Corrective Action Plans

Finding Number: 2025-001 Condition: The Authority did not provide sufficient evidence that there was adequate monitoring of subrecipients. Planned Corrective Action: SMART has implemented a subrecipient review schedule and created a monitoring checklist. All entities receiving any passthrough funding from SMART are included on the schedule. This will ensure no missed subrecipients, including Monroe agencies. The new checklist will ensure all required monitoring activities are considered during the review and will document all monitoring performed. SMART believes this new schedule and checklist will satisfy all federal monitoring requirements. Contact person responsible for corrective action: Ryan Byrne, CFO; Allyssa Gartrelle, Manager of Community Mobility Programs Anticipated Completion Date: 6/30/2026

Item: 2025-002 Assistance Listing Number: 93.332 Program: Cooperative Agreement to Support Navigators in Federally-Facilitated Exchanges Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: N/A Pass-Through Grantor Identifying Number: N/A Award Year: August 27, 2021 through August 26, 2024; August 27, 2024 through August 26, 2029 Compliance Requirement: Subrecipient Monitoring Criteria: In accordance with 2 CFR 200.332 (e), (g) and (h) - pass-through entities must monitor subrecipient activity through reviewing financial and performance reports, verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. Condition: While AACHC performed several of the required subrecipient monitoring tasks, AACHC’s system of internal controls did not include a process to monitor the subrecipients’ financial and performance reports by verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. Name of Contact Person: Brenda Hanserd, CFO Phone Number: 602-288-7559 Anticipated Completion Date: March 31, 2026 Views of Responsible Officials and Corrective Action Plan: AACHC will update their subrecipient monitoring policies and procedures to specifically include a process to monitor subrecipient activity through reviewing financial and performance reports, verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. AACHC will also regularly attend trainings on the Uniform Guidance to ensure they are knowledge of the required compliance procedures.

Item: 2025-001 Assistance Listing Number: 21.027 Program: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of the Treasury Pass-Through Agencies: Maricopa County Pass-Through Grantor Identifying Number: None Award Year: November 1, 2021 through September 30, 2026 Compliance Requirement: Subrecipient Monitoring Criteria: In accordance with 2 CFR 200.332 (e), (g) and (h) - pass-through entities must monitor subrecipient activity through reviewing financial and performance reports, verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. Condition: While AACHC performed several of the required subrecipient monitoring tasks, AACHC’s system of internal controls did not include a process to monitor the subrecipients’ financial and performance reports by verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. Name of Contact Person: Brenda Hanserd, CFO Phone Number: 602-288-7559 Anticipated Completion Date: March 31, 2026 Views of Responsible Officials and Corrective Action Plan: AACHC will update their subrecipient monitoring policies and procedures to specifically include a process to monitor subrecipient activity through reviewing financial and performance reports, verifying that subrecipients are audited if they meet the single audit criteria, and ensure that subrecipients take corrective action on single audit findings. AACHC will also regularly attend trainings on the Uniform Guidance to ensure they are knowledge of the required compliance procedures.

Views of Responsible Officials: Management acknowledges the condition noted regarding the pre-award risk assessment. ICFJ is committed to ensuring that all subrecipient monitoring procedures are followed consistently and documented completely. Going forward, a pre-award risk assessment will be completed and approved for all subrecipients prior to execution of any subaward agreement. ICFJ will also ensure that all subrecipient reporting includes the name and date of the submitter and reviewer, and that applicable RCA audits are obtained and reviewed annually with documentation of that review maintained on file.  Anticipated completion date: 9/30/26  Responsible position: Chief Financial Officer

Contact Person(s): Brianna Mariani - BriannaMariani@housinghope.org Kathryn Opina - KathrynOpina@housinghope.org Explanation and specific reasons for disagreement with the audit finding or that corrective action is not required (if applicable): N/A Corrective action planned: This was the first and only grant Housing Hope has administered that required subrecipient monitoring. The grant has since ended and the organization does not anticipate entering any future agreements that would require subrecipient monitoring. To ensure compliance should such an agreement arise again, Housing Hope adopted a Subrecipient Monitoring Policy. This policy outlines the criteria for identifying subrecipient relationships and establish a standardized process for monitoring subrecipients, if any are engaged in the future. Anticipated completion date: The Subrecipient Monitoring Policy was adopted October 2025 by the Board.

2024-003 Program: WIOA Cluster Federal Financial Assistance Listing Number: 17.258, 17.259, 17.277, 17.278 Federal Grantor: U.S. Department of Labor Pass-Through: California Department of Employment Development Award No. and Year: AA011008 and 2019 Compliance Requirements: Subrecipient Monitoring Type of Finding: Material Weakness Management’s or Department’s Response: Imperial County Workforce Development Office (ICWDO) agrees with the finding. Views of Responsible Officials and Corrective Action Plan: The questions from finding 2021-008 relate to a formalization of the fiscal processes and protocols. ICWDO operates under WIOA guidelines and follows Imperial County’s fiscal policies. Internal policy will be formally updated to reflect compliance with WIOA regulations, as well as Imperial County policies. These policies will include formal controls and procedures to evaluate each subrecipient’s risk of noncompliance. Once the formal procedure is drafted, it will go through the ICWDO Policy Committee for comment and direction, and then finally reviewed and approved for implementation by the full Workforce Development Board. Additionally, for any future Memorandums of Understanding (MOUs) between this Imperial County department and any outside agency, there will be an additional step to include review by Imperial County Counsel to reflect that recital around the funding source will specify the following required information: • Federal Award Identification Number • Federal award date of award to recipient by the Federal agency • Name of Federal awarding agency • CFDA Number • Specific identification of whether the award is research and development ICWDO will develop internal policies for formalizing all subrecipient monitoring process. ICWDO operates under WIOA guidelines for monitoring; therefore a formal internal policy for future contracts will be developed and implemented using the usual review and approval procedures followed by the department. ICWDO will develop a formal internal documentation system, with appropriate checks and signatures, for the evaluation and assessment of each subrecipient’s risk of noncompliance. ICWDO will utilize this formal process to properly document the risk assessment of all subrecipients. ICWDO anticipates to implement the corrective action by December 31, 2025. Name of Responsible Person: Priscilla A Lopez, ICWDB Director Implementation Date: December 31, 2025

Concur: · 8 instances where the Government was unable to obtain Quarterly Progress Reports. As a result of the audit finding and in accordance with grant requirement, a Governor's Authorized Representative (GAR) Memo is being implemented, requiring Subrecipients to submit Quarterly Progress Reports within 10 days of quarter end. All reports are reviewed and retained in a centralized location for documentation and audit compliance. · 8 instances where the Government was unable to obtain completion/inspection certificate. Project inspection/certification report(s) are now required for all payment request federal fund drawdowns. The reports must now be uploaded to the Enterprise Resource Planning System (ERP) and retained in centralized location for documentation and record keeping purposes. · 8 subrecipients with no supporting documentation that VITEMA verified that subrecipients expected to be audited as required by 2 CFR part 200, subpart F. The Program will annually notify subrecipients of their audit responsibilities, monitor compliance, obtain required audit reports, and maintain documentation in a centralized location for audit and recordkeeping purposes.

The Government concurs with the auditor’s findings and recommendations. Corrective action plan as follows: - Develop subrecipient monitoring policies (2 CFR 200.331–200.332) - Conduct risk assessments - Monitor financial and performance reports - Establish tracking system - Require follow-up on audit findings

To address this finding, OMB will strengthen its subrecipient monitoring controls and formalize procedures to ensure compliance with 2 CFR 200.303 and 2 CFR 200.332, including requirements related to identifying subawards, assessing subrecipient risk, documenting monitoring activities, following up on deficiencies, and maintaining evidence of supervisory review. OMB will also conduct periodic internal quality control reviews of subrecipient files to confirm that monitoring documentation is complete, timely, and consistent with federal requirements.

The Government concurs with the auditor’s findings and recommendations. DPNR’s subrecipient monitoring records and supporting documentation were maintained in multiple locations and were not consistently centralized in a manner that readily demonstrated compliance with Federal subrecipient monitoring requirements. In addition, DPNR did not maintain a comprehensive master listing of subrecipients that incorporated all information necessary to support risk assessments, monitoring activities, and audit requests. DPNR with the support of the federal agency’s consultant will implement a centralized electronic repository system to serve as the official recordkeeping location for all sub recipient supporting documentation. This repository will house all documents necessary to determine if a vendor is at high risk, if they are required to be audited and monitoring, including but not limited to: • A master listing of all subrecipients for each fiscal year; • Subaward agreements and any modifications; • Required subaward information pursuant to 2 CFR §200.331(a); • Subrecipient risk assessments and supporting documentation; • Financial and programmatic reports submitted by subrecipients; • Monitoring plans and monitoring reports; • Documentation of desk reviews and on-site monitoring, where applicable; • Audit reports, Single Audit reports, and management decisions; • Documentation of corrective actions and follow-up activities; and • Correspondence and any additional records necessary to demonstrate compliance with Federal requirements.

VIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to establishing a comprehensive subrecipient management framework. We are prioritizing the formalization of subaward agreement templates, the implementation of a rigorous risk-based monitoring program, and the institutionalization of standardized oversight procedures to ensure full compliance with all federal pass-through entity responsibilities. Action Steps: 1. Develop and implement a formal "Entity Classification Protocol" based on 2 CFR §200.331 to correctly identify subrecipients versus contractors for all existing and future TANF agreements. 2. Redesign all subaward templates to include the mandatory thirteen (13) elements required by 2 CFR §200.332(a), including FAIN, ALN, period of performance, and audit access clauses. 3. Implement a mandatory Subrecipient Risk Assessment tool to evaluate every subrecipient's fraud risk, financial management capacity, and history of audit findings before funding is disbursed. 4. Establish a monitoring protocol that includes mandatory reviews of financial and performance reports, verification of Single Audits (Subpart F), and scheduled on-site programmatic site visits. 5. Create a formal "Enforcement Policy" to manage subrecipient Non-Compliance, outlining the process for issuing management decisions on audit findings and implementing corrective action plans. 6. Launch an intensive training program for all program and procurement staff on the Uniform Guidance requirements for pass-through entities, focusing on proper identification, monitoring, and federal reporting accountability. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Blanca M. Medina Díaz Administrator Gerhil Medina Baez Auxiliary Administrator Operational ServicesVIEWS OF RESPONSIBLE OFFICIALS ADSEF is committed to establishing a comprehensive subrecipient management framework. We are prioritizing the formalization of subaward agreement templates, the implementation of a rigorous risk-based monitoring program, and the institutionalization of standardized oversight procedures to ensure full compliance with all federal pass-through entity responsibilities. Action Steps: 1. Develop and implement a formal "Entity Classification Protocol" based on 2 CFR §200.331 to correctly identify subrecipients versus contractors for all existing and future TANF agreements. 2. Redesign all subaward templates to include the mandatory thirteen (13) elements required by 2 CFR §200.332(a), including FAIN, ALN, period of performance, and audit access clauses. 3. Implement a mandatory Subrecipient Risk Assessment tool to evaluate every subrecipient's fraud risk, financial management capacity, and history of audit findings before funding is disbursed. 4. Establish a monitoring protocol that includes mandatory reviews of financial and performance reports, verification of Single Audits (Subpart F), and scheduled on-site programmatic site visits. 5. Create a formal "Enforcement Policy" to manage subrecipient Non-Compliance, outlining the process for issuing management decisions on audit findings and implementing corrective action plans. 6. Launch an intensive training program for all program and procurement staff on the Uniform Guidance requirements for pass-through entities, focusing on proper identification, monitoring, and federal reporting accountability. IMPLEMENTATION DATE During Fiscal Year 2026-2027 RESPONSIBLE PERSON Blanca M. Medina Díaz Administrator Gerhil Medina Baez Auxiliary Administrator Operational Services

Pearl River County Board of Supervisors and the County Administrator will work with the Airport Board to ensure compliance and monitoring of all future federal grants. We will establish an effective process to implement in the future to monitor all expenditures and receipts.

Views of Responsible Officials and Planned Corrective Action While the Organization concurred with the prior year (2023-002) and current year renumbered recommendation (2024-002), the Organization notes the corrective actions that have been implemented, specifically, related to the subrecipient monitoring and management provision of 2 CFR§ 200.331 and 2 CFR §200.332 of the Uniform Guidance, that emphasizes accountability and compliance in managing federal funds and subrecipients, and that have been in practice, from the effective date(s) noted below, to the present period of the report dated June 17, 2026: A. Subrecipient Monitoring and Management. Implemented internal process changes, effective November 1, 2024, specifically, prospectively, and consistently the: 1. Use of a checklist, to comprehensively assess risk of determining subrecipient or contractor classification, before entering into any subrecipient agreement; 2. Provision of identification details such as CFDA number, amount of federal funds obligated, and the award period for determined subrecipient awards; 3. Submission of programmatic and financial reports as specified in the subrecipient agreement; 4. Review of a single audit in accordance with 2 CFR Part 200, Subpart F for subrecipients that expend $750,000 or more in federal funds during a fiscal year, if applicable; and 5. Review of their audit report(s) and addressing any finding(s) related to their federal award(s), including the related appropriate corrective actions, when applicable. B. Retroactive Subrecipient Portfolio Risk Assessment and Correction(s). The Organization performed a risk assessment of the existing subrecipient portfolio to identify risks, for the audit periods July 1, 2022 – June 30, 2023, and July 1, 2023 – June 30, 2024. The objective of this risk assessment was to identify, evaluate, and prioritize risks that could adversely impact the Organization’s ability to achieve its strategic, operational, compliance and quality assurance goals. The completion of the Organization’s portfolio risk assessment resulted in correction of identified non-compliant subrecipient agreement(s). C. Subrecipient Policies and Procedures. By December 31, 2024, the Organization updated and implemented financial policies and procedures aligned to the subrecipient monitoring and management provision of 2 CFR §200.331 and 2 CFR §200.332 of the Uniform Guidance, including checklists, flowcharts, samples, data sheets, data sharing agreements, etc.; and the current practices of the Organization to the present period of the report dated June 17, 2026, is consistent with such developed subrecipient policies and procedures.

Undocumented Subrecipient Monitoring Recommendation: We recommend that the Alliance establishes a formal policy for subrecipient monitoring in accordance with requirements outlined in 2 CFR §200.331 and 2 CFR §200.332 to ensure its sub-recipients are properly monitored. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: The Alliance did monitor the subrecipients, but the documentation was not properly saved. This policy has since been revised to save the monitoring documentation to the grant management software. Name of the contact person responsible for corrective action: Lisa Wolf Planned completion date for corrective action plan: July 1st 2026

The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants.

Finding No.: 2024-031 Subrecipient Monitoring Responding Agency: Bureau of Budget and Management Research (BBMR) Responsible Personnel: Lester Carlson, Director BBMR will create Standard Operating Procedures as well as a checklist, to assist in the monitoring of subrecipient compliance.

Finding No.: 2024-028 Subrecipient Monitoring Responding Agency: Department of Administration (DOA) Responsible Personnel: Edward M. Birn, Director The Agency disagrees with this finding. Please refer to a letter dated March 31, 2026, regarding Reports on Compliance September 30, 2024.

Finding No.: 2024-016 Subrecipient Monitoring Responding Agency: Bureau of Budget and Management Research (BBMR) Responsible Personnel: Lester Carlson, Director BBMR will create Standard Operating Procedures as well as a checklist, to assist in the monitoring of subrecipient compliance.

SUBRECIPIENT MONITORING ALN Number 93.558 Temporary Assistance for Needy Families (TANF) 93.489. 93.575. 93.596 Child Care Development Fund (CCDF) 93.568 Low Income Household Energy Assistance Program (LII-IEAP) 2024-039 Strengthen Controls over Subrecipient Monitoring to Ensure Compliance with Uniform Guidance Auditing Requirement . Federal Award No. All Current Active Grants Response : MDHS concurs that controls should be strengthened over subrecipient monitoring to ensure compliance with Uniform Guidance Auditing Requirements. Corrective Action Plan: 1. Strengthen Controls over Subrecipient Monitoring to ensure compliance with Uniform Guidance. A. The Office of Compliance. Division of Monitoring has made significant strides in strengthening controls over the subrecipient monitoring process ensuring compliance with Uniform Guidance Auditing Requirements. The Division continues to review and update the processes and procedures as necessary to ensure processes are adequate and effective. Staff are constantly notified/trained on updates to policies. procedures. and regulations to ensure continued compliance with monitoring the agency's subgrant agreements. B. Responsible Party: Laketha Gilmore. Director of Monitoring and Kameron Harris. Chief Compliance Officer C. Completion Date: The corrective action has been implemented and is ongoing.

Assistance listing numbers and program names 84.010 Title I Grants to Local Education Agencies 84.367 Supporting Effective Instruction state Grants, Title II (formerly Improving Teacher Quality State Grants) Agency: Arizona Department of Education (ADE) Name of contact person and title: Sarka J. White, Deputy Associate Superintendent Anticipated completion date: December 2027 Agency’s Response: Concur Monitoring of CMO We will update protocols and implement an annual monitoring process specifically for charter schools with CMO relationships by integrating defined procedures to evaluate additional conflicts of interest, related party transactions, and segregation of duties concerns, while assigning a programmatic risk label in addition to the one assessed by Grants Management. To ensure accurate identification and appropriate separation of responsibilities, Title I and Title II will incorporate procedures for detecting CMO associations within both the grant review process and programmatic monitoring functions, supported by coordinated information sharing across relevant departments. Updated policies will also include requirements for disclosure of organizational associations and embed these indicators into the LEA level risk framework that determines monitoring frequency and representation based on assessed risk. Checks and balances will include programmatic follow-up on these disclosures prior to review of funding applications and or any assistance provided. Title I and Title II will revise monitoring tools to include CMO specific review steps, provide targeted staff training on identifying CMO relationships and apply enhanced oversight procedures, and carry out funding and program approval activities and monitoring activities. These can be in the form of financial and performance report reviews, Grant approvals, Data submissions, technical assistance, and onsite or virtual visits, in alignment with the strengthened risk-based model. Completion will be demonstrated through finalized procedures, documented staff training, and the application of revised monitoring methods during the next annual grant and monitoring cycle. Monitoring – Programmatic – Grant Monitoring We have revised LEA monitoring policies and procedures to incorporate coordinated processes between departments for clear identification of charter schools with CMO relationships, require now disclosure of organizational associations, and strengthen oversight of conflicts of interest, related party transactions, and segregation of duties risks. Updated procedures also define a structured, risk-based monitoring framework that assigns LEA monitoring levels, representation, and monitoring frequency based on assessed risk, independent of CMO affiliation, while integrating new indicators into monitoring tools to support consistency through equal representation and ensuring each LEA is treated as an individual LEA without respect to associations. Staff have and will continue to receive targeted training on the revised requirements, and completion will be demonstrated through the approval and publication of updated procedures, documented staff training, and application of the enhanced risk-based monitoring approach during the next LEA monitoring cycle.

Assistance listing number and program name: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Agency: Governor’s Office of Strategic Planning and Budgeting (OSPB) Arizona Department of Housing (ADOH) Arizona Department of Water Resources (ADWR) Arizona Office of Tourism (AOT) Industrial Commission of Arizona (ICA) Name of contact persons and titles: Ben Henderson, Director Governor’s Office of Strategic Planning & Budgeting Keon Montgomery, ADOH Assistant Deputy Director of Programs Will Palmisano, ADWR Finance and Administration Assistant Director Mary-Ellen Kane, AOT Assistant Deputy Director Sylvia Simpson, ICA Chief Financial Officer Anticipated completion date: See below Agency’s response: Concur OSPB anticipated completion date: April 2027 As indicated by the auditors, OSPB has demonstrated compliance with subrecipient monitoring requirements in FY24. The audit report limits OSBP’s inclusion in this finding to the questioned costs ($1,623,846) identified by OSPB through its subrecipient monitoring. However, the identification of questioned costs is not evidence of a deficiency in OSPB’s subrecipient monitoring; rather, the opposite, it demonstrates that OSPB has sound internal controls and an effective subrecipient monitoring system in place. Accordingly, OSPB will continue with the existing comprehensive subrecipient monitoring framework as outlined below: ● On-going Grantee Support - The Office provides a variety of subrecipient support including technical assistance, Communities of Practice(COP), and regular status check meetings. ● Training - Office staff facilitate ongoing training and provide resources and guides to improve understanding of compliance requirements and provide tools to support proper grants management. ● Financial Report-Reimbursement Requests—The Office reviews the grantee's financial reports to ensure costs align with the approved budget, program objectives, and federal cost principles. ● Performance Reports—The Office reviews the submission of programmatic reports to track progress on grant goals. ● Single Audit Reports—The Office confirms any required subrecipient Single Audits, reviews a copy of the most recent Single Audit Reporting Package (SARP), issues any necessary management decisions, and conducts follow-up monitoring of Corrective Action Plans. ● Risk Assessment (RA)—The Office conducts a Risk Assessment (RA) of grantees when applying for grants to inform the grant award decision and possible grantee oversight or restrictions. Additionally, the Office conducts an annual RA of any grantee currently awarded funding. ● Monitoring Reviews - The Office utilizes the RA results to prioritize high risk grantees to be reviewed through a desk or on-site monitoring. Medium risk grantees will receive additional support and will be referred to our Compliance and Reporting team for further review if additional concerns arise. The Office has implemented all past recommendations and OSPB is committed to continuing these ongoing efforts to actively reduce the risks of waste, fraud, and abuse of federal dollars through our subrecipient monitoring process. OSPB will continue Coronavirus State and Local Fiscal Recovery Funds subrecipient monitoring and follow-up through the grant closeout in April 2027. ADOH anticipated completion date: March 2026 The ADOH has begun to develop and implement formal, documented subrecipient risk assessment procedures to ensure monitoring activities are aligned with assessed levels of risk. This will include establishing standardized criteria to evaluate subrecipient risk and documenting risk determinations. These enhancements are also consistent with recommendations identified in the State’s most recent Sunset Audit, and the Agency has already begun implementation of these procedures. The ADOH will update policies and procedures accordingly and provide staff training to ensure consistent application. These actions will strengthen internal controls and ensure compliance with applicable subrecipient monitoring requirements. The ADOH will implement procedures to strengthen subrecipient monitoring related to Single Audit requirements. This will include verifying submission to the Federal Audit Clearinghouse, obtaining and retaining copies of all applicable Single Audit reports, and maintaining a tracking mechanism to document receipt and review. The ADOH will also establish procedures to review audit findings and ensure appropriate follow-up, including verification of subrecipient corrective actions, and will support consistent implementation. ADWR anticipated completion date: December 31, 2026 Before approving an application from an eligible subrecipient for federal grant monies, ADWR as a passthrough entity, will conduct a risk assessment of the subrecipient as part of the initial award approval. ADWR will create a standardized checklist that will enable ADWR to make an informed decision regarding what monitoring tasks will be necessary consistent with 2 CFR 200.332. Once an eligible subrecipient applies for federal grant monies, ADWR will require the applicant subrecipient to fill out the checklist and establish a monitoring program consistent with the results. ADWR will develop staff training and a standard work to implement this program. If the award spans more than one year, the results of any applicable single audits will inform ADWR if changes to the monitoring program for a particular subrecipient are required. As part of a program standard work, ADWR will send a questionnaire to subrecipients regarding federal award expenditures and remind them of any single audit requirements as well as expected completion date of any applicable audits. Failure of any prescribed monitoring items will trigger award review and possible reclassification of risk, additional monitoring, and/or withholding of pending reimbursements until the subrecipient remedies an issue. AOT anticipated completion date: March 20, 2026 AOT has established a process to verify that subrecipients who receive a grant award greater than $750,000.00 are able to provide a current single audit. AOT will provide sub recipients additional written documentation identifying required completion dates and any additional instructions required. Processes and procedures have been developed and implemented. The program has concluded and no further action will be taken. AOT has established a process to ensure the required backup documentation provided by the subrecipient is acceptable for reimbursement. AOT will continue to communicate with OSPB on updates to policy to ensure the processes and procedures are being implemented within federal and state funding guidelines. The program has concluded and no further action will be taken. ICA anticipated completion date: December 31, 2025 The ICA concurs with the finding regarding subrecipient monitoring. The ICA’s involvement as a pass-through entity for the SLFRF program was a unique, one-time occurrence designed to facilitate the equitable distribution of funds to Arizona fire districts based on a methodology approved by the Office of Strategic Planning and Budgeting (OSPB). The ICA does not expect to serve as a pass-through entity for federal funds in the future. While the ICA implemented rigorous validation steps, including the thorough review of payroll records, receipts, and attestations prior to any reimbursement, the agency recognizes that formal risk assessments and subaward agreements were not executed at the onset of the program. The ICA became aware of these specific documentation deficiencies through the audit process after the program had already ended on December 31, 2025. The ICA will address the underlying control deficiency by updating its internal grant management procedures to ensure in the event the agency was to act as a pass-through entity again, formal risk assessments and standardized subaward agreements would be completed by the subrecipient as part of the requirements to receive federal monies. Additionally, the ICA has since obtained 100% of the required single audit reports from the applicable subrecipients and has verified that all necessary corrective actions for unrelated findings have been addressed.

Assistance listing number and program name: 21.027 Coronavirus State and Local Fiscal Recovery Funds Agency: Department of Economic Security (DES) Name of contact person and title: Molly Bright, Community Services Division Assistant Director Anticipated completion date: June 30, 2026 Agency’s Response: Concur The Department of Economic Security will address the audit recommendations as follows: 1. Include information required by federal regulations in its subawards to subrecipients, including federal award identification information and any additional requirements the Department imposed on the subrecipients to meet its responsibilities under the federal award. The Department will analyze and improve its information dissemination practices to ensure that all information required by federal regulations is included in the subawards to subrecipients. This will include the federal award identification information and any further requirements the Department imposes on the subrecipients to meet the responsibilities under the federal award and applicable state laws. 2. Perform required monitoring of its subrecipients and their compliance with the award terms and program requirements. The Department will revise its agency-wide policies and procedures related to single audit requirements for pass-through entities to include guidance regarding how to establish effective subrecipient monitoring procedures. The Department will also offer additional subrecipient monitoring guidance for programs administered by divisions with existing subrecipient monitoring findings. A divisional Monitoring and Compliance Policy and Procedure Manual is currently being developed to ensure compliance with these regulations across all program areas, including those subject to the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Grant. 3. Develop, implement, and train all divisions on entity-wide written subrecipient-monitoring policies and procedures requiring all divisions to: a. Ensure that every subaward is clearly identified to the subrecipient as a subaward by including in its award terms with subrecipients information necessary for the subrecipient to administer the program in accordance with federal requirements. Required information includes federal award identification, all requirements of the subaward, any additional requirements the Department imposes on the subrecipient for the Department to meet its responsibilities under the federal award, indirect cost rate, and audit and closeout requirements. b. Assess the risk of each subrecipient’s noncompliance and carry out monitoring activities based on those risk assessments such as providing training or technical assistance on program-related matters, and performing on-site reviews, selective audits, and/or other monitoring procedures. c. Review financial and performance reports. d. Verify subrecipients receive timely single audits, if required; follow up on and ensure that corrective action is taken on any audit findings that could potentially affect the program; and issue management decisions for any audit findings pertaining to the federal award. e. Maintain documentation of monitoring procedures demonstrating they were performed, including the monitoring procedures’ results and any Department actions taken, if appropriate. In addition to the revisions in policy and procedures outlined in Recommendation #2 above, the Department will train staff responsible for administering compliance requirements for pass-through entities. This training will include instructions to formulate a risk assessment, review controls related to compliance requirements, review timely single audit submittal, follow up on audit findings, issue management decisions for findings, and maintain adequate documentation of monitoring procedures. Furthermore, the training will be inclusive of proper information dissemination practices aimed at ensuring every subaward is clearly identified to the subrecipient as a subaward by including in its award terms with subrecipients information necessary for the subrecipient to administer the program in accordance with federal requirements. The training and revised procedures will be provided to all staff responsible for administering programs with pass-through entities. 4. Allocate sufficient resources, such as staffing, to comply with the award terms and program requirements, and designate individuals within each division to perform necessary subrecipient-monitoring procedures. The Department will conduct analyses to determine resources needed, including staffing, to ensure compliance with applicable requirements. For example, the Department will assess the efficiency of its subrecipient-monitoring procedures, estimate future workloads, determine staffing needed to meet those workloads, and assign sufficient staff the responsibility for ensuring compliance with each requirement outlined in the federal award. The Department will also ensure the staff responsible for administering the compliance requirements prioritize this responsibility and communicate anticipated compliance deficiencies to management.

Assistance listing number and program name: 17.258 WIOA Adult Program 17.259 WIOA Youth Activities 17.278 WIOA Dislocated Worker Formula Grants Agency: Department of Economic Security (DES) Office of Economic Opportunity (OEO) Name of contact persons and titles: David Almaraz, DES DERS Business Administrator Stephen Sifuentes, OEO Finance Administrator Senior Anticipated completion date: See below Agency’s Response: Concur DES Anticipated completion date: December 31, 2026 The Department will address the audit recommendations by amending its ISA subaward with the Arizona Office of Economic Opportunity. The Department will also adjust its subrecipient monitoring schedule, procedures and offer training and assistance on conference-related requirements to the Arizona Office of Economic Opportunity. OEO Anticipated completion date: June 30, 2027 The Office of Economic Opportunity (OEO) acknowledges the finding regarding the use of WIOA Dislocated Worker Formula Grant funds for conference meals and promotional items. To address these concerns, OEO has undertaken proactive measures to strengthen internal controls, enhance oversight, and improve compliance with federal cost principles. As such, OEO will utilize these findings to strengthen its existing system, address any identified deficiencies, and continue to enhance fiscal management. Through these corrective actions, the OEO is committed to full compliance and the effective stewardship of federal funds. 1. Ensure Summit costs charged to the WIOA federal program are appropriate, necessary, and managed to minimize charges to the federal award. The OEO acknowledges the auditors’ findings regarding the management of Summit costs charged to the Workforce Innovation and Opportunity Act (WIOA) federal program. OEO is committed to ensuring that all expenditures are appropriate, necessary, and managed with the highest level of fiscal responsibility to ensure charges are necessary and allowable to the federal award. To address this finding, OEO will collaborate closely with the Arizona Department of Economic Security (ADES) to develop and implement comprehensive formal policies and procedures governing the State Workforce Development Board and WIOA funded events including Summit expenditures. Our joint efforts will focus on implementing a documented review and approval process to ensure costs charged to the federal award are supported by documentation and evaluated in accordance with 2 CFR §§ 200.403. As part of this corrective action, the process will integrate cost-containment measures into the planning and approval of the events budget planning phase. This will include requiring staff to assess whether proposed costs are necessary, reasonable, allocable and limited to helping the workforce development system achieve the purpose of the Workforce Innovation and Opportunity Act (WIOA). OEO and ADES will conduct working sessions to develop, implement, and monitor these protocols, with the goal of finalizing a standardized procedure for all WIOA-funded event expenditures. This approach ensures consistency across agencies and establishes clear oversight to prevent recurrence. 2. Develop and implement written procedures, including a standardized review process, to ensure that costs charged to the WIOA federal program are allowable prior to requesting reimbursement from DES. The OEO recognizes the importance of verifying the allowability of expenditures prior to the reimbursement phase. We concur that a standardized documented review process is necessary to maintain fiscal integrity and compliance of WIOA federal program funding and federal regulations. OEO, in partnership with the ADES, will develop and formalize written internal control procedures designed to vet all costs before they are submitted to ADES for reimbursement. The proposed standardized review process will align with existing practices for monitoring and expending federal funds as described under WIOA for the State Workforce Development Board and will include: ● Pre-submission verification: Implementation of an internal review checklist based on 2 CFR 200 Subpart E Cost Principles and applicable State policy. This will ensure that every line item is: ○ Allowable under both WIOA statutory requirements and federal cost principles. ○ Allocable to the specific federal award in proportion to the benefits received. ○ Compliant with the State of Arizona Accounting Manual ○ Documented with sufficient supporting evidence (pictures, invoices, receipts, and justifications) to withstand audit scrutiny. ● Standardized approval workflow: Establishment of a clear designated approval framework. ● Policy Integration: These procedures will be codified into an OEO Fiscal Manual, providing staff with a clear roadmap for processing WIOA-related expenditures. OEO will coordinate with ADES technical assistance teams to ensure our internal review templates align with ADES’s appropriate reimbursement systems. This collaborative design phase will ensure that once a request reaches ADES, it has already undergone a vetting process, thereby reducing errors. 3. Work with federal grantor and/or DES to resolve the $90,015 of questioned costs associated with the 2024 Summit and any subsequently held Summits. OEO will collaborate with the ADES, the primary grant recipient, to establish the most appropriate course of action for resolving any unallowable expenditures. Initially, OEO will work with ADES to precisely define the actual allowable amount based on programmatic cost allowability, which may require consultation with the original federal grantor, for final clarification on disputed cost. Subsequent steps for resolution will be guided by ADES’s direction and the requirements of the federal grantor.

Assistance listing numbers and program names 10.558 Child and Adult Care Food Program Agency: Arizona Department of Education (ADE) Name of contact person and title: Cara Alexander, Deputy Associate Superintendent Anticipated completion date: December 2026 Agency’s Response: Concur We have an established process in place for collecting the information necessary to determine total fiscal year expenditures for federal awards (the questionnaire) for entities that do not participate in any federal programs housed within the ADE's Grants Management Enterprise. The policy and procedures will be updated by April 1, 2026, to the following: (1) include additional internal controls such as the annual Child and Adult Care Food Program renewal process and serious deficiency process; and (2) detail the procedures to review single audit reports for findings related to the program and issue management decision letters when applicable. Finally, training will be provided to personnel responsible for collecting and reviewing the questionnaires and single audit reports when submitted.

SDWP acknowledges the requirement under 2 CFR 200.332(b) to provide specified Federal award information to subrecipients at the time of subaward. During the audit period, certain required elements (including Assistance Listing information, Federal Award Identification Number, and other required data elements) were not consistently included in subaward agreements at the time of issuance. This condition was primarily due to the absence of a standardized subaward agreement template and checklist to ensure all required elements under Uniform Guidance were included and communicated to subrecipients at the time of subaward. To address this finding, effective April 1, 2026, the Contract Manager will include all required data elements in a standardized subaward agreement template, confirm source of funding for each subaward, and include required data elements in all applicable subaward agreements.