Corrective Action Plans

Root Cause Analysis: The root cause of this finding was a misapplication of the approved indirect cost rate to the appropriate Modified Total Direct Cost (MTDC) base in connection with drawdown calculations. Although The EPI Center had an approved indirect cost rate and related policy in place, the operational procedures and system configurations necessary to consistently apply the methodology were still being refined and operationalized. The EPI Center notes that a formal, written Indirect Cost Rate Policy consistent with Uniform Guidance (2 CFR Part 200) was in place at the time of award. However, during the initial year of administering a federal award as fiscal agent, the procedures outlined in the policy were not fully operationalized. This resulted in a misapplication of the approved indirect cost rate. The overdraw resulted from applying the indirect cost rate to budgeted, rather than actual, direct expenditures. Management has since recalculated allowable indirect costs based on actual expenditures and has implemented enhanced controls to ensure accurate application of the MTDC base and compliance with federal requirements going forward. Response, with details: ☒Corrective Action Plan ☐Clarification Management acknowledges the misapplication of the approved indirect cost rate and has taken immediate steps to correct the calculation and ensure full alignment with federal requirements. Specifically, The EPI Center has recalculated indirect costs based on allowable expenditures within the Modified Total Direct Cost (MTDC) base and is actively engaging with the U.S. Department of Education to determine the appropriate resolution of the overdrawn amount. Management confirms that all underlying expenditures charged to the program were allowable, allocable, and supported by appropriate documentation, and no unallowable costs were identified. Corrective Actions Management has implemented the following corrective actions to address the issue and strengthen internal controls: 1. Training and Capacity Building (Completed - April 2026) Finance staff and senior leadership have completed targeted training on the application of indirect cost requirements under Uniform Guidance to reinforce compliance expectations. 2. Recalculation and Resolution of Overdraw (Implementation Initiated) The EPI Center has recalculated allowable indirect costs by applying the restricted 8 percent indirect cost rate for Teacher and School Leader Incentive Program (TSL) grants to actual expenditures incurred during the reporting period. The program officer has been informed of the miscalculation and resulting overdraw. The EPI Center will follow all applicable agency protocols upon receiving formal guidance from the U.S. Department of Education. Management is actively coordinating with the U.S. Department of Education to resolve the calculated overdraw and will comply with all agency guidance, including repayment of any amounts determined to be unallowable. Controls are now in place to ensure that all future drawdowns are calculated based on the approved indirect cost rate applied to the MTDC base and are subject to documented review prior to submission. 3. Standardized Indirect Cost Calculation Worksheets (Completed - April 2026) A standardized indirect cost calculation worksheet will be required and reviewed prior to approval of all drawdown requests. 4. Independent Oversight (Completed – June 2025) The EPI Center has engaged a third-party controller who will review and independently validate indirect cost calculations prior to submission, providing an added layer of oversight and control. Responsible Party: Finance and Compliance Manager, Third-party Controller, CEO Timeline for Completion: May 2026

Finding 2024-009: Reporting – Material Weakness Condition: As a result of the audit procedures, it was noted that the Organization did not maintain copies of performance-related reports submitted to the grantor for the Title V program. Corrective Action: Management is implementing a formal process to retain all supporting documentation for performance-related reports submitted to grantors in accordance with Federal requirements. NACA is also hiring and training a Grant Director to strengthen oversight of grant reporting, compliance, and documentation requirements. As part of the monthly and grant reporting process, staff will ensure that copies of all submissions are saved. A review step will also be added to confirm that all required documentation has been retained prior to final submission. Management will continue to evaluate and adjust processes as needed to ensure compliance and completeness. Name of Person Responsible: Walter McCullough, CFO and finance staff Anticipated Date of Completion: May 31, 2026

Finding 2024-008: Cash Management – Material Weakness Condition: As a result of the audit procedures, it was noted that the Organization did not retain copies of cost reimbursement reports submitted to the grantor for the Urban Health Clinic, Substance Abuse Prevention, and Title V programs. Corrective Action: Management is implementing a formal process to retain all cost reimbursement reports submitted to grantors in accordance with Federal record retention requirements. NACA is also hiring and training a Grant Director to strengthen oversight of grant reporting, reimbursement processes, and documentation requirements. This will include establishing a centralized and organized filing system, to ensure all submitted reimbursement reports are maintained and accessible. As part of the monthly reimbursement and grant reporting process, staff will ensure that copies of all submissions are saved and reconciled to the accounting records. A review step will also be added to confirm that all required documentation has been retained and properly organized prior to final submission. Management will continue to evaluate and adjust processes as needed to ensure compliance and completeness. Name of Person Responsible: Walter McCullough, CFO and finance staff Anticipated Date of Completion: May 31, 2026

UCM will develop and implement written procedures requiring that all financial reports submitted to federal awarding agencies or pass-through entities are prepared using actual expenditures recorded in UCM’s accounting system. Reported amounts will be reconciled to the general ledger and supported by appropriate documentation before submission, including general ledger detail, payroll records, accounts payable records, allocation schedules, invoices, receipts, proof of payment, and other records supporting the reported costs. UCM will implement a federal financial reporting checklist to document preparation, reconciliation, and review each report. The checklist will require verification that reported costs agree to actual expenditures, are recorded in the correct reporting period, are charged to the correct federal award, are supported by documentation, and are consistent with award terms and Uniform Guidance requirements. A qualified individual independent of the report preparation process will review and approve reports before submission, and evidence of review will be retained. Responsible for Corrective Action: Shruti Jha, Senior Director of Finance Gina Macanlalay, Director of Family Achievement Program Laura D’Ambrogi, Grants Manager Independent Reviewer (CEO, Finance Committee Chair, or another qualified reviewer) Anticipated Completion Date: December 31, 2026

VIEWS OF RESPONSIBLE OFFICIALS We are resolving these deficiencies by leveraging the new Government ERP system, scheduled for launch in July 2026. This platform will provide the essential functionality to properly configure our Chart of Accounts, ensuring that all TANF and PTTA administrative expenditures are automatically segregated by federal award and Assistance Listing Number (ALN). This system will be the foundation for accurate, traceable, and reconcilable financial reporting, supported by robust internal controls and multi-level supervisory oversight. Action Steps: 1. ERP Chart of Accounts Configuration – Configure the ERP system with a granular Chart of Accounts that strictly segregates TANF and PTTA administrative expenditures, ensuring every transaction is coded to the correct federal grant and ALN. 2. Automated Reporting Workflow – Utilize the ERP's financial reporting modules to generate ACF-196TR reports directly from the General Ledger, ensuring reported expenditures are 100% traceable to source transactions. 3. Digital Reconciliation Workpaper – Require the ERP to generate an automated "Reconciliation Package" for every ACF-196TR submission, which links reported line items directly to General Ledger accounts, eliminating discrepancies. 4. Staff Training & ERP Stabilization – Execute comprehensive training for all finance staff on the new ERP accounting structure, reconciliation modules, and federal reporting requirements, ensuring the system is utilized for full audit compliance. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget

VIEWS OF RESPONSIBLE OFFICIALS The Department of the Family and PR-DDS acknowledge the audit finding regarding the differences identified between the balances reported on Form SSA-4513, the PRIFAS accounting records, and the supporting documentation for unliquidated obligations. To address this issue, the following corrective actions will be implemented: 1. Monthly meetings will be held between the Department of the Family’s Finance staff and PR-DDS administrative and fiscal personnel to review and monitor all outstanding obligations and any differences identified between the PRIFAS records and the reports prepared for the Social Security Administration (SSA). 2. A formal monthly reconciliation will be performed between the balances reported on Form SSA-4513 and the financial records maintained in PRIFAS. Any discrepancies identified will be analyzed, documented, and supported with appropriate evidence. 3. Differences between the PRIFAS records and valid obligations that are not reflected in the system will be explained and documented in the comments section of Form SSA-4513, as applicable. 4. The review process for unliquidated obligations will be strengthened through periodic evaluations to identify obligations that should be modified, liquidated, or canceled in accordance with SSA requirements. 5. Written internal procedures will be developed for the preparation, review, and approval of Form SSA-4513, including the retention of supporting documentation necessary to substantiate the reported balances. Management further notes that certain obligations related to Medical Evidence of Record (MER) and Applicant Travel (AT) are authorized and monitored by PR-DDS before the related disbursements occur. These obligations are not recorded in the PRIFAS accounting system until payment is processed by the Special Payments Office (OPE). As a result, temporary differences may exist between the balances reflected in PRIFAS and the unliquidated obligations reported on Form SSA-4513. To address this situation, PR-DDS and the Department of the Family’s Finance Office have established a monthly reconciliation process to identify, document, and explain all temporary differences between PRIFAS records and the obligations maintained by PR-DDS. In addition, any significant differences will be properly disclosed and explained in the comments section of Form SSA-4513 and supported by the appropriate documentation. IMPLEMENTATION DATE The monthly meetings and formal reconciliation process began during Fiscal Year 2026 and will continue an ongoing basis. Expected Completion Date: September 30, 2026 RESPONSIBLE PERSON Ramón Luis Vargas Escalante Chief Accountant of Finance

VIEWS OF RESPONSIBLE OFFICIALS ADFAN appreciates the observations presented in the audit and acknowledges the importance of strengthening its reporting processes. The agency recognizes that staffing limitations within the Finance Division have affected the ability to perform timely reviews and ensure adequate segregation of duties. Additionally, the Finance Procedures Manual referenced during the audit was approved in 2009 and is currently undergoing a comprehensive revision to reflect the agency’s present operational structure and accounting practices. ADFAN is committed to improving its internal controls, enhancing staff training, and implementing the necessary measures to ensure full compliance with federal reporting requirements moving forward. IMPLEMENTATION DATE December 31, 2026 RESPONSIBLE PERSON Yazmín Cruz Colón, Budget Director

VIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to establishing a comprehensive internal control framework. We are prioritizing the development of formal written policies, the standardization of regional data reporting, and the implementation of a rigorous oversight system to ensure all TANF programmatic reports are complete, accurate, and filed on time. Action Steps: 1. Revise the Protocol of “TANF – Reporting Procedures Manual" that defines the full data lifecycle: collection, regional validation, quality control, supervisory review, and submission. 2. Regional Standardization – Establish mandatory, standardized templates for all regional offices to report programmatic data, ensuring uniformity and minimizing data entry errors. 3. Reporting Calendar & Oversight – Implement a master’s "Federal Reporting Calendar" that tracks all due dates for ACF-199, ACF-209, and other reports, with automated alerts sent to management 30 days prior to submission. 4. Training & Certification – Launch a mandatory training curriculum for all staff involved in reporting, focusing on 45 CFR Part 265 standards, data accuracy, and the consequences of reporting failures. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Blanca M. Medina Díaz Administrator Gerhil Medina Baez Auxiliary Administrator Operational Services Johana Hernandez Andaluz TANF Program Director

VIEWS OF RESPONSIBLE OFFICIALS To resolve this, we are integrating these reporting requirements into the new Government ERP system, scheduled for launch in July 2026. This platform will provide the capability to generate accurate General Ledger data and automated financial reports, ensuring that all LIHEAP performance data is traceable to verified accounting sources and subject to multi-level supervisory approval workflows. Action Steps: 1. ERP-Driven Financial Reporting – Configure the ERP system to generate General Ledger reports that align precisely with LIHEAP financial data requirements. The ERP will serve as the "Single Source of Truth," eliminating discrepancies between accounting and reporting. 2. Automated Reconciliation Workflows – Utilize the ERP’s native reconciliation engine to automatically match expenditure records against reported LIHEAP budget obligations, ensuring figures are accurate and validated before submission. 3. Segregation of Duties (SOPs) – Formalize protocols where the ERP system enforces mandatory "Preparer-Approver-Certifier" roles. This ensures that performance data compiled by program staff is independently validated against ERP financial records by a supervisor. 4. Training on ERP Reporting – Train all staff on how to use ERP reporting modules for financial data extraction and the new protocols for reconciling this data with programmatic LIHEAP performance metrics. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget Nesvia Fontanez Marín Principal Accountant Federal Reports

VIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to establishing a rigorous compliance framework to ensure all reported Maintenance-of-Effort (MOE) expenditures are internally consistent, fully supported by source documentation, and reconciled prior to submission. We will formalize these processes through new protocols and dedicated oversight to guarantee the integrity of our federal reporting IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget Nesvia Fontanez Marín Principal Accountant Federal Reports

VIEWS OF RESPONSIBLE OFFICIALS To resolve these systemic issues, the Government of Puerto Rico is transitioning to a new Enterprise Resource Planning (ERP) system, scheduled for live launch in July 2026. This modern platform will centralize our financial data and provide the necessary automation to ensure that all federal reports are accurate, traceable to source documentation, and subject to multi-level supervisory approval workflows. Action Steps: 1. ERP Implementation & Workflow – Deploy the new ERP system to centralize all financial accounting. The system will be configured to require distinct user roles for the preparation, review, and certification of federal reports. 2. Automated Traceability – Utilize ERP reporting tools to ensure all administrative expenditures are linked to valid source documentation (e.g., invoices, payroll registers), providing a clear audit trail from report to General Ledger. 3. Implement report validation tool – No federal report may be submitted until an independent, designated official has digitally validated the report against source accounting records. 4. Reconciliation SOPs – Formalize a written SOP requiring monthly reconciliations of reported federal expenditures against the ERP database. These reconciliations will be retained as evidence of review for audit purposes. 5. Training & Accountability – Conduct mandatory training for all staff on new reporting workflows and the importance of segregation of duties, ensuring all personnel understand their responsibility in maintaining accurate financial data. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget

VIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to a fundamental restructuring of our cash management lifecycle. By migrating drawdown processes into our ERP system, we will ensure that every request is supported by system-generated documentation, enforced through systematic segregation of duties, and fully reconciled against the general ledger in real-time. Action Step: 1. ERP-Based SOP Manual-Implement of the Procedure Manual of ERP system. This manual will supersede legacy documentation and clearly map every procedural step to a specific ERP function. 2. Systemic Segregation ERP is configurated to enforce mandatory "Preparer" and "Approver" roles. The system will prevent a single user from both creating and authorizing a drawdown request, ensuring logical segregation of duties. 3. Automated Reconciliation-Implement a system-level control where the ERP automatically reconciles drawdown requests. Any variance will trigger a "Pending Review" flag, preventing unauthorized processing. 4. Real-Time Supervisory Review-Require supervisors to conduct an audit of all drawdown documentation directly within the ERP interface. No request will be released for funding without a digital system approval following a reconciliation review IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget

VIEWS OF RESPONSIBLE OFFICIALS ADFAN concurs with the finding. The agency acknowledges the requirement to maintain written procedures in accordance with 2 CFR §200.302, including procedures related to cash management and the determination of allowable costs under federal awards. The condition identified was impacted by limited staffing resources within the Finance Area, which affected the timely completion and formalization of the required written procedures. In addition, the Finance Procedures Manual is currently under review and revision to ensure compliance with Uniform Guidance requirements and to strengthen internal controls over federal programs. As corrective action, ADFAN is completing the update and formalization of the Finance Procedures Manual, which will incorporate the written procedures required by Uniform Guidance. Upon completion, the revised manual will be formally approved, communicated to relevant personnel, and implemented across the agency. Management will also continue assessing staffing needs and resource allocation within the Finance Area to support the ongoing maintenance and monitoring of financial policies and procedures. IMPLEMENTATION DATE December 31, 2026 RESPONSIBLE PERSON Rafael López Arocho Assistant Administrator on Administration

VIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to transitioning from manual, offline tracking to a fully integrated, system-based approach within our Enterprise Resource Planning (ERP) system. Action Step: 1. ERP System Configuration: Configure the ERP system to automatically flag and categorize transactions eligible for indirect cost calculation by class object, replacing manual Excel-based methods. 2. Indirect Cost SOP-Develop and implement written formal procedures detailing the extraction of data from the ERP, ensuring traceability back to the source transaction IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget

VIEWS OF RESPONSIBLE OFFICIALS ADSEF acknowledges the findings regarding weaknesses in the Random Moment Sampling (RMS) methodology used for allocating administrative costs. We conclude that the absence of formal written procedures, combined with insufficient communication between the Human Resources Appointments Office and the Finance Division, has contributed to inaccuracies in the distribution of administrative expenses across federal programs. ADSEF reaffirms its commitment to strengthening its cost allocation plan to ensure that only allowable costs, directly associated with the administration of federal awards, are charged to the TANF program, in strict compliance with 2 CFR §200.302. Action Steps: 1. Policy Formalization Develop, approve, and implement a comprehensive Standard Operating Procedure (SOP) that formalizes the RMS methodology, including clear and standardized definitions for all survey response categories. 2. HR–Finance Liaison Establish a structured monthly reporting protocol between the Human Resources Appointments Office and the Finance Division to ensure the RMS participant list remains accurate, complete, and current. 3. RMS Questionnaire Update Revise the RMS questionnaire to remove non-federal program selections and ensure that all response options align directly with federally allowable functions. 4. Quarterly Oversight Institute a mandatory quarterly review of RMS results by senior management to validate alignment between RMS survey data and accounting system allocations IMPLEMENTATION DATE March 31, 2027 RESPONSIBLE PERSON Eddie J. Burgos Auxiliary Administrator for Finance and Budget Coral M. Caceres Alvarez Auxiliary Administrator Human Resources Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget Gerhil Medina Baez Auxiliary Administrator Operational Services Rafael Acosta Sepulveda Program Director

VIEWS OF RESPONSIBLE OFFICIALS The data will be evaluated by the IT department to verify the controls in place at the time the files identified as duplicates were issued. Regarding the issuance, the IT department acknowledges an error in the file transmission, which resulted in the information not being matched against the issuance. The data will be available as reference for evaluation. For reconciliation purposes, work will be performed efficiently and within the established timeframes to ensure that all transactions are recorded promptly in the system. This will enable the accurate completion of the reconciliation process, as well as the recording of issuances and any other related transactions, in accordance with established procedures. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Blanca M. Medina Díaz Administrator Eddie J. Burgos Auxiliary Administrator for Finance and Budget Carlos Martinez Colón Finance Director Vanessa Ayala Gerena Director of Budget Carmen Ramírez IT Director

Incorrect Grant Drawdown - Allowable Costs/Reporting - Assistance Listing Numbers: 93.224 and 93.527 Consolidated Health Center Cluster Type of Finding: Material Weakness in Internal Control Over Compliance Cause: Controls designed to ensure grant expenditures were properly aligned with the correct federal award prior to drawdown were not operating effectively, and procedures for identifying, reporting, and correcting drawdown errors were not consistently applied. Corrective Actions: 1. Strengthen internal controls over grant drawdowns by implementing procedures to ensure expenditures are reviewed and reconciled to the appropriate federal award prior to requesting funds. Management should also establish formal procedures for timely identification, documentation, and communication of drawdown errors to the awarding agency when identified.

Recommendations: Management should establish formal procedures requiring documented authorization for all disbursements and ensure that such approvals are retained in an organized and accessible manner. Additionally, the Organization should implement procedures requiring formal documentation of employee compensation arrangements, including established pay rates, and ensure that this documentation is consistently maintained and readily available for audit and compliance purposes. Views of responsible officials and planned corrective actions: Management agrees with the finding and indicates that it will implement formal approval procedures requiring documented authorization for all disbursements and will retain such documentation within its accounting records. Management also plans to implement standardized employment agreements and compensation authorization documentation for all employees and strengthen document retention practices to ensure compliance with federal requirements. Anticipated Completion Date: September 30, 2026

All federal programs requiring engineering assistance will be also be tracked internally for compliance.

The District concurs with the finding and acknowledges the importance of maintaining complete and accessible documentation to support federal expenditures, compliance activities, reimbursement requests, and financial reporting in accordance with Uniform Guidance requirements. The condition identified in the audit resulted from grant management, documentation retention, and accounting practices that existed prior to the current administration. During fiscal year 2025-2026, the District implemented significant corrective measures to strengthen federal grants management, financial oversight, documentation retention, and compliance monitoring. The District established enhanced grant administration procedures designed to improve the organization, retention, and accessibility of grant records. Grant expenditures, reimbursement requests, budget monitoring documents, approval records, and supporting documentation are now maintained in centralized electronic files to improve audit readiness and support compliance monitoring activities. In addition, the District strengthened coordination among program administrators, the Business Office, and District administration to improve oversight of federal grant activity. Grant budgets, expenditures, reimbursements, and compliance requirements are reviewed on an ongoing basis to ensure expenditures are properly supported, allowable, and consistent with grant requirements. The District has also implemented procedures to improve grant-level tracking and monitoring of revenues and expenditures and has worked to ensure that grant activity is supported by documentation sufficient to demonstrate compliance with applicable federal requirements. Efforts have been made to strengthen record retention practices, improve financial reporting by grant award, and maintain documentation necessary to support future audit and monitoring activities. The District will continue to formalize written procedures governing federal grant administration, accounting, reconciliation, reimbursement processing, documentation retention, and compliance monitoring. Staff responsible for grant administration will continue to receive guidance and training regarding documentation and record retention requirements. The District believes that the corrective actions implemented during FY26 have substantially strengthened internal controls over federal grants management, documentation retention, and financial reporting and have significantly improved the District's ability to demonstrate compliance with federal program requirements.

Finding 2024-002 – Untimely and Inaccurate Preparation of the Schedule of Federal Awards (SEFA) (Sig-nificant Deficiency) Financial Reporting / Internal Control Over Compliance CFDA Title and Number: 97.036 Public Assistance Program – Disaster Grants Name of Federal Agency: Federal Emergency Management Agency (FEMA Internal Control over Compliance: Skills Knowledge and Education (SK&E) CFDA Title and Number: 66.202 Wastewater Treatment Plant Name of Federal Agency: U. S. Environmental Protection Agency Internal Control over Compliance: Skills Knowledge and Education (SK&E) Criteria: The Uniform Guidance (2 CFR §200.510(b)), requires the auditee to prepare a Schedule of Federal Ex-penditures of Federal Awards (SEFA) that accurately reports federal expenditures for each federal award, including the Assistance Listing number, federal agency, pass-through entity (if any), and amount expended for the fiscal year. In addition, (2 CFR §200.302(b)), requires financial management systems that provide for accurate, current, and complete disclosure of federal award expenditures and support reliable financial reporting and reconciled to the general ledger. Condition: The auditee did not timely or accurately prepare the Schedule of Expenditures of Federal Awards. Specifically: • The initial SEFA provided to auditors was significantly later than the requested date, and required signifi-cant auditor inquiry and assistance to complete. • Management did not demonstrate an understanding of the dates and amounts of federal expenditures to be reported on the SEFA. • The SEFA provided to auditors did not include all federal awards. • Required Assistance Listing numbers were not included for federal programs. • The format of the SEFA was not easily reconcilable to the general ledger, and required auditor-identified corrections and adjustments in order to fairly present federal expenditures in accordance with federal re-quirements. Cause: The condition resulted from: • An insufficient understanding of SEFA preparation requirements, including which expenditures to report and how federal awards should be presented; and • Inadequate internal controls over the preparation, review, and reconciliation of the SEFA to the account-ing records. Effect or Potential Effect: As a result of these conditions: • There was an increased risk that federal expenditures were incomplete, inaccurate, or improperly re-ported. • Management’s ability to determine total federal expenditures, for the fiscal year, including evaluation of Single Audit applicability, was impaired. • The entity relied on auditor assistance to identify omitted awards, reconcile amounts and bring the SEFA into compliance with federal reporting requirements, indicating a lack of effective internal controls over federal financial reporting. Questioned Cost: None noted here. Repeat of a Prior-Year Finding: No Recommendation: We recommend the entity strengthen its internal controls over federal financial reporting by: • Developing and documenting procedures for the timely preparation of the SEFA, including identification of all federal awards, correct Assistance Listing numbers, and determination of reportable expenditures. • Establish a process to reconcile the SEFA to the general ledger and to supporting records to ensure com-pleteness and accuracy. • Providing training to appropriate personnel regarding Uniform Guidance SEFA requirements and the de-termination of federal expenditures for reporting and audit threshold purposes. • Establish cutoff procedures to capture year-end accruals/deferred items and ensure completeness of ex-penditures for the SEFA. Views of Responsible Officials: Port of Brookings Harbor acknowledges this finding. Management recognizes that it did not fully understand SEFA reporting requirements. Management is committed to enhancing its under-standing of federal reporting requirements and strengthening internal controls to ensure future SEFA’s are prepared accurately, completely, and in a timely manner. Corrective Action Plan: While the Port disagrees with the characterization that the SEFA preparation was untimely, the Port acknowledges that inaccuracies were present in the report. The inaccuracies occurred because the Port believed it was following the direction and guidance contemplated in the Municipal Auditing Services Proposal provided by Umpqua Valley Financial, LLC, which indicated time would be dedicated to assisting the Port with grant administration regulations and related compliance requirements. Nevertheless, the Port accepts responsibility for strengthening its internal processes and will immediately develop and implement formal procedures for timely and accurate SEFA preparation. In addition, the Port will provide Uniform Guidance and SEFA training to appropriate perso,mel to improve compliance and federal financial reporting practices. The Port has attached a copy of the Municipal Auditing Services Proposal from Umpqua Valley Financial, LLC to demonstrate that the Port proactively sought guidance well in advance of the completion of the fiscal year and prior to the commencement and finalization of the audit process. Port Management remains committed to improving its understanding of Uniform Guidance requirements and strengthening its federal financial reporting and grant compliance practices moving forward. Sincerely, Travis Webster Port Manager

The Village will establish formal UG policies and procedures.

The City will review the requirements for written policies and will adopt policies, as needed, or will revise its current policies as needed to comply with Uniform Guidance.

Management has reviewed the finding and recommendations. We note that this item was identified as a repeat issue primarily due to the timing of the prior year's audit. Because the FY23 findings were delivered after FY24 had already concluded, the Organization did not have the opportunity to incorporate the auditors' feedback during the FY24 audited period. However, the Organization took immediate, proactive steps to deploy enhanced internal controls for FY25 to ensure continuous alignment with federal standards. To ensure strict adherence to 2 CFR § 200.302(a), we are actively implementing a more regular reconciliation process between government grant revenue claimed and actual revenue earned. As a key part of this initiative, the Organization has developed and deployed new internal financial tools designed to incorporate automation into our daily workflows. By utilizing these automated tools-such as standardized templates for recording cash receipts and systematically clearing Accounts Receivable-we have significantly enhanced the accuracy of our data entries and reduced the risk of manual misstatements. Our ongoing objective is to leverage these tools to establish clear, standardized documentation procedures, ensuring that all financial reports and claims are consistently generated from a reconciled general ledger. Management remains fully committed to dedicating the necessary time and resources to mature these financial controls and ensure robust compliance with federal regulations.

The Parish has written a Standard Operating Procedure for "Grant Maangement - Financial Reporting & Reconciliation" which outlines the role of the Finance Department in monitoring grant activities including measures to ensure correct general ledger coding for budget planning, complete and accurate recording of grant expenditures and revenues, and administrative review to confirm reconciliation of grant activities against the general ledger on a monthly basis.