Audit 351108

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: 2023-004 Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: 2018,2019,2020,2023 Pass-Through Entity: N/A Award Number and Period: B-18-MC-51-0018 (7/1/18-9/1/26) B-19-MC-51-0018 (7/1/19-9/1/27) B-20-MC-51-0018 (7/1/20-9/1/28) B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Reporting - Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance - Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth did not report subaward information to FSRS during FY 2024. Context: None of the ten subawards selected for testing were reported to FSRS during FY 2024. Total subawards selected were $50,000.00, and $-0- was reported as required by FFATA requirements. Transactions Subaward Report not Subaward Subaward Tested not reported timely amount missing key incorrect elements 1 1 0 0 0 Dollar Amount Subaward Report not Subaward Subaward of Tested not reported timely amount missing key Transactions incorrect elements $50,000.00 $50,000.00 $0 $0 $0 Cause: The City's procedures and controls were not sufficient to ensure that subawards were reported to FSRS during FY 2024. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the City establish procedures and internal controls to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance of each subaward. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding:Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Internal Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonFederal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The City of Portsmouth did not have adequate internal controls in place to manage and monitor the distribution and usage of gift cards. Specifically, there were no formal procedures for tracking the issuance, distribution, and reconciliation of gift cards. This lack of controls resulted in an inability to ensure that gift cards were used for their intended purposes and increased the risk of misappropriation or misuse. Context None, the finding relates to the maintenance of records. Questioned costs: None noted Cause: The City's initial response was to provide immediate financial assistance to the City's residents. As a result, the time to establish adequate internal controls that prevent and/or detect errors and irregularities was decreased. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City review and evaluate procedures to ensure that the procedures over safeguarding assets, maintenance of records, and reconciliation of activity are consistently performed. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S Treasury Entity: City of Portsmouth (the City) Federal Program: Coronavirus State and Local Recovery Funds (CSLRF) Assistance Listing: 21.027 Federal Award Identification Number and Year: None Pass-Through Entity: N/A Award Number and Period: None, March 3, 2021 - December 31, 2024 Compliance Requirement: Allowable Activities Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: Compliance - Recipients may use CSLFRF payments for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act as added by section 9901 of the American Rescue Plan Act of 2021 (codified as 42 USC 802 and 42 USC 803 respectively). Control - Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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). Condition: The City developed policies to determine the allowable uses of gift cards under the program+ including supporting documentation to be obtained prior to distribution of the gift cards. The City was not in compliance with its internal policy for obtaining required supporting documentation. Context: CLA noted that 2 out of 60 samples did not have support for the current year school contract and 2 out of 60 samples did not have support for proof of school or VA State ID. Questioned costs: $2,100 Cause: The City initially responded by offering immediate financial assistance to its residents. Consequently, this led to the bypassing of internal controls related to supporting documentation. Effect: The City may be unable to support the allowability of activity supported by the gift cards. Recommendation: We recommend that the City develop and distribute clear guidelines on the documentation requirements for the assistance program and provide training for staff on the importance of obtaining and maintaining proper documentation and adhering to internal controls. Views of responsible officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.

Prior Year Finding: No Federal Agency: U.S. Department of Housing and Urban Development (HUD) Entity: City of Portsmouth (the City) Federal Program: Community Development Block Grants/Entitlement Grants Assistance Listing: 14.218 Federal Award Identification Number and Year: None, 2023 Pass-Through Entity: N/A Award Number and Period: B-23-MC-51-0018 (7/1/23-9/1/30) Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: A non-federal entity may charge to the Federal award allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award, only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.344(b), states that unless the Federal awarding agency or pass-through entity authorized an extension, a non-Federal entity must liquidate all financial obligation incurred under the Federal award no later than 90 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Control: Per 2 CFR Section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply 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). Condition: The City of Portsmouth charged costs to the program that were incurred outside of the grant. award's period of performance. Context: One of Five expenditure transactions selected for testing, totaling $ 1,000, were incurred before the award start date of July 1, 2023. Cause: Accounting staff identified and charged program costs to the incorrect grant. The Program's review process did not detect the errors nor take timely corrective action. Effect: The City of Portsmouth was not compliant with the grant's period of performance which could result in the grantor's disallowance of the costs. Questioned costs: $1,000. Recommendation: We recommend that the City of Portsmouth review its procedures to ensure that expenditures charged to the program are incurred within the grant's period of performance. Views of Responsible Officials: Management agrees with the finding.