Audit 369907

Finding Number: 2022-023 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Child Nutrition Cluster ALN: 10.555, 10.559, 10.582 Award #: 4V1300308 Award Period: 10/01/2021 – 9/30/2022 Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 11 of 104 payroll disbursements and noted the following: • 11 instances where the approved timesheet for the pay period selected was not available for review. • 11 instances where VIDE did not provide support that time and effort is charged in accordance with A-87 requirements. • 4 instances where the NOPA provided did not include any evidence that the employee was approved to be federally reimbursed for the project code utilized in the payroll register. • One instance where the project code on the approved NOPA did not agree with the project code utilized on the payroll register. • 7 instances where the payroll register did not include and employee’s retirement and health insurance benefits for the pay period selected. • One instance where the employee’s pay rate in the approved NOPA provided did not agree with the pay rate in the payroll register. • One instance where the payroll register did not show any hours worked by the employee for the pay period selected. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $205,418. The amount sampled is $22,738 The known amount of the instances of inconsistent funding allocation is $22,738. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-024 Prior Year Finding Number: 2021-022 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Year: Various Government Department/Agency: Department of Health (DOH) Criteria - The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 319 drawdowns and noted that all 60 drawdown requests did not contain evidence of review and approval. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,870,825. The amount sampled is $1,275,356. Effect – Without proper review and oversight drawdowns may not be in compliance with the CMIA Agreement and cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation – We recommend that the DOH reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Health (DOH) will update drawdown Standard Operating Procedures (SOPs) for Fiscal Year 2025 to require signatures or initials on all supporting documents, certifying proper review. This updated procedure will be included in Federal Grants training in December 2024 and made accessible on the Business Process Improvement SharePoint site. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-025 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Agriculture Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Year: Various Government Department/Agency: Department of Health (DOH) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, 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. Condition – We sampled and selected 73 out of 909 transactions and noted 32 transactions that were charged to an internal project code associated with a grant that ended on 9/30/21 but were incurred after 10/1/21. Upon further investigation, it was determined that such transactions were charged to the incorrect internal project code but were not ultimately drawn down from the 2021 grant associated with the internal project code. Such costs incurred after 10/1/21 were ultimately drawn down from a grant ending on 9/30/22. Additionally, we analyzed each open grant award and compared the Federal award to award-to-date expenditures according to the internal project codes through September 30, 2022. For the grants noted above, according to the internal project code accounting, we noted $1,355,231 of spending above the total federal award. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the period of performance compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DOH’s compliance with the specified requirements using a statistically valid sample. Total amount of expenditures charged to the program was $4,560,676. Total amount sampled is $2,951,525. The total amount of the exceptions is $157,215. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DOH does not appear to have adequate policies and procedures in place to ensure compliance with applicable period of performance stipulations. Recommendation – We recommend that DOH strengthen its process with respect to setting up and charging expenditures between various grant awards. We also recommend that DOH enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-020 Prior Year Finding Number: 2021-019 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of 1,854 payroll disbursements and noted the following: • 13 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). Of the 13, we found 5 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 8 instances in which hours that should have been split 50/50 were charged 100% (3), 95% (3), 75% (1), and 55% (1) to federal funds. • One instance where an employee’s compensation was charged to SNAP while working on a different federal program. • One instance in which overtime hours noted per the employees’ timesheet did not agree to the overtime hours in the payroll register. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not Determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2022 were $3,354,155. The amount sampled is $132,885. The known amount of the instances of inconsistent funding allocation is $6,453. Effect – An ineffective control system related to review of transactions to ensure that only allowable costs are allocated to federal programs can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements that could ultimately lead to disallowed costs for the major programs. Cause – DHS does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Recommendation – We recommend that DHS reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll and to ensure proper and accurate funding allocation of payroll cost. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) adopted the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance are approved through management levels, with payroll based on Notice of Personnel Action (NOPA) cost centers. Financial Analysts reconcile payroll, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-021 Prior Year Finding Number: 2021-020 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its matching process. Further, 2 CFR Section 200.306 provides detailed criteria for acceptable matching costs. The basic criteria for acceptable matching costs include costs that are necessary and reasonable for accomplishment of program objectives and are allowed under 2 CFR Part 200, Subpart E (Cost Principles). Condition – During the fiscal year, it appears that management's internal controls over matching compliance were not functioning as intended. We found that management was not monitoring its compliance with the matching requirement throughout the year. Further, we tested 60 of 1,455 matching transactions and noted the following: • 13 instances where DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). Of the 13, we found 9 instances where hours that should have been charged 100% to federal funds were split 50/50 (local/federal) and 4 instances in which hours that should have been split 50/50 were charged incorrectly. We do note, however, that all such employees did work 100% on the federal program such that time allocated to the match is allowable. • One transaction did not contain the appropriate management approvals. • One transaction totaling $4,500 that did not appear to be an allowable cost was claimed as part of the match. We do note, however, that the overall match appears to have been met with the exclusion of this transaction. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The total expenditures claimed as the match fiscal year 2022 were $3,864,719. The amount sampled is $406,626. Effect – DHS is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with matching requirements, there is an increased risk that matching will not be properly applied and funding could be jeopardized. Cause – DHS does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Further, lack of monitoring of the match requirement appears to be the result of significant personnel turnover and lack of staffing. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) shifted to the electronic Timeforce (STATS) system for payroll, replacing manual processes. Time and attendance require multi-level management approval, finalized by the Agency Head. Payroll is based on Notice of Personnel Action (NOPA) cost centers, updated annually with ERP codes. A dedicated Financial Analyst reconciles payroll costs, and a workflow ensures accurate NOPA listings for payroll purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-022 Prior Year Finding Number: 2021-021 Compliance Requirement: Special Tests and Provisions – EBT Card Security Program: U.S. Department of Agriculture Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.551, 10.561 Award #: 4VI400408 Award Year: 10/01/20 – 09/30/21 10/01/21 – 09/30/22 Government Department/Agency: Department of Human Services (DHS) Criteria – CFR Section 200.303, Internal Controls, Section (a) states DHS must establish and maintain effective internal control over federal awards that provides reasonable assurance that DHS is managing the federal awards in compliance with federal statutes, regulations, and terms and conditions of the federal award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its EBT Card Security process. Per 7 CFR Section 274.8(b)(3), System Security, as an addition to or component of the Security Program required of Automated Data Processing (ADP) Systems, the State or Territory agency shall ensure that a certain electronic benefits transfer (EBT) security requirements are established. As such, DHS is required to maintain adequate security over, and documentation/records for EBT cards, to prevent their theft, embezzlement, loss damage, destruction, unauthorized transfer, negotiation, or use. Condition – DHS contracted with Fidelity National Information Service (FIS) for the issuance and security of the EBT cards; however, it is DHS’ ultimate responsibility to ensure the contractor has controls in place to maintain adequate security over, and documentation/records of EBT cards. We sampled 8 out of 24 monthly card reconciliations and found one (1) reconciliation with differences between new/replacements issued cards status report and the actual new/replacements cards issued. Specifically, we identified differences of 10 new cards and 6 replacement cards issued. Further, we noted that internal controls identified did not appear to be operating at a level of precision to ensure compliance with the above-mentioned requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. The reconciliations sampled reported 535 new cards and 1,436 replacement cards issued. Effect – Without adequate internal controls to ensure compliance with EBT card security requirements, there is an increased risk that the inventory of EBT cards will not be properly maintained and accounted for which can lead to noncompliance with laws, regulations, and the provision of the grant agreement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adequate safeguarding and documentation of EBT cards. Recommendation - We recommend that DHS strengthen formal policies and procedures to maintain adequate security, documentation, and records over EBT Cards to ensure internal controls over EBT cards security are operating effectively. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Standard Operating Procedures and Procedures (SOPP) document is being developed to outline the EBT Reconciliation process. Additionally, a Director of Support Services will be hired to oversee and review all reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-026 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities and Period of Performance Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, 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. Condition – We sampled and selected 60 out of 597 payroll transactions and noted the following: • Eleven (11) instances where the employees’ payroll costs were charged to prior year grant projects that had not been extended or approved. • One (1) instance where there was no evidence of approval of an employee’s timesheet. • Seven (7) instances where the timesheet for the pay period selected was not provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and period of performance compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2022 were $1,812,537 and the total amount of our sample was $252,320. The known amount of the exceptions amounted to $97,989. Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and the required period of performance stipulations. Recommendation – We recommend that OTAG improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG enhanced internal controls by implementing a dual timesheet system manual and electronic to verify employee hours. Updated policies ensure payroll process validation, supported by an Employee Relations Coordinator. The Director of Administration certifies, and the Agency Head approves payroll activities based on cost principles. OTAG is refining the grant review process for performance periods. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-027 Prior Year Finding Number: N/A Compliance Requirement: Cash Management and Reporting Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – U.S. Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. Treasury-State Agreements also specify the terms and conditions under which an interest liability would be incurred. Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. SF-270, Request for Advance or Reimbursement Report, is required to be filed in connection with cash drawdowns. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We were unable to verify the completeness of the SF-270 (cash management and reporting) population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management and reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Inaccurate information may have been reported to the Federal government in the absence of required reconciliations and reviews. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that OTAG reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG could not complete the SF-270 report for Fiscal Year 2022. However, it developed a Policies and Procedures Manual for FY2023 and hired a Reimbursement Specialist to ensure separation of duties in financial reporting. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-028 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – According to the Master Cooperative Agreement Section 303, Cost Sharing, cost sharing requirements are found in a grantees individual Cooperative Agreements. The Government has various cost-sharing requirements within their Cooperative Agreements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – OTAG was unable to readily exhibit and provide its computation of the matching calculation or provide evidence that it was monitoring compliance with said requirement. Therefore, we were unable to determine if the matching requirement has been met or if the expenditures being claimed towards the matching requirement are allowable activities/costs. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the matching compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. Effect – OTAG is not in compliance with the stated provisions. Cause – OTAG does not appear to have adequate policies and procedures in place to ensure complete compliance with the matching requirement. Recommendation – We recommend that OTAG deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the matching requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG updated their policies and procedures manual to include tracking match fulfillment for each expenditure. The master cooperative agreements, through appendices, identifies cost share and requirements for management functions. Procedures are updated annually to reflect any changes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-029 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Defense National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-22-2, W9127P-21-2 Award Year: 10/01/2020 – 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Office of the Adjutant General (OTAG) Criteria – National Guard Bureau O&M cooperative agreements (CA) are funded with one-year appropriations. By policy, only state costs obligated during the period of the federal fiscal year or period of performance identified in the CA are reimbursable. (National Guard Regulation (NGR) 5-1, chapters 3 and 11) The recipient shall not request reimbursement for any expenditure it made before the date that all required parties execute the Master Cooperative Agreement (MCA) unless the United States Property & Fiscal Officer (USPFO) expressly authorizes expenditures made during the funding period, but prior to the date of final signature, the parties may also agree on a specific start or effective date (NGR 5-1, Chapter 11). Within 90 days after the end of the federal fiscal year or upon termination of the CA, whichever is earlier, the recipient shall promptly deliver to the USPFO a final accounting of all funding and disbursements under the agreement for the fiscal year (NGR 5-1, Chapter 11). If unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA will remain 90 days after the close of the federal fiscal year, the recipient shall provide a detailed listing of uncleared obligations and a projected timetable for their liquidation and disbursement no later than 31 December. The USPFO shall then set an appropriate new timetable for the recipient to submit its final accounting (NGR 5-1, Chapter 11). Costs incurred in a federal fiscal year, which are not disclosed by the recipient within 90 days of the end of the federal fiscal year, except costs associated with unliquidated claims and undisbursed obligations arising from the recipient’s performance of the CA that the recipient has reported, shall not be eligible for reimbursement by NGB. The USPFO may extend the 90-day limit for good cause shown (NGR 5-1, Chapter 11). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 126 out of 600 transactions and noted the following: • Five (5) instances where transactions were charged to the incorrect grant award. • Forty-four (44) instances where the transaction was paid outside the liquidation period. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the allowable costs/cost principles and period of performance compliance requirements. . Questioned Costs – $416,938. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements using a statistically valid sample. The total amount expenditures subject to sampling were $1,301,606 and the total amount of our sample was $858,928. The known amount of the exceptions amounted to $416,938. Effect – OTAG is not in compliance in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grant awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG updated policies and procedures to manage pre-award costs, scope of work, and vendor payouts, ensuring compliance with the 90-day closeout process. They are training new personnel and actively monitoring implementation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-030 Prior Year Finding Number: 2021-025 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – US Department of the Treasury (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as amended (Pub. L. No. 101-453; 31 USC 6501 et seq.). Subpart A of those regulations requires state recipients to enter into Treasury-State Agreements that prescribe specific methods of drawing down federal funds (funding techniques) for federal programs listed in the Assistance Listing that meet the funding threshold for a major federal assistance program under the CMIA. The CMIA agreement for this program stipulates a reimbursement method with 7-day clearance. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 12 out of 59 drawdowns and noted 1 instance where the drawdown was made in advance and did not adhere to the reimbursement method in the CMIA Agreement. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the cash management compliance requirements. This includes 9 instances where the journal entry to record the cash receipt was reviewed and approved by unauthorized individuals. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2022 drawdown requests were $7,577,962. Total amount sampled is $5,547,527. The amount of the drawdown made in advance is $741,450. Effect – The Government is not in compliance with the stated provisions. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Recommendation - We recommend that the Government reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with stated provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government of the Virgin Islands (GVI) is enacting reforms to enhance financial accountability and internal controls. An Executive Order directs CFOs of the Government agencies to report to the Department of Finance, streamlining oversight. Introduction of new Public Finance Policy is an important step to standardize procedures, ensuring compliance with Cash Management regulations to maintain transparency and minimize financial risks. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-031 Prior Year Finding Number: 2021-026 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Per 2 CFR section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition data including the date of disposal and sale price of the property. Further, a physical inventory of equipment should be taken at least once every 2 years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2022. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2022 totaled $3,007,762. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Asset Management Division (AMD) adheres to Federal equipment guidelines. Assets are tagged, and records are created using the Tyler Munis Resource Planning system (ERP). In 2022, AMD inventoried four agencies, ensuring compliance with Federal regulations. The completed Standard Operation Policies and Procedures (SOPP) are pending approval, crucial for enhancing internal controls. Training sessions for fixed assets employees are planned, and additional staff will be needed to support the initiative effectively. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-032 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Government Department/Agency: Various Criteria – When procuring property and services, states must use the same policies and procedures they use for procurements from their non-federal funds (2 CFR section 200.317). Per Procurement Manual, User Agencies are required to submit a written justification letter to he Government’s Department of Property and Procurement (DPP), which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition - In our review of 11 out of 77 procurement transactions, we noted 5 procurement transactions did not contain sufficient supporting documentation to validate adherence to procurement policy. One procurement did not contain a justification letter for emergency purchases. Four procurements did not include the following: • Contract file documents showing the significant history of the procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis of contract price. • The procurement provides full and open competition. • Documentation in support of the rationale to limit competition in those cases where competition was limited and ascertain if the limitation was justified. • Cost or price analysis in connection with procurement action, including contract modifications and that this analysis supported the procurement action. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DPP’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $8,984,016. Total amount sampled was $3,455,217. The known amount of exceptions is $2,424,927. Effect – DPP could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – DPP does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised manuals, along with position-specific Standard Operating Procedures. Processes to enforce internal controls and ensure adherence to procurement laws have been established and are regularly reinforced. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-033 Prior Year Finding Number: 2021-027 Compliance Requirement: Reporting Program: U.S. Department of the Interior Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Year: Various Government Department/Agency: Various Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 14 out of 134 financial and performance reports and noted the following: • 5 financial reports and 5 performance reports were not available for review. • 2 financial reports and 2 performance reports where sufficient supporting documentation were not available to validate that the respective financial information agreed with the underlying records. • 1 financial report and 1 performance progress report where the report was reviewed by an individual other than authorized reviewer. • 1 performance report that was submitted 305 days late. Additionally, the Government did not submit FFATA reports where subawards were made for more than $30,000 for fiscal year 2022. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of the Government’s compliance with the specified requirements using a statistically valid sample. Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the Government does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that Government reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government plans a high-level review of internal control policies and closely monitoring reports for completeness, accuracy, timeliness, and consistency with Cognizant Agency guidelines. An analyst will be assigned to track reporting schedules, oversee grant activity, and manage document storage, ensuring timely submission of all required reports for each grant award. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-034 Prior Year Finding Number: 2021-028 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – In accordance with the Uniform Guidance in 2 CFR Section Part 200, a State or Territory must adopt its own written fiscal and administrative requirements for expending and accounting for all funds, which are consistent with the provisions of Uniform Guidance and extend such policies to all sub-recipients. These fiscal and administrative requirements must be sufficiently specific to ensure that: funds are used in compliance with all applicable Federal statutory and regulatory provisions, costs are reasonable and necessary for operating these programs, and funds are not used for general expenses required to carry out other responsibilities of a State or Territory or its sub-recipients. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDOL was unable to provide reconciled accounting information relating to the majority of the Unemployment Insurance Trust Fund accounts. As such, we are unable to conclude on the fiscal and administrative requirements with respect to expending and accounting for all funds related to the Unemployment Insurance program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the above referenced compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in various interim financial statements and/or Federal reports. A lack of timely preparation of complete and accurate reconciliations results in the absence of adequate control over both cash receipts and disbursements. Cause – VIDOL does not appear to have adequate policies and procedures in an effort to adequately administer the expending and accounting for all funds. Recommendation – We recommend that VIDOL improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for all funds. In order to prevent significant errors in the financial records as well as prevent possible irregularities, including fraud, to exist and continue without notice, we recommend that all accounts, accruals, and reconciliations be reviewed on a periodic basis. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL updated the report writer for balance queries and issued a proposal for a contractor to install a Trust Fund accounting system. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-035 Prior Year Finding Number: 2021-029 Compliance Requirement: Eligibility Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Public Law 112-96 Sec. 2101 requires that as a condition of eligibility for regular compensation, a claimant must be able to work, available to work, legally authorized to work in the United States and actively seeking work. Claimants must meet other conditions of eligibility for Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC) and Federal Pandemic Unemployment Compensation (FPUC). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 60 out of 19,227 unemployment claim files and noted the following: • 7 instances where VIDOL was not able to provide evidence that the claimant met the criteria for participating in the UI program but had received benefits during the year. • 1 instance where VIDOL was not able to provide evidence of UI interviewer eligibility assessment. • 3 instances where VIDOL was not able to provide evidence that the claimant is legally authorized to work in the United States. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate claims charged to the program. Questioned Costs – $34,076. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Total amount of unemployment claims charged to the program during fiscal year were $36,406,202. Total amount sampled is $187,107. The known amount of the exceptions is $34,076. Effect – Noncompliance with program requirements could result in disallowances of costs and participants could be receiving benefits that they are not entitled to receive. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its claimant files. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirming that only eligible participants are receiving benefits they are entitled to. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The agency is reviewing retention policies and training staff on systematic record-keeping. In 3rd Qtr. of FY2025, an electronic record-keeping system for claims files will be launched, enhancing record retention. VIDOL staff will collaborate with USDOL for technical assistance and data validation to ensure eligibility and record maintenance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-036 Prior Year Finding Number: 2021-030 Compliance Requirement: Reporting Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with the program requirements. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 28 out of 100 financial, performance and special reports required to be submitted. We noted the following: • 3 reports (2 ETA-9050 and 1 ETA-9052) did not have any supporting information available to review. • 1 report (ETA-9052) did not contain evidence of review and approval. • 8 reports (2 ETA-9050, 2 ETA-9052 and 4 ETA-9055) where information reported did not agree with the underlying records. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various report. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL received a federal grant from USDOL to update and redesign the UI reporting and accounting system. This grant aims to rebuild the reporting structure for complete, accurate, and timely processes. VIDOL has begun preparing the scope of works for the projects, with completion anticipated by 4th Qtr. of FY2026. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-037 Prior Year Finding Number: 2021-031 Compliance Requirement: Special Tests and Provisions – Employer Experience Rating Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – Per 2 CFR section 200.303(a), a nonfederal 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 comply with the 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). Certain benefits accrue to states and employers as a result of the state having a federally approved experience-rated UI tax system. All states currently have an approved system. For the purpose of proper administration of the system, the SWA maintains accounts, or subsidiary ledgers, on state UI taxes received or due from individual employers, and the UI benefits charged to the employer. The employer’s “experience” with the unemployment of former employees is the dominant factor in the SWA computation of the employer’s annual state UI tax rate. The computation of the employer’s annual tax rate is based on state UI law (26 USC 3303). Condition – We tested 60 of 5,381 employer tax remittances and found the employer tax rate to be accurate and applied appropriately in all instances. However, we were unable to determine if the population subject to testing is complete. We found the total taxes collected by employer according to VIDOL systems does not reconcile to the total taxes collected in the general ledger of the Government of the Virgin Islands. Out of total taxes collected by employer of $19,203,630, we found a variance of $177,714 to the General Ledger. Further, it appears internal controls were not designed to ensure compliance with the employer experience rating compliance requirement. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s population completeness over the compliance requirements of the program. Effect - VIDOL did not comply with the employer experience rating compliance requirements of the program. Cause – VIDOL does not appear to have adequate policies and procedures in place to ensure compliance with applicable requirements, and maintenance of underlying documentation. Recommendation – We recommend that VIDOL improve its existing internal controls and procedures over maintenance of appropriate documentation to ensure compliance with Federal regulations related to employer experience rating. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL acknowledges the auditor's finding regarding balance discrepancies with the general ledger, attributed to an incomplete file for audit. To prevent future issues, VIDOL updated the report writer for balance queries and issued a proposal for a contractor to install a Trust Fund accounting system. This system aims to correct accounting deficiencies, improve operations, and ensure accurate account balances. It will facilitate accrual, month-end, and year-end system closes, with trained personnel managing postings and ledger balances. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-038 Prior Year Finding Number: 2021-033 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs (WPRS and RESEA) Program: U.S. Department of Labor Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Government Department/Agency: Department of Labor (VIDOL) Criteria – The UI program serves as one of the principal “gateways” to the workforce system. It is often the first workforce program accessed by individuals who need workforce services. The WPRS and RESEA programs service as UI’s primary programs that facilitate the reemployment needs of UI claimants. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA’s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. RESEA is a voluntary program and under certain circumstances may be designed to also satisfy WPRS requirements. Operating guidance for the RESEA program is updated annually. UIPL 7-19 provides RESEA operating guidance for FY 2019. Per 2 CFR section 200.303(a), a nonfederal 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 comply with the 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 – During our testing of VIDOL’s compliance with UI Reemployment Programs, we found VIDOL did not submit the 9129 Quarterly RESEA reports. Further, it appears controls are not designed to ensure the timely and proper submission of required reports. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Effect – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Cause – VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various report. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by the appropriate official who would ensure that information reported is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL is implementing a RESEA case management system for reporting and program services, currently in the configuration phase. This system will serve as the official system for documenting all services provided to RESEA claimants participating in the program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-039 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – The CARES Act provides that payments from the Coronavirus Relief Fund (CRF) may only be used to cover costs that were incurred during the period that begins on March 1, 2020 and ends on December 31, 2021. All such obligations would need to be liquidated by September 30, 2022. (Section 601(d)(3) of the Social Security Act (42 U.S.C. 801(d)(3)), as added by section 5001 of the CARES Act and as amended by section 1001 of Division N of the Consolidated Appropriations Act, 2021) In “Revision to Guidance Regarding When a Cost is Considered Incurred, December 14, 2021” Treasury revised the guidance to provide that a cost associated with a necessary expenditure incurred due to the public health emergency shall be considered to have been incurred by December 31, 2021, if the recipient has incurred an obligation with respect to such cost by December 31, 2021. Treasury defines obligation for this purpose consistently with the Uniform Guidance definition in 2 C.F.R. 200.1 as an order placed for property and services and entry into contracts, subawards, and similar transactions that require payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our testing of 12 expenditures sampled of a population of 53 we found 3 expenditures that were not incurred within the period of performance. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirements. Questioned Costs – $45,300. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll disbursements totaled $5,277,012. The total amount sampled was $4,636,495. Effect – OMB is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – OMB does not appear to have adequate policies and procedures in place to ensure compliance with the period of performance compliance requirements. Recommendation – We recommend that OMB strengthen its process with respect to incurring and charging expenditures. We also recommend that OMB enhance its review process to properly determine the activities of the grant relative to the appropriate period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Office of Management and Budget will collaborate with the Department of Finance to implement control measures designed to prevent the approval of transactions beyond the designated period of performance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-040 Prior Year Finding Number: 2021-035 Compliance Requirement: Reporting Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Each prime recipient of Coronavirus Relief Funds shall provide a quarterly Financial Progress Report that contains COVID-19 related costs incurred during the covered period (the period beginning on March 1, 2020; and ending on December 31, 2021) to Treasury Office of Inspector General. Each prime recipient shall report this quarterly information mentioned above into the GrantSolutions portal. The prime recipient’s quarterly Financial Progress Report submissions should be supported by the data in the prime recipient’s accounting system. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 3 out of the 5 quarterly reports submitted during the fiscal year and noted that OMB was unable to furnish underlying financial records to determine whether the 3 quarterly reports submitted were complete and accurate. Additionally, all 3 reports were not submitted in a timely manner, ranging from 7 to 14 days late. Further, it appears internal controls were not designed to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – Inaccurate reporting of financial information to the federal government can result in the use of inaccurate data by the federal government when making programmatic decisions. Cause – It appears that internal controls, including management review of federal reports and underlying documentation were not properly designed. Recommendation – We recommend that OMB reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. An analyst will be designated to track reporting schedules, oversee grant activity, and store documents. This analyst will regularly monitor each grant award's reporting schedule to ensure timely submission of all required reports. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-041 Prior Year Finding Number: 2021-036 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury COVID-19 - Coronavirus Relief Fund ALN: 21.019 Award #: N/A Award Period: 03/01/2020 – 12/31/2021 Government Department/Agency: Office of Management and Budget (OMB) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed two sub-awards made during 2022 and found that OMB did not evaluate the risks or monitor the two subrecipients. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $4,500,000. Effect – OMB is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – OMB does not have internal controls in place to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will establish a robust framework featuring detailed monitoring procedures, regular compliance checks, and comprehensive oversight mechanisms to ensure subrecipients adhere to federal requirements. This framework aims to promote accountability, proper use of federal funds, mitigate risks, enhance transparency, and ensure subrecipients effectively fulfill their obligations under federal statutes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-042 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities and Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – 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), Treasury’s Interim Final Rule and Final Rule at 31 CFR sections 35.7 and 35.8. The following activities are not permitted under CSLFRF: • Offset a reduction in net tax revenue (applicable to states and territories) • Deposits into pension funds (applicable to all recipients except Tribes) • Debt service or replenishing financial reserves (e.g., “rainy day funds”) (applicable to all recipients) • Satisfaction of settlements and judgements (applicable to all recipients) • Programs, services, or capital expenditures that include a term or condition that undermines efforts to stop the spread of COVID-19 (applicable to all recipients) Recipients may use payments from CSLFRF to: • Support public health expenditures, by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff; • Address negative economic impacts caused by the public health emergency, including economic harms to workers, households, small businesses, impacted industries, and the public sector; • Replace lost public sector revenue to provide government services; recipients may use this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic. • Provide premium pay for essential workers, offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and, • Invest in water, sewer, and broadband infrastructure, making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and to expand access to broadband internet. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In mid-2024, an inquiry was conducted by the United States Department of Justice (“DOJ”) into potential criminal activity associated with three individuals, each of whom were senior GVI officials working in their respective capacities as Director / Commissioner of the U.S. Virgin Islands Office of Management and Budget, Virgin Islands Police Department and Department of Sports, Parks, and Recreation. As of January 2025, the DOJ filed formal indictments against the these now former USVI officials (collectively the “Indicted Individuals”). The DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, specifically providing, or attempting to provide, accelerated approval of contracts and payments on invoices to a vendor, Mon Ethos Pro Support, LLC. The court cases are on-going. In 2022, Mon Ethos Pro Support, LLC was paid $52,290 from Coronavirus State and Local Fiscal Recovery Funds, which are considered questioned costs. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the allowable activities and procurement compliance requirements. Questioned Costs – $52,290 Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Effect – Fraudulent transactions associated with a Federal program can lead to an assessment of penalties, claw back of federal funds and termination of awards. Further, an ineffective control system related to procuring of vendors and submission of allowable costs that could ultimately lead to disallowed costs for the major programs. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and procurement standards. Specifically, there appears to be a lack of monitoring controls and an appropriate level of review and approval of transactions prior to charging costs to a federal program. Recommendation – We recommend that OMB evaluate its policies and procedures to ensure appropriate internal controls in order to comply with federal regulations relating to the procurement of goods and services and review current records retention policies. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A comprehensive corrective action plan has been implemented to strengthen grant management and compliance. Key personnel have been hired, including a Grants Administrator and an external accounting firm, to provide oversight and expertise. The Government has developed detailed policies and procedures to ensure compliance with federal regulations, including internal controls for subrecipient vetting, documentation, monitoring of expenditures, and clear communication regarding non-compliance. Efforts are underway to finalize overarching policies, such as a Fraud, Waste, and Abuse policy with a whistleblower process. Robust internal controls have been established, including regular financial reviews, segregation of duties, and staff training. Additionally, a monitoring and evaluation framework has been set up through the OMB Compliance Unit, supported by an Audit Committee, to assess and improve the effectiveness of controls. Regular training sessions are provided to all staff involved in grant management to ensure they understand and adhere to compliance requirements. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-043 Prior Year Finding Number: 2021-038 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – Recipients may use award funds to enter into contracts to procure goods and services necessary to implement one or more of the eligible purposes outlined in sections 602(c) and 603(c) of the Act and Treasury’s Interim Final Rule and Final Rule. As such, recipients are expected to have procurement policies and procedures in place that comply with the procurement standards outlined in the Uniform Guidance. Specifically, a state must follow the same policies and procedures it uses for procurements from its non-federal funds and comply with 2 CFR sections 200.321, 200.322, and 200.323. States must also ensure that every contract includes the applicable contract clauses required by 2 CFR section 200.327. Per Procurement Manual, User Agencies are required to submit a written justification letter to DPP, which was signed by the agency head, which explains the need for the services, the exception in title 31, Virgin Islands Code, chapter 23, section 239(a) being relied upon, the methodology for the selection process, and the rationale for selecting the prospective contractor. The letter must identify the funding source, and comply with all other requirements necessary for the acquisition of services under title 31, Virgin Islands Code, chapter 23, sections 239(a) (1), (2) or (3) whichever is applicable. The letter must contain an “approve/disapprove” block for the Commissioner of Property and Procurement. As such, please provide the justification letter for these three Task Order Contracts. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) is primarily responsible for procurement transactions. In our review of 9 out of 86 procurement transactions, we noted 3 transactions where there was no written justification letter for task order contracts. Further, internal controls over compliance do not appear to be operating effectively to ensure compliance with the procurement compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Total amount of the procurement transactions was $17,487,469. Total amount of the samples was $5,699,575. The known amount of the exceptions is $3,530,516. Effect – OMB could inadvertently contract or make sub-awards to parties that are suspended or debarred from doing business with the Federal government as well as award contracts to vendors whose contract prices are unreasonable. In addition, contracts may be executed to unqualified vendors. Cause – OMB does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Recommendation – We recommend that OMB and DPP improve internal controls to ensure adherence to federal regulations relating to the procurement of goods and services and review current records retention policies. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing procurement tasks. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government updated its procurement laws and issued revised procurement manuals, along with issuing position-specific Standard Operating Procedures. Processes for enforcing Internal controls and adherence to procurement laws have been established and are regularly reinforced. In early 2025, the Government-wide training reinforced expectations for full and open competition. User Agencies now access GVIBUY for informal solicitations in the eProcurement system, with ongoing training to prioritize competition and enhance oversight by the Department of Property and Procurement. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-044 Prior Year Finding Number: 2021-039 Compliance Requirement: Reporting Program: U.S. Department of the Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – There are three types of reporting requirements for the CSLFRF program: Interim Report: Provide initial overview of status and uses of funding. The interim report will include a recipient’s expenditures through July 31, 2021 by category and at the summary level. The reporting requirements vary by type of recipient, the total allocation amount, and the date which the recipient first received its allocation. This is a one-time report. Project and Expenditure Report: Report on financial data, projects funded, expenditures, and contracts and subawards over $50,000, and other information. Project and Expenditure Reports are due on a regular, recurring basis after the Interim Reports. The reporting frequency and deadlines vary by type of recipient and total allocation amount. Recovery Plan Performance Report: The Recovery Plan Performance Report (the “Recovery Plan”) will provide information on the projects that large recipients are undertaking with program funding and how they plan to ensure program outcomes are achieved in an effective, efficient, and equitable manner. It will include key performance indicators identified by the recipient and some mandatory indicators identified by Treasury. The Recovery Plan will be posted on the website of the recipient as well as provided to Treasury. In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 3 out of 4 reports submitted during the fiscal year, we noted 3 reports did not contain evidence of review and approval prior to submission and the financial and other information did not agree with underlying records. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that OMB reevaluates its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting in 2024, OMB has implemented a reporting approval memo, signed by the OMB Director, to confirm the review and approval of Treasury reports. OMB has enhanced the collection and storage of supporting financial information for all projects in quarterly reports, ensuring necessary support is available upon request as of FY23. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-045 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Treasury COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Government Department/Agency: Office of Management and Budget (OMB) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We obtained a list of subrecipients from OMB and found that the list identified internal Government of the Virgin Islands (GVI) departments and offices as subrecipients. The list of subrecipients also included an external entity whose federal expenditures are part of the GVI Schedule of Expenditures of Federal Awards. As a result, the listing of subrecipients was amended to exclude 23 projects totaling $23,559,959. Using the amended listing of subrecipients, we selected 12 of 18 subrecipients and found the following: • 3 projects which OMB did not verify if the entity underwent a single audit as required by 2 CFR part 200, subpart F. • 1 project which OMB did not complete their monitoring workbook during the fiscal year • 5 projects in which there was no evidence the monitoring workbook was reviewed by the ARPA Grants Administrator. • 6 projects where entities were identified as subrecipients but were ultimately considered to be beneficiaries of SLFRF funds and not subrecipients. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $56,490,165. The total amount of our sample totaled $46,452,928. Effect – OMB is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – OMB does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that OMB implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. Starting FY25, OMB will identify and monitor federal awarding agencies, requesting single audit results for applicable recipients and including them in monitoring reviews. For revenue replacement projects, Treasury's Final Rule FAQ (13.14) states that these funds do not create subrecipient relationships, thus exempting them from the Single Audit Act due to the absence of a federal program or purpose. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-046 Prior Year Finding Number: 2021-041 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Question Costs – None. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE will enhance their asset tracking system, maintaining centralized records with detailed asset information, including description, serial number, acquisition details, and federal participation. The Procurement Division will conduct quarterly inventory audits and reconciliations to ensure alignment with actual inventory, promptly resolving discrepancies. The Fixed Asset Director will establish protocols for regular communication among Programs/Divisions responsible for asset management, requiring monthly status reports to ensure data accuracy and timely updates. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-047 Prior Year Finding Number: 2021-042 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Further, in accordance with the Uniform Guidance in 2 CFR Section 200.306, a State may not reduce the amount of State financial support for special education and related services for children with disabilities (or State financial support otherwise made available because of the excess costs of educating those children) below the amount of State financial support provided for the preceding fiscal year. The Secretary reduces the allocation of funds under 20 USC 1411 for any fiscal year following the fiscal year in which the State fails to comply with this requirement by the amount by which the State failed to meet the requirement. Additionally, an LEA can use not more than 15 percent of the amount of federal Part B funds the LEA receives for any fiscal year (less any amount by which it reduces its expenditures under 20 USC 1413(a)(2)(C)) (see III.G.2.1.b.(6) in this section), in combination with other funds, to develop and implement, early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment (20 USC 1413(f); 34 CFR section 300.226). Condition – We reviewed the level of effort calculations and noted the following: • At the Local Education Agency (LEA) level, we noted that although the two LEAs appeared to meet the required financial support thresholds on the per child basis based on the level of effort compliance requirement, we were unable to verify the number of students for each LEA. • At the State Education Agency (SEA) level, we were unable to review documentation that included the approval /certification of the amounts in the Maintenance of Financial support at the State Education level. In addition, although the calculation shows that VIDE met the Maintenance of Effort at the State level, we were unable to review documentation that would allow us to verify the number of students served in the current year. We reviewed the earmarking documentation and noted the following: • At the State Education Agency (SEA) level, for the ARP grant and non-ARP grant, we were unable to verify the total numbers of students and the number of students in poverty. We were therefore unable to confirm that the allocation of the remaining funds to the LEA agreed with the relative numbers of children living in poverty. • At the Local Education Agency (LEA) level, we were unable to review documentation that the LEA did not use more than 15% of the amount of federal Part B funds to develop and implement early intervening services for children in kindergarten through grade 12 who have not been identified under IDEA but need additional academic and behavioral support to succeed in the general education environment. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the level of effort and earmarking compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. Without adequate internal controls to ensure compliance with level of effort requirements and earmarking, there is an increased risk that level of effort and earmarking requirements will not be properly applied, and funding could be jeopardized. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the level of effort and earmarking requirements at the SEA and LEA levels by deploying resources that are given the responsibility to ensure periodic monitoring and compliance of the level of effort and earmarking requirements. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE acknowledges need to enhance monitoring and internal controls. VIDE will establish a team for quarterly reviews of documentation, report issues, and recommend corrective actions. The IDEA State Office will set procedures for verifying accuracy of data reported by LEAs. Comprehensive staff training will ensure understanding of new policies and procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-048 Prior Year Finding Number: 2021-043 Compliance Requirement: Cash Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Further, the U.S. Department of Education (DOE) imposed specific conditions on grant awards provided to the U.S. Virgin Islands. VIDE is required to draw down funds and provide any applicable matching funds to the Agent within 24 hours of receipt of the written notice from the Third-Party Fiduciary Agent (TPFA). Condition – We reviewed 24 out of 204 drawdowns and noted the following: • 2 drawdowns were not performed within the required 24 hours after receipt of the request from the TPFA as required by the DOE. In addition, the drawdown reconciliation for one of these sample was not provided so we were unable to confirm that it was properly reviewed and approved; • 2 drawdowns were missing required documentation. Further, we noted that the internal controls are not designed at a level of precision that would prevent or detect and correct noncompliance. Question Costs – None. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of cash drawdowns for the program was $16,413,229. Total amount sampled is $5,764,930. The known amount of the exception is $38,540. Effect – VIDE is not in compliance with the stated provisions. Payment to vendors could be delayed when cash drawdowns are not completed in a timely manner. Cause – It appears that policies and procedures, including timely submission of drawdown requests, were not functioning as intended. Further, the Government did not appear to exercise due diligence in requesting Federal funds consistent with the U.S. Department of Education imposed specific conditions and its actual cash needs. Recommendation – We recommend that VIDE comply with the specific conditions imposed by the U.S. Department of Education and request Federal funds consistent with the specific conditions imposed for this program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce the procedure to complete drawdown requests within 24 hours and ensure designated individuals are trained to process requests. Weekly reconciliations of requests and disbursements will be conducted, with processes to resolve discrepancies and maintain detailed records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-049 Prior Year Finding Number: 2021-044 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per the Uniform Guidance in 2 CFR Section 200.313, Equipment, property records must be maintained that include a description of the property, a serial number or other identification number, the source of the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and conditions of the property, and any ultimate disposition date including the date of disposal and sale price of the property. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (ie. auditee management) establish and maintain internal control designed to ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – The VIDE maintains an equipment listing for fixed assets purchased with federal funding. VIDE was unable to provide complete property records which met the stated requirements. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the equipment management compliance requirements. Question Costs – Not determinable. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping or equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all personnel that are responsible for handling and managing such assets as well as monitoring of the performance of the recording of the equipment. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE plans to improve management and documentation of federally funded equipment by enhancing its asset tracking system and maintaining centralized records with detailed asset information. The Procurement Division will conduct quarterly inventory audits to reconcile records with actual inventory, resolving discrepancies promptly. The Fixed Asset Director will establish communication protocols among Programs/Divisions, requiring monthly status reports to ensure data accuracy and timely updates. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-050 Prior Year Finding Number: 2021-045 Compliance Requirement: Reporting Program: U.S. Department of Education Consolidated Grant to the Outlying Areas, ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities, receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – VIDE failed to submit subaward data to fulfill the Transparency Act reporting requirements for the first tier subawards of $30,000 or more. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Question Costs – None. Context – This is a condition per review of VIDE’s compliance with reporting requirements. In fiscal year 2022, VIDE passed through $1,051,727 to 10 subrecipients. Effect – VIDE is not in compliance with reporting requirements as it failed to provide evidence of identifying and reporting Transparency Act reporting requirements. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that VIDE should implement policies, procedures and controls that will comply with all required laws, guidelines, and requirement under the award. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE plans to address the audit finding on FFATA reporting by developing detailed reporting policies and procedures. These will include guidelines for identifying and tracking subawards, collecting required data, and setting submission timelines. Roles and responsibilities of involved personnel will be clearly defined. VIDE will enhance existing system or implement a new system for tracking subawards and provide comprehensive training to staff. Data verification and validation procedures will be strengthened, with formal processes for reviewing data accuracy before submission and regular reconciliations to ensure consistency. Mandatory training sessions will ensure all personnel understand FFATA requirements and new reporting procedures. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2022-051 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Education Consolidated Grant to the Outlying Areas, ALN: 84.403A Award #: Various Award Period: Various Government Department/Agency: Department of Education (VIDE) Criteria – Per Compliance Supplement, a pass-through entity (PTE) must: • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: (1) the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); (2) all requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and (3) any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). • Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). • Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled subawards to 3 out of 10 subrecipients and found no supporting documentation that VIDE verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Additionally, there was no evidence of award monitoring performed for 2 of the 3 subrecipients tested. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements and general compliance principles. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $1,051,727. Effect – VIDE is not in compliance with the stated provisions. Failure to properly monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – VIDE does not have internal controls in place to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VIDE implement policies, procedures, and controls to ensure subrecipients are monitored in accordance with federal statutes. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is committed to strengthening controls to ensure subrecipient compliance with federal audit requirements under 2 CFR Part 200, Subpart F. This includes implementing effective measures, such as explicit reporting requirements in subrecipient agreements and providing training to internal staff on subrecipient monitoring requirements and ensure consistent implementation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-052 Prior Year Finding Number: 2021-046 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records: • Reasonable reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100% effort); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – For ALN 84.425A, we sampled and selected 60 out of 2,319 payroll expenditures and noted 4 timesheets were not available for review. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the activities allowed or unallowed and allowable costs/cost principles compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to program in fiscal year 2022 is $3,138,454. Total amount sampled is $98,332. The known amount of the exceptions if $7,968. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Where employees work on multiple activities or cost objectives, a distribution of salaries or wages should be supported by personnel activity reports (time and attendance) or equivalent documents. Such information should also be monitored, retained, and approved by a responsible official of VIDE in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations. Key measures include improving timesheet management through electronic submission, mandatory supervisor review, and secure storage. Additionally, VIDE will strengthen rate verification processes with a standardized checklist for comparing NOPA rates with payroll system rates, requiring payroll staff to complete it at each pay cycle and maintain a discrepancy tracker. Mandatory training sessions will be conducted for employees and supervisors to ensure understanding of the new policies, covering timesheet completion, rate verification, and adherence to guidelines. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-053 Prior Year Finding Number: 2021-049 Compliance Requirement: Reporting Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governor) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – Each State or Territory must file various financial, programmatic and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., 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). Specifically for this program, the CARES Act 15011(b)(2) requires institution receiving funds under ESF II-Governor and ESF II-SEA to submit the required quarterly reports to the Secretary at such time and manner and containing such information as the Secretary may require. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 4 out of 12 performance and special reports during the fiscal year and noted the following: • 1 quarterly performance report did not contain evidence of review and approval. • 1 annual performance report was not available for review. • 1 quarterly performance report was not submitted timely (8 days late). We also performed testing over the Transparency Act reporting requirements outlined in the criteria section above. We noted that 1 report submitted in FSRS did not contain evidence of review and approval. The results of the testing are outline in the table. See table included in the report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements using a statistically valid sample. Effect – Failure to properly track all reporting requirements, including the due dates of those reports, could result in missed or late reporting. This could also lead to a reduction in funding due to noncompliance with the terms of the Federal award. Cause – The internal controls established for submission of reporting requirements did not fully operate as designed causing late submission and not in compliance with reporting requirements under the Transparency Act related to the program’s subrecipients. Recommendation – We recommend that OMB and VIDE reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing deficiencies in the reporting processes for the COVID-19 Education Stabilization Fund (ESF-SEA) by committing to enhance reporting practices for compliance with federal requirements. This includes implementing a structured review and approval process for all performance and special reports, ensuring they are vetted by appropriate officials. Additionally, training will be provided to all staff involved in report preparation and submission. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-054 Prior Year Finding Number: 2021-051 Compliance Requirement: Special Tests and Provisions – Participation of Private School Children Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per Compliance Supplement, the State or Territory or agency receiving financial assistance under ESF-SEA I and ESF-Governor I, must provide eligible private school children and their teachers or other educational personnel with equitable services or other benefits under the program. Before an agency, consortium, or entity makes any decision that affects the opportunity of eligible private school children, teachers, and other educational personnel to participate, the agency, consortium, or entity must engage in timely and meaningful consultation with private school officials. Expenditures for services and benefits to eligible private school children and their teachers and other educational personnel must be equal on a per-pupil basis to the expenditures for participating public school children and their teachers and other educational personnel, taking into account the number and educational needs of the children, teachers and other educational personnel to be served. For the programs under ESF-SEA, ESF II-SEA, ESF-Governor, ESF II- Governor will ensure equitable services will be provided to students and teachers in non-public elementary and secondary schools in the same manner provided under section 8501 of the Elementary and Secondary Education Act (ESEA). Condition – We reviewed OMB and VIDE's compliance with the compliance participation of private school children and noted the following: • OMB did not implement a formal process for the participation of private school children compliance for FY2022. • OMB did not conduct a timely consultation with nonpublic schools. • OMB did not provide documents to support that the educational services that were planned were provided and that the allocation to nonpublic schools are equal on a per-pupil basis for public and private schools. Additionally, we sampled and selected 9 out of 29 non-public schools for VIDE and noted following: • Computation by VIDE of amount allocated to nonpublic schools did not contain evidence of review and approval. • VIDE did not provide the Affirmation of Consultation/Intent to Participate for 9 out of 29 nonpublic schools consulted. • VIDE did not provide documents to support that the educational services that were planned were provided. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the special tests and provisions requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of OMB and VIDE’s compliance with the specified requirements. Effect – Noncompliance with program requirements could result in disallowances of costs and ineligible schools could be participating in the program. Cause – OMB and VIDE do not appear to have an effective system in place to ensure consistent and systematic review of documentation and file maintenance. Recommendation – We recommend that OMB and VIDE implement policies, procedures, and controls that will ensure equitable services are provided to eligible private school children and their teachers and other educational personnel. OMB and VIDE should also review its record retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is committed to addressing issues related to the participation of private school children in the COVID-19 Education Stabilization Fund. OMB will develop and implement formal policies and procedures to ensure compliance with federal regulations. This includes establishing guidelines and a schedule for timely consultations with nonpublic schools and collaborating with the Department of Education to ensure equitable per-pupil expenditures for both private and public school children. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-055 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of Education COVID-19 - Education Stabilization Fund State Educational Agency (Outlying Areas) (ESF-SEA) ALN: 84.425A Award #: S425A200004, S425A210004 Award Period: 06/22/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 - Education Stabilization Fund Governors (Outlying Areas) (ESF-Governors I and II) ALN: 84.425H Award #: S425H200003, S425H210003 Award Period: 06/29/2020 - 09/30/2022 01/13/2021 - 09/30/2023 COVID-19 – American Rescue Plan - Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Non-federal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the Department of Labor regulations (29 CFR part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition – We reviewed VIDE's compliance with the wage rate requirements and noted the following: • VIDE did not implement a formal process for the wage rate requirements compliance for FY2022. • We randomly selected 1 contract for classroom repair services and determined it did not indicate a provision that the contractor complies with wage rate requirements. • VIDE did not provide the certified payrolls required to be submitted by the contractor. Further, it does not appear that there are controls in place to ensure compliance with the special tests and provisions compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements. Effect – VIDE is not in compliance with the stated provisions. There is potential that contractor or subcontractors could have paid their employees less than the prevailing wage rates established by the Department of Labor. Cause –VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Recommendation – We recommend the VIDE implement policies, procedures, and controls that will ensure adherence to Federal regulations related to wage rate requirements, and to ensure that responsible project management personnel obtain and review the required certified payroll reports for each week in which contract work is performed. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. VIDE is addressing compliance gaps related to wage rate requirements under the COVID-19 Education Stabilization Fund by reviewing all contracts to ensure they include appropriate compliance language. Contract templates will be updated to mandate compliance and specify consequences for noncompliance. Additionally, VIDE will implement a system requiring contractors to submit certified payroll reports weekly, with a designated team responsible for collecting, reviewing, and retaining these reports to verify compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-056 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: NU50CK000507 Award Year: 08/01/19 – 07/31/24 Government Department/Agency: Department of Health (DOH) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Control Section (a), requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principle process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records; • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – DOH was unable to reconcile the payroll expense include in the SEFA ($2,025,690) with the payroll expense in the payroll register ($1,909,128). As a result, the auditor was not able to establish the completeness of the population and was unable to perform testing procedures. Questioned Costs – None. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Cause – DOH does not appear to have adequate policies and procedures in place to review and reconcile program expenditures. Effect – Lack of proper reconciling information can result in noncompliance with laws and regulation along with loss of funding. Recommendation – We recommend that DOH improve internal controls to ensure program data is reconciled, monitored and retained in order to facilitate adherence to federal regulations and compliance requirements. Views of Responsible Official - The Government concurs with the auditor’s findings and recommendations. DOH acknowledges the auditor's finding regarding the inability to reconcile payroll expenses in the SEFA with the payroll register due to untimely payroll adjustments. To address this, DOH is training its team and ensuring staff have access to make necessary adjustments in the Government Financial Management System starting FY2024. Moving forward, DOH will enhance its SOPs by holding monthly reconciliation meetings with relevant program teams for timely adjustments and continuous monitoring. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-057 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: NU50CK000507 Award Year: 08/01/19 – 07/31/24 Government Department/Agency: Department of Health (DOH) Criteria – Per 2 CFR Section 200.313, property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sales price of the property. Further, a physical inventory of equipment should be taken at least once every two years and reconciled to the equipment records along with the usage of an appropriate control system to safeguard and maintain equipment. Additionally, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for the Government. DPP was unable to provide an accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2022. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Questioned Costs – Not determinable. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Cause – DOH does not appear to have a process in place to adequately monitor property and equipment acquired with Federal funds. Effect –There is a risk that inadequate recordkeeping lead to misappropriation of assets and noncompliance with Federal regulations resulting in loss of funding. Recommendation – We recommend that DOH and DPP improve internal to ensure adherence to federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments responsible for handling managing such assets. Views of Responsible Official - The Government concurs with the auditor’s findings and recommendations. The Epidemiology Division has implemented strong procedures for managing and monitoring property and equipment in line with Property and Procurement guidelines, including meticulous inventory and employee acknowledgment of assigned items. However, DOH acknowledges the need for better coordination with Property and Procurement. To improve asset management, DOH will update the Fixed Asset SOP to mandate that each division shares its asset inventory with Property and Procurement quarterly, ensuring more accurate and current records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-058 Prior Year Finding Number: 2021-053 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Real property, equipment, and intangible property, that are acquired or improved with a federal award must be held in trust by the nonfederal entity as trustee for the beneficiaries of the project or program under which the property was acquired or improved. The HHS awarding agency may require the nonfederal entity to record liens or other appropriate notices of record to indicate that personal or real property has been acquired or improved with a federal award and that use and disposition conditions apply to the property (45 CFR section 75.323 and 45 CFR section 1303 – Subpart E). Real property acquired or improved under a federal award must be used for the authorized purpose so long as it is needed for that purpose, during which time the HSA may not dispose of, replace or encumber the property without prior ACF approval (45 CFR section 75.318; 45 CFR section 75.308(c)(1)(xi)). Equipment acquired under a federal award must be used for the authorized purposes of the project during the period of performance, or until the property is no longer needed for the purposes of the project. A HSA may not dispose of, replace, or encumber title to equipment without prior ACF approval (45 CFR section 75.319; 45 CFR section 75.308(c)(1)(xi)). Property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The Government’s Department of Property and Procurement (DPP) maintains the equipment register for DHS. DPP was unable to provide complete property records which met the stated requirements. Further, no physical inventory of equipment was taken in the previous two years. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Recommendation – We recommend that DHS and DPP improve internal controls to ensure adherence to Federal regulations related to equipment and its related maintenance. There should be timely coordination and communication amongst all Government departments and/or agencies that are responsible for handling and managing such assets. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) maintains an internal asset listing and will collaborate with the Department of Property and Procurement to ensure compliance with Federal regulations regarding equipment and its maintenance. The Office of Management and Budget is reviewing and coordinating with the leadership of both DPP and DHS to ensure that processes are updated and maintained for monitoring equipment acquired with Federal funds. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-059 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance supplement, the states and territories are required to submit to the Federal administering agency, the Administration for Children and Families (ACF), the SF-429 Real Property Status Report and SF-429 A General Reporting on an annual basis 90 days after the end of the reporting period. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 3 out of 11 reports required to be submitted during the fiscal year and noted program personnel did not ensure 3 SF-429 reports were prepared and submitted to the federal grantor agency as prescribed. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The program is working with the Director of Asset Management and the Fiscal Analyst to incorporate SOPP language that ensures forms are completed and submitted in a timely manner. These efforts are supported by the Federal Office of Head Start Grants Office. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-060 Prior Year Finding Number: N/A Compliance Requirement: Special Test and Provision – Protection of Federal Interest in Real Property and Facilities Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Head Start uses specific terms related to real property and facilities, which are defined at 45 CFR section 1305.2, including construction, facility, federal interest, major renovation, and modular unit. Facilities activities (purchase, construction, major renovation, subordination of a federal interest, refinancing, and disposition) are initiated through the submission of Form SF¬429 (cover sheet) and applicable attachments B (Request to Acquire, Improve or Furnish) or C (Disposition or Encumbrance Request). With written prior approval from ACF, a HSA may use Head Start funds to purchase, construct, or renovate (major) a facility, including using Head Start funds to pay ongoing purchase costs which include principal and interest on approved loans (45 CFR sections 1303.40 through 1303.44). A HSA that uses Head Start funds to purchase real property or purchase, construct, or renovate (major) a facility appurtenant to real property (either owned or leased) must record a Notice of Federal Interest (also referred to as “reversionary interest”) (45 CFR sections 1303.46). The Notice of Federal Interest must include the required language content from 45 CFR section 1303.47(a) and be properly recorded in the official real property records for the jurisdiction where the facility is or will be located. A similar Notice of Federal Interest is required for leased facilities on land the HSA does not own (45 CFR section 1303.47(b)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Based on audit procedures performed, we identified 8 of 11 facilities with major repairs that did not have evidence of the required Notice of Federal Interest. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with protection of Federal interest in real property and facilities. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to protection of Federal interest in real property and facilities. This includes incorporating the necessary internal controls to ensure the Notice of Federal Interest is obtained when required. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The program is collaborating with the Office of Legal Counsel to incorporate SOPP language to ensure the timely completion of forms, with support and technical assistance from the Federal Office of Head Start Grants Office. All outstanding reports are scheduled for submission by the end of March 2025, and this will be addressed in quarterly monitoring meetings. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-061 Prior Year Finding Number: 2021-054 Compliance Requirement: Special Test and Provision – Program Governance Program: U.S. Department of Health and Human Services Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – A Head Start Agency (HAS) must share accurate and regular financial information with the governing body and the policy council, including monthly financial statements, including credit card expenditures and the financial audit (42 USC 9837(d)(2)(A) and (E)). Head Start governing body has a legal and fiscal responsibility for the HSA. The governing body’s responsibilities include approving financial management, accounting, and reporting policies, and compliance with laws and regulations related to financial statements, including the: • approval of all major financial expenditures of the agency; • annual approval of the operating budget of the agency; • selection (except when a financial auditor is assigned by the state under state law or is assigned under local law) of independent financial auditors; and • monitoring of the agency’s actions to correct any audit findings and of other action necessary to comply with applicable laws (including regulations) governing financial statement and accounting practices (42 USC 9837(c)(1)(E)(iv)(VII)(aa) through (dd)). The auditee has provided training and technical assistance to the governing body and policy council to support understanding of financial information provided to them and support effective oversight of the Head Start award (42 USC 9837(d)(3)). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – When evaluating DHS’ compliance with the above-mentioned compliance requirements we found the following: • DHS was unable to validate that they provided training and technical assistance to the governance board during the fiscal period under review. • Financial information is not shared with the governing board monthly. We observed financial information being shared quarterly. • We found no discussion by the governing board relating to monitoring of DHS’ actions to correct audit findings. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There is a risk that lack of compliance with the stated requirements can result in significant fiscal issues that may put the Head Start program they administer at risk along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Recommendation – We recommend that DHS strengthen and improve internal controls to ensure adherence to Federal regulations related to program governance training and technical assistance to governing body and policy council. There should be regular training that will enable the governing body to perform it’s legal, fiscal, and oversight responsibilities. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Governing Board transitioned to virtual meetings due to the pandemic, which pre-empted the FY22 training, and has incorporated electronic voting into its procedures. Regular trainings are now conducted to enable the governing body to effectively perform its legal, fiscal, and oversight responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-070 Prior Year Finding Number: 2021-055 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services Child Support Enforcement ALN: 93.563 Award #: 2001VICSES, 2101VICES, 2201VICSES Award Year: 10/01/2019 - 09/30/2020 10/01/2020 - 09/30/2021 10/01/2021 - 09/30/2022 Government Department/Agency: Department of Justice (DOJ) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – In our review of 60 out of 1,527 payroll transactions, we noted 38 timesheets did not contain evidence of review and approval of the respective employee’s supervisor. Questioned Costs – None. Context – This is a condition identified per review of the DOJ’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program were $3,457,487. Total amount sampled is $154,186. The known amount of the exceptions is $102,505. Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DOJ does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Recommendation – We recommend that DOJ improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The DOJ will ensure that each timesheet is approved by the respective employee’s supervisor before being forwarded to the DOF Payroll Division for processing. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-062 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575/93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Activities allowed for CCDF Funds include the following: a. Funds may be used for child care services in the form of certificates, grants, or contracts (42 USC 9858c(c)(2)(A)). b. Funds may be used for activities that improve the quality or availability of child care services, consumer education, and parental choice (42 USC 9858e). c. Funds may be used for activities that improve access to child care services, including the use of procedures to permit enrollment of homeless children (after an initial eligibility determination) while required documentation is obtained; training and technical assistance on identifying and serving homeless children and their families; and specific outreach to homeless families (42 USC 9858c(c)(3)(B)(i)). d. Funds may be used for any other activity that the Lead Agency deems appropriate to (a) promote parental choice; (b) provide comprehensive consumer education information to help parents and the public make informed choices about child care services and promote involvement by parents and family members in the development of their children in child care settings; (c) deliver high-quality, coordinated early childhood care and education services to maximize parents’ options and support parents trying to achieve independence from public assistance; (d) improve the overall quality of child care services and programs by implementing the health, safety, licensing, training and oversight standards established in the CCDBG Act and in state law and regulations; (e) improve child care and development of participating children; and (f) increase the number and percentage of low-income children in high-quality child care settings (42 USC 9857 and 9858c(c)(3)(B)). In addition, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 82 out of 1,243 non-payroll transactions and noted 3 transactions totaling $23,502 that appear to be unallowable costs. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the allowable activities compliance requirement. Questioned Costs – $23,502. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $2,697,115. Total amount sampled is $907,839. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the allowable activities compliance requirement. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A dedicated Fiscal Analyst has been hired and integrated into the approval workflow to ensure compliance. Furthermore, all open purchase orders are now closed at the end of the grant year to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-063 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles - Payroll Activities Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (1.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Management is responsible for establishing and maintaining a system of internal control that should include controls over its activities allowed or unallowed, allowable cost/cost principal process. CFR 200.403(g) states that for costs to be allowed under federal awards, they must be adequately documented. Additionally, salaries and wages charged to Federal awards are subject to the standards of documentation as described by 2 CFR Section 200.430(i) and must be based on records that accurately reflect the work performed. These records must: • Be incorporated into the organization’s official records. • Reasonably reflect the total activity for which the employee is compensated across all grant-related and non-grant related activities (100%); and • Support the distribution of employee salary across multiple activities or cost objectives. Condition – We sampled and selected 67 out of 302 payroll transactions and in all instances found that DHS did not consistently apply funding allocation in accordance with the Notice of Personnel Action (NOPA). We found the project code approved on the NOPA did not agree to the project code used on the payroll register. However, in all instances we found the employee’s actual time and effort was appropriately charged to the CCDF program. Thus, internal controls were not operating at a level of precision to ensure compliance with the allowable costs compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program were $820,305. Total amount sampled was $202,805. Effect – Failure to properly update an employee’s NOPA can result time and effort charged to the incorrect project code resulting in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll expenditures. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Division of Human Resources is updating the Notice of Personnel Actions to include the necessary Project code at the start of each fiscal year. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-064 Prior Year Finding Number:N/A Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – DHS must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements selected by the Territory in its approved Plan. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – The CCDF program appears to have policies and procedures in place for eligibility determinations and child care provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of child care provider voucher distributions that includes relevant information to test eligibility of recipients. As a result, it appears DHS did not perform a reconciliation of the benefits paid to eligible participants and the expenditures recorded in the general ledger. Further, internal controls were not operating at a level of precision to ensure compliance with the eligibility compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements and general compliance principles. Approximately $1.5 million was expended for child care vouchers. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Recommendation - We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures over reviews and authorizations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Department of Human Services (DHS) has introduced a checklist as an additional internal control measure to ensure compliance with Federal requirements for review of provider enrollment applications by the provider relations staff. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-065 Prior Year Finding Number: N/A Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The annual appropriations law for CCDF Discretionary Funds (Assistance Listing 93.575), the CARES Act (Pub. L. No. 116-136), and the CRRSA Act (Pub. L. No. 116-260) all specify that funds shall be used to supplement, not supplant State general revenue funds for child care assistance for low-income families. Funds appropriated by the ARP Act (Pub. L. No. 117-2) shall be used to supplement and not supplant other federal, state, and local public funds expended to provide child care services for eligible individuals. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We discussed with management the process to ensure compliance with the level of effort requirement noting they do not appear to have adequate policies and procedures to monitor and ensure compliance with level of effort requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS is not in compliance with the stated provisions. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Recommendation - We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. According to Federal regulations and the instructions provided for completing the 696 reports, earmarking is assessed with the final report submission, not the intermediate report. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-066 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – 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 Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – To track spending on individual federal awards, DHS establishes project codes within the general ledger. Creation and close down of project codes are subject to a review and approval process. The purpose is to ensure accuracy of the period of performance associated with project codes and expenditures are coded to the correct grants for period of performance. During our testing of period of performance, we found all 2 project codes subject to testing did not contain evidence of review and approval during creation of the project. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Spending on the projects totaled $822,355. Effect – Failure to properly review and approve project codes can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure adherence to their system of internal controls. Recommendation – We recommend that DHS strengthen its system of internal controls to ensure all projects contain evidence of approval when established. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A dedicated Fiscal Analyst has been hired and integrated into the approval workflow to ensure compliance. Additionally, all open purchase orders are now closed at the end of the grant year to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-067 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Pursuant to CCDF regulations at 45 CFR 98.65(g), and as part of the terms and conditions of the grant award, States and Territories are required to complete and submit a quarterly financial status report (ACF-696). The form must be submitted quarterly (reports are due 30 days after the end of the quarter). States must submit quarterly reports for each federal fiscal year until all funds are expended or when the liquidation period expires. Since CCDF funds are awarded each federal fiscal year, a Lead Agency might submit multiple separate quarterly ACF-696 forms for multiple overlapping grant award years simultaneously. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled and selected 6 reports of 36 reports expected to be filed during the fiscal year. During our testing, we found the following: • 3 financial reports had not been submitted in a timely manner, ranging from 222 to 227 days late. • 3 financial reports that did not appear to be submitted as required. • 6 financial reports where we could not determine if the amounts reported were complete and accurate. Further, internal controls were not operating at a level of precision to ensure compliance with the reporting compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, DHS does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A Federal Grants Financial Analyst for CCDF program has been onboarded, tasked with ensuring the accuracy and submission of financial reports. Internal controls have been established, requiring final review and approval by a supervisor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-068 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – As part of their CCDF plans, Lead Agencies must certify that procedures are in effect (e.g., monitoring and enforcement) to ensure that providers serving children who receive subsidies comply with all applicable health and safety requirements. This includes verifying and documenting that child care providers (unless they meet an exception, e.g., family members who are caregivers or individuals who object to immunization on certain grounds) serving children who receive subsidies meet requirements pertaining to health and safety. These requirements must address 11 specific areas—including first aid and CPR, safe sleeping practices, and administration of medication—and child care workers must be trained in these areas (42 USC 9858c(c)(2)(I); 45 CFR section 98.41). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS was unable to provide a list of child care providers serving children who receives subsidies. Thus, we were unable to select a sample to determine if DHS verified and documented that child care providers meet requirements pertaining to health and safety. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – DHS in not in compliance with the stated provisions. Noncompliance with program requirements could result in disallowances of costs and ineligible providers could be participating in the program. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS remains in compliance with this finding from previous audit years, the untimely submission led to the issue in current year. To address this, a shared file will be established to ensure that the necessary information for each year is readily available for audit purposes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-069 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services CCDF Cluster ALN: 93.575, 93.489 Award #: Various Award Period: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Lead Agencies shall recover childcare payments that are the result of fraud. These payments shall be recovered from the party responsible for committing the fraud (45 CFR section 98.60). The Lead Agency must correctly identify and report fraud and take steps to recover payment. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While DHS has a procedure for identifying and recovering payments resulting from fraud, via its internal audit process, it was unable to evidence that such audit(s) had been conducted during the fiscal year. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’s compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud that may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance with fraud detection and repayment requirements throughout the fiscal year. DHS should also review its records retention policies to ensure that complete documentation is maintained, safeguarded, and available for review. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. An internal audit process is actively utilized, involving the exchange of caseloads between workers. Eligibility and subsidy determinations are cross-checked by different workers according to federally and locally established policies. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-071 Prior Year Finding Number: 2021-056 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition – We sampled and selected 60 of 1,458 payroll transactions and noted 2 timesheets where hours worked were not reflected correctly on the payroll register. While non-compliance was not found, controls did not appear to be operating at a level of precision to ensure accuracy of the payroll register. We also sampled 60 of 362 non-payroll transactions and noted 1 instance where the invoice did not have evidence of approval by authorized personnel. Questioned Costs – Not determinable. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of payroll expenditures charged to the program in fiscal year 2022 were $3,814,841. Total amount sampled is $180,651. The known amount of the exceptions is $4,945. Total amount of non-payroll expenditures charged to the program in fiscal year 2022 were $1,919,342. Total amount sampled is $956,768. The known amount of the exception is $45,063. Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with applicable cost principles and maintenance of underlying documentation. Recommendation – We recommend that DHS improve internal controls to ensure adherence to federal regulations related to the fiscal and administrative requirements for expending and accounting for payroll and non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. The Stats Timeforce system has been implemented, automating the time and attendance process and eliminating manual variances. Employees use a fingerprint to log their time, which, once vetted and approved, is sent to the Department of Finance for check processing. This automated process aligns with the ERP cost center listed on the employee's Notice of Personnel Action. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-072 Prior Year Finding Number: 2021-057 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – A Non-Federal entity may charge to the Federal award only 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. Additionally, the Uniform Guidance in 2 CFR Section 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 obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 24 out of 164 expenditures and found 7 expenditures that were charged to the grant during the liquidation period and incurred outside the period of availability. Such expenditures totaled $4,152. Further, outside of our sample, we found six expenditures that were charged to a grant after the liquidation period. Additionally, internal controls do not appear to be operating at a level of precision to ensure grant expenditures are charged to the correct grant and within the allowable period of performance. Questioned Costs – $6,934 Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures subject to sampling were $183,568. Total amount sampled is $35,873. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend that DHS enhance its review process to properly determine the activities of each grant relative to the appropriate period of performance. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As part of the close-out process, all open purchase orders are now submitted to the Department of Finance for closure. The grant close-out process has been shifted to the OMB to ensure the grant is no longer available for transaction entries or liquidations. Additionally, a dedicated Fiscal Analyst is being integrated into the workflow to ensure compliance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-073 Prior Year Finding Number: 2021-058 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Social Services Block Grant ALN: 93.667 Award #: Various Award Year: Various Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, in accordance with the compliance Supplement, the states and territories are required to submit to the Federal administering agency, the Office of Community Services (OCS), SF-425 ‘Federal Financial Report’ and an annual ‘Post Expenditure Report’ (42 USC 1397e) no later than six months following the close of the fiscal year. Further, in accordance with OCS SSBG Supplemental Terms and Conditions, SSBG is required to submit an interim and final SF-425 report covering Year 1 and the entire 2-year of the project period, 90 days following Year 1 (FFY 1) and 90 days following the end of Year 2 (FFY 2), respectively. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires the non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonable ensure compliance with Federal statutes, regulations, and other terms and conditions of the Federal Award. Condition - We sampled and selected 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: • 1 financial report was not available for review. • For 1 special report, we noted no evidence of the date the report was prepared, reviewed, and submitted to the Federal grantor. Additionally, we were not able to agree the key line item of the report to the underlying records. Additionally, internal controls do not appear to be operating at a level of precision to ensure federal reports are prepared accurately, reviewed and submitted timely, and maintained for inspection. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect - DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Recommendation – We recommend that DHS strengthen its process with respect to ensuring proper retention, monitoring, and review of the required reports by an appropriate official. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Currently, there is a collaboration with Federal Partners to consolidate reporting in the Payment Management System portal, as there is no single report for the SSBG as required. Report requests are currently inconsistent with one consolidated grant. Additionally, pre and post expenditures are submitted through the portal, accompanied by a submission log. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-074 Prior Year Finding Number: 2021-061 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria –2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under federal awards: a. Be necessary and reasonable for the performance of the federal award and be allocable thereto under these principles. b. Conform to any limitations or exclusions set forth in these principles or in the federal award as to types or amounts of cost items. c. Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-federal entity. d. Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. e. Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f. Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g. Be adequately documented.” Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Condition – In the prior year, BDO noted one instance where DHS paid a monthly fee for a trailer to store excess furniture and other administrative items. It was determined that the Medicaid staff no longer needed the trailer. The amount charged to the Medicaid program in fiscal year 2022 related to trailer totals $4,870. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – $4,870. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Cause - DHS does not have adequate policies and procedures in place to ensure that expenses are reviewed and approved to ensure reasonability and necessity. Recommendation – We recommend that DHS improve internal controls to ensure adherence to Federal regulations related to the fiscal and administrative requirements for expending and accounting for non-payroll expenditures. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. This was an isolated occurrence during the transition of the MAP program from one building to another. Since the equipment could not be used at the new location, it was stored for future use. The Director of Asset Management now oversees the storage of inventory to prevent similar occurrences in the future. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-075 Prior Year Finding Number: 2021-062 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Plan and eligibility requirements must comply with various Federal requirements. The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e. auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Additionally, in accordance with the State Plan under Title XIX of the Social Security Act, Section 4.7, Maintenance of Records, the Medicaid agency maintains or supervises the maintenance of records necessary for the proper and efficient operation of the plan, including records regarding applications, determination of eligibility, the provisions of medical assistance, and administrative costs, statistical, fiscal and other records necessary for reporting and accountability. Condition – In our review of 60 out of 2,047 participant case files, we noted the following: • For 4 participants, there was no documentation in the case file supporting the verification of income or resource requirements. • For 1 participant, there was no evidence that the social security number was verified. • For 16 participants, it does not appear the application was processed timely. • For all 60 participants, there was no evidence that a review and approval of the eligibility determination had been performed. Questioned Costs – Not determinable. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – Noncompliance with program requirements could result in disallowances of costs and program participants could be receiving benefits that they are not entitled to receive. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review of the data in its participant case files. Recommendation – We recommend that DHS perform regular reviews of the data in its participant case files to ensure accuracy and completeness and confirming that only eligible participants are receiving the entitled benefits. Additional levels of review by a supervisor or manager can provide more timely quality assurance oversight over the eligibility process. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS staff will collaborate with the PMO, hired to assist with the Public Health Emergency Unwind, to establish Standard Operating Policies and Procedures (SOPPs) for certification and recertification processes. DHS is in the process of hiring a Program Integrity Director and Medical Eligibility Quality Control (MEQC) staff, who will be responsible for reviewing completed case files. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-076 Prior Year Finding Number: 2021-063 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. In accordance with the Compliance Supplement, the State or Territory is required to submit CMS-64, Quarterly Statement of Expenditures for the Medicaid Assistance Program, thirty days after the end of the quarter. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 2 out of the 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 2 reports did not contain evidence of review or approval. • 1 report had not been submitted in a timely manner (44 days late). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Recommendation – We recommend that DHS reevaluate its policies and procedures to ensure proper monitoring and review of the required reports by an appropriate official who would ensure the information submitted is complete, accurate, consistent, and submitted within the required timeframe. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. As Medicaid staffing shortages are addressed, reports are submitted for review via email. To ensure access for audit purposes, the Department has implemented a shared folder where copies of approval emails and any time extension requests are stored, since the submission portal does not allow for attachments. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-077 Prior Year Finding Number: 2021-064 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The state plan must provide methods and procedures to safeguard against unnecessary utilization of care and services. In addition, the state must have (1) methods of determining criteria for identifying suspected fraud cases; (2) methods for investigating these cases; and (3) procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials (42 CFR parts 455, 456, and 1002). Credible allegations of provider fraud must be referred to the state MFCU or an appropriate law enforcement agency in states with no certified MFCU (42 CFR Part 455.21). The SMA must establish and use written criteria for evaluating the appropriateness and quality of Medicaid services. The agency must have procedures for the ongoing post-payment review, on a sample basis, of the need for, and the quality and timeliness of, Medicaid services. The SMA may conduct this review directly or may contract with an independent entity (42 CFR 456.5, 456.22 and 456.23). In addition, the SMA as required per Section 1902(a)(68) – [42 USC 1396a(a)(68)] False Claims Education must ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Upon investigation, DHS was not able to provide evidence of compliance with the above referenced compliance requirements. Specifically, we found the following: • No evidence of a method of determining criteria for identifying suspected fraud cases. • No evidence of a method for investigating these cases. • No evidence of procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. Further, we noted DHS had not provided evidence of established and used written criteria for evaluating the appropriateness and quality of Medicaid services, including procedures for the ongoing post-payment review. Additionally, DHS did not provide evidence they ensure that providers and contractors receiving or making payments of at least $5 million annually under a state’s Medicaid program have (a) established written policies for all employees (including management) about the Federal False Claims Act, whistleblower protections, administrative remedies, and any pertinent state laws and rules; (b) included as part of these policies detailed provisions regarding detecting and preventing fraud, waste, and abuse; and (c) included in any employee handbook a discussion of the False Claims Act, whistleblower protections, administrative remedies, and pertinent state laws and rules. Finally, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – There may be prolonged, ongoing cases of unnecessary utilization and fraud which may be unnoticed and remain unreported by the program. Funds available are possibly being used inappropriately, with no methodology of properly identifying or tracking the amounts. Cause – DHS does not appear to have an effective system in place to address the program’s requirements. Recommendation – DHS should reconsider whether it would like to be directly responsible for Utilization Control and Program Integrity, or if the use of a QIO would better suit current needs. Once this is decided, DHS should take the necessary steps to ensure compliance with this requirement. The written procedures should reflect the actual actions to be taken. In the event a QIO is used, DHS should be involved throughout, so that it is aware of the program’s vulnerabilities and has the opportunity to make the necessary changes for improvement in a timely manner. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS has onboarded a Director of Program Integrity who will be responsible for establishing the Quality Control Unit, which will collaborate with the Medical Eligibility Quality Control (MFCU) on behalf of the Medicaid Program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-078 Prior Year Finding Number: 2021-065 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – The SMA pays for inpatient hospital services and long-term care facility services through the use of rates that are economic and efficient and are in accordance with the state plan. To the extent the state pays reconciled costs, the SMA must provide for the filing of uniform cost reports for each participating provider in order to establish payment rates. The SMA must provide for the periodic audits of financial and statistical records of participating providers. The specific audit requirements will be established by the state plan (42 CFR 447.253). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS provides Medicaid services to eligible Territory residents through inpatient hospitals and long-term care facilities. These hospitals and facilities include various Territory agencies and third-party service providers. The costs incurred by these facilities are summarized in a cost report that is submitted to DHS. DHS awarded a contract in August 2017 for the audit of these cost reports; however, we noted that DHS had not received any audited cost reports for fiscal year 2022. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect – Without timely audits of the cost reports, DHS has no assurance that the costs incurred by the medical facilities are actual costs incurred. Further, the difference between costs submitted for reimbursement and the costs actually reimbursed result in the use of local, rather than Federal, dollars to fund Medicaid expenditures. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Recommendation – We recommend that DHS evaluate and develop policies and procedures to obtain and audit the cost reports. This will allow DHS to reduce the time between the Medicaid expenditures being incurred and the ultimate reimbursement from the Federal government. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS is currently in the process of drafting the solicitation for bids on the project to address all outstanding periods. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-079 Prior Year Finding Number: 2021-066 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria – SMAs must establish and maintain a program for conducting periodic risk analyses to ensure that appropriate and cost-effective safeguards are incorporated into new and existing systems. SMAs must perform risk analyses whenever significant system changes occur. SMAs shall review the ADP system security installations involved in the administration of HHS programs on a biennial basis. At a minimum, the reviews shall include an evaluation of physical and data security operating procedures, and personnel practices. The SMA shall maintain reports on its biennial ADP system security reviews, together with pertinent supporting documentation, for HHS on-site reviews (45 CFR 95.621). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS did not perform the required ADP Risk Analysis and System Security Review for the systems that support the Medicaid Program. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - The absence of policies to ensure these analyses and reviews are performed may lead to physical and data security issues and noncompliance with program requirements. Further, DHS’ risk of incomplete or inaccurate data processing, or worse, the risk of fraud, increases. Cause – DHS’ records do not permit a determination as to the sufficiency of the design and operation of key controls surrounding the environment in which the Medicaid claims reside. Recommendation - We recommend that management should perform and review a risk analysis and system security review for all systems that support the Medicaid program. All issues should be addressed by management. If management becomes aware that such a report will not be available, we recommend that management conduct its own review. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. DHS had secured a commitment from a vendor who was unable to perform the required services. Currently, DHS is working through the procurement process with DPP to identify a new vendor to perform the mandated services. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-080 Prior Year Finding Number: 2021-069 Compliance Requirement: Special Tests and Provisions – Medicaid National Correct Coding Initiative Program: U.S. Department of Health and Human Services Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2022 Government Department/Agency: Department of Human Services (DHS) Criteria - States or Territories are required to incorporate six National Correct Coding Initiative (NCCI) methodologies into the state Medicaid Programs pursuant to requirements of Section 6507 of the Affordable Care Act (section 1903(r) of the Social Security Act). The purpose of the NCCI Program is to promote correct coding, prevent coding errors, prevent code manipulation, reduce improper payments and reduce the paid claims improper payment rate. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DHS did not provide documentation to verify that the quarterly NCCI edit files were uploaded timely. In addition, DHS did not have the required signed Confidentiality Agreements in place as required by Technical Guidance Manual, sections 7.1.1 and 7.1.2 during fiscal year 2022. Further, it does not appear that DHS has internal controls in place to ensure compliance with the compliance requirement. Questioned Costs – Not determinable. Context - This is a condition identified per review of DHS’ compliance with the specified requirements. Effect - DHS is not in compliance with regulations for the Medicaid National Correct Coding Initiative. Cause - DHS did not establish internal controls to ensure that the NCCI methodologies were incorporated into the Medicaid program or that the required signed Confidentiality Agreements were in place. Recommendation - We recommend that DHS establish internal controls to ensure compliance with the requirements of the Medicaid National Correct Coding Initiative and incorporate the NCCI methodologies into the state Medicaid program. Views of Responsible Officials - The Government concurs with the auditor’s findings and recommendations. Although DHS indicated that documentation supporting the download and incorporation of NCCI methodologies was available for review and that the MMIS has these methodologies built into the system, OMB recommends that DHS implement internal controls to ensure the NCCI methodologies are consistently incorporated into the Medicaid Program. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-081 Prior Year Finding Number: 2021-072 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of the 67 reports submitted during the fiscal year and noted that 6 financial reports and 2 performance reports did not have supporting documentation to reconcile the amounts reported to the appropriate financial and non-financial records of VITEMA. We further noted that Project Close Out Reports for D4335 (22 reports) and D4340 (25 reports) were not submitted within 180 days of project completion. Finally, we selected 8 projects with first-tier subawards greater than $30,000 and found that none had submitted FFATA reports. The results of the testing performed over Transparency Act are outlined in the table. See the table included in the report. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A formalized process for the preparation and submission of financial and performance reports is now established, with clearly defined roles and responsibilities. The Disaster Program Financial Specialist is tasked with preparing the reports quarterly and submitting them to the Territorial Public Assistance Officer for review. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-082 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award #: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – A pass-through entity (PTE) must: Identify the Award and Applicable Requirements – Clearly identify to the subrecipient: 1. The award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.331(a)(1); 2. All requirements imposed by the PTE on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); 3. Any additional requirements that the PTE imposes on the subrecipient in order for the PTE to meet its own responsibility for the federal award (e.g., financial, performance, and special reports) (2 CFR section 200.331(a)(3)). Evaluate Risk – Evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward (2 CFR section 200.332(b)). This evaluation of risk may include consideration of such factors as the following: 1. The subrecipient’s prior experience with the same or similar subawards; 2. The results of previous audits including whether or not the subrecipient receives single audit in accordance with 2 CFR Part 200, Subpart F, and the extent to which the same or similar subaward has been audited as a major program; 3. Whether the subrecipient has new personnel or new or substantially changed systems; and 4. The extent and results of federal awarding agency monitoring (e.g., if the subrecipient also receives federal awards directly from a federal awarding agency). Monitor – Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, complies with the terms and conditions of the subaward, and achieves performance goals (2 CFR sections 200.332(d) through (f)). In addition to procedures identified as necessary based upon the evaluation of subrecipient risk or specifically required by the terms and conditions of the award, subaward monitoring must include the following: 1. Reviewing financial and programmatic (performance and special reports) required by the PTE. 2. Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the federal award provided to the subrecipient from the PTE detected through audits, on-site reviews, and other means. 3. Issuing a management decision for audit findings pertaining to the federal award provided to the subrecipient from the PTE as required by 2 CFR section 200.521. Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 8 of 25 subrecipients and found the following: • 5 instances where we were unable to obtain subrecipient agreements. • 8 instances where we were unable to obtain Quarterly Progress Reports. • 3 instances with no Certification Letter of Completion of Work and Disaster Response and Recovery Final Inspection Report. • 8 instances with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the subrecipient monitoring compliance requirements or proper identification of subrecipients. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2022 were $205,714,063. The total amount of our sample totaled $190,927,885. Effect – VITEMA is not in compliance with the stated provisions. Failure to properly identify and monitor subrecipients can result in noncompliance with laws and regulations and failure to meet the programs objectives. Cause – VITEMA does not have internal controls in place to properly identify and monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Recommendation – We recommend that VITEMA implement policies, procedures, and controls to ensure subrecipients are identified and monitored in accordance with federal statutes. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The formal process for completing and retaining Subrecipient Agreements is now operational to ensure compliance with programmatic obligations. As the Recipient, the Territory is responsible for notifying the Subrecipient when federal funds are obligated and providing them with a subrecipient agreement outlining the program's terms and conditions. The Disaster Program Financial Specialist is responsible for ensuring that the subrecipient agreement is signed by both the Applicant and the Governor's Authorized Representative and provided to the Territorial Public Assistance Officer. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2022-083 Prior Year Finding Number: 2021-074 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Hazard Mitigation Grant Program ALN: 97.039 Award #: FEMA-4335-DR, FEMA-4340-DR-VI Award Periods: 09/20/2017 – 09/30/2027 09/07/2017 – 11/30/2025 Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Criteria – Each State or Territory must file various financial, programmatic, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying performance records and presented in accordance with program requirements. More specifically for the program, the Territorial agreement between VITEMA and FEMA dictates that all performance reports must be submitted within 30 days of the end of each quarter. Further, under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., 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). Further, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 8 out of the 16 reports submitted during the fiscal year and noted the following: • 2 performance reports did not agree to the underlying records. • 1 performance report had not been submitted in a timely manner (10 days late). • 3 performance reports submitted did not contain evidence of review and approval. • 3 financial reports did not contain evidence of review and approval. • 3 financial Reports did not have sufficient supporting documentation to validate accounting records agree with the reports. • FFATA reports had not been prepared and submitted. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the reporting compliance requirements. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Effect – VITEMA is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, VITEMA does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official who would ensure that information submitted is complete, accurate, consistent and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. A process for the preparation and submission of financial and performance reports will be formalized, with clear roles and responsibilities outlined. The Disaster Program Account Supervisors will be responsible for preparing the reports on a quarterly basis and submitting them to the Territorial Hazard Mitigation Officer for review. The review process will include thorough reconciliation between the reports and supporting data, such as accounting records. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.