2025-001: Compliance Finding – Special Tests and Provisions Community Services Block Grant (ALN 93.569) Condition: A board roster was obtained for September 24, 2025, the final board meeting of the fiscal year. This listing showed that the board was comprised of 13 members of the following designations: participant sector – 4 members (30.77%), private sector – 5 members (38.46%), and public sector – 4 members (30.77%). Criteria or specific requirement: All eligible entities in the state of Vermont shall be governed by a tripartite board as described in section 6768 of "The Community Services Block Grant Act". The board must fully participate in the development, planning, implementation, and evaluation of the program to serve low-income communities, and must be composed of 1/3 elected public officials, at least 1/3 representative of lowincome individuals and families in the neighborhood served, and the remaining members of business or community groups. Cause: Lack of oversight by management. Effect: The Organization was out of compliance with CSBG statutory governance requirements for a portion of the fiscal year. Continued noncompliance may increase the risk of corrective action by the pass-through entity and jeopardize future CSBG funding. Questioned costs: No questioned costs were identified. Recommendation: Adopt a board composition matrix with term tracking. This matrix can include sector designation, term start and end dates, public official designation expiration, as applicable, and vacancy status. This matrix can be reviewed at each board meeting to ensure timely addressing any issues or concerns. Establish written requirement that vacancies must be filled within 60–90 days. Require immediate escalation to the board chair or governance committee if ratios fall below statutory minimums. This demonstrates proactive compliance rather than reactive correction. Document Contingency Procedures - Create procedures specific to the Organization for situations where: public officials decline appointment, democratic elections fail to produce candidates, and / or board size changes mid-year. Require Written Annual Certifications - Have the board chair or governance committee sign an annual certification confirming the tripartite composition compliance documentation of democratic selection procedures. This provides clear internal control and audit trail.
2025-002: Compliance Finding – Cash Management Low-Income Home Energy Assistance Program (LIHEAP) (ALN 93.568) Condition: During audit testing of LIHEAP cash management, we noted the entity drew the maximum allowable 50% advance at the onset of the grant period. The advance was drawn solely because it represented the maximum amount permitted under the award rather than being based on documented immediate or near-term cash requirements. At the time of the draw, the entity did not prepare or retain cash flow projections, disbursement schedules, or other documentation demonstrating that the amount requested was limited to minimum cash needs. Approximately 30 days after receipt of the advance, a significant portion of the funds remained unexpended. Criteria or specific requirement: Per 2 CFR 200.305(b), advances of federal funds must be limited to the minimum amounts needed and timed in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program. In addition, 2 CFR 200.305(b) requires that the timing and amount of cash drawdowns minimize the time elapsing between transfer of funds and disbursement by the non- Federal entity. Cause: Management did not design or implement effective procedures to ensure that federal cash draws were based on documented cash needs. Instead, staff interpreted the maximum allowable advance percentage under the award as the default draw amount, without performing a cash flow analysis or documenting anticipated disbursement needs. Effect: The entity received federal cash in excess of immediate program needs, resulting in idle federal funds on hand for approximately 30 days. This practice is not consistent with the requirements of 2 CFR 200.305, which require advances to be limited to minimum amounts needed and disbursed in close timing with program expenditures. This increases the risk of noncompliance with federal cash management requirements and may create potential exposure to interest liability depending on aggregate interest earned and applicable thresholds. Questioned costs: No questioned costs were identified. Recommendation: We recommend the entity strengthen cash management procedures to ensure compliance with 2 CFR 200.305 by requiring all federal drawdowns to be supported by documented cash flow forecasts or near-term disbursement schedules, ensuring cash draws are based on actual, immediate cash needs rather than maximum allowable advance limits, implementing supervisory review and approval of draw requests to confirm alignment with anticipated expenditures, and periodically reconciling cash balances to expected disbursement timing to ensure advances are minimized and timely utilized.
2025-003: Compliance finding (Allowable Costs / Cost Principles, Reporting) and material weakness over compliance and financial reporting Weatherization Assistance for Low-Income Persons (ALN 81.042) Low-Income Home Energy Assistance (ALN 93.568) Condition: The entity was unable to reconcile expenditures recorded in its general ledger to expenditures reported in the state reporting systems for both LIHEAP and Weatherization programs. In addition, work-in-progress, grant revenue, and deferred revenue related to the Weatherization program did not properly reconcile to supporting documents required by the grants. As a result, the completeness and accuracy of the populations subject to audit testing could not be verified, and significant adjustments were required to properly record grant activity. During audit procedures, reconciliation efforts identified discrepancies between the accounting records and reported expenditures in both programs. Further investigation determined that certain costs—primarily subcontract labor and subcontract materials— were overstated and improperly billed to grant programs. The accounting records also did not reflect an accurate accounting of grant expenses, revenue, deferred revenue, and work-in-progress balances. These misstatements resulted in material overbilling across both LIHEAP and Weatherization programs, which required repayment to the state. Criteria or specific requirement: Under 2 CFR 200 (Uniform Guidance), the entity is required to maintain internal control over compliance and financial management systems that provide reasonable assurance that costs charged to federal awards are allowable, allocable, reasonable, and properly supported; financial reports submitted to awarding agencies are accurate, complete, and reconcilable to accounting records; and adequate controls exist to ensure that expenditures are properly reviewed, approved, supported, and accounted for prior to submission for reimbursement. Timely and accurate reports are also necessary to ensure that the goals and purposes of federal grants have been achieved and are accounted for properly. Cause: Deficiencies in internal control over compliance and grant accounting, including lack of formal, recurring reconciliations between the general ledger, state reporting systems, work-in-progress reports, and grant-required supporting documentation; inadequate supervisory review of reimbursement submissions prior to reporting; insufficient controls over classification, allocation, and support of subcontract labor and subcontract materials prior to billing; and lack of management oversight. These control deficiencies were not isolated to a single program but were systemic across multiple federal funding streams. Effect: Costs charged to both programs were not consistently supported or accurately recorded at the time of reporting, financial reports submitted to the state for both programs were not reconcilable to the accounting system, and work-in-progress, grant revenue, and deferred revenue were not properly reconciled to supporting documentation. Material overbilling occurred in both programs, resulting in repayment to the state, and significant audit adjustments were required to properly record grant activity. Audit procedures were unable to rely on the completeness and accuracy of the populations for testing, resulting in limitations during compliance testing. In addition, the control deficiencies increase the risk that additional uncorrected misstatements or unallowable costs may exist across both programs. Questioned costs: Material repayments were made to the state related to identified overbilling in both LIHEAP and Weatherization programs. Total returned to the State of Vermont: $133,144.05. Recommendation: We recommend management establish formal monthly reconciliations between the general ledger, each state reporting system, work-inprogress reports, and grant-required supporting documentation for both programs. Management should implement documented supervisory review and approval of all reimbursement submissions prior to submission, strengthen controls over subcontract labor and subcontract materials to ensure proper allocation, support, and classification at the point of entry, and maintain accurate and complete documentation for all grant revenue, expenses, deferred revenue, and work-in-progress. Management should also perform periodic internal compliance reviews across all federal programs to ensure consistency between reported and recorded expenditures and to verify that grant activity agrees to the books of account.