Assistance Listing, Federal Agency, and Program Name 12.300, U.S. Department of Defense Office of Naval Research (ONR), Research and Development Federal Award Identification Number and Year N00014 24 1 2020, N00014 23 1 2389, N00014 23 1 2393, N00014 23 2 2000, N00014 24 1 2204. Pass through Entity N/A all direct awards Finding Type Significant deficiency Repeat Finding No Criteria 2 CFR section 200.305(b)(3) requires the federal agency or pass through entity to make payment to the subrecipient within 30 calendar days after receipt of the payment request unless the Federal agency or pass through entity reasonably believes the request is improper. Condition During testing of subrecipient payments, we identified 15 instances in which payments to subrecipients were made more than 30 calendar days after receipt of a complete and approved invoice. Questioned Costs None If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported The finding pertains to internal control over compliance related to the timely payment of subrecipients and does not involve questioned costs. Identification of How Questioned Costs Were Computed N/A Context During the fiscal year LIFT made 117 payments to subrecipients and 15 of those payments were delayed. Payment delays ranged from 15 to 33 days beyond the required payment date which is 30 calendar days after receipt of a complete and approved invoice Cause and Effect LIFT's controls over the review, approval, and processing of subrecipient invoices were not operating effectively to ensure payments were remitted within the timeframe required by federal regulations. As a result, certain payments to subrecipients were made after the required payment deadline, resulting in noncompliance with grant requirements. Recommendation Management should evaluate procedures for funding and processing subrecipient payments to ensure compliance with the 30 day payment requirement, including consideration of circumstances in which funding from the federal awarding agency is received after subrecipient payment obligations arise. Views of Responsible Officials and Corrective Action Plan During the audit period, the organization experienced delays in processing certain subrecipient invoices. As a result, some subrecipients were not paid in accordance with the requirements of 2 CFR 200.305(b)(3). To address this finding, management has implemented the following corrective actions: • Revised internal procedures to ensure payments are made within 30 calendar days of the approval of subrecipient invoices, regardless of when reimbursement is received from the federal awarding agency. • Implemented a weekly aging report to identify subrecipient invoices approaching payment due dates and to ensure timely resolution. • Provided additional training to the program, finance and the management teams on federal payment requirements and internal procedures. • Established periodic management reviews to monitor compliance with payment timeliness requirements and identify process improvements as needed. Management fully implemented all corrective actions as of June 30, 2026.