Corrective Action Plans

Inadequate Subrecipient Equipment Use and Disposal Procedures - Transit - MDT - The Montana Department of Transportation concurs with the finding. A. The department will continue enhancing its disposal procedures. The Transit Section is now fully staffed and is working through the backlog of disposition requests, which is expected to be resolved by the end of calendar year 2026. A system issue that prevented the disposition vehicle report from capturing all submitted vehicles was corrected with the June 2025 BlackCat update. The Transit Section was aware of vehicle records requiring a full audit and continues to work on this project. B. Disposal instructions have been prepared and are available in BlackCat for subrecipients to reference. C. The Transit Section will continue working through the inventory cleanup and expects to complete this work by the end of state fiscal year 2027. This cleanup is being conducted in conjunction with the migration from BlackCat to the B2G platform. Responsible Party - Kimberly Doherty, Accounting Systems Supervisor, Montana Department of Transportation Target Implementation Date - 6/30/2027

Noncompliant Equipment and Construction Controls – ESSER – OPI - The Montana Office of Public Instruction notes that the grant is closed and the temporary grant-funded staff are no longer with the agency. Moving forward, new grant managers will have better direction on the agency’s internal controls. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 9/30/2026

Inadequate Assurance Over Controls at Service Organization - SNAP - DPHHS - The Montana Department of Public Health and Human Services does not concur. The department agrees that 7 CFR 274.8(b)(3)(i) requires the state agency to ensure that its electronic benefit transfer system includes storage and control measures for blank unissued cards. The department satisfies this requirement through controls operated by its contracted electronic benefit transfer vendor rather than through state‑held card stock. The department does not concur that this control is absent. As provided in 2 CFR 200.511(c), the explanation below describes why corrective action is not required. The department does not issue electronic benefit transfer cards over the counter. All card manufacture, personalization, storage, and mailing occur within the contracted vendor’s centralized issuance environment. No blank unissued cards are held in department offices or accessible to staff or the public. Blank unissued cards contain no benefits, are not associated with a participant account, and cannot be activated without a corresponding record in the electronic benefit transfer system. Their only intrinsic value is the cost of the card stock. The vendor conducts risk assessments and monitors subcontractors responsible for card stock. Independent assurance is provided through the system and Organization Controls (SOC) report, which confirms that these assessments and monitoring controls are fully implemented. Centralized issuance significantly reduces opportunities for unauthorized access, making the risk associated with blank unissued cards very low in Montana. The department also performs reconciliations independent of benefit issuance and redemption. Eligibility determinations in the departments eligibility system (CHIMES) are reconciled to the vendor’s records; retailer transactions are reconciled to the banking system; recipient transactions are reconciled to redeemed benefits; and funds drawn from the federal treasury are reconciled to the federal draw system. The department’s card monitoring controls address replaced, returned, and excessive card requests. These enhanced controls align higher‑risk activities with appropriate safeguards and oversight. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - N/A

Equipment Inventory Controls - R&D - MSU - The Montana State University - Bozeman concurs and has already engaged in several improvements to its inventory processes. It is increasing proactive communication with department heads and other leaders across campus when physical inventory is taking place. It is adding more information into the procurement system to identify the location of items at the time of purchase to ensure accurate documentation and future inventory. It is including the property management team in employee termination paperwork to ensure a new responsible party is identified for any assigned asset prior to departure. It is coordinating with a newly hired research asset coordinator to complete cross-training. The University has made significant progress from the last finding to the current finding. Responsible Party - Kristy Colling, Controller, Montana State University - Bozeman Target Implementation Date - 8/31/2026

Equipment Inventory Controls - R&D - UM - The University of Montana - Missoula will establish a system-level inventory monitoring process by generating an annual listing from the Banner system to identify all departments required to perform inventories. This listing will serve as the official inventory checklist and will be used to track and verify inventory completion. The University will continue to use the dedicated staff member responsible for capital asset management and will perform physical inventories every two years to verify asset existence and ensure all capital assets are properly tagged. Responsible Party - Rachel Buswell, Controller, University of Montana - Missoula Target Implementation Date - 3/31/2027

Inadequate Physical Inventory Procedures - Nutrition - OPI - The Montana Office of Public Instruction partially concurs with this finding. The 1,000 cases of beef arrived on June 12 for the next fiscal year, while the physical inventory count occurred on June 3. The order had been entered into MAPS before the count, but the product had not yet arrived at the warehouse. When MAPS reporting was run after June 12, during verification, the beef appeared in the system even though it was not present during the physical count. The product was distributed during the following school year. This discrepancy was due solely to timing between delivery, system entry, and the inventory count. Because of staff turnover, the employee entering inventory into MAPS was not aware that items should only be entered once they are physically received. The invoice was entered before delivery, while inventory was being performed, creating a short‑term difference between the MAPS count and the actual inventory. This was a training issue, and staff have now been instructed on correct inventory procedures. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

CORRECTIVE ACTION PLAN2025-001 [2023-001]—TRACKING AND VALUATION OF MORTGAGE RECEIVABLES AND AMOUNTS DUE TO GRANTORType of Finding: (A) Material Weakness in Internal Control Over Financial ReportingStatement of ConditionWhile the Housing Trust has begun a complete review of its loan portfolio, the project has not yet been completed. Therefore, we were unable to obtain sufficient audit evidence to support the Housing Trust’s tracking and valuation of its mortgage receivables and amounts that are due to grantor.Per our audit procedures, we noted that management was unable to provide the following:A reasonable methodology for estimating its allowance for loan losses.Funding provided by grantors for the loan programs that should also be classified as amounts that are due to grantor.Not all current year loans were recorded in the general ledger (approximative $512,066) and approx. $481,201 were recorded twice.A net prior year adjustment of $36,460 for mortgages receivable and $35,000 for land leases held was necessary.Reclassification between loans accounts and grant revenue were necessaryContextThe Housing Trust has a portfolio of over six-hundred individual mortgage receivables that include both non-amortizing and amortizing loans, which management has valued at approximately $25,291,075. These loans have been funded by several sources, including federal, state, and local funding. Some of the grantors have established in their agreements that these funds do not belong to the Housing Trust, but actually belong to the grantor. CriteriaThe Housing Trust should ensure it has a board-approved policy for its loan portfolio to ensure that these assets are properly tracked, classified, and maintained with specialized loan management software that can perform the following:Loan Classification and TrackingEach loan is properly identified with its funding source (federal, state, local, etc.) and type of restriction Each loan agreement has the funding source specifiedThe current status of each loan is tracked (current, delinquent, defaulted)Loan funding that has been established as due to the grantor is properly tracked.Compliance and ReportingEnsure the loans comply with the specific guidelines of their respective funding source. Audit trails are available for all transactions and valuations.The receivables and related interest accruals supported by the loan management software should be reconciled to the Housing Trust’s accounting software.Financial TrackingThe valuation of the portfolio should be updated periodically (at least quarterly) for any changes in loan status or market conditions.All new loans should be recorded in the general ledger A loan loss policy was established that includes a loan loss methodology incorporating risk classes based on the borrower’s ability to repay. However, the calculations seem to follow a different methodology established afterwards. The policy should be updated with calculation methodology and with the backup research of historical data. A loan review committee should be responsible for reviewing and approving the classifications of loans and the associated allowance for loan losses which should be supported by high-quality data collection on each borrower’s payment history and any relevant economic indicators. The calculations and methodology should follow the approved policy, or the policy should be improved to include all factors mentioned above.EffectThe auditors were not able to verify the accuracy of the loan records and financial statements related to mortgage loans, the related accrued loan interest, the allowance for loan losses and loan funding that should also be recorded as due to grantor. CauseWhile the Housing Trust has begun a complete review of its loan portfolio, the project has not yet been completed. Therefore, the loan portfolio tracking and valuation have not yet been designed or implemented to support its policies and procedures or provide the loan review committee with a workable system for reviewing, approving and monitoring the organization’s mortgage receivable portfolio. The methodology seems to be changing, and the calculations do not seem to be accurate,RecommendationWe recommend the Housing Trust update policies and procedures for its loan portfolio as identified in the “Context” section of this finding to include methodology, risk assessment, historical loan data research, calculations method with reasoning.View of Responsible OfficialThe Housing Trust acknowledges the finding. Due to turnover in prior years, historical loan records and tracking systems were incomplete or inaccurate. Since then, SFCHT has taken the following steps:A second title company has been contracted to obtain final loan data for the 2026 loan portfolio. A title company will also be engaged annually at year-end to identify and resolve any differences arising during the year.Establish one master loan inventory using Portfol data. This inventory will serve as the master loan control schedule for monthly financial reconciliations. All differences will have a documented resolution, including reconciliation of receivables and related interest between the two systems. Reconciliations will be completed by the 15th business day of the following month.Create a new loan-recording process for every loan closing.Create a Due to Grantor Matrix based on findings from the annual loan review performed by the title company. Supporting documentation, such as grant agreements, correspondence, or other applicable documentation, will be maintained.Review the ASC 326 loan loss methodology to ensure it reflects the actual calculation methodology and is supported by appropriate research. This review will be performed quarterly.Establish a formal loan review committee and process to review loan calculations and the allowance for loan losses. The committee will meet quarterly and review reports from Portfol. Meeting minutes will document updates, decisions, and changes.Corrective Action Plan TimelineFinalize and implement the loan loss methodology: by December 2026Begin monthly Portfol-to-QBO reconciliations: by September 2026Fully hand over all loans to Amerinat by end of 2026; Land Leases will remain “in-house”Continue staff training and Executive-level reviewDesignated Employee Responsible for Corrective Action-Director of Operations-Accounting Specialist2025-002 [2023-002]—FINANCIAL CLOSE AND RESTATEMENTS TO BEGINNING NET ASSETSType of Finding: (A) Material Weakness in Internal Control Over Financial ReportingStatement of ConditionDuring the audit of the financial statements, we noted that material adjustments and restatements were necessary to correct errors in the current and previously reported financial statements. A summary of the areas and the net effect of the changes are as follows: Type Amount, net Accounts Receivable $ (13,490) Grants and Contracts Receivable 830,747 Accrued Interest 5,798 Amortizing Loan Receivable 419,551 Non-Amortizing Loans Receivable (433,722) Land Held in Trust (61,323) Other Assets (145,000) Prepaid Expenses (61,940) Notes Receivable (195,000) Developments Projects (184,559) Real Estate Inventory to Sell (333,079) Fixed Assets (785,081) ROU Accumulated Amortization (7,511) Accounts Payable (807) Due to Grantor 10,000 Grant Advances (97,963) Accrued Expenses (6,249) Other Current Liabilities 52,841 Lease Liabilities 7,845 Notes Payable (9,710) Net Assets 1,154,733 Total $ 146,081 CriteriaAccounting Standards Codification (ASC) 265 “Presentation of Financial Statements—Communicating Internal Control Related Matters Identified in an Audit” requires that deficiencies in internal control over financial reporting be communicated to those charged with governance when the design or operation of a control does not allow management or employees to prevent or detect misstatements on a timely basis.The correction of material misstatements indicates the existence of a material weakness in internal control over the maintenance of the organization’s financial statements.EffectThe material adjustments and restatements resulted in significant changes to the current year balances and beginning balances of the organization’s unrestricted and restricted net assets. These adjustments could potentially undermine the stakeholders' confidence in the financial information presented by the organization and may lead to difficulties in securing future funding or maintaining current donor relationships.CauseThe material misstatements were caused by a weakness in the development and implementation of internal controls and financial reporting processes, as well as significant turnover in the organization’s management.RecommendationWe recommend the Housing Trust strengthens its internal controls and financial reporting processes to prevent future occurrences of such errors. This could involve adding additional staff, training current accounting staff and implementing more robust review procedures to ensure that all financial reporting is in strict accordance with GAAP. View of Responsible OfficialThe Housing Trust acknowledges the finding. In prior years, however, internal controls were insufficient. There was no formal month-end close or review process, and prior audits relied on outdated balances without verification. Under new leadershipA formal monthly close calendar has been established, with the monthly close to be completed within 10-15 business days.Create a supporting schedule for every balance sheet account. These schedules will be used as part of the monthly reconciliation process and will be certified.A grant receivable roll-forward will be prepared for each grant, compared to QuickBooks, and reconciled monthly.Each development project will have its own subledger, which will be reconciled monthly.A detailed fixed asset register will be maintained and reconciled quarterly.6. To help prevent future restatements, establish a formal journal-entry control process that requires appropriate supporting documentation and approvals.7. Establish a policy requiring documentation and approval for any changes made to beginning balances.8. The CEO and Finance Committee will perform monthly analytical reviews using the balance sheet, profit and loss statement, and actual-to-budget comparisons.9. Establish a reconciliation exception and audit adjustment log to track outstanding issues requiring resolution, including a timeline for resolving each item.Corrective Action Plan Timeline The timeline to complete this is prior to December 31, 2026.Designated Employee Responsible for Corrective Action-Director of Operations-Accounting Specialist2025-003 [2024-003] - GRANT TRACKING AND SEFA RECONCILIATIONFederal Agency: U.S. Department of Housing and Urban Development (HUD)Federal Program: Housing Opportunities for Persons With AIDS (HOPWA)Assistance Listing Number: 14.241Award Number and Period: [NMH240051], [November 1, 2024 – October 31, 2027]Type of Compliance Requirements: Internal Controls Type of Finding: (B) Significant Deficiency in Internal Control Over Financial ReportingKnown Questions Cost: NoneStatement of ConditionDuring our audit, we identified initial differences between expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) and the general ledger. Management subsequently provided additional supporting schedules and completed a reconciliation of the SEFA to the general ledger. However, the reconciliation required manual effort because one federal award included program income amounts that had not been properly reconciled or corrected, another federal award had expenses that did not belong to the award, and recycled funds were tracked separately partially only from new grant funds in the accounting records. Some of expenses did not have appropriate backup documentation, however, the billing to the grant was correct. Expenses from program income for salaries did not match the timesheets. CriteriaPer 2 CFR 200.302 and 200.510(b), recipients of federal awards must maintain accurate, current, and complete records that adequately identify the source and application of funds. Grant expenditures must be traceable to the financial records and properly classified. Program income, including recycled funds, must be used and tracked in accordance with federal requirements and grantee policies. Specifically, all grants should be tracked separately in the general ledger, and the revenue and expenses should match the reimbursement grants. The SEFA reconciliation should be done thoroughly and discrepancies reconciled or resolved, if that is the case. The policies for recycling the funds should be updated with the financial tracking in the general ledger and update with all grantor recommendations. The HOPWA program policy was updated in July 2025.The recycled funds received/spent should be separately tracked and used per policies and grantor recommendations.EffectThe lack of properly tracking expenditures and recycled funds increases the risk of misstating the SEFA, billing non-allowable or duplicate costs to the grantor, and not meeting timeliness or use restrictions related to program income. This may lead to questioned costs or future audit findings.Recycled funds not properly tracked separately may result in noncompliance with the application of loan funding. CauseThe issues stemmed from frequent staff turnover and the complexity of accounting for loans and recycled funds across departments. RecommendationWe recommend the Housing Trust:Revise and implement grant management policy and procedures that ensure each grant has a dedicated general ledger account.Require all reimbursement requests to be supported by general ledger detail.Ensure program income and recycled funds are separately tracked in accordance with federal guidelines (separate classes).Establish regular reconciliations between Finance and Program records to maintain consistency.View of Responsible OfficialThe Housing Trust acknowledges the finding. Corrective Action Plan: 1. A master grant register has been created that includes all active grants and federal awards.2. Each grant will have a unique class/project established in QuickBooks to capture payroll and other grant-related expenses. Reports will be generated monthly.3. Each grant will be reconciled monthly.4. Grant reimbursement requests will be supported by appropriate documentation.5. Payroll review procedures have been established to confirm that payroll costs are properly allocated to grants.6. Program income will be tracked separately for all applicable income and expenditures.7. Monthly SEFA reconciliations will be completed for all grants, including grants that do not meet the definition for inclusion in the SEFA.8. A grant reconciliation exception log will be established to track outstanding issues, responsible parties, and timelines for resolution. Corrective Action Plan Timeline- Finalize and adopt new Grant Management Policies: by September 2026- Implement monthly SEFA reconciliations: by September 2026- Complete staff training on program income and federal grant tracking: by September 2026Designated Employee Responsible for Corrective Action-Director of Operations-Accounting SpecialistCurrent Year Findings 2025-004 - Program Income Federal Agency: U.S. Department of Housing and Urban Development (HUD)Federal Program: Housing Opportunities for Persons With AIDS (HOPWA)Assistance Listing Number: 14.241Federal Award: [NMH240051], [November 1, 2024 – October 31, 2027]Compliance Requirement: Program Income Known Questions Cost: None Type of Finding: (F, G) Significant Deficiency in Internal Control Over Compliance of Federal Awards and Instance of Noncompliance related to Federal Awards Statement of Condition During 2025, the Housing Trust received certain repayments of loans originally funded by HOPWA awards. Of this amount, certain amount may have remained unspent or had not been recorded/reconciled in accordance with HUD requirements as of December 31, 2025. Management did not maintain a documented control to identify HOPWA repayment receipts, determine the applicable award requirements, reconcile receipts and expenditures among IDIS, QuickBooks, and the program-income subsidiary record, and document approval of their disposition. Criteria Under 2 CFR 200.307(c), program income earned after a Federal award’s period of performance is subject to Federal requirements only when required by Federal agency regulations or the terms and conditions of the award, and the Federal agency may establish appropriate disposition requirements through closeout. HUD may require HOPWA-funded loan repayments received after the original award period to be recorded as program income.CauseThe Housing Trust had not designed and assigned ownership of a formal program-income and grant-closeout control addressing repayments generated from HOPWA-funded loans after the originating award’s period of performance. Effect Program income may have been subject to incorrect or untimely reporting/use, increasing the risk of noncompliance and misstatement of federal expenditures. Known questioned costs were unknown. RecommendationHousing Trust should implement a documented monthly program-income reconciliation and grant-closeout control that identifies the originating award, applicable HUD disposition requirement, IDIS receipt, QBO classification, eligible use, remaining balance, reviewer approval, and resolution of differences. Evidence of HUD determinations for post-period receipts should be retained with the reconciliation.Views of Responsible Officials: SFCHT acknowledges the finding and notes that the New Mexico HOPWA program is the only documented HUD grant that funds mortgages.Management has established a formal process to identify and track repayments associated with HOPWA-funded loans. Management will maintain a subsidiary program income register that identifies the originating federal award, receipts, applicable HUD disposition requirements, accounting classification, eligible expenditures, and remaining balance. Program income activity will be reconciled monthly among loan-servicing records, QBO, IDIS, and supporting program records. Written HUD determinations regarding post-period repayments will be retained when applicable.Corrective Action Plan TimelineAn onsite meeting with HUD HOPWA representatives is scheduled for September 10, 2026, at the Santa Fe offices. During this meeting, policies and procedures, including the program income policy, will be reviewed and formalized, and a HUD determination log will be established.The HOPWA Program Income Register will be implemented, and repayment schedules for HOPWA loans will be documented in the master loan inventory. Implementation date: July 2026.HOPWA program income will be expended before additional HOPWA IDIS reimbursement requests are approved.A historical review of HOPWA loans and funding sources will be completed. Target date: August 2026.QBO, Portfol, Amerinat, and IDIS will be reconciled monthly. Beginning: July 2026 and ongoing.Post-period repayments and related HUD determinations will be reviewed. Target date: September 2026.Designated Employee Responsible for Corrective Action Director of Operations, with assistance from the Accounting Specialist and HOPWA HUD program staff, as applicable.Signature Title

Finding 2025-003 Federal Agency name: Department of Housing and Urban Development Pass-Through Entity: Governor’s Office of Economic Development and Moody County Assistance Listing Number: 14.228 Program Name: Community Development Block Grant Finding Summary: The property records listing had no formal review or approval in place. Additionally, there was no formally documented physical inventory of property that was purchased with federal award monies within the last two years. Corrective Action Plan: When the auditors asked for a physical inventory of property bought with federal funds, we gave them a complete list in June 2026, within five business days. That showed our property records were accurate and on hand. We are now adding a formal review and approval step for the property list, and we will keep it current with the information 2 CFR 200.313(d)(1) requires: a description, the identification number, the funding source and Federal Award Identification Number (FAIN), the title holder, the date and cost of purchase, the federal share, and the location, use, condition, and disposition of each item. We will take a physical inventory of federally funded property at least every two years and match it against the records. We have assigned a staff member to keep the property records current and to document the reviews and inventory counts. Responsible Individuals: Jody Hernandez, Chief Executive Officer; Tim Dietz, Chief Financial Officer Anticipated Completion Date: Inventory provided in June 2026. The review and approval process and the two-year inventory schedule will be in place by July 2026

The County will work with Rehmann to develop policies and procedures sufficient to satisfy the rules of the uniform guidance.

FINDING 2025-004 EQUIPMENT AND REAL PROPERTY MANAGEMENT - SIGNIFICANT DEFICIENCY Management agrees with the finding that the fixed asset listing maintained by the City for assets acquired with federal and state funds did not contain all required elements and further recognizes the importance of maintaining complete and accurate property records for assets acquired with federal and state financial assistance. The City will update its existing fixed assets and grant administration policies to establish specific requirements for identifying and tracking property acquired with federal and state funds in accordance with applicable federal and state regulations. The updated procedures will require the fixed asset records to include, as applicable, the property description, serial number or other identification number, funding source and applicable award identification number, title holder, acquisition date, acquisition cost, percentage of federal or state participation, location, use and condition, and disposition information. As part of the corrective action, the Finance Department will review the existing fixed asset records for federally and state-funded assets and update the records to include the required information. Procedures will also be established to ensure that applicable information is captured when assets are acquired and maintained throughout the asset's useful life, including when assets are transferred, disposed of, or otherwise removed from service. The new Finance Director and Comptroller will oversee implementation of the updated procedures and provide appropriate guidance to personnel responsible for purchasing, grant administration, and fixed asset management. These measures will strengthen the City's internal controls and ensure that property acquired with federal and state financial assistance is consistently identified, tracked, and reported in accordance with applicable requirements.

Responsible Official: Marcos A. Rivera Sánchez, Executive Director Management acknowledges the condition identified in the audit: the perpetual inventory system calculates inventory costs using the weighted average method, while the entity's established methodology for valuing USDA Foods is FIFO. Because the system does not support FIFO, inventory costs must be recalculated manually at year end, resulting in significant adjustments and indicating that perpetual inventory records maintained during the year do not reconcile to USDA-assigned costs. To address this issue, management will implement the following corrective actions consistent with the audit recommendation: - Evaluate and configure the inventory system to apply the FIFO costing method or adopt a system capable of reflecting USDA-assigned costs. - Develop and implement formal written procedures requiring periodic reconciliation between the perpetual inventory, accounting records, and USDA costs assignments. - Document and investigate any differences identified during reconciliations to ensure accurate, complete, and compliant inventory records in accordance with 7 CFR 250.19. These actions are intended to eliminate the need for significant manual adjustments at year end, strenghten inventory valuation controls, and ensure compliance with USDA requirements. Anticipated Completion Date: December 31, 2026.

Due to the organization’s transition period, the reports were submitted late. After the new Finance Director started in June 25, 2025. In January 30, 2026, we received system access, all reports were submitted on February 4, 2026. This matter was presented in the most recent focus Area II monitoring by the Agency, with no complaints noted. We will request additional system access for reporting purposes in case the person responsible is unavailable. Contact Person: Carlos Rivera Nora Boschetti Team: Finance Team Anticipated Completion Date: September 30, 2026

BGCPR acknowledges a significant oversight in the financial management of assets acquired with Community Development Block Grant – Disaster Recovery (CDBG-DR) funds. Specifically, it has been identified that certain property and equipment purchased using these funds were not properly recorded in the equipment detail ledger. As a result of this omission, these assets were incorrectly treated as expenses in the financial records, rather than being capitalized in accordance with BGCPR’s established financial policies and the federal guidelines governing the administration of CDBG-DR funds. This misclassification not only affects the accuracy of BGCPR’s financial statements but also represents a deviation from required asset management practices, which mandate the capitalization and tracking of equipment to ensure accountability, proper depreciation, and compliance with grant conditions. As a corrective measure, BGCPR will take the following actions: a. BGCPR will implement a corrective action plan to strengthen accounting processes related to account registration and equipment capitalization related to the CDBG-DR; b. Procurement procedures for requesting, approving, and accepting goods and services, Include agency consultation; c. Ensure accuracy in financial records that Maintain compliance with applicable regulations; d. Account for taxes and support service costs (e.g., installation, delivery); e. Ensure all purchases align with federal regulations. Contact Person: Paul Barrera Carlos Rivera Enrique Vélez Cortes Team: Finance Team Anticipated Completion Date: December 31, 2026

BGCPR recognizes that it must keep and improve the asset capitalization processes and policies, particularly within the accounting system of record. It acknowledges the need to strengthen these processes to ensure accurate and compliant management of equipment acquisitions. To address this, during fiscal year 2025-26, BGCPR implemented a system capable of recording, classifying, and monitoring all capital assets in alignment with the criteria established under federal regulation 2 CFR §200. This improvement is essential to ensure that all asset capitalization activities meet regulatory standards and support greater financial transparency and accountability. As a corrective measure, BGCPR will take the following actions: a. A property and inventory coordinator was hired and is responsible for overseeing all aspects of property control and asset management. b. Full Implementation Property software to accurately all property of by BGCPR. The system includes information such as asset identification number, acquisition date, funding source, cost, useful life, depreciation, location, and other relevant details, serving as a support tool for the property records maintained in the accounting system. c. Prepare an updated Property Control Manual, which is pending final approval by senior management. Implement procedures for timely recording of acquisitions, transfers, disposals, and impairments to ensure that asset records remain current and accurate. d. Perfom and complete physical inventory for all Units and Central Office. e. All inventory counts have been entered into the system. f. All property acquired have been recorded in the property software. g. Currently we are in the process of valuation of the physical inventory to reconcile with the accounting records by December 31, 2026. h. Training was provided to personnel involved in asset management and inventory activities to ensure consistent application of established procedures. i. Perform periodic monitoring reviews by finance, compliance, or internal audits to validate adherence to property control policies and inventory requirements. Contact Person: Paul Barrera Carlos Rivera Enrique Vélez Cortes Lexa M. González Brown Team: Finance Team Anticipated Completion Date: December 31, 2026

The Treasurer will work with the Inventory Clerk to update property records to include a description of the property, serial/identification number, source of funding for the property including the federal award identification number, title holder, acquisition date, cost of property, percentage of federal participation in the project costs for the federal award, location, use and condition of the property, and all disposal information. Additionally, the Inventory Clerk will perform a physical inventory of that property and reconcile with the property records at least once every two years for property purchased with federal awards dollars.

Finding 2025-003 Recommendation: We recommend original records relating to the requirements for receipted foods be retained for the required period. Corrective Action: Documentation was previously being filed in hard copy. Efforts have been made to now have all documents scanned into the Operations Receipts Teams fo lder at receipt and are confirmed in Teams by designated members of the Operations management team. Person Responsible for Corrective Action: Norman Stafford, VP of Operations Anticipated Completion Date for Corrective Action: 8/14/26

Finding 2025-002 Recommendation: We recommend controls be strengthened to ensure all donations are supported with verification of count, weight, product identification, and other inspection of the product as evidenced through signature of the person(s) receiving inventory items. This could be made through a checklist attached to the bill of lading and used with entering the items into the inventory system that includes verification was properly made and items properly set up in inventory. Corrective Action: A majority ofTEFAP orders arrive with a BOL that will have the USDA secondary 5000 PO number as well as a 4000 Customer sales number and many times a 2000 Solicitation number. These are requirements t he USDA has with the vendors supplying the items. We report both the 5000 and 4000 numbers to GA OHS/SC Dept of Ag upon receipt of the goods. If either or both numbers are missing from the BOL, we note that in t he receipt report sent to these agencies. These numbers, although unique to USDA product, are not the only designation we use for TEFAP loads. We can access the TEFAP Requisition Status Report that indicates items that we have ordered and the status such as approved and delivery period. By contract the vendors/delivery brokers are required to give us a 48-hour notice prior to delivery. Moving forward, we will attach the TEFAP report sent to the respective state agencies in the event that either the 4000 or 5000 number is not on the BOL to the required retention paperwork for audit purposes. Person Responsible for Corrective Action: Norman Stafford, VP of Operations Anticipated Completion Date for Corrective Action: 8/14/26

Name of contact person: Renae Alston Corrective Action: The County will continue to train employees on a monthly basis and as needed when new and updated policies are received. Supervisors and lead workers will continue to conduct second party reviews and utilizing any findings to aid in training staff on any necessary policy information. The department will continue to implement changes as necessary to achieve the overall improvement of eligibility determinations. Proposed Completion Date: June 30, 2026

The organization will develop a policy on inventory acquisition, maintenance and disposal. Inventory will be conducted a prescribed by the funding source for Head Start it will be every two years in June of odd years, or when classrooms are relocated. Inventory will be reconciled with the last inventory taken. In addition, if prescribed by other funding sources the organization may do an annual inventory and reconcile it with the previous year as well. Disposal policies will include methods of disposition as required by the various funding sources. Responsible Individual: Chief Financial Officer - Scott Korba Estimated Completion Date: Fourth Quarter - ending Dec. 2026

The organization will develop a policy on inventory acquisition, maintenance and disposal. Inventory will be conducted a prescribed by the funding source for Head Start it will be every two years in June of odd years, or when classrooms are relocated. Inventory will be reconciled with the last inventory taken. In addition, if prescribed by other funding sources the organization may do an annual inventory and reconcile it with the previous year as well. A form will be created to ensure that all requirements of inventory are met: date of purchase, description of item, purchase price, vendor, location, grant award number. Responsible Individual: Program Directors Estimated Completion Date: December 2026, thereafter June of odd years

2025-001 Financial Reporting – Material Adjustments Criteria: Internal controls over financial reporting should be designed and implemented to ensure that financial statements are free from material misstatement, whether due to error or fraud, and that such misstatements are prevented or detected and corrected on a timely basis. Condition: During the audit, material audit adjustments were proposed and accepted by management. The adjustments were necessary to correct material misstatements in the financial statements that had not been identified by the organization’s internal control processes. Significant adjustments included: • Recording loan forgiveness, which corrected the overstatement of liabilities and understatement of revenues • Reclassifying HOME program assistance from revenue to deferred loan liability, which corrected the overstatement of revenues and changes in net assets and the understatement of liabilities • Reclassifying development costs from expenses to property and equipment, which corrected the understatement of assets and overstatement of expenses. Cause: The Organization’s internal control processes did not identify or correct these misstatements prior to the audit. This suggests certain review and reconciliation procedures may not be operating effectively. Effect: Financial statements generated from the accounting system and provided to the board may contain error(s), which could potentially affect decision-making and oversight. Auditor’s Recommendation: We recommend that management review and enhance its financial reporting processes, including implementing more robust review procedures and reconciliations, to help ensure that misstatements are identified and corrected prior to the audit. Auditee’s Response: Management agrees with this finding and agrees with the recommendation. Management will evaluate current procedures and implement improvements to strengthen the accuracy and completeness of financial reporting. Contact Person: Brad Hinkfuss Anticipated Completion: December 31, 2026

Corrective action planned: Complete the physical inventory of all offices; reconcile inventory results to the property subsidiary ledger; investigate any discrepancies identified, resolved and ensure all required inventory documentation is complete, including supervisory review and approvals, is maintained. Assets determined to be missing, obsolete, or no longer in service will be processed in accordance with MLSC’s property management procedures and the Financial Guide. Anticipated completion date: August 31, 2026.

This finding is due to the district inadequately maintaining property records for assets acquired under the Education Stabilization Fund – Elementary and Secondary Education that identify all of the property records elements not per federal guidance. Additionally, there was no indication that a physical inventory of the property acquired under the Education Stabilization Fund – Elementary and Secondary Education had been performed within the preceding two years.

2025-009 Airport Improvement Program, Infrastructure Investments and Jobs Act Programs, and COVID-19 Airports Programs - Assistance Listing Number 20.106 Recommendation: We recommend the City strengthen procedures and internal controls to ensure that all equipment acquired under the Federal program is accurately recorded and included in the annual inventory list, and that the annual physical inventory is reconciled to the equipment records. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding:  Airport created a new SOP for AIP Property Name(s) of the contact person(s) responsible for corrective action:  Kim Waldecker Planned completion date for corrective action plan:  7/30/2026

CORRECTIVE ACTION PLAN FINDING 2025-003 Finding Subject: Contact Person Responsible for Corrective Action: Katie Ritchie, Clerk Treasurer Contact Phone Number and Email Address: 260-347-7025, kritchie@kendallvillein.gov Views of Responsible Officials: Option 1: “We concur with the finding.” Description of Corrective Action Plan: The Clerk Treasurer will add the 16 airpacks to the asset list and will add any capital threshold assets purchased with federal funding to the asset list at the time of attainment going forward Anticipated Completion Date: August 1, 2026