Corrective Action Plans

Inadequate Support for Benefit Accuracy Measurement Reviews - UI - DLI - The Montana Department of Labor and Industry began retaining copies of the on-demand report generated from the Sun System upon learning of the concern. This process continued until October 2024, when staff confirmed that the newly developed view in the Montana Unemployment System Enhancement (MUSE) system was functioning as intended. The MUSE system now includes a real-time interface that compares its data with the Sun System, providing staff with immediate information to monitor the volume of items selected for workload sampling. Responsible Party - Robin Graham, Central Services Division Administrator, Montana Department of Labor and Industry Target Implementation Date - 12/31/2026

Inaccurate Federal Reporting - UI - DLI - The Montana Department of Labor and Industry has made several revisions to the Employment and Training Administration (ETA) 2112 preparation and reconciliation process. Additional notations have been added to the existing ETA 2112 preparation workbook, along with screenshots to assist the preparer with accuracy. Unemployment Insurance transactional tasks have been re-assigned to the appropriate accounting and budgeting staff to improve workflow. An additional separate but collaborative bank-to-SABHRS reconciliation has been incorporated into the process. Monthly Unemployment Insurance process meetings have been reinstated for all staff who perform tasks that impact the preparation and reconciliation of the ETA 2112 report. The purpose of these meetings is to discuss any issues regarding the process and to check in on the completion of the report and its components. The department will be engaging with a sister state that uses the same vendor software for its Unemployment Insurance system in an information-sharing session. The designated state has staff experienced in ETA 2112 preparation and submission, and department staff hope to confirm that the system report utilized in the process reflects accurate data. The department has also re-engaged a previously procured vendor to conduct a reporting accuracy and efficiency assessment of the Unemployment Insurance Program. Responsible Party - Robin Graham, Central Services Division Administrator, Montana Department of Labor and Industry Target Implementation Date - 12/31/2026

Inadequate ACF-199 Reporting Controls - TANF - DPHHS - The Montana Department of Public Health and Human Services implemented additional internal controls over the ACF-199 reports in December 2024 and completed this corrective action. This implementation was in response to the prior audit, and the corrective action plan should have been included with that audit. The timing of the implementation occurred between the prior audit and the current audit period. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 12/31/2024

Inaccurate ACF‑204 Reporting Controls - TANF - DPHHS - The Montana Department of Public Health and Human Services revised its instructions and implemented a mandatory review checklist on August 26, 2026. The updated process includes enhanced review steps and requires formal sign-off by both the program manager and the Temporary Assistance for Needy Families (TANF) unit designee prior to final report submission to ensure data accuracy. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 8/26/2026

Inaccurate RSA-911 Case Service Report - Voc Rehab - DPHHS - The Montana Department of Public Health and Human Services strengthened internal controls in August 2026 to ensure employment start dates are consistently and accurately captured in the RSA-911 report. The employment start date information was present in the department's case management system (Madison) and in case documentation; the condition arose in the system's reporting extraction layer, which caused accurate underlying data to be misstated in the submitted report. Because approximately 75 percent of cases in each RSA-911 submission carry forward from one reporting cycle to the next, the defect in the reporting layer affected multiple reporting periods. The department corrected the system's program field data in August 2026, prior to submitting the April through June 2026 RSA-911 report due that month. The department also implemented a validation check to detect and correct mismatches in future reports. The department has implemented corrective action and is working with its federal grantor agency to correct the reports submitted in fiscal year 2026. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 8/21/2026

Inadequate 1505-029 Reporting Controls - HAF - Commerce - The Montana Department of Commerce updated the Homeowners Assistance Fund reporting procedure to strengthen internal controls by requiring supervisory verification of all quarterly and annual reports. These updates ensure all reports are complete, accurate, and fully documented prior to submission. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 7/1/2026

Noncompliant Annual Reporting Controls - ESSER - OPI - The Montana Office of Public Instruction concurs with the finding. The grant is closed, and the temporary grant-funded staff are no longer with the agency. Moving forward, new grant managers will receive clearer direction on the agency’s internal controls. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Noncompliant FFATA Reports - ESSER - OPI - The Montana Office of Public Instruction concurs with this finding. This grant is closed. For all future reporting under the Federal Funding Accountability and Transparency Act, the Office will update internal guidance to align with federal regulations and federal oversight requirements. The Office will ensure that required documentation is maintained and that reconciliations verify values in USAspending and SAM. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Deficient FFATA Controls - Disaster Grants - DMA - The Montana Department of Military Affairs, Disaster and Emergency Services Division concurs with the finding. The division has implemented changes in response to prior audit finding 2023-073. When federal reporting systems were updated in March 2025, the division adjusted its internal processes to align with the System for Award Management (SAM) and trained additional staff to reduce late and inaccurate reporting. Corrective actions have been implemented, and the required appendix is currently under review for approval. Responsible Party - Janae Brower, Chief Financial Officer, Montana Department of Military Affairs Target Implementation Date - 10/31/2026

Misstated Obligation Reporting - SLFRF - GOV - The Montana Governor's Office of Budget and Program Planning does not agree that this matter represents material noncompliance. As the finding itself confirms, cumulative obligations were accurate as of the federal December 31, 2024 obligation deadline. No evidence supports the assertion that Treasury drew any incorrect conclusions from the one-quarter reporting delay, and the statement that the federal government “may have concluded” funds would be returned is speculative rather than fact based. The Office maintained documented controls over SLFRF administration and reporting, and the assertion that the Office had “no control” for verifying current obligations is factually incorrect, as the finding itself describes multiple control activities, including portal validations, MOU delegations, SABHRS budgetary accounting limitations, and standardized form checks. Additionally, the auditors identified no unsupported obligations under these controls or from the Office's interagency agreements, demonstrating that the Office’s control environment provided adequate assurance over current obligations and that additional internal audit procedures were not warranted given the low assessed risk of noncompliance before the obligation deadline. Ultimately, the one-quarter timing difference reflected a prudent and immaterial verification of accumulating budgetary reservations under newly issued Treasury guidance and had no impact on current or future financial integrity, state or federal appropriations, federal program outcomes, or compliance with cumulative obligation reporting requirements. Responsible Party - Chet McLean, Internal Control Coordinator, Montana Office of the Governor and Lieutenant Governor Target Implementation Date - N/A

Untimely Eligibility Determinations - CHIP - Medicaid - DPHHS - The Montana Department of Public Health and Human Services prioritized safeguarding continuous coverage for eligible Montanans during the unwinding period while working to minimize delays for new applicants. No questioned costs were identified in connection with this finding, underscoring that the issue was related to processing timeliness rather than improper payments. To ensure timely eligibility determinations going forward, the department implemented case-based processing in May 2026 that prioritizes cases based on aging and processing timelines, along with business processes to communicate with clients regarding necessary documentation for eligibility determinations. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 5/15/2026

Inadequate Internal Controls Over Certified Payrolls - AIP - DOA - The Montana Department of Administration partially concurs with the finding. While the department oversees construction activities, it has consistently informed agencies that they retain responsibility for grant administration and federal reporting for grants awarded directly to them. Each agency is responsible for notifying the Department of all applicable grant requirements, guidance, and restrictions. In this instance, the department understood that the Montana Department of Transportation approved invoices reflecting the federal and non-federal funding split only after receiving the contractor’s Statement of Compliance for all pay periods included in the invoicing period. Due to limited time to respond to the audit finding, the department was unable to confirm with its contracted engineering firm the specific dates the certified payrolls were received and verified. To strengthen future compliance, the department will include language in project memoranda of understanding assigning responsibility for federal wage-rate compliance and record keeping to the agency that received the federal grant. The department will also implement internal controls requiring agencies to confirm that certified payroll requirements have been verified before payments are processed. Responsible Party - Russell Katherman, Administrator of Architecture and Engineering , Montana Long Range Building, Montana Department of Administration Target Implementation Date - 12/31/2026

Inaccurate Federal Reporting - AIP - MDT - The Montana Department of Transportation will update its procedures and add a secondary review process for the 2026 report submission. The procedures will also be revised to clarify the analysis and reporting of payments and revenues to ensure compliance. Responsible Party - Kimberly Doherty, Accounting Systems Supervisor, Montana Department of Transportation Target Implementation Date - 12/31/2026

Inaccurate Federal Reporting - AIP - MDT - The Montana Department of Transportation will be reviewing and updating its SF425 and SF270 procedures and adding a secondary review. This process began in January 2025, and the updated procedure will be completed by December 2026. Responsible Party - Kimberly Doherty, Accounting Systems Supervisor, Montana Department of Transportation Target Implementation Date - 12/31/2026

Noncompliant FFATA - Innovation Waivers - SAO - The Montana State Auditor’s Office concurs with the finding. The Office has provided additional training to the team responsible for administering the State Innovation Waiver grant. The Office has also strengthened its procedures for monitoring award notices to ensure that reports required under the Federal Funding Accountability and Transparency Act are submitted no later than the end of the month following the month in which an obligation is made. Responsible Party - Amber Long-Thorvilson, Chief Financial Officer, Montana State Auditor's Office Target Implementation Date - 9/1/2026

Inaccurate FISAP Reporting - SFA - MSU - The Montana State University – Bozeman partially concurs. The University concurs that additional efforts can be made to ensure data elements are reported accurately. The University has operated with transparency regarding known challenges in validating the FISAP report with the Federal Student Aid office for the Federal Perkins Loan program dating back to 2019. Reporting for the Perkins Loan, which has been discontinued, now focuses on repayment activity, and the December cash‑on‑hand update is accurate for the distribution of asset calculation. The Montana State University – Billings acknowledges that tuition and fee amounts reported on FISAP Part II, Section E, Lines 22a and 22b for award years 2022-23 and 2023-24 were based on estimates derived from undergraduate and graduate enrollment percentages rather than actual tuition and fee assessments as required by FISAP instructions. To correct this issue, the University will discontinue the use of formulated allocations and implement a process that uses actual tuition and mandatory fee assessment data for students reported in FISAP Part II, Section D. Financial Aid will work with Financial Services, Institutional Research and Business Services to develop a report that identifies actual assessed tuition and fees, net of applicable refunds, and separately reports undergraduate and graduate amounts. To prevent recurrence, the University will establish an independent review of the tuition and fee calculations before each FISAP submission. The review will verify that the reported amounts are based on actual student charges, properly classified by student level, and consistent with FISAP reporting requirements. These actions will ensure future FISAP submissions comply with federal reporting instructions and accurately reflect actual tuition and fee assessments for the reported student population. Responsible Party - James Broscheit, Director of Financial Aid, Montana State University - Bozeman Justin Beach, Director of Financial Aid & Scholarships, Montana State University - Billings Target Implementation Date - 10/31/2026

Inadequate FISAP Reporting Controls - SFA - UM - The Montana Technological University will establish a centralized repository and require supporting documentation for all key FISAP report line items to be retained in that location. The Helena College will establish automated procedures to reduce manual processes, as well as a centralized repository for supporting documentation pertaining to all FISAP report line items. The University of Montana - Western will establish a procedure for documenting the required tuition and fees line items that must be reported on the FISAP and that correspond to the student population reported in Section D of the FISAP. The University of Montana - Missoula will strengthen FISAP reporting controls by formalizing procedures, improving documentation retention, centralizing supporting records, and implementing additional review of reported data before submission. The university is also exploring improvements to reporting and data-management processes to support accurate and reliable reporting. Responsible Party - Carleen Cassidy, Director of Finance and Budget, Montana Technological University Valerie Curtin, Executive Director of Compliance & Financial Aid, Helena College of Technology - University of Montana Louise Driver, Financial Aid Director, University of Montana - Western Morgan Hahn, Interim Financial Aid Director, University of Montana - Missoula Target Implementation Date - 9/30/2026

Inadequate HDS System Access Controls - HVC - Commerce - The Montana Department of Commerce has developed a user access review procedure to be performed semiannually. The first review was completed in June 2026. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 12/16/2026

Inadequate HAPPY System Access Controls - HVC - Commerce - The Montana Department of Commerce began conducting user access reviews during the audit period. The department’s Chief Information Officer updated the Access Control Policy and distributed it to all employees. Staff received training on access control requirements on May 28, 2026. The department plans to obtain a new vendor to replace the HAPPY system by October 2028. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 10/31/2028

Inadequate HQS Inspection Controls - HVC - Commerce - The Montana Department of Commerce has updated its inspection procedures to clearly outline requirements, including annual reexaminations. While the department may have lacked documentation of certain monthly reports, both the fiscal year 2024 and fiscal year 2025 Section 8 Management Assessment Program Indicator 12 inspection reviews received all available points. The department is also transitioning to the National Standards for the Physical Inspection of Real Estate (NSPIRE) model for inspections. Staff completed training on June 16, 2026, and have begun using the federal inspection checklist to ensure compliance with current standards. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 9/18/2025

Inadequate FASS Reporting Controls - HVC - Commerce - The Montana Department of Commerce has developed procedures for the Financial Assessment Subsystem (FASS) reports to ensure they are complete and accurate and that the reviews of these reports are sufficiently documented. Responsible Party - Ingrid Mallo, Chief Financial Officer, Montana Department of Commerce Target Implementation Date - 8/20/2026

Noncompliant FFATA Reports - Nutrition - OPI - The Montana Office of Public Instruction does not concur with the portions of the finding related to historical reporting issues that were fully resolved in the prior audit, including the deletion of historical reports and resubmission of final versions. Earlier discrepancies resulted from concurrent reports within the federal reporting system, which caused amounts to duplicate. Federal partners verbally confirmed the system correction, and SAM.gov was updated at the beginning of fiscal year 2026. These issues were attributable to federal system functionality rather than to the Montana Office of Public Instruction, and reporting was completed as directed. The Office concurs with the portion of the finding involving discrepancies associated with prior‑period adjustments. After awards were liquidated and closed, the Office submitted final reports using complete expenditure data. Subsequent adjustments created differences between the Office’s internal records and federal reporting. For ALN 10.582, the Office concurs with the finding but does not agree that the Office is responsible. SAM.gov did not recognize the Federal Award Identification Number, preventing submission of required reports. This issue was later identified as a broader system problem affecting agencies nationwide. To address the recommendation, the Office will update internal FFATA guidance to ensure continued compliance with federal requirements. Documentation will be retained, and reconciliations will verify values reported in both USAspending and SAM.gov. These actions strengthen internal controls and support timely, accurate reporting. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Noncompliant FFATA Reports - CCDF - DPHHS - The Montana Department of Public Health and Human Services partially concurs. The department agrees that internal control deficiencies existed in its subaward reporting processes under the Federal Funding Accountability and Transparency Act (FFATA) during fiscal years 2024 and 2025, and that instances of noncompliance occurred. The department does not concur with the quantified extent of the exceptions, including report counts and reporting figures. The department has been unable to replicate the amounts noted and did not receive sufficient detail, as outlined in 2 CFR 200.516(b), to fully understand the specific errors identified. In response to a prior audit recommendation, the department implemented corrective actions to strengthen its internal controls and review processes. These actions included enhanced oversight and the identification and correction of duplicate and inaccurate records. Many of these duplication issues originated from data quality challenges within the former federal reporting system. When the federal reporting system transitioned to the System for Award Management in state fiscal year 2026, many of those data quality concerns were eliminated. The department corrected most of the duplicated and inaccurate records that migrated from the former system to the new one. The department also enhanced its internal controls and revised its policies and procedures for reporting under FFATA. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 7/23/2025

Contact Person: Amy Boothe Management’s Response: Management acknowledges that the required financial report was submitted after the established due date. The delay was an isolated occurrence and did not affect the accuracy or completeness of the information reported. To address the finding, management will strengthen its grant monitoring process by incorporating a review of financial reporting requirements and associated due dates into quarterly grant meetings. During these meetings, upcoming reporting requirements will be reviewed, responsible parties will be identified, and submission deadlines will be monitored to ensure required reports are completed and submitted timely. This additional oversight is intended to prevent recurrence and support compliance with grant reporting requirements. Completion Date: 9/30/2026

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