Audit 406809

Finding Number: 2024-018 Prior Year Finding Number: 2023-019 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities/ Period of Performance Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 noted the following: • The SNAP participation report was not properly reconciled to accounting records. • One grant award was overspent by $391,000. No adjustment was made to the SEFA. • During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 60 of the 1,806 payroll disbursements and noted the following: o 19 instances in which DHS did not consistently apply the funding allocation. The hours that should have been split 50/50 between federal and local or that should have been 100% local were charged 100% to the program. o 3 instances in which the project code on an employee’s Notice of Personnel Action (NOPA), which is used to record time and effort to the appropriate grant, were expired and had not been updated. o 9 instances in which payroll costs were charged outside of the award’s period of performance. 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. 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. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. 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 2024 were $4,207,231. The amount sampled is $159,098. The known amount of inconsistencies noted is $38,462. The total food stamps expenditure charged to the program in fiscal year 2024 were $72,308,337. The known amount of unreconciled information is $355,108. 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. DHS has enhanced the internal control policies and processes to ensure compliance with federal requirements and has adopted an electronic system for payroll, replacing manual processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-019 Prior Year Finding Number: 2023-020 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various Criteria – 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 – We found that DHS was unable to readily exhibit and provide evidence that it met the matching requirement or monitored compliance with the matching requirement. 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. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. 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. DHS has developed a specific liquidation report to ensure that matching is completed with each report submission. Additionally, an audit team is being developed to support compliance and 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: 2024-020 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Agriculture Government Department/Agency: Department of Human Services (DHS) Supplemental Nutrition Assistance Program Cluster (SNAP) ALN: 10.561 Award #: Various Award Period: Various 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, 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We found that for 1 project, expenditures were incurred before the award’s period of performance without written approval from the Federal awarding agency. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to obtain Federal awarding agency approval for incurring expenditures before an award’s period of performance can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $47,135. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Total expenditures for this project in the fiscal year 2024 SEFA are $47,135 and all were determined to be incurred prior to the award’s period of performance. Recommendation – We recommend that DHS strengthen its process with respect to charging expenditures between various grant awards. We also recommend 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. DHS has established close-out procedures so that all open purchase orders are now submitted to the Department of Finance for closure and the grant close-out process has been shifted to the OMB. Additionally, an audit team is being developed to support compliance and oversight. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-017 Prior Year Finding Number: 2023-024 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) ALN: 10.557 Award #: Various Award Period: Various Criteria – The WIC program is subject to the provisions of the Cash Management Improvement Act (CMIA) (42 USC 1786(h)(8)(J)) and federal regulation 7 CFR section 246.15(a). 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, document, 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 16 of the 153 drawdowns and noted that 4 drawdown requests did not contain evidence of review and approval. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – Without proper review and oversight drawdowns may not be in compliance with the cash management compliance requirements. 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 $2,014,096. The amount sampled is $317,786. The total drawdowns related to the sampled drawdown requests that lack evidence of review and approval is $97,870. 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. DOH has updated Standard Operating Procedures (SOPs) over drawdowns requiring signatures or initials on all supporting documents, certifying proper 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: 2024-021 Prior Year Finding Number: 2023-026 Compliance Requirement: Cash Management Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 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, document, 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 6 of the 8 drawdowns and noted that all 6 drawdown requests did not contain evidence of review and approval. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – Without proper review and oversight drawdowns may not be in compliance with the cash management compliance requirements. 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 $2,051,331. The total drawdowns related to the sampled drawdown requests that lack evidence of review and approval is $1,971,498. 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 matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-022 Prior Year Finding Number: 2023-027 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 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 the 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. Further, non-Federal entity must comply with section 70914 of the Build America, Buy America Act (BABA), including through incorporation of a Buy America preference in the terms and conditions of each award with an infrastructure project or obtain waiver. 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 5 of 13 procurement transactions and noted the following: • The support provided for 3 procurement transactions did not contain sufficient supporting documentation to validate adherence to procurement policy. • The support provided for 5 procurements did not include Buy America domestic preference provisions in the agreement or obtained a BABA waiver. Cause – DOH and DPP do not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – DOH and 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. 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 amount of procurement transactions was $2,016,062. The known amount of exceptions is $2,016,062. Recommendation – We recommend that DOH 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 matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-023 Prior Year Finding Number: 2023-028 Compliance Requirement: Reporting Program: U.S. Department of Agriculture Government Department/Agency: Department of Health (DOH) WIC Grants to States (WGS) ALN: 10.578 Award #: 1VI700748 Award Period: 07/01/19 - 12/31/23 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected all reports submitted, consisting of 2 financial reports and 2 progress reports, and noted the following: • 1 financial report and 1 progress report did not appear to be submitted as required. • 1 financial report where the basis of accounting used in reporting the data was not specified. • 1 progress report did not contain evidence that it was reviewed by an authorized reviewer prior to submission. Further, it does not appear that the controls are operating at a level of precision to ensure compliance with reporting compliance requirements. 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. Effect or Potential Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of the DOH’s compliance with the specified requirements. 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 matter will be considered in future recommendations; however, as the program has been closed, no further action can be taken to address the observation at this time. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-025 Prior Year Finding Number: 2023-029 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – 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 200.403(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. The Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 60 out of 3,696 payroll transactions and identified the following: • 3 instances where the timesheets for the pay period selected were not provided. • 1 instance in which total hours worked on the employees’ timesheet did not agree with total hours worked as recorded in the payroll register. 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 compliance requirements. 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. Effect or Potential 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. Questioned Costs – Below reporting threshold. 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 2024 were $1,669,934 and the total amount of our sample was $52,772. The known amount of the exceptions totaled $11,469. Recommendation – We recommend that OTAG strengthen internal controls by developing and implementing policies and procedures to ensure compliance with Federal requirements related to payroll expenditures, including applicable cost principles and documentation standards. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG has reviewed the payroll transactions identified during the audit and has initiated corrective measures to strengthen controls over payroll documentation, appendix charging, and period-of-performance 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: 2024-026 Prior Year Finding Number: 2023-030 Compliance Requirement: Cash Management and Reporting Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 Criteria – U.S. Department of the (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as (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 Assisting Lising 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 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 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – As a part of its reporting requirements, OTAG is required to submit the SF-270, 'Request for Advance or Reimbursement' Report to the Federal grantor to facilitate cash drawdown requests for reimbursements. 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. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. 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 will enhance internal control processes and procedures including reconciliations, a centralized tracking log, and supervisory review and approval. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-027 Prior Year Finding Number: 2023-031 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 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 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 had 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 level of precision to ensure compliance with the matching compliance requirement. Cause – OTAG does not appears to have adequate policies and procedures in place to ensure compliance with the matching requirement. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OTAG’s compliance with the specified requirements and general compliance principles. 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 will enhance internal control processes and procedures including a formal methodology for calculating, documenting, and monitoring matching 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: 2024-028 Prior Year Finding Number: 2023-032 Compliance Requirement: Period of Performance Program: U.S. Department of Defense Government Department/Agency: Office of the Adjutant General (OTAG) National Guard Military Operations and Maintenance (O&M) Projects ALN: 12.401 Award #: W9127P-23-2, W9127P-24-2 Award Period: 10/01/2022 – 09/30/2023 10/01/2023 – 09/30/2024 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 per National Guard Regulation (NGR) 5-1, chapter 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 authorized 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 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). Additionally, a non-federal entity may charge to the Federal award, allowable costs incurred during the period of performance and any cost 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 the written approval of the Federal awarding agency. Further, the Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, 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 83 of 489 transactions and noted the following: • 28 instances where transactions were charged to the incorrect grant award based on the noted period of performance for each award. • 2 instances where transactions were paid outside the liquidation period. Additionally, we tested period of performance and noted the following : • We selected a sample of 60 of 619 non-payroll transactions and identified 13 instances in which non-payroll expenditures were incurred and charged outside of the allowable liquidation period, without evidence of an approved extension or authorization, in noncompliance with Federal award requirements. • We selected a sample of 60 out of 3,696 payroll transactions and noted 6 instances in which payroll costs were charged to prior-year Federal grant projects that were outside the approved period of performance and lacked evidence of an authorized extension. Cause – OTAG did not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance. Effect or Potential Effect – OTAG is not in compliance with the stated provisions. Failure to properly review and support expenditures can result in noncompliance with laws regulations along with loss of funding. Questioned Costs – 257,468. 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 charged to program was $3,300,673 and the total amount of our sample was $881,480. The known amount of the exceptions totaled $257,468. Recommendation – We recommend that OTAG strengthen its processes with respect to setting up and charging expenditures between various grants awards. We also recommend that OTAG enhance its review process to properly determine the activities of each grant relative to the appropriated period of performance. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OTAG will implement tracking tools to monitor award periods, liquidation deadlines, and expenditure charging. In addition, OTAG should enhance its review and monitoring processes to ensure payroll costs are properly supported and charged within the appropriate period of performance for each Federal 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: 2024-029 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 the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 and allowable cost/cost principal process. Condition – In our review of 60 of 538 non-payroll transactions, we noted 5 instances in which the expenditure was not approved by authorized personnel. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – None. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $1,565,197. Total amount sampled is $828,341. The known amount of the instances of noncompliance is $27,015. Recommendation – We recommend that DPNR improve internal controls to ensure adherence to the 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. DPNR will review and update its policies and procedures to ensure all non-payroll expenditures are approved by authorized personnel, provide staff training on proper approval processes and internal control requirements, and conduct periodic checks to monitor compliance and promptly address any exceptions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-030 Prior Year Finding Number: 2023-033 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 and allowable cost/cost principal process. CFR 200.403(g) requires all costs charged to a federal award 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 620 payroll disbursements and noted the following: • 1 instance in which the approved timesheet for the pay period selected was not available for review, and there was a variance between the hours reported on the payroll register and the Detail Check History. • 13 instances in which the employee assigned project code documented on the Notice of Personnel Action was not associated with the grant. Additionally, the payroll register reflected a different project code for these transactions. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and to ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential 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. Questioned Costs – $43,593. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 were $1,704,442. The amount sampled is $181,084. The value of transactions with exceptions totaled $43,593. Recommendation – We recommend that DPNR 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. DPNR will enhance internal control procedures to include reconciliations and increased review and approval 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: 2024-031 Prior Year Finding Number: 2023-034 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Fish and Wildlife Cluster ALN: 15.605, 15.611 Award #: Various Award Period: 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, document, 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 DPP maintains the equipment register for the Government. DPNR was unable to provide accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management and real property compliance requirements. Cause – DPNR and DPP do not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential Effect – Inadequate recordkeeping of equipment could lead to misappropriation of assets and noncompliance with Federal regulations resulting in a return of Federal awards received. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements. Equipment purchased in 2024 totaled $47,748. Recommendation – We recommend that DPNR 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 Asset Management Division (AMD) adheres to Federal Equipment guidelines. Assets are tagged, and records are created using the Tyler Munis Resource system (ERP) The completed Standard Operating Policies and Procedures (SOPP) are pending update and approval crucial for enhancing internal controls. Training sessions will occur 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: 2024-032 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 – The payroll expenditures recorded in the Schedule of Expenditures of Federal Awards (SEFA) agree to the payroll expenditures recorded in the accounting system. The summary level payroll transactions recorded in the accounting system could not be reconciled to the transaction level detail obtained from the payroll system. When comparing the two populations, we identified multiple differences that net to a variance of $38,439. Cause – DPNR did not adhere to their internal policies and procedures to ensure the accuracy of the SEFA. Effect or Potential Effect – The SEFA may not be completely and accurately stated. In addition, the lack of established internal control policies and procedures to ensure the SEFA is completely and accurately stated can lead to noncompliance with federal statutes, regulations, and provisions of grant agreements. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR system’s population completeness over the compliance requirements for the program. Total payroll expenditure charged to the program for the year is $16,218. Recommendation – We recommend that the DPNR develop policies and procedures and enhance existing their existing reconciliation process to ensure completeness and accuracy of the SEFA, and that amounts reported on the SEFA are supported by transaction level detail. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will implement enhanced internal control procedures to ensure that payroll expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) are complete, accurate, and fully supported by transaction-level detail in accordance with Federal statutes and regulations by implementing monthly payroll reconciliations, by developing and enhancing internal controls and procedures, and by providing training to relevant personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles and Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Office of Management and Budget (OMB) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various Criteria – Funds may be used only for activities that are authorized under the terms and conditions of the award, the approved project budget, and applicable federal requirements, including 2 CFR Part 200. Costs charged to the program must be necessary, reasonable, allocable, and directly related to carrying out the approved program objectives. 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, document, 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 government 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 now former USVI officials (collectively the “Indicted Individuals”). DOJ alleged that the Indicted Individuals were involved in activities associated with bribery, and 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 2024, Mon Ethos Pro Support, LLC was paid $20,000 from Economic, Social, and Political Development of the Territories Program funds, which are considered questioned costs. 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. Effect or Potential 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. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Recommendation – We recommend that OMB should strengthen controls over vendor procurement and the review and submission of program costs to help ensure that transactions charged to federal programs are valid, properly supported, and allowable under applicable grant requirements. This should include clearer review procedures, adequate supporting documentation, supervisory approval, and periodic monitoring of procurement and cost submissions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will strengthen grant management and compliance through the Public Finance Management initiative including the development of a three-tier overarching Financial and Compliance policy and procedures framework and the hiring of key personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-034 Prior Year Finding Number: 2023-035 Compliance Requirement: Cash Management Program: U.S. Department of the Interior Government Department/Agency: Virgin Islands Department of Education (VIDOE) & Department of Planning and Natural Resources (DPNR) Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: Various 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. 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 10 out of 77 drawdowns, and noted no supporting documentation was available for review for 1 drawdown. Additionally, for one project included in the program, we noted a variance of $2,288 between the cash receipts recorded in the accounting system and the amount reflected in the related federal drawdown. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – VIDOE and DPNR are not in compliance with the stated provisions. Questioned Costs – $258,122. Context – This is a condition identified per review of VIDOE and DPNR’s compliance with the specified requirements using a statistically valid sample. Total fiscal year 2024 drawdown requests were $5,674,452. Total amount sampled is $4,247,674. The total related to the drawdown request without supporting documentation is $258,122. Recommendation - We recommend that VIDOE and DPNR 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’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-035 Prior Year Finding Number: 2023-036 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: 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, document, 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 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 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – The Government does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the Government’s compliance with the specified requirements. Equipment purchased in 2024 totaled $ 2,633,484. Recommendation – We recommend that the Government 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 Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Additional staff will be needed to effectively support the initiative and regular training sessions will be provided to staff to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-036 Prior Year Finding Number: 2023-037 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: 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 the Procurement Manual, User Agencies are required to submit a written justification letter to the Government’s 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, document, 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 14 out of 90 procurement transactions, we noted the following: • The supporting documentation for 1 procurement transaction did not contain evidence that a quotation was obtained prior to selection of the vendor. • In addition, we noted that 6 procurement transactions did not include the following: o 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. o The procurement provides full and open competition. o Documentation in support of the rationale to limit competition in those cases where competition was limited and ascertain if the limitation was justified. o Cost or price analysis in connection with procurement action, including contract modifications and that this analysis supported the procurement action. Cause – The Government does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – The Government 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. 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 amount of procurement and suspension and debarment transactions was $6,395,225. Total amount sampled was $4,137,592. The known amount of exceptions is $1,150,428. Recommendation – We recommend that the Government 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. DPP has transitioned the Government of the Virgin Islands to a centralized eProcurement system, GVIBuy. Vendor profiles are centralized with all corporate documents attached. Additionally, DPP has published written guidelines that dictate adherence to federal regulations relate to the procurement of goods and services including records retention. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-037 Prior Year Finding Number: 2023-038 Compliance Requirement: Reporting Program: U.S. Department of the Interior Government Department/Agency: Various Economic, Social, and Political Development of the Territories ALN: 15.875 Award #: Various Award Period: 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, document, 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 24 out of 224 financial and performance reports and noted the following: • 2 performance reports were not available for review. • For 12 financial reports, sufficient supporting documentation was not available to verify that the reported financial information agreed to the underlying records. • 2 performance reports did not contain evidence of review or approval prior to submission. • For 3 performance reports and 2 financial reports, there was no evidence of submission. Additionally, the Government did not submit FFATA report where subawards were made for more than $30,000 for fiscal year 2024. 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. Effect or Potential Effect – The Government is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. 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. 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’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-038 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 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, document, 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 11 out of 23 drawdowns and noted that sufficient supporting invoices were not available for review for 3 drawdowns. Cause – It appears sufficient documentation was not maintained or provided to support certain reimbursement requests, and review procedures over amounts requested were not functioning effectively. Effect or Potential Effect – Without adequate supporting documentation, the entity may draw Federal funds in excess of allowable and supported expenditures, resulting in noncompliance with cash management requirements and unsupported questioned costs. Questioned Costs – $142,939. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $7,857,474. The amount sampled is $7,590,468. The total of drawdowns for which we were unable to obtain support is $142,939. Recommendation – We recommend that DPNR reevaluate its policies and procedures to ensure proper monitoring and continue to be vigilant in following internal procedures to ensure compliance with cash management provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all Federal drawdown requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-039 Prior Year Finding Number: N/A Compliance Requirement: Eligibility Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria - DPNR must have in place procedures for documenting and verifying eligibility in accordance with the Federal requirements, as well as the specific eligibility requirements in accordance with grant agreement. 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it implemented a formal process to ensure compliance with eligibility requirements during the year under audit. Cause – It appears that policies and procedures, including review over the eligibility of transactions, were not designed and functioning as needed. Effect or Potential 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 along with loss of funding. Questioned Costs – $6,964,757. Context - This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPNR strengthen its policies and procedures for documenting and retaining evidence that eligibility controls are performed and operating effectively to ensure compliance with eligibility requirements. DPNR should also maintain a complete and accurate listing of eligible participants, including all relevant information needed to support eligibility determinations. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all eligibility requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-040 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 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). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it implemented a formal process to ensure compliance with procurement and suspension and debarment compliance during the year under audit. Cause – It appears that policies and procedures, including review over procurement and suspension and debarment transactions, were not designed and functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. DPNR 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPNR strengthen its documentation and record-retention procedures to ensure evidence is maintained to support that internal controls over procurement and suspension and debarment requirements are designed and operating effectively to ensure compliance with procurement and suspension and debarment provisions. DPNR should also maintain a complete and accurate procurement population listing to support compliance monitoring. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all procurement requests and supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-041 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 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. 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, document, 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 4 out of 8 financial and progress reports, and noted that 2 financial reports were reviewed by an individual other than the authorized reviewer. Additionally, DPNR was unable to provide a listing of FFATA reports submitted during the year under audit. Cause – It appears that policies and procedures, including review over reporting procedures, were not designed and/or not functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the stated provisions, and inaccurate information may have been reported to the Federal government. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPNR reevaluate its policies and procedures to ensure proper retention, monitoring, and review of the required reports by an appropriate official to 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. DPNR will conduct an internal review to analyze internal controls and procedures for potential weaknesses and will implement additional measures as needed. In addition, DPNR, with the support of the federal agency’s consultant, will implement a centralized electronic repository system to serve as the official recordkeeping location for all reporting supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-042 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • 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(c)). 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 a 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(e) through (g)). 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 performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 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. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPNR did not provide supporting documentation to determine whether it designed and implemented a formal process to ensure compliance with subrecipient monitoring requirements during the year under audit. Additionally, DPNR was not able to provide a listing of subrecipient payments made during the year under audit. Cause – It appears that DPNR did not maintain or provide sufficient documentation to demonstrate the design and implementation of controls and compliance with subrecipient monitoring requirements. Effect or Potential Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives along with loss of funding. Questioned Costs – $6,964,757. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. The total subrecipient payments made during the year were $6,964,757. Recommendation – We recommend that DPNR strengthen its policies and procedures for documenting and retaining the evidence to ensure that internal controls over subrecipient monitoring are designed and operating effectively. DPNR should also maintain a complete and accurate listing of subrecipients for the year to support monitoring activities. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR, with the support of federal agency’s, consultant will implement a centralized electronic repository system to serve as the official recordkeeping location for all subrecipient supporting documentation. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-043 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of the Interior Government Department/Agency: Department of Planning and Natural Resources (DPNR) Emergency Supplemental Historic Preservation Fund ALN: 15.957 Award #: P19AP00016 Award Period: 03/01/2019 - 09/30/2026 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, document, 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 Contracts Covering 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 – DPNR did not provide supporting documentation to determine whether it had implemented a formal process to ensure compliance with wage rate requirements during the year under audit. Cause – DPNR does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Effect or Potential Effect – DPNR is not in compliance with the stated provisions. There is the potential that the contractor or subcontractors could have paid their employees less than prevailing wage rates. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend the DPNR 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. DPNR will develop and implement formal written policies and procedures to ensure compliance with applicable Wage Rate 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: 2024-044 Prior Year Finding Number: 2023-040 Compliance Requirement: Activities Allowed or Unallowed Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – In accordance with the Uniform Guidance in 2 CFR 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, document, 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. Cause – VIDOL does not appear to have adequate policies and procedures in place to adequately meet the requirements for expending and accounting for all funds. Effect or Potential Effect – Accounting tasks, such as periodic reconciliations, play a key role in proving the accuracy of accounting data and information included in 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of VIDOL’s compliance with the specified requirements. 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 will develop and implement Standard Operating Policies and Procedure, a monthly reconciliation process, provide additional staff training and technical assistance, and strengthen oversight through ongoing monitoring and compliance 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: 2024-045 Prior Year Finding Number: 2023-041 Compliance Requirement: Eligibility Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Public Law 112-96 Section 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. 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, document, 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 5,690 unemployment claim files and noted the following: • 1 instance where an individual received benefits during the year, but VIDOL was not able to provide evidence that the claimant met the criteria for participating in the Unemployment Insurance program but had received benefits during the year. Benefits paid to the individual during fiscal year 2024 totaled $2,270. • 1 instance where VIDOL was not able to provide evidence of eligibility to work (social security card and proof of U.S. citizenship) and also failed to provide the initial claim form. Benefits paid to the individual during fiscal year 2024 totaled $14,835. Further, it does not appear that controls in place are operating at a level of precision to ensure that documentation is maintained for the proper time period to substantiate claims charged to the program. 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. Effect or Potential Effect – Noncompliance with program requirements could result in disallowances of costs and participants could receive benefits that they are not entitled to receive. Questioned Costs – Below reporting threshold. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements using a statistically valid sample. The total amount of unemployment claims charged to the program during fiscal year 2024 was $5,159,650. The total amount sampled is $62,844. The known amount of the instances of noncompliance is $17,105. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure proper maintenance and retention of complete program files and confirm that benefits are provided only to participants who are eligible to receive them. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL is reviewing its record retention policy and procedures and will provide training to staff on proper maintenance and retention of complete program files. In addition, an electronic record-keeping system for claims files is expected to be launched before the end of fiscal year 2026, enhancing record retention. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-046 Prior Year Finding Number: 2023-042 Compliance Requirement: Reporting Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – Each State or Territory must file various financial, performance, and special reports. Additionally, the requirements necessitate that all submitted reports should be supported by the underlying accounting or performance records and presented in accordance with the program requirements. (2 CFR Part 200 Subpart D). 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, document, 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 28 out of 109 financial, performance and special reports required to be submitted during fiscal year under audit. We noted the following reports did not have complete and adequate supporting documentation available for review: • 5 ETA 9130, Financial Reports • 2 ETA 191, Financial Status of UCFE/UCX reports • 3 ETA 2112, UI Financial Transaction Summary reports • 2 ETA 2208A, Quarterly UI Above-Base Reports • 4 ETA 9050, Time Lapse of All First Payments except Workshare reports • 4 ETA 9052, Nonmonetary Determination Time Lapse Detection reports • 4 ETA 9055, Appeals Case Aging – Lower and Higher Authority Appeals reports Further, it does not appear that controls in place are operating at level of precision to ensure documentation is maintained for the proper time period to substantiate reports submitted to the Federal government. Cause – It appears that policies and procedures, including preparation and review over reporting procedures, were not designed or functioning as intended. Further, VIDOL does not appear to have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect - VIDOL is not in compliance with the stated provisions and inaccurate information may have been reported 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. 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 to 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 has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-047 Prior Year Finding Number: 2023-043 Compliance Requirement: Special Tests and Provisions – UI Reemployment Programs: Worker Profiling and Reemployment Services (WPRS) and Reemployment Services and Eligibility Assessments (RESEA) Program: U.S. Department of Labor Government Department/Agency: Department of Labor (VIDOL) Unemployment Insurance ALN: 17.225 Award #: Various Award Period: Various Criteria – The Unemployment Insurance (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. Unemployment Insurance Program Letter (UIPL) No. 41-94 provides guidance on WPRS requirements. 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 10-22 provides RESEA operating Guidance for fiscal year 2022. Further, the Uniform Guidance 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, 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 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. Cause – VIDOL does not appear to have adequate control over preparation and submission of various reports. Effect or Potential Effect – It appears that policies and procedures, including review over RESEA reporting procedures, were not functioning as intended. Questioned Costs – None. Context - This is a condition identified per review of VIDOL’s compliance with the specified requirements. Recommendation – We recommend that VIDOL reevaluate its policies and procedures to ensure required reports are timely prepared and submitted within the required timeframe. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDOL has reviewed its policies and procedures and is working to provide staff training to ensure supporting documentation is secure and readily accessible. VIDOL will update its policies and procedures to ensure that all supporting documentation is certified by the UI Director or designee before a report is submitted to the grantor. An electronic case management system for reporting is expected to be deployed before the end of fiscal year 2027. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-048 Prior Year Finding Number: 2023-044 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles - Non-Payroll Activities and Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 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, document, 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 government 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 2024, Mon Ethos Pro Support, LLC was paid $1,638,043 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. 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. Effect or Potential 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. Questioned Costs – $1,638,043. Context – This is a condition identified per review of current events and specific transactions related to the vendor identified in the DOJ indictment. Recommendation – We recommend that OMB should strengthen controls over vendor procurement and the review and submission of program costs to help ensure that transactions charged to federal programs are valid, properly supported, and allowable under applicable grant requirements. This should include clearer review procedures, adequate supporting documentation, supervisory approval, and periodic monitoring of procurement and cost submissions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. OMB will strengthen grant management and compliance through the Public Finance Management initiative including the development of a three-tier overarching Financial and Compliance policy and procedures framework and the hiring of key personnel. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-049 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. 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 20,245 payroll disbursements, and noted 1 instance in which the fringe benefit calculation did not agree to the fringe benefits reported on the Detail Check History. 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. Cause – OMB does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and to ensure that an appropriate level of review and approval was completed prior to charging costs to a federal program. Effect or Potential 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 program. Questioned Costs - Below reporting threshold. Context – This is a condition identified per review of OMB’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 were $72,688,940. The amount sampled is $68,113,730. The known amount of instances of noncompliance is $7,155, which represents the fringe benefits charged to the program that did not agree with the calculation. Recommendation – We recommend that OMB 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. OMB will coordinate with the Department of Finance to communicate the identified discrepancy and will work collaboratively to strengthen review procedures over payroll cost allocations charged to federal programs. In addition, OMB will reevaluate its existing oversight controls to ensure that payroll expenditures charged to federal awards are supported by appropriate documentation and reviewed for compliance with applicable federal 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: 2024-050 Prior Year Finding Number: 2023-046 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 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 602I and 603I 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 the Procurement Manual, User Agencies are required to submit a written justification letter to the 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. 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We were unable to verify the completeness of the procurement population. As a result, we were unable to test compliance and internal controls over compliance related to the procurement and suspension and debarment compliance requirements. Cause – It appears that policies and procedures, including review over procurement transactions, were not functioning as intended. Effect or Potential Effect – OMB is not in compliance with the stated provisions. 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of OMB’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that OMB 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. OMB will retain all necessary supporting documentation for purchase orders, contracts, and vendor profiles to ensure adherence to internal policies and regulatory requirements. Management will implement procedures to regularly review and verify that all procurement activities are properly documented and compliant with applicable regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-051 Prior Year Finding Number: 2023-047 Compliance Requirement: Reporting Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria - There are two types of reporting requirements for the CSLFRF program: 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Of the 5 reports submitted during the fiscal year, we selected the following reports for review: • Projects and Expenditures Report – Quarter Ended December 31, 2023 • Projects and Expenditures Report – Quarter Ended June 30, 2024 • Recovery Plan Performance Report – Year ended June 30, 2024 During our review, we noted that the reported amounts submitted under the award did not agree to the subrecipient’s underlying accounting records and supporting documentation. The data was not accumulated and summarized accurately and/or completely in accordance with required reporting criteria. 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. Cause – It appears that OMB does not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – OMB is not in compliance with the stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of the OMB’s compliance with the specified requirements using a statistically valid sample. 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. OMB will strengthen its internal controls over the preparation, review, reconciliation, and retention of documentation supporting CSLFRF 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: 2024-052 Prior Year Finding Number: 2023-048 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of the Treasury Government Department/Agency: Office of Management and Budget (OMB) COVID-19 - Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Award #: N/A Award Period: 03/03/2021 – 12/31/2024 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • 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(c)). 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 a 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(e) through (g)). 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 performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 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. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). 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, document, 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 19 subrecipients and found no evidence that the subrecipient monitoring workbook, which outlines all processes and procedures for ensuring compliance, had been reviewed by the American Rescue Plan Act (ARPA) Grants Administrator. Cause – OMB does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Effect or Potential Effect – Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives. 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 2024 were $15,142,370. The total amount of our sample totaled $3,730,369. 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. To address this finding, OMB will strengthen its subrecipient monitoring controls and formalize procedures to ensure compliance with federal regulations, including requirements related to identifying subawards, assessing subrecipient risk, documenting monitoring activities, following up on deficiencies, and maintaining evidence of supervisory 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: 2024-053 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, Factors Affecting Allowability of Costs, “Except where otherwise authorized by statute, costs must meet the following general criteria 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.” Condition – Expenditures in excess of the award amount totaling $67,068 were reported on the 2024 SEFA. 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 compliance requirements. Cause – The Government did not adhere to their internal policies and procedures to ensure the accuracy of the SEFA. Effect or Potential Effect – The SEFA is not accurately stated. Lack of established internal control policies and procedures to ensure the SEFA is completely and accurately stated can lead to noncompliance with federal statutes, regulations, and provisions of grant agreements. Questioned Costs – $67,078. Context – This is a condition identified per review of the completeness of the non-payroll expenditures population for the program. Recommendation – We recommend that DPNR develop policies and procedures and enhance existing reconciliation process to ensure completeness and accuracy of the SEFA and that amounts reported on the SEFA are not in excess of award amounts. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-054 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria – 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 200.403(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. The Uniform Guidance in 2 CFR 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 6 out of 55 payroll transactions, and noted 4 employee timesheets were not available for review. Cause – DPNR 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. Effect or Potential Effect – DPNR 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. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total amount of payroll expenditures charged to the program during fiscal year 2024 were $44,751 and the total amount of our sample was $5,086. The known amount of the exceptions totaled $3,029. Recommendation – We recommend that DPNR strengthen 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 Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-055 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria – U.S. Department of the (Treasury) regulations at 31 CFR Part 205 implement the Cash Management Improvement Act of 1990 (CMIA), as (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 Assisting Lising 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 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 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We were unable to verify the completeness of the cash management population. As a result, we were unable to test compliance and internal controls over compliance related to the cash management compliance requirements. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – DPW and DPNR were 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DPW and DPNR’s compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DPW and DPNR reevaluate its policies and procedures to ensure proper monitoring over cash management requirements. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPW and DPNR will implement enhanced internal control procedures including monthly reconciliations, assigning oversight, and will conduct internal reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-056 Prior Year Finding Number: N/A Compliance Requirement: Reporting Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: 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 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected all reports submitted and noted the following: • 1 financial report did not contain evidence that it was reviewed by an authorized reviewer prior to submission, and the reported financial information did not agree with the underlying records. • 1 programmatic report and 1 performance report 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 reporting compliance requirements. 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. Effect or Potential Effect – DPW and DPNR are not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of DPW and DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPW and DPNR 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. DPW and DPNR will implement enhanced internal control procedures including establishing review and approval procedures, maintaining supporting documentation and a central repository for 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: 2024-057 Prior Year Finding Number: N/A Compliance Requirement: Subrecipient Monitoring Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Public Works (DPW) Department of Planning and Natural Resources (DPNR) Construction Grants for Wastewater Treatment Works ALN: 66.418 Award #: Various Award Period: Various Criteria - A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • 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(c)). 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 a 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(e) through (g)). 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 performance reports required by the PTE. 2. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 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. 4. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – DPW did not provide supporting documentation to demonstrate whether they implemented a formal process during the year to ensure compliance with subrecipient monitoring requirements. Cause – DPW does not have policies and procedures in place to ensure personnel adhere to the internal procedures to properly monitor subrecipients to ensure adherence to applicable federal regulations, including expending federal awards for allowable expenditures. Effect or Potential Effect – DPW is not in compliance with the stated provisions. Failure to properly adhere to policies and procedures can result in noncompliance with laws and regulations and failure to meet the program’s objectives. Questioned Costs – $6,364,139. Context – This is a condition identified per review of DPW’s compliance with the specified requirements using a statistically valid sample. The total amount of expenditures passed through to subrecipients in fiscal year 2024 were $6,364,139. Recommendation – We recommend that DPW 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. DPW will develop subrecipient monitoring policies and procedures: including subrecipient risk assessments, tracking and monitoring over reporting, and audit findings. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-058 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Management is responsible for establishing, documenting and maintaining a system of internal control that should include controls over its activities allowed or unallowed, and the 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 – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 10 of 91 payroll disbursements. For each of the 10 samples, the employee pay rate documented in the approved Notice of Personnel Action did not agree with the pay rate reflected in the payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with applicable cost principles and ensure that an appropriate level of review was completed prior to charging costs to a federal program. Effect or Potential 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 program. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. The total payroll expenditures charged to the program in fiscal year 2024 was $132,646. The amount sampled is $18,936. Recommendation – We recommend that DPNR reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for expending and accounting for payroll transactions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will conduct a comprehensive internal review of the payroll transactions identified in the audit sample to determine the cause of the discrepancies between the payroll registers and the Notices of Personnel Action provided during the audit. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-059 Prior Year Finding Number: N/A Compliance Requirement: Cash Management Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various 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 require 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 54-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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed 4 out of 6 drawdowns and noted the following: • No supporting documentation was available for 2 drawdowns. • There were 2 instances in which funding was received in advance and vendor payment documentation was not available to verify DPNR minimized the time between receipt of funds and disbursement. Cause – It appears that policies and procedures, including review over cash management transactions, were not functioning as intended. Effect or Potential Effect – DPNR is not in compliance with the cash management requirements. Questioned Costs – $1,127,439. Context – This is a condition identified per review of the DPNR’s compliance with the specified requirements using a statistically valid sample. Total drawdown requests were $3,860,135. Total amount sampled is $3,151,128. Recommendation – We recommend that the DPNR reevaluate its policies and procedures to ensure proper monitoring over cash management requirements including retention of supporting documentation for drawdowns and vendor payments. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DPNR will reevaluate and strengthen its cash management policies and procedures to ensure compliance with the Cash Management Improvement Act (CMIA), Treasury-State Agreement requirements, and federal cash management regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-060 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Environmental Protection Agency Government Department/Agency: Department of Planning and Natural Resources (DPNR) Capitalization Grants for Drinking Water State Revolving Fund ALN: 66.468 Award #: Various Award Period: Various 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 that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – During our period of performance testing, we sampled and selected 6 of 11 transactions. We identified 1 instance in which payment for the expenditure was made after the period of performance liquidation period. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DPNR does not appear to have adequate policies and procedures to ensure compliance with the required period of performance requirements. Effect or Potential Effect – DPNR 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. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of DPNR’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DPNR enhance its review process to ensure adherence to federal regulations related to the fiscal administrative requirement relating to liquidation provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-061 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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. Condition – In our review of 12 out of 119 non-payroll transactions, we noted 1 instance where the supporting documentation was not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. 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 was completed prior to charging costs to a federal program. Effect or Potential 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. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total non-payroll expenditures charged to the program in fiscal year 2024 was $1,791,690. The amount sampled is $337,470. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the 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. VIDE is addressing audit findings related to non-payroll expenditures by enhancing internal controls and procedures to ensure compliance with federal regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-062 Prior Year Finding Number: 2023-049 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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. Furthermore, CFR 200.113 requires that an applicant, recipient, or subrecipient of a Federal award must promptly disclose, in writing, whenever it has credible evidence of the commission of a violation of Federal criminal law involving fraud, conflict of interest, bribery, or gratuity violations found in Title 18 of the United States Code, or a violation of the civil False Claims Act, in connection with the Federal award (including any activities or subawards thereunder). The disclosure must be made to the Federal agency, the agency's Office of Inspector General, and the pass-through entity (if applicable). Condition – During our testing of allowable costs for payroll expenditures incurred throughout the year, we sampled and selected 40 of 3,392 payroll disbursements and noted the following: • 6 instances where the approved timesheets for the selected pay periods were not available for review. In addition, in 1 of these instances the check detail payment was not available for review. • 1 instance where there was inconsistency between the project code reflected on the check detail and on the NOPA for the selected pay period. • 1 instance where the hours per the timesheet did not agree to the check history detail. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. 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 was completed prior to charging costs to a federal program. Effect or Potential 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. Questioned Costs – Below reporting threshold. 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 2024 was $6,233,846. The amount sampled is $88,200. 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 transactions. 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 and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-063 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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, indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 4 transactions out of 13 transactions and noted 4 instances where the check payment details and other related supporting documentation were not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. 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. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $94,264. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $390,164. Total amount sampled is $94,264. The known amount of the instances of noncompliance is $94,264. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures for tracking, compiling, and storing documentation related to grant expenditures to ensure compliance with federal regulations. VIDE is scheduling mandatory trainings for all relevant VIDE 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: 2024-064 Prior Year Finding Number: 2023-050 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing 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. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. 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 planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-065 Prior Year Finding Number: 2023-051 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, 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, a Local Education Agency (LEA) can use not more than 15% 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: • VIDE was unable to provide supporting documentation that shows the approval of the amounts in the Maintenance of Financial support at the State Education level. • At the State level, VIDE did not meet the Maintenance of Effort requirement. In addition, for Earmarking, we noted that the number of students in poverty for St. Thomas/St. John and the Total Students in Poverty for the Territory used in the calculation did not agree with the underlying support. 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. Cause – VIDE did not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of the requirements. Effect or Potential 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. Questioned Costs – None. Context – This is a condition identified per review of VIDE’s compliance with the specified 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 will establish and update internal control policies and procedures to meet federal standards over data collection and certification for level of effort and earmarking requirements. VIDE will establish a team for quarterly reviews of documentation and reporting issues and to recommend corrective actions. The IDEA State Office will set procedures for verifying accuracy of data reported by LEAs. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-066 Prior Year Finding Number: N/A Compliance Requirement: Period of Performance Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: Various 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, document, 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 costs incurred throughout the year, we sampled and selected 8 disbursements and noted 6 instances in which supporting documentation evidencing payment was not available. In addition, in 1 of these instances, the reimbursement report for the indirect cost sample was 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 period of performance compliance requirement. Cause – VIDE does not appear to have adequate policies and procedures to ensure compliance with applicable liquidation provisions. Effect or Potential Effect – VIDE 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. Questioned Costs – $73,481. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total non-payroll expenditures charged to the program in fiscal year 2024 were $659,602 and indirect costs totaled $66,901. The amount sampled is $167,809. The known amount of instances of noncompliance is $73,481. Recommendation – We recommend that VIDE reevaluate and improve internal controls to ensure adherence to federal regulations related to the fiscal administrative requirement for adhering to liquidation provisions. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE is strengthening its internal controls and record retention procedures to ensure strict adherence to federal period of performance and liquidation provisions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-067 Prior Year Finding Number: N/A Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Special Education Cluster ALN: 84.027 (84.027A and 84.027X) Award #: Various Award Period: 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 the Government’s 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, document, 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 7 out of 50 procurement transactions, we noted the following: • 2 instances where the purchase order was over $25,000 for services, but no VIDE Standard Short Form Contract or Sole Source letter was provided for review. • 1 instance where the Justification Letter(s) (including the additional letter to the Commissioner of DPP) and requisition/workflow approval were not available for review. • 1 instance where no supporting documentation was made available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Cause – VIDE does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – VIDE 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. Questioned Costs – $563,674. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $2,042,339. Total amount sampled was $737,526. The known amount of exceptions is $563,674. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the procurement of 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. VIDE has implemented additional system controls to ensure all procurements meet federal documentation standards and to adequately maintain completed contract 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 2024-068 Prior Year Finding Number: 2023-052 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 3,236 payroll disbursements and noted the following: • 4 instances where the approved timesheet for the selected pay period was not available for review. In addition, in 1 of these instances, the NOPA/per diem support was also not available for review. • 1 instance where the project code was not reflected in check detail and NOPA. • 1 instance where the payment support (check detail) and the NOPA/per diem support were not available for review. • 2 instances where recorded timesheet hours did not agree with payroll register. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. 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. Effect or Potential 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. Questioned Costs – Below reporting threshold. 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 2024 was $6,052,527. The amount sampled is $128,721. 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. VIDE is addressing audit findings related to payroll activities by enhancing internal controls to ensure compliance with federal regulations and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-069 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 4 transactions out of the 16 transactions and noted 4 instances where the check payment details and other related supporting documentation were not available for review. As a result, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. 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. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $229,560. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $801,866. Total amount sampled is $229,560. The known amount of the instances of noncompliance is $229,560. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures for tracking, compiling, and storing documentation related to grant expenditures to ensure compliance with federal regulations. VIDE is scheduling mandatory trainings for all relevant VIDE 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: 2024-070 Prior Year Finding Number: 2023-053 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While the VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing 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. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. 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 planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number 2024-071 Prior Year Finding Number: 2023-054 Compliance Requirement: Procurement and Suspension and Debarment Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: 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 the Government’s 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, document, 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 40 out of 381 procurement transactions, we noted the following: • 5 instances where evaluation reports or bid response documentation were not available. • 1 instance where the justification letter did not correspond to the selected vendor. • 1 instance where all supporting documentation was not available for review. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the procurement compliance requirements. Cause – VIDE does not appear to have a process in place to adequately monitor and maintain completed contract files comprising of all supporting documents. Effect or Potential Effect – VIDE 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. Questioned Costs – $95,084. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. Total amount of procurement transactions was $7,501,502. Total amount sampled was $514,529. The known amount of exceptions is $95,084. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to federal regulations relating to the procurement of 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. VIDE has implemented additional system controls to ensure all procurements meet federal documentation standards and to adequately maintain completed contract 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 2024-072 Prior Year Finding Number: 2023-055 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Consolidated Grant to the Outlying Areas ALN: 84.403A Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. For Reporting, 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. Per 2 CFR Section 200.329, Submitting performance reports - (1) The recipient or subrecipient must submit performance reports as required by the Federal award. Intervals must be no less frequent than annually nor more frequent than quarterly except if specific conditions are applied (See § 200.208). Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal agency or pass-through entity may require annual reports before the anniversary dates of multiple-year Federal awards. The final performance report submitted by the recipient must be due no later than 120 calendar days after the period of performance. A subrecipient must submit a final performance report to a pass-through entity no later than 90 calendar days after the conclusion of the period of performance. See also § 200.344. The Federal agency or pass-through entity may extend the due date for any performance report with justification from the recipient or subrecipient. As applicable, performance reports should contain information on the following: (i) A comparison of accomplishments to the objectives of the Federal award established for the reporting period (for example, comparing costs to units of accomplishment). Where performance trend data and analysis would be informative to the Federal agency program, the Federal agency should include this as a performance reporting requirement. (ii) Explanations on why established goals or objectives were not met; and (iii) Additional information, analysis, and explanation of cost overruns or higher-than-expected unit costs. 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). Condition – We noted the following: • For Performance Reporting, 1 annual report contained amounts that did not agree with the supporting documentation, and annual reports were not prepared and submitted as required for 4 grant awards. • For FFATA Reporting, 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. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – VIDE is not in compliance with reporting requirements as it failed to provide evidence of identifying and reporting Transparency Act reporting requirements. Questioned Costs – None. Context – This is a condition noted per review of VIDE’s compliance with reporting requirements. In fiscal year 2024, VIDE passed through approximately $472,820 to 4 subrecipients. Recommendation – We recommend that VIDE implement policies, procedures and controls that will comply with all required laws, guidelines, and requirements 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 reporting by developing detailed reporting policies and procedures. These will include guidelines for identifying and tracking subawards, collecting required data, and setting submission timelines. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-073 Prior Year Finding Number: 2023-056 Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) 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 – American Rescue Plan – Outlying Areas State Educational Agency (ARP-OA SEA) ALN: 84.425X Award #: S425X210004 Award Period: 04/08/2021 – 09/30/2024 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, document, and maintain internal control designed to 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 84.425 subprograms A and X, we sampled and selected 60 of 5,693 payroll expenditures and noted the following: • 1 instance where the approved timesheet was not available for review. • 1 instance where a duplicate payment of retirement costs was made to an employee. • 2 instances where the hours recorded on the employees’ timesheets did not agree with the hours recorded per the payroll register. • 4 instances where there was inconsistency between the project code reflected on the check detail and the NOPA. 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. 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. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – Below reporting threshold. 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 2024 is $7,941,259. Total amount sampled is $112,072. The known amount of the instances of noncompliance is $17,628. 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 and by providing mandatory training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-074 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Indirect Cost Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) 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 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 indirect costs charged to the program must be supported by a valid negotiated indirect cost rate agreement or applied using the de minimis rate, and must be allowable, allocable, reasonable, and adequately supported. Condition – During our testing of allowable costs for indirect cost expenditures incurred throughout the year, we sampled and selected 3 transactions out of 16 transactions and noted 3 instances where the detailed project expenditure report was 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. 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. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $637,951. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements using a statistically valid sample. The total indirect cost expenditures charged to program in fiscal year 2024 is $2,539,845. Total amount sampled is $637,951. The known amount of the instances of noncompliance is $637,951. Recommendation – We recommend that VIDE improve internal controls to ensure adherence to the Federal regulations related to the fiscal and administrative requirements for expending and accounting for indirect costs. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. VIDE will reinforce its procedures and controls over grant expenditures and indirect costs and will coordinate to facilitate trainings for all relevant VIDE 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: 2024-075 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) and Office of Management and Budget (OMB) 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 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – While the VIDE maintains an equipment listing for fixed assets purchased with federal funding, VIDE was unable to provide a complete equipment listing 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. Cause – VIDE does not appear to have adequate policies and procedures in place to adequately monitor equipment acquired with Federal Funds. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of the VIDE’s compliance with the specified requirements. 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 planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-076 Prior Year Finding Number: 2023-057 Compliance Requirement: Reporting Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) 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 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). Furthermore, the Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We reviewed VIDE and OMB's compliance with the reporting requirements and noted that OMB was unable to provide evidence of submission for the FFATA reports and the required quarterly reports for ALN 84.425, subprogram H. Further, it does not appear that the controls in place are operating at a level of precision to ensure the timely filing of reports. Cause – The internal controls established for the submission of reporting requirements did not fully operate as designed, resulting in noncompliance with the reporting requirements under the Transparency Act related to the program’s subrecipients and the required quarterly reports. Effect or Potential 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. Questioned Costs – None. Context – This is a condition identified per review of the OMB’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that VIDE and OMB reevaluate its policies and procedures to ensure submission of the required reports by an appropriate official after ensuring 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’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-077 Prior Year Finding Number: 2023-060 Compliance Requirement: Special Tests and Provisions – Wage Rate Requirements Program: U.S. Department of Education Government Department/Agency: Department of Education (VIDE) Office of Management and Budget (OMB) 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 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, document, 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 – VIDE did not implement a formal process for the wage rate requirements compliance for fiscal year 2024. In addition, VIDE was unable to provide a complete listing of construction contracts which met the stated requirements. Further, it does not appear that there are controls in place to ensure compliance with the special tests and provisions compliance requirements. Cause – VIDE does not appear to have adequate policies and procedures in place to ensure compliance with applicable wage rate requirements. Effect or Potential Effect – VIDE is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of VIDE’s compliance with the specified requirements not using a statistically valid sample. Recommendation – We recommend that 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: 2024-078 Prior Year Finding Number: N/A Compliance Requirement: Allowable Costs/Cost Principles – Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Health (DOH) Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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 with the payroll expense in the payroll register. As a result, we were not able to establish the completeness of the population and were unable to perform testing procedures. Cause – DOH does not appear to have adequate policies and procedures in place to review and reconcile program expenditures. Effect or Potential Effect – Lack of proper reconciling information can result in noncompliance with laws and regulation along with loss of funding. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. 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 Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Regular training sessions will be provided to staff involved in grant management to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-079 Prior Year Finding Number: N/A Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Health (DOH) Epidemiology and Laboratory Capacity for Infectious Disease ALN: 93.323 Award #: Various Award Period: 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 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, document, 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 DPP maintains the equipment register for the Government. DOH was unable to provide accurate and complete property records which met the stated requirements. Further, no physical inventory was taken in fiscal year 2024. Further, we noted that internal controls were not operating at a level of precision to ensure compliance with the equipment management compliance requirements. Cause – DOH does not appear to have a process in place to adequately monitor property and equipment acquired with Federal funds. Effect or Potential Effect – There is a risk that inadequate recordkeeping could lead to misappropriation of assets and noncompliance with Federal regulations, resulting in loss of funding. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DOH’s compliance with the specified requirements. Recommendation – We recommend that DOH 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 responsible for handling and managing such assets. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Government’s Audit Committee is leading the development of a structured, three-tier policy and procedures framework under the Public Finance Management project. Additional staff will be needed to effectively support the initiative and regular training sessions will be provided to staff to ensure they understand and adhere to compliance requirements with monitoring and evaluation occurring by the OMB Compliance Unit supported by the Government’s Audit Committee, to assess and improve the effectiveness of controls. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-080 Prior Year Finding Number: 2023-062 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various 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, document, 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 857 non-payroll transactions, we noted 8 instances in which the expenditures were not approved by the authorized personnel. Cause – DHS does not appear to have adequate policies and procedures in place to ensure internal controls are consistently and diligently applied. Effect or Potential Effect – Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – None. Context – This is a condition identified per review of the DHS’ compliance with the specified requirements using a statistically valid sample. The total amount of non-payroll expenditures charged to the program were $13,817,623. Total amount sampled is $7,953,867. The known amount of the instances of noncompliance is $1,963,765. Recommendation – We recommend that DHS improve internal controls to ensure adherence to the 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. DHS will review and update its policies and procedures to ensure all non-payroll expenditures are approved by authorized personnel, provide staff training on proper approval processes and internal control requirements, and conduct periodic checks to monitor compliance and promptly address any exceptions. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-081 Prior Year Finding Number: 2023-064 Compliance Requirement: Equipment and Real Property Management Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various 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 Department of Health and Human Services (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 Head Start Agency (HSA) may not dispose of, replace or encumber the property without prior the Administration for Children and Families (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)). Per 2 CFR Section 200.313, Equipment, 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, document, 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 DPP maintains the equipment register for DHS. DHS 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. Cause – DHS does not appear to have a process in place to adequately monitor equipment acquired with Federal funds. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. 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. DHS will be onboarding dedicated staff for Head Start inventory. DHS will continue to collaborate with DPP to ensure compliance with Federal regulations regarding equipment and its 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: 2024-082 Prior Year Finding Number: 2023-065 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: 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. 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 and the SF-428, SF-428 B, and if needed, SF-428 S Tangible Personal Property Report at closeout 90 days after the grant closes. 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, document, 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 6 out of 14 special reports required to be submitted during the fiscal year and noted program personnel did not ensure these special 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. Cause – It appears that policies and procedures, including oversight over submission of required reports, were not functioning as intended. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to submit required reports could result in reduction or disallowance of Federal funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements not using a statistically valid sample. 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. DHS will enhance internal control policies and processes by establishing a reporting tracking system, by assigning clear roles and responsibilities, by requiring proper documentation and record retention over reports and supporting documents, by increasing program staff training, and by developing an audit compliance unit. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-083 Prior Year Finding Number: 2023-066 Compliance Requirement: Special Tests and Provisions – Protection of Federal Interest in Real Property and Facilities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various 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 SF429 (cover sheet) and applicable attachments B (Request to Acquire, Improve or Furnish) or C (Disposition or Encumbrance Request). With written prior approval from Administration for Children and Families (ACF), a Head Start Agency (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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – Based on audit procedures performed, we identified 4 of 6 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. 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. Effect or Potential Effect – There is a risk that lack of compliance with the stated requirements can result in a loss of funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. 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. DHS has taken immediate corrective actions to record the required Notices of Federal Interest for the two facilities cited. DHS will enhance internal control policies and processes by ensuring a comprehensive facilities review, by designating roles and responsibility, by training and providing technical assistance to relevant program and fiscal staff, and by developing ongoing monitoring and internal reviews. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-084 Prior Year Finding Number: 2023-067 Compliance Requirement: Special Tests and Provisions – Program Governance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Head Start Cluster ALN: 93.356, 93.600 Award #: Various Award Period: Various Criteria – A Head Start Agency (HSA) 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, document, and maintain internal control designed to 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. Instead, 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. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with program governance. Effect or Potential 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. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. 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 its legal, fiscal, and oversight responsibilities. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will strengthen internal controls and governance oversight processes to ensure full compliance with Head Start Act requirements and Uniform Guidance by implementing monthly financial reporting, establishing a governance training program, and by strengthening audit oversight 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: 2024-085 Prior Year Finding Number: 2023-068 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various 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, document, and maintain internal control designed to 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 childcare provider voucher preparation and distribution. However, DHS was unable to provide a complete listing of childcare provider voucher distributions that includes relevant information in order 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. Cause – It appears that policies and procedures, including review over eligibility transactions, were not functioning as intended. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Approximately $2.4 million was expended for child care vouchers. 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. DHS has updated the childcare database to more efficiently produce monthly vouchers. An independent audit will be conducted to verify processes, review files, and to make recommendations. Additionally, An Audit and Compliance Unit has been established within the Fiscal Division. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-086 Prior Year Finding Number: 2023-069 Compliance Requirement: Matching, Level of Effort, Earmarking Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – In accordance with the Compliance Supplement, the State or Territory: • May not spend on administrative costs more than five percent of total CCDF awards expended (i.e., the total of Assistance Listings 93.575, 93.596, and 93.489 with the exception of any ARP Act stabilization funds and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (42 USC 9858c(c)(3)(C); Pub. L. no. 116-20; CFR section 98.52). • Quality Earmark – For fiscal year 2020 and succeeding fiscal years, states and territory Lead Agencies must spend on quality activities, as provided in the state/territorial plan, not less than nine percent of CCDF funds expended (i.e. the total of Assistance Listing 93.575, 93.596, and 93.489 with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds spent on construction and renovation) and any state expenditures for which Matching Funds (Assistance Listing 93.596) are claimed (45 CFR section 98.53). States and territory Lead Agencies must spend at least an additional three percent on quality improvement for infants and toddlers (45 CFR section 98.50(b)). • Direct Spending Earmarks - (1) From the aggregate amount of Discretionary funds (Assistance Listing 93.575) and Disaster Relief funds (Assistance Listing 93.489) provided for a year (with the exception of any CARES Act, CRRSA Act, and ARP Act, and of any Disaster Relief funds used for construction or major renovation), state Lead Agencies, territory Lead Agencies, as well as those tribal Lead Agencies with allocations of at least $250,000 must reserve funds for administrative costs (described above) and the minimum amount required for quality activities (described above). (2) From the remainder, the Lead Agency must use not less than 70 percent to fund direct services. In addition, states and territories must spend not less than 70 percent of the Mandatory and federal and state share of Matching funds (Assistance Listing 93.596) to provide child care assistance to families who: (a) receive Temporary Assistance for Needy Families (TANF); (b) are attempting through work activities to transition of TANF; and (c) are at risk of becoming dependent on TANF (45 CFR section 98.50(e) and (f)). • Direct spending requirements do not apply to supplemental funds provided by the CARES Act (Pub. L. No. 116-136), the CRRSA Act (Pub. L. No. 116-260) and the ARP Act (Pub. L. No. 11702). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – For one project that ended during the fiscal year, management was unable to provide a final ACF-696 Financial Reporting Form for State and Territory CCDF Lead Agencies that reconciled to accounting records. As such, we are unable to determine if the Administrative, Quality and Direct Spending earmarks for this project have been met. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic monitoring of the requirements. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’s compliance with the specified 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. DHS has added new roles, one filed and one open to be filled, tasked with oversight of the reporting process to ensure compliance with earmarking. Internal controls have been enhanced, outlining roles and responsibility over supervisory review and approval. Additionally, an Audit and Compliance unit has been established. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-087 Prior Year Finding Number: 2023-070 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various 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, document, 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 9 of the 32 reports required to be filed during the fiscal year. During our testing, we noted the following: • 4 financial reports had not been submitted in a timely manner, ranging from 7 to 43 days late. • 9 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. 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. Effect or Potential Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context –This is a condition identified per review of DHS’s compliance with the specified requirements using a statistically valid sample. 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. DHS has added new roles, one filed and one open to be filled, tasked with oversight of the reporting process. Internal controls have been enhanced, outlining roles and responsibility over supervisory review and approval. Additionally, an Audit and Compliance unit has been established. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-088 Prior Year Finding Number: 2023-071 Compliance Requirement: Special Tests and Provisions – Health and Safety Requirements Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various 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, document, 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 9 of the 47 child care providers and noted that for 3 of the 9 providers selected for testing, there was no evidence of monitoring for compliance with applicable minimum health and safety requirements. Further, internal controls were not operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential 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. 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 child care expenditures charged to the program were $2,446,801. Total amount sampled is $606,615. The known amount of inconsistencies is $329,116. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the health and safety requirements are documented throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS has onboarded additional licensing staff which has built increased capacity to conduct provider visits for the purpose of assessing compliance with health and safety requirements. Efforts to recruit additional staff continue. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-089 Prior Year Finding Number: 2023-072 Compliance Requirement: Special Tests and Provisions – Fraud Detection and Repayment Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various 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, document, and maintain internal control designed to 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. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential 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. Questioned Costs – None. Context – This is a condition identified per review of DHS’s compliance with the specified 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. DHS will implement a centralized, secure tracking matrix for all fraud referrals to monitor and to track total funds identified for recovery and recovery status to date. Internal audits will be conducted quarterly, and quality staff will conduct unannounced visits of childcare facilities to monitor attendance. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-090 Prior Year Finding Number: 2023-073 Compliance Requirement: Special Tests and Provisions – Child Care Provider Eligibility for ARP Act Stabilization Funds Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) CCDF Cluster ALN: 93.575 Award #: Various Award Period: Various Criteria – To be qualified to receive ARP Act stabilization funds, a provider on the date of application for the award must either be: (1) open and available to provide child care services, or (2) closed due to public health, financial hardship, or other reasons relating to the COVID-19 public health emergency. In addition, the provider must either (1) be eligible to serve children who receive CCDF subsidies at the time of application for stabilization funds, or (2) be licensed, regulated, or registered in the state, territory, or tribe as of March 11, 2021 and meet applicable state and local health and safety requirements at the time of application for stabilization funds. In their application for stabilization funds, a child care provider must certify: a. That the provider will, when open and providing services, implement policies in line with guidance and orders from corresponding state, territorial, tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the CDC. b. For each employee, the provider must pay at least the same amount in weekly wages and maintain the same benefits for the duration of the stabilization funding. c. The provider will provide relief from copayments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and prioritize such relief for families struggling to make either type of 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected a sample of 11 of 48 child care providers that received ARP Act stabilization funds. During our testing, we were not provided evidence to substantiate that the child care providers selected for testing were eligible to receive ARP Act stabilization funds. Further, internal controls were not operating effectively to ensure the maintenance of documentation evidencing compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure consistent and systematic monitoring of requirements. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. 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 ARP Act stabilization expenditures charged to the program were $8,952,043. Total amount sampled is $3,448,197. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure periodic monitoring and compliance of the ARP Act stabilization provider eligibility requirements throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will review current procedures to strengthen monitoring and documentation of provider eligibility for ARP Act stabilization funds. DHS is committed to improving internal controls and ensuring compliance with all program 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: 2024-091 Prior Year Finding Number: 2023-074 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles – Non-Payroll Activities Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the 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. Condition – We sampled 60 of the 362 non-payroll transactions and noted 1 instance where the benefit date and payment are outside of the period under audit. 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. Effect or Potential Effect - Failure to properly review and support expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $29,985. Context – This is a condition identified per review of compliance with the specified requirements using a statistically valid sample. Total amount of non-payroll expenditures charged to the program in fiscal year 2024 were $2,642,402. Total amount sampled is $918,181. The known amount of the exception is $29,985. 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. DHS will update policies and procedures to ensure all costs are properly documented and comply with federal allowable cost principles. DHS is committed to addressing the identified issues and maintaining ongoing compliance with federal regulations. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-092 Prior Year Finding Number: 2023-075 Compliance Requirement: Period of Performance Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: Various 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 that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, 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 1 out of 10 transactions recorded at the beginning of a project's period of performance and noted 1 instance where fringe benefits were incorrectly charged to the program. Specifically, the employer share of fringe benefits was charged to the program without any associated time and effort by the employee. The employee had retired, yet the fringe benefit continued to be charged to the program after retirement. 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. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with the required period of performance stipulations. Effect or Potential 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. Questioned Costs – Below reporting threshold. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Total amount of expenditures recorded during the grant’s beginning period of performance are $1,310. 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. DHS has strengthened internal control policies and processes including reconciliations, retrospective reconciliations, and team engagement to better understand the underlying factors and nuances resulting in discrepancies. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-093 Prior Year Finding Number: 2023-076 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Social Services Block Grant ALN: 93.667 Award #: Various Award Period: 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. 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 that non-federal entities receiving Federal awards (i.e., auditee management) establish, document, 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 2 out of 4 financial (SF-425) and special (Post-Expenditure) reports and noted the following: • For 1 financial report, we were unable to agree a line item of the report to the underlying supporting records. • For 1 special report, there was no evidence indicating the date the report was prepared, reviewed, or submitted to the federal grantor. Additionally, we were unable to agree the key line item reported to the underlying supporting 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. Cause – It appears that policies and procedures, including oversight over submission of required reports were not functioning as intended. Effect or Potential Effect - DHS is not in compliance with the stated provisions. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. 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. DHS remains in collaboration with Federal Partners relative to the required change to reflect a consolidated report in the Payment Management System financial reporting module and for formal notification of report submissions. In addition, a Federal Grants Financial Analyst has been onboarded and processes enhanced to allow for a match to all reports inclusive of Federal draws. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-094 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Criteria – Federal funds can be used only for Medicaid and CHIP benefit payments (as specified in the state plan, federal regulations, or an approved waiver/demonstration), expenditures for administration and training, expenditures for the State Survey and Certification Program, and expenditures for the establishment and operation of state MFCUs (42 CFR 435.10, 440.210, 440.220, and 440.180). Payments may only be made to providers determined by the SMA to be eligible to participate in the Medicaid program. 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, document, 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 of 971 payroll transactions and noted the following: • 1 instance where the project code on an employee’s Notice of Personnel Action (NOPA), used to record time and effort to the appropriate grant, had not been updated. However, during the fiscal year, program personnel made adjustments to ensure the employee’s time and effort was recorded to the correct grant. • 1 instance in which the hours noted per the employee’s timesheet did not agree to the hours in the payroll register. We have also noted that the expense population included expenditures for 3 grant awards with award periods beginning after September 30, 2024. 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 compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure compliance with stated provisions. Effect or Potential Effect – DHS is not in compliance with the stated provisions. Failure to properly review and report expenditures can result in noncompliance with laws and regulations along with loss of funding. Questioned Costs – $61,457. Context – This is a condition identified per review of DHS’ compliance with the specified requirements and general compliance principles. Recommendation – We recommend that DHS deploy resources that are given the responsibility to ensure monitoring and compliance of stated requirement throughout the fiscal year. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. DHS will continue to strengthen its review and documentation procedures to ensure compliance with federal requirements and has adopted an electronic system for payroll, replacing manual processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-095 Prior Year Finding Number: 2023-078 Compliance Requirement: Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 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, document, and maintain internal control designed to ensure compliance with Federal statutes, 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 of 2,207 participant case files, we noted the following: • 33 instances where documentation supporting the eligibility determinations were not available. • 4 instances where there was no evidence of completed application. • 12 instances where there was no evidence that the eligibility determination had been reviewed and approved, or that the application was processed in a timely manner. In addition, we were unable to determine the completeness of the population of eligible participants, as an ADP/Risk analysis was not performed on the VIBES system (which houses the eligibility database). Cause – DHS does not appear to have adequate policies and procedures in place to ensure a consistent and systematic review and maintenance of the data in its participant case files. Effect or Potential 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. Questioned Costs – Not determinable. Given the nature of the finding (e.g. unavailability of supporting documentation), we determined that projecting estimated questioned costs to the entire population was inappropriate. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. 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 has enhanced internal control policies and processes including implementing in-person/active renewal requirements, enhancing the treatment and steps for obtaining and maintaining required supporting documentation, updating system configurations, implementing a review tracker, outlining roles and responsibilities, and conducting targeted staff training. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-096 Prior Year Finding Number: 2023-080 Compliance Requirement: Reporting Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – For Medicaid Cluster, we reviewed 2 of 4 quarterly CMS-64 reports submitted during the fiscal year and noted the following: • 1 report did not contain evidence of review or approval. • 2 reports had not been submitted in a timely manner. For Children’s Health Insurance Program, we noted 1 of 2 reports tested that did not contain evidence of review or approval. Cause – It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Effect or Potential Effect – DHS is not in compliance with stated provisions and inaccurate information may have been reported to the Federal government. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. 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. DHS has implemented a shared folder where copies of approval emails and any time extension requests are stored to enhance current internal control processes. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-097 Prior Year Finding Number: N/A Compliance Requirement: Special Tests and Provisions – Medicaid Fraud Control Unit Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2023 – 09/30/2024 Criteria – The Medicaid Fraud Control Unit (MFCU) is required to submit the SF-425, Federal Financial Report. As per the requirements, the: • Quarterly expenditure reports are due 30 days after the end of each quarter. • If the grantee will be unable to submit the financial expenditure report by the due date, the grantee must request an extension. Condition – We reviewed 2 out of the 4 reports submitted during the fiscal year and noted the following: • 1 report and its related documentation were not provided for review. • 1 report was not submitted in a timely manner. • For 1 report, supporting accounting detail was not provided to verify the data reported. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause - It appears that policies and procedures, including review over reporting procedures were not functioning as intended. Further, the DHS and DOJ do not have adequate control over maintenance of the underlying documentation used in preparing various reports. Effect or Potential Effect – DHS and DOJ are not in compliance with the stated provisions with respect to special reporting requirements. Questioned Costs - None. Context - This is a condition identified per review of DHS and DOJ’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that DHS and DOJ reevaluate their 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. DHS and DOJ have established internal controls and accountability measures to ensure the timely preparation, review, and submission of 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: 2024-098 Prior Year Finding Number: 2023-082 Compliance Requirement: Special Tests and Provisions - Inpatient Hospital and Long-Term Care Facility Audits Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 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, document, and maintain internal control designed to 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 2024. Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place for the provision of audited cost reports of its participating providers. Effect or Potential 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. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. 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 has strengthened its oversight of Medicaid financial reporting through the establishment of a Director of Audits position in September 2025. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-099 Prior Year Finding Number: 2023-083 Compliance Requirement: Special Tests and Provisions – ADP Risk Analysis and System Security Review Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 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, document, and maintain internal control designed to 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. 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. Effect or Potential 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. Questioned Costs - None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements. Recommendation - We recommend that DHS 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 DHS. If DHS 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. To address this finding, DHS is actively pursuing Requests for Qualifications (RFQs) seeking to partner with a technology system vendor to perform a comprehensive security risk assessment of the Medicaid Enterprise Systems (MES), including the VIBES Eligibility and Enrollment System, Provider Enrollment Application (PEA), Pharmacy Benefit Management (PBM) solution, and related supporting systems. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-100 Prior Year Finding Number: 2023-084 Compliance Requirement: Special Tests and Provisions – Provider Eligibility Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2022 – 09/30/2024 Children’s Health Insurance Program ALN: 93.767 Award #: 2205VQ5021 Award Period: 10/01/2022 – 09/30/2025 Criteria – Medicaid – In order to receive Medicaid payments, providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the Medicaid program (42 CFR 431.107 and 447.10; and Section 1902(a)(9) of the Act (42 USC 1396a(a)(9)); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR Part 455, Subpart B, sections 455.100 through 455.106). Medicaid managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the Medicaid program (see 42 CFR 455.436). CHIP – In order to receive CHIP payments, CHIP providers must: (1) be licensed in accordance with federal, state, and local laws and regulations to participate in the CHIP program (42 CFR 457.900); (2) screened and enrolled in accordance with 42 CFR Part 455, Subpart E (sections 455.400 through 455.470); and make certain disclosures to the state (42 CFR 457.990(a), cross referencing 455.107). CHIP managed care network providers are subject to the same disclosure, screening, enrollment, and termination requirements that apply to Medicaid fee-for-service providers in accordance with 42 CFR Part 438, Subpart H. Guidance was provided to states in the Medicaid Provider Enrollment Compendium (MPEC) to enroll CHIP providers into their Medicaid programs to ensure that they meet federal requirements. Providers who have been barred from participation by the OIG exclusion list are not eligible to be enrolled in the CHIP program (42 CFR 457.990, 42 CFR 455 Subpart E). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We sampled 60 of 834 providers that provided Medicaid and CHIP services during fiscal year 2024. We noted 26 total exceptions: • 9 instances in which no supporting documentation was provided for review. • 16 instances in which the Medicaid Provider Agreement was not provided for review. • 11 instances in which evidence of exclusion screening from the Office of Inspector General (OIG) list was not provided for review. In addition, we were unable to determine the completeness of the population of eligible providers, as an ADP/Risk analysis was not performed on the VIBES system (which houses the eligibility database). Further, it does not appear that the controls in place are operating at a level of precision to ensure compliance with the compliance requirement. Cause – DHS does not appear to have adequate policies and procedures in place to ensure documentation is maintained and available to be inspected. Effect or Potential Effect – DHS is not in compliance with the stated provisions for provider eligibility, including maintaining appropriate evidence of compliance. Noncompliance with program requirements could result in future impacts to funding. Questioned Costs – None. Context – This is a condition identified per review of DHS’ compliance with the specified requirements using a statistically valid sample. Recommendation - We recommend that DHS implement policies and procedures to ensure provider enrollment documentation is maintained and available for inspection. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. To address these challenges and strengthen program integrity, DHS implemented the Provider Enrollment Application (PEA) Portal on March 2, 2026. In addition to implementing the PEA Portal, DHS is strengthening policies and procedures related to provider file maintenance, document retention, and quality assurance reviews. Staff training and periodic monitoring will help ensure required enrollment documents and exclusion screening records are consistently maintained and available for inspection. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-101 Prior Year Finding Number: 2023-081 Compliance Requirement: Special Tests and Provisions - Utilization Control and Program Integrity Program: U.S. Department of Health and Human Services Government Department/Agency: Department of Human Services (DHS) Medicaid Cluster ALN: 93.775, 93.778 Award #: 75X0512 Award Period: 10/01/2015 – 09/30/2024 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 – We noted that a Program Integrity Director was onboarded in 2024 and started implementing policies & procedure in a defined phased manner to establish the Program Integrity Unit for the compliance requirements detailed above. As such DHS was not able to provide evidence of meeting compliance requirements during Fiscal Year 2024. Specifically, we noted the following: • The method of determining criteria for identifying suspected fraud cases was still being developed. • The method for investigating these cases was still being developed. • The procedures, developed in cooperation with legal authorities, for referring credible allegations of fraud cases to law enforcement officials was still being developed. 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 – As the Program Integrity Director was onboarded and started the groundwork, DHS should be involved and monitor the progress of Program Integrity Unit against the planned roll out of this Unit and take corrective action for any deviations, as necessary, in a timely manner to ensure compliance. The written procedures should reflect the actual actions to be taken. Views of Responsible Officials – The Government concurs with the auditor’s findings and recommendations. The Program Integrity Unit has established SOPPs which identifies the method for identifying fraud cases, investigating cases, and developed procedures in collaborating and cooperating with legal authorities, for referring credible allegations of fraud cases to law enforcement officials. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-102 Prior Year Finding Number: 2023-085 Compliance Requirement: Reporting Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR FEMA-3603-EM, FEMA-3581-EM Award Periods: 09/20/2017 – 09/07/2026 09/07/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – 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). Additionally, 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We selected 60 projects with first-tier subawards greater than $30,000 and noted the following: • There was no evidence of review of the FFTA reporting prior to submission. • The timeliness of FFATA reporting could not be verified. Additionally, we sampled and selected 8 out of 40 financial and progress reports and noted that 6 performance/progress reports were not available for review. Cause – It appears that policies and procedures, including review over reporting procedures, were not functioning as intended. Effect or Potential Effect – Lack of internal controls over compliance may lead to material noncompliance with the stated provision. Questioned Costs – None. Context – This is a condition identified per review of VITEMA’s compliance with the specified requirements using a statistically valid sample. Recommendation – We recommend that VITEMA reevaluate its policies and procedures to ensure proper 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. VITEMA remains committed to submitting all required reports by the last day of the month following each award. A certification process has also been implemented to verify the date reports are filed and reviewed. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.

Finding Number: 2024-103 Prior Year Finding Number: 2023-086 Compliance Requirement: Subrecipient Monitoring Program: U.S. Department of Homeland Security Government Department/Agency: Virgin Islands Territorial Emergency Management Agency (VITEMA) Disaster Grants - Public Assistance (Presidentially Declared Disasters) ALN: 97.036 Award#: FEMA-4335-DR, FEMA-4340-DR-VI, FEMA-4513-DR FEMA-3603-EM, FEMA-3581-EM Award Periods: 09/20/2017 – 09/07/2026 09/07975/2017 – 09/16/2025 04/02/2020 – 05/11/2023 Criteria – A pass-through entity (PTE) must: • Verify the Subrecipient – Verify that the subrecipient is not excluded or disqualified in accordance with 2 CFR 180.300. Verification methods are provided in 2 CFR 180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds (2 CFR 200.322(a)). • Identify the Award and Applicable Requirements – Clearly identify to the subrecipient the award as a subaward at the time of subaward (or subsequent subaward modification) by providing the information described in 2 CFR section 200.332(b). • 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(c)). This evaluation of risk may include consideration of such factors as the following: 5. The subrecipient’s prior experience with the same or similar subawards; 6. The results of previous audits including whether or not the subrecipient receives a 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; 7. Whether the subrecipient has new personnel or new or substantially changed systems; and 8. 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(e) through (g)). 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: 5. Reviewing financial and performance reports required by the PTE. 6. Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward in accordance with 2 CFR 200.332(e)(2). 7. 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. 8. Resolve audit findings specifically related to the subaward. • Ensure Accountability of For-Profit Subrecipients – Some Federal awards may be passed through to for-profit entities. For-profit subrecipients are accountable to the PTE for the use of the Federal funds provided. Because 2 CFR Part 200 does not make Subpart F applicable to for-profit subrecipients, the PTE is responsible for establishing requirements, to ensure compliance by for-profit subrecipients. The subaward with the for-profit subrecipient must describe applicable compliance requirements and the for-profit subrecipient's compliance responsibility. Methods to ensure compliance for Federal awards made to for-profit subrecipients may include pre-award audits, monitoring throughout the performance of the subaward, and post-award audits (2 CFR section 200.501(i)). 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, document, and maintain internal control designed to ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition – We have selected 8 of 32 subrecipients for testing and found the following: • 8 instances where we were unable to obtain Quarterly Progress Reports. • 8 instances where we were unable to obtain completion/inspection certificate. • 8 subrecipients 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. 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. Effect or Potential 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 program's objectives. 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 2024 was $194,161,499. The total amount of our samples totaled $104,355,230. 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. VITEMA has implemented new policies and procedures by implementing a quarterly report deadline, a centralized location for supporting documentation and audit compliance, an inspection and certification of reports, and an annual notification to subrecipients of their audit responsibilities. The planned corrective actions are presented in the Government’s Corrective Action Plan attached as Appendix B to the Single Audit Report.