Audit 304033

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-004 (2021-005) – FEDERAL AND FINANCIAL PROCUREMENT, SUSPENSION, AND DEBARMENT COMPLIANCE Type of Finding: (B, E, F) – Significant Deficiency in Internal Control Over Financial Reporting, Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition Heading Home did not follow federal procurement and suspension and debarment regulation nor its federal procurement policy. Context During our testing of procurement, suspension, and debarment we noted the following: • We sampled five out of five vendors which were paid more than $10,000 in fiscal year 2022, and noted there was no evidence of bids or quotes obtained. Additionally, adequate sole source documentation was not maintained to support the procurement. • We sampled three out of three vendors for tests of internal control over compliance and compliance and we noted Heading Home did not show evidence of internal controls over compliance with suspension and debarment requirements. Criteria • Heading Home’s procurement policy states that for the purchase of goods or services in excess of $10,000 three (3) competitive bids must be obtained in writing prior to selecting a vendor. • Per 2 CFR 200.320(a)(2)(i) Small purchases - o (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold ($10,000 in fiscal year 2022) but does not exceed the simplified acquisition threshold ($249,999 in fiscal year 2022). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. • Additionally, 2 CFR 200.214 requires vendors awarded contracts expected to equal or exceed $25,000 to be checked for suspension and debarment via the System for Award Management Exclusions (SAM.gov). Heading Home is required to verify that entities it plans to do business with are not excluded or disqualified under the federal procurement regulations and non-procurement common rule, or otherwise declared ineligible under statutory or regulatory authority. According to §200.303 Internal controls of 2 CFR Part 200, the nonfederal entity (Heading Home) must establish and maintain effective internal control over the Federal award that provides reasonable assurance Heading Home is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). According to §180.300 of Subpart C–Responsibilities of Participants Regarding Transactions Doing Business with Other Persons of 2 CFR Part 180, when you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. This can be done by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person. Cause Heading Home is not following their own policies and procedures related to procurement. Additionally, Heading Home’s procurement policy does not note the requirement for checking suspension and debarment via SAM.gov. Effect Heading Home is not in compliance with their own policies and the federal procurement, suspension, and debarment requirements. Heading Home may have entered into contracts with ineligible contractors and exposed itself to potential liability and loss of federal funds. Recommendation We recommend Heading Home follow their internal control policies and procedures related to procurement, as well as the following: • Document controls to ensure compliance with federal procurement regulation and its federal procurement policy. • Implement policies and procedures to verify the suspension and debarment status of contractors before awarding contracts using federal funds. • Include the required suspension and debarment clause in its contracts with contractors using federal funds. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. Management has reviewed the existing procurement policies and procedures found in Section III Policy #301 of Heading Homes fiscal policies and procedures with appropriate staff and will enforce the policies and procedures to ensure competitive bids are obtained where required. Management has also reviewed the existing suspension and debarment policies and procedures found in Section III Policy #302 with appropriate staff and which requires these vendors to be reviewed on the SAM website to ensure they have not been suspended or debarred. While after the fact, each of the five vendors noted in this finding have since been reviewed on the SAM website and none of them returned any notices of having been suspended or debarred. Management is in the process of going back and reviewing all vendors paid $10,000 or more against the SAM website and will ensure all vendors are checked against the website who currently meet this requirement as well as for those it is anticipated will meet this threshold. Proof of the SAM website review and approval will be maintained in each vendor file. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-005 (2021-006) – FEDERAL MATCHING COMPLIANCE Type of Finding: (E, F) – Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Non-Compliance Related to Federal Awards Funding Agency: U.S. Department of Housing and Urban Development (HUD) Title: Emergency Solution Grant (ESG) Program AL #: 14.231 Award #: 202101171, 202200142, 20-02-HDH-EHA-001 Award Period: July 1, 2021 – June 30, 2022 Questioned Costs: None Statement of Condition During our review of internal controls covering matching funds, we noted Heading Home did not have formal documentation to demonstrate compliance with the matching requirements of the ESG program related to contracts 202101171, 202200142, 20-02-HDH-EHA-001. Context Heading Home was required to match $396,366.16, $319,604.90, and $32,562.55, respectively during fiscal year 2022. Heading Home was ultimately deemed to be compliant with the required match, however, there is no formal process to document and track the match requirement related to federal expenses. Criteria The ESG program requires recipients to match the funding provided by HUD. Cause Heading Home does not have internal controls to ensure matching requirements are adequately evaluated, documented, and met. Effect When related matches for federal expenses are not tracking, Heading Home would not know if they are in compliance. Recommendation We recommend Heading Home design and implement internal controls to ensure that matching requirements of the ESG program are met and appropriately documented. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding and is currently developing controls to ensure compliance with all grant matching requirements. The new controls will address a thorough review of each grant agreement, documentation of matching funds contributed by the organization, including cash contributions, in-kind donations, and volunteer hours, and the method of tracking match progress by either spreadsheet and/or within the accounting system. An appropriate individual will be assigned the responsibility for monitoring compliance and the internal controls over matching compliance including document retention and recordkeeping. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Chief Executive Officer, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.

2022-006 – LATE DATA COLLECTION FORM Type of Finding: (F) –Instance of Non-Compliance Related to Federal Awards Funding Agency: All (see Schedule of Expenditures of Federal Awards) Title: All (see Schedule of Expenditures of Federal Awards) AL #: All (see Schedule of Expenditures of Federal Awards) Award #: All (see Schedule of Expenditures of Federal Awards) Award Period: All (see Schedule of Expenditures of Federal Awards) Questioned Costs: None Statement of Condition Heading Home submitted the data collection form after the required due date. Context Heading Home was required to submit their data collection form for the year ended June 30, 2022, by March 31, 2023. Criteria The audit shall be completed, and the data collection form and reporting package shall be electronically transmitted within the earlier period of 30 days after receipt of the auditor's reports, or nine months after the end of the audit period. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day (2 CFR 200.512(a)). Cause Heading Home did not submit the June 30, 2022, data collection form and reporting package by the due date due to significant program expansion and the backlog created for the administrative team. This also caused a delay in preparing and completing the fiscal year 2022 audit. Effect Heading Home is not in compliance with Federal Award data collection form requirements and could jeopardize future federal funding. Recommendation Heading Home should implement procedures and controls to ensure that all future audit reports and data collection forms are completed in a timely manner. View of Responsible Official and Corrective Action Plan Heading Home management is in agreement with this finding. After years of turnover in key management positions steps have been taken to address staffing challenges and these positions have been successfully staffed with high-quality individuals who bring extensive knowledge and expertise to their roles. These positions include a new Chief Executive Officer, Director of Operations, Chief Financial Officer, and Director of Human Services. To address challenges in accounting and finance Heading Home has contracted with a local CPA firm specializing in nonprofit accounting and financial reporting to assist the CFO with daily accounting tasks, the monthly close, financial reporting to management and the board of directors, and to facilitate and ensure audits are completed timely each year. The new management group is committed to maintaining a skilled and competent team in key financial roles. Heading Home’s accounting team is in the process of preparing for the 2023 audit and anticipates the audit to be completed by June 30, 2024. While this will once again result in a late filing, the new management team has made significant strides in a short amount of time and anticipates that the 2024 and all future audits will be submitted on or before the March 31st due date. Management anticipates the above corrective action plan to be fully implemented by June 30, 2024. Personnel responsible for ensuring implementation include Connie Chavez, Executive Director, Debbie Brickman, Chief Financial Officer, and Armando Sanchez, contract accountants team lead.