Corrective Action Plans

We will implement procedures to ensure correct labor rates and fleet asset usage are used in calculating reimbursements.

Findings - Financial Statement Audit: None Findings - Federal Award Programs Audit: U.S. Department of Housing and Urban Development Finding 2024-001: Section 202 Capital Advance, CFDA 14.157. Recommendation: Make the required delinquent deposit to the residual receipts account and ensure all future deposits are made as required by the Regulatory Agreement. Action Taken: Management will make the deposit when cash flow is available. At March 31, 2024, the Company has a negative surplus cash.

Findings - Financial Statement Audit: None Findings - Federal Award Programs Audit: U.S. Department of Housing and Urban Development Finding 2023-001: Section 223(f) Loan Program, CFDA 14.157. Recommendation: Make the deposit to the residual receipts amount as required and ensure that all future residual receipts amounts are deposited within 90 days after year end. Action Taken: Management will make the required residual receipts deposit as soon as available cash flow allows.

We agree. The reimbursement has been processed in the Voucher for the month of August 2024. Procedures have been established improving the reviewing and monitoring process in order to detect and help to identify errors before vouchers processed.

Management agrees with the finding and will put processes and controls in place to verify timely deposit in the future. The required deposit of $9,507 was made in April 2024 to the residual receipts account.

Comment on Finding: We concur with the auditors' finding that the balance in excess residual receipts was above the limit allowed by HUD and was not remitted per HUD guidelines. Actions Taken or Planned: The Director of Accounting and Property Accountant will review and verify the Residual Receipts balance, determine amount eligible for retainage and return the remainder to HUD in accordance with HUD regulations.

Reference Number: 2023-005 Finding: Update Documented Policies amt Procedures Over Federal Awards Name of Contact Person: Christine Chamberland Corrective Active Plan: The City will develop and implement comprehensive policies and procedures specifically addressing the management and oversight of federal awards to ensure compliance with the Uniform Guidance. Designated staff will be tasked with drafting these documents, which will be reviewed and approved by senior management. Training sessions will be conducted for all relevant personnel to ensure consistent application of the new policies and procedures. Proposed Completion Date: 3/31/26

Finding Number: 2023-003 Finding Title: Reporting Program: 93.778 Medical Assistance Program Name of Contact Person Responsible for Corrective Action: Taylor Spilde Corrective Action Planned: Taylor has been receiving supporting documents and reports since 1/1/2024. Taylor received notification since 2024 and has been reporting since receiving notification. Anticipated Completion Date: 1/1/2024

December 23, 2025 The City of Colonial Heights respectfully submits the following corrective action plan for the year ended June 30, 2023. Name and address of independent public accounting firm: Brown, Edwards & Company, L.L.P. 3906 Electric Road Roanoke, VA 24018 Audit period: June 30, 2023 The findings from the June 30, 2023 Schedule of Findings and Questioned Costs (the “Schedule”) are discussed below. The findings are numbered consistently with the number assigned in the Schedule. FINDINGS – FINANCIAL STATEMENT AUDIT 2023-001: Fund Balance Adjustments (Material Weakness) Condition: During our review of beginning fund balances, we noted that several fund balances did not agree to the ending amounts on the previous year’s annual comprehensive financial report due to issues with a financial software conversion during the fiscal year. As a result, adjustments were made to beginning fund balances during the audit. Criteria: Due to the financial software conversion, various fund balances were misstated due to the way the software was converting the fold balances and posting some new transactions. Cause: The financial software conversion lead to errors in fund balance reporting. Effect: Fund balance for several funds was materially misstated. Recommendation: We recommend correcting software issues and reconciling the prior year ending fund balances from the annual comprehensive financial report to the current year general ledger prior to fiscal year- end. Corrective Action: Management has noted the software issues for prior year ending fund balance reconciliation. The department has worked with the software vendor to resolve the underlying issues for prior year end fund balances and will continue to monitor for the following fiscal year audit to ensure the issue is fully resolved.. The software vendor also showed management a report to run on a monthly basis to check for any imbalances. Management will run this report at least monthly to check for imbalances going forward. FINDINGS – FINANCIAL STATEMENT AUDIT (CONTINUED) 2023-002: Audit Adjustments (Material Weakness) Condition: During the audit, we noted material year-end audit adjustments were required due to software conversion issues. These audit adjustments were required to ensure that the financial statements were prepared in accordance with accounting principles generally accepted in the United States of America. The adjustments were related to fund balance, trial balance discrepancies, and governmental account receivables. Criteria: Fund balance, various trial balance accounts, and governmental accounts receivables were initially materially misstated before audit adjustments were made. Cause: The financial software conversion lead to errors in financial reporting for some accounts. Effect: The ending balance for several accounts were materially misstated. Recommendation: We recommend establishing procedures in which qualified supervisors are reviewing year-end workpapers and reconciliations that feed into the final general ledger and focusing on the accuracy of year-end balances. We also recommend correcting any issues caused by the software conversion. Corrective Action: Management is working to establish procedures for qualified supervisors to review year-end workpapers and reconciliations that feed into the final general ledger. The department continues to correct issues caused by the software conversion. In addition, management has contracted with a consultant who is fully focused on audit work and will consider pre-audit engagements in the future. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT 2023-003: COVID-19 Elementary and Secondary School Emergency Relief (ESSER) Fund – ALN #84.425D and COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – ALN #84.425U, Special Tests and Provisions – Wage Rate (Material Noncompliance) Condition: During our review of the 1 applicable contract related to a federally funded project, we noted that the contract did not include the Wage Rate (Davis Bacon Act) and DOL regulations. Criteria: Federally funded projects under ESSER must comply with the Davis Bacon Act in the written contract. Cause: The omission of this clause was due to oversight. Effect: The written contract was not in compliance with required disclosures related to the Davis Bacon Act. Recommendation: We recommend that a process be put in place that ensures that all contracts related to federally funded projects include necessary DOL regulations. Corrective Action: Management will implement processes to ensure that any future contracts for federally funded projects will include the Wage Rate (Davis Bacon Act) and DOL regulations to ensure compliance. 2023-004: Highway Planning and Construction – ALN # 20.205, COVID-19 Coronavirus State and Local Fiscal Recovery Funds – ALN # 21.027, Special Education - Grants to States – ALN # 84.027, Special Education - Preschool Grants – ALN # 84.173, COVID-19 Elementary and Secondary School Emergency Relief (ESSER) Fund – ALN # 84.425D, and COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – ALN # 84.425U, Late Filling of Data Collection Form Condition: The City did not submit the data collection form for the year ended June 30, 2023 timely. For June 30, 2023 year-end audits, under the requirements in the Uniform Guidance and the Office of Management and Budget (OMB), all entities are required to submit the annual data collection form with the Federal Audit Clearinghouse the earlier of either 30 days after the issuance of the entity’s annual audit or nine months after the entity’s fiscal year-end. FINDINGS AND QUESTIONED COSTS – MAJOR FEDERAL AWARD PROGRAM AUDIT (CONTINUED) 2023-004: Highway Planning and Construction – ALN # 20.205, COVID-19 Coronavirus State and Local Fiscal Recovery Funds – ALN # 21.027, Special Education - Grants to States – ALN # 84.027, Special Education - Preschool Grants – ALN # 84.173, COVID-19 Elementary and Secondary School Emergency Relief (ESSER) Fund – ALN # 84.425D, and COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) – ALN # 84.425U, Late Filling of Data Collection Form Criteria: The City is required to submit the annual data collection form with the Federal Audit Clearinghouse the earlier of either 30 days after the issuance of the City’s annual audit or nine months after the City’s fiscal year-end. Cause: The data collection for was not filed timely due to the timing of the issuance of the City’s ACFR. Effect: The data collection form was not filed timely. Recommendation: Management should take steps to ensure that the firm is filed in a timely manner. Corrective Action: Management will work to complete the annual audit in a more timely manner, which is necessary to submit the annual data collection form in a more timely manner in future years. If the Federal Audit Clearinghouse has questions regarding this plan, please call Christina Sadler, Director of Finance at 804-520-9261. Sincerely yours, Christina E Sadler Director of Finance

The department will adopt written policies with the Uniform Guidance for Federally Funded Grant Programs accepted by the department.

Jordan CRC concurs with the recommendation to strengthen internal controls over cash management by establishing a formal, written Cash Management Policy. This will ensure compliance with 2 CFR 200.305(b)(1) and enhance oversight of subrecipient cash drawdowns. The following action steps and best practices will be implemented:

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1. Development and Implementation of a Written Cash Management Policy:

A comprehensive Cash Management Policy will be developed to define the procedures, responsibilities, and internal controls related to the timing and oversight of cash drawdowns, particularly for pass-through funding to subrecipients. The policy will be formally adopted and incorporated into the Organization’s 2025 Financial Policies and Procedures Manual.

2. Integration of Best Practices:

Just-In-Time Funding: Federal funds will be disbursed to subrecipients on a reimbursement basis or just-in-time to minimize the time between fund transfer and disbursement.

Cash Advance Justification: Where advances are necessary, subrecipients must submit detailed cash forecasts and justification for the requested advance, which will be reviewed and approved before release.

Drawdown Monitoring: Monthly reconciliation of subrecipient expenditures against drawdowns will be required to ensure alignment with actual program disbursements.

Reporting Requirements: Subrecipients will be required to submit periodic cash management reports and maintain documentation of timely use of federal funds.

3. Subrecipient Agreements:

All subrecipient agreements will be updated to include provisions reflecting cash management expectations, timing of disbursements, and documentation standards.

4. Training and Technical Assistance:

Training will be provided in 2025 for internal staff and subrecipients on the new policy and procedures. Guidance will cover federal cash management standards, the importance of minimizing idle federal funds, and documentation compliance.

5. Monitoring and Compliance Oversight:

The Grants and Finance Departments will jointly review cash activity of subrecipients at least quarterly. Any discrepancies or patterns of delayed disbursement will trigger follow-up and corrective actions.