting on assigned logistics of the Program in hopes that this could lead the way to allocations. future alliances between other agencies and UPR resources. This approval only covers UPR required allocations to implement the program.

Option 1: <> Approve full amount Option 2: Rejection Approve the request for the full amount of $3.016M. This Deny the request and require that cost concepts and approval does increase the UPR spending envelope by unearned revenues remain unchanged. ~$1.21M. Permit use of FY18 unearned revenue for program. UPR would not be able to provided proposed services to The three Programs are scheduled to commence agencies. during January 2021. 4

Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change 140 December 2020 Public Meeting - Appendix

FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO December 18, 2020

RESOLUTION CERTIFYING THE COMMUNITY DEVELOPMENT BLOCK GRANT MITIGATION (CDBG-MIT) ACTION PLAN SUBMITTED BY THE COMMONWEALTH OF PUERTO RICO TO THE US DEPARTMENT OF HOUSING AND URBAN DEVEOPMENT (HUD) PURSUANT TO HUD’S NOTICE OF ALLOCATIONS, COMMON APPLICATION, WAIVERS AND ALTERNATIVE REQUIREMENTS FOR COMMUNITY DEVELOPMENT BLOCK GRANT MITIGATION GRANTEES FOR THE COMMONWEALTH OF PUERTO RICO ALLOCATION DATED JANUARY 27, 2020

WHEREAS, on June 30, 2016, the federal Puerto Rico Oversight, Management, and Economic Stability Act (“PROMESA”) was enacted; and

WHEREAS section 101 of PROMESA created the Financial Oversight and Management Board for Puerto Rico (the “Board”); and

WHEREAS, the Commonwealth of Puerto Rico (though the Puerto Rico Department of Housing) (the “Grantee”) submitted to HUD an Action Plan (a copy of which is attached as Exhibit A hereto) (the “Action Plan”) pursuant to the HUD’s Notice Allocations, Common Application, Waivers, and Alternative Requirements for Community Development Block Grant Mitigation (CDBG-MIT) Grantees for the Commonwealth of Puerto Rico Allocation dated January 16, 2020 and published in the Federal Register Docket No. FR–6109–N–04 on January 27, 2020 (“HUD’s Notice”); and WHEREAS Section II.B.1. (Special Condition Related to Program Risk) of HUD’s Notice substantially require the Grantee to submit the Action Plan and the Related Budget to the Board for review and certification by the Board that the Action Plan and Related Budget are consistent with any reasonably related provisions of the applicable Board-certified budgets and fiscal plans, and shall submit the same to HUD, together with any observations and recommendations by the Board; and WHEREAS, after substantial deliberations and consultations with its staff and advisors, the Board has determined to so certify the Action Plan and the Related Budget and to provide the recommendations and observations thereto as set forth in the letter attached as Exhibit B hereto (the “Letter”);

NOW, THEREFORE, IT IS HEREBY RESOLVED THAT pursuant to Section II.B.1. (Special Condition Related to Program Risk) of HUD’s Notice, the Board certifies that the Action

141 December 2020 Public Meeting - Appendix

Plan and the Related Budget are consistent with any reasonably related provisions of the Fiscal Plan and Budget for the Commonwealth of Puerto Rico, as certified on May 27, 2020 and June 30, 2020, respectively, and directs the Board’s Executive Director to provide the Commonwealth with the recommendations and observations set forth in the Letter.

142