Audit 351740

MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER FINANCIAL REPORTING Criteria: Management is responsible for maintaining a system of internal controls over the preparation of the financial statements and all required footnotes that are free of material errors and are in accordance with generally accepted accounting principles (GAAP). This includes preparing and/or thoroughly reviewing the GAAP based financial statements to ensure they are free of material misstatement, retaining documentation of entries made, and maintaining proper internal controls to ensure reconciliations are completed, maintained and accurate. As described in Section III – FEDERAL PROGRAM AUDIT FINDINGS (Section III), testing during the audit identified that management did not track grant specific expenses in separate ledgers within the accounting system as well as salary and benefits charged to certain federal programs were based solely on budget. There were no records able to be provided of actual time spent on each grant by employee, and therefore, management was unable to provide documentation of a review of actual time charged to each program to determine it was accurate, allowable and properly allocated. Further details regarding the criteria, condition, cause, and other finding elements may be found in Section III. Condition: The Organization’s year end close procedures did not adequately address the completeness, existence, and accuracy of the financial statements. Material audit adjustments Cause: The Organization’s internal control procedures were not designed to adequately detect material misstatements. Effect: A material audit adjusting journal entry related to revenues and receivables. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that as part of its internal controls over the preparation of financial statements, the Organization should implement a more effective and comprehensive, and documented financial statement close and review process, to ensure that the financial statements are complete and accurate. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements. Criteria: Management did not track grant specific expenses in separate ledgers within the accounting system. Tracking expenses within separate ledgers provides assurance that grant expenses are being allocated properly and duplicate submissions under multiple grants is avoided. Title 2, Subtitle A, Chapter 200, Subpart E, § 200.430 of the Code of Federal Regulations states that “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated” and “(vii) Budget estimated (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity performed;” and “(C) The recipient’s or subrecipient’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable and properly allocated.” Condition: Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal Recovery Funds indicated grant expenses were not recorded within separate ledgers leading to difficulty in gaining assurance that grant expenses were billed properly to each respective grant and that expenses were only billed to their applicable grants. Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal Recovery Funds indicated that salaries charged to that Federal award were based on budgeted amount. There was no documentation of the required periodic after-the-fact review of the budgeted amounts applied to ALN 21.027 that management was able to provide during the audit process. Cause: Management was unaware of grant reporting requirements leading to non-separately reported grant data and allocation of payroll based on estimates. Effect: Little assurance that grant allocations were being done correctly and that grant expenses were not being billed to multiple grants. Payroll expenses being allocated based on estimates instead of actual time spent leading to uncertainty of validity of payroll expenses being billed to grants. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management takes the steps necessary to understand and implement the controls needed in order to maintain compliance for new and unusual funding. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements

Assistance Listing Number: 21.027 Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Award Number: N/A Federal Award Year: 2023/2024 Pass Through Entity: Chicago Cook Workforce Partnership Criteria: In accordance with 2 CFR 200.303, the 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. Condition: The Organization is either lacking or has nonconforming written policies and procedures for the following administrative functions, required by0 the Uniform Guidance: 1. Financial management - 2 CFR 200.302(b)(6) - spacing 2. Allowable Costs - 2 CFR 200.302(b)(7) 3. Federal payment - 2 CFR 200.305(b)(1) 4. Procurement - 2 CFR 200.318(a) and 2 CFR 200.318(c)(1) 5. Competition - 2 CFR 200.319(d) 6. Methods of procurement to be followed - 2 CFR 200.320 7. Compensation (Personal Services) - 2 CFR 200.430(a)(1) 8. Compensation (Fringe Benefits - Leave) - 2 CFR 200.431(b)(1) 9. Relocation costs of employees - 2 CFR 200.464(a)(2) 10. Travel costs - 2 CFR 200.474 Questioned Costs: There are no questioned costs related to the items described above. Context: The conditions outlined above are based on our review of the Organization’s policies and procedures, which were found to be not in accordance with Uniform Guidance. Cause: The Organization was not aware of the specific Uniform Guidance requirements for certain written policies and procedures. Effect: The Organization did not have these policies and procedures in place to reasonably ensure that program functions are achieved effectively, efficiently and in compliance with Federal statutes, regulations, and the terms and conditions of the award. The Organization was not in compliance with the administrative requirements set forth in the Uniform Guidance. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization design procedures and implement internal control procedures to ensure that the Uniform Guidance administrative requirements are met. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements.

MATERIAL WEAKNESS IN INTERNAL CONTROLS OVER FINANCIAL REPORTING Criteria: Management is responsible for maintaining a system of internal controls over the preparation of the financial statements and all required footnotes that are free of material errors and are in accordance with generally accepted accounting principles (GAAP). This includes preparing and/or thoroughly reviewing the GAAP based financial statements to ensure they are free of material misstatement, retaining documentation of entries made, and maintaining proper internal controls to ensure reconciliations are completed, maintained and accurate. As described in Section III – FEDERAL PROGRAM AUDIT FINDINGS (Section III), testing during the audit identified that management did not track grant specific expenses in separate ledgers within the accounting system as well as salary and benefits charged to certain federal programs were based solely on budget. There were no records able to be provided of actual time spent on each grant by employee, and therefore, management was unable to provide documentation of a review of actual time charged to each program to determine it was accurate, allowable and properly allocated. Further details regarding the criteria, condition, cause, and other finding elements may be found in Section III. Condition: The Organization’s year end close procedures did not adequately address the completeness, existence, and accuracy of the financial statements. Material audit adjustments Cause: The Organization’s internal control procedures were not designed to adequately detect material misstatements. Effect: A material audit adjusting journal entry related to revenues and receivables. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that as part of its internal controls over the preparation of financial statements, the Organization should implement a more effective and comprehensive, and documented financial statement close and review process, to ensure that the financial statements are complete and accurate. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements. Criteria: Management did not track grant specific expenses in separate ledgers within the accounting system. Tracking expenses within separate ledgers provides assurance that grant expenses are being allocated properly and duplicate submissions under multiple grants is avoided. Title 2, Subtitle A, Chapter 200, Subpart E, § 200.430 of the Code of Federal Regulations states that “Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable and properly allocated” and “(vii) Budget estimated (meaning, estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity performed;” and “(C) The recipient’s or subrecipient’s system of internal controls includes processes to perform periodic after-the-fact reviews of interim charges made to a Federal award based on budget estimates. All necessary adjustments must be made so that the final amount charged to the Federal award is accurate, allowable and properly allocated.” Condition: Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal Recovery Funds indicated grant expenses were not recorded within separate ledgers leading to difficulty in gaining assurance that grant expenses were billed properly to each respective grant and that expenses were only billed to their applicable grants. Testing over Assistance Listing #21.027 - Coronavirus State and Local Fiscal Recovery Funds indicated that salaries charged to that Federal award were based on budgeted amount. There was no documentation of the required periodic after-the-fact review of the budgeted amounts applied to ALN 21.027 that management was able to provide during the audit process. Cause: Management was unaware of grant reporting requirements leading to non-separately reported grant data and allocation of payroll based on estimates. Effect: Little assurance that grant allocations were being done correctly and that grant expenses were not being billed to multiple grants. Payroll expenses being allocated based on estimates instead of actual time spent leading to uncertainty of validity of payroll expenses being billed to grants. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management takes the steps necessary to understand and implement the controls needed in order to maintain compliance for new and unusual funding. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements

Assistance Listing Number: 21.027 Program Title: Coronavirus State and Local Fiscal Recovery Funds Federal Award Number: N/A Federal Award Year: 2023/2024 Pass Through Entity: Chicago Cook Workforce Partnership Criteria: In accordance with 2 CFR 200.303, the 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. Condition: The Organization is either lacking or has nonconforming written policies and procedures for the following administrative functions, required by0 the Uniform Guidance: 1. Financial management - 2 CFR 200.302(b)(6) - spacing 2. Allowable Costs - 2 CFR 200.302(b)(7) 3. Federal payment - 2 CFR 200.305(b)(1) 4. Procurement - 2 CFR 200.318(a) and 2 CFR 200.318(c)(1) 5. Competition - 2 CFR 200.319(d) 6. Methods of procurement to be followed - 2 CFR 200.320 7. Compensation (Personal Services) - 2 CFR 200.430(a)(1) 8. Compensation (Fringe Benefits - Leave) - 2 CFR 200.431(b)(1) 9. Relocation costs of employees - 2 CFR 200.464(a)(2) 10. Travel costs - 2 CFR 200.474 Questioned Costs: There are no questioned costs related to the items described above. Context: The conditions outlined above are based on our review of the Organization’s policies and procedures, which were found to be not in accordance with Uniform Guidance. Cause: The Organization was not aware of the specific Uniform Guidance requirements for certain written policies and procedures. Effect: The Organization did not have these policies and procedures in place to reasonably ensure that program functions are achieved effectively, efficiently and in compliance with Federal statutes, regulations, and the terms and conditions of the award. The Organization was not in compliance with the administrative requirements set forth in the Uniform Guidance. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization design procedures and implement internal control procedures to ensure that the Uniform Guidance administrative requirements are met. Views of Responsible Officials and Corrective Action Plan: See corrective action plan attached to financial statements.