Corrective Action Plans

Finding No. 2026-001: During testing of allowable costs for Major Program 93.912, one instance was identified in which payroll benefit costs charged to the federal award were overstated by $383 due to an error in the calculation of payroll-related benefits associated with an individual employee. As a result of the exception identified during audit testing, we performed additional procedures over the affected population and determined that an incorrect payroll base had been used in calculating benefit allocations charged to federal awards for certain employees for which payroll and benefits are allocated to federal programs. We identified unsupported payroll benefit costs and indirect costs charged to the following federal programs: Program 93.912-$15,046; Program 93.387-$1,901; and Program 93.889-$29,718, for total questioned costs of $46,665. We intend to return these funds to the grantor agencies. Accordingly, the $46,665 of unsupported costs was removed from expenditures reported on the Schedule of Expenditures of Federal Awards, and no known questioned costs are reported in the Schedule of Findings and Questioned Costs. Corrective Actions Planned: A simplified report has been identified that will reduce the risk of calculation errors. This report will be used for all future calculations related to payroll-related benefits for grants. Responsible Party: Karla Dillow, Assistant Director of Accounting Target Completion Date: March 31, 2027

Inadequate Support for Federal Reimbursement - Literacy - OPI - The Montana Office of Public Instruction partially concurs with this finding. The prior audit was not completed in time for the Office to implement changes before the fiscal years reviewed in the current audit. The Office implemented more stringent criteria for cash requests from schools in late 2024, and these requirements have been in place since that time. Although there has been considerable pushback from local education agencies due to the added burden, the Office has remained firm on the information required. Cash requests are audited quarterly by the Internal Control Auditor against submitted budget documents, and any issues identified are addressed. The more stringent criteria are fully implemented, and no further corrective actions are needed beyond continuing the current process. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Inadequate Supporting Documentation for Local Agency Costs - WIC - DPHHS - The Montana Department of Public Health and Human Services does not concur because the recommendations would require receipt level documentation for every subrecipient transaction, which federal regulation does not require, and because the department’s existing monitoring framework meets the requirements of 2 CFR 200.332. Paragraph citations in this response refer to the Uniform Guidance as revised effective October 1, 2024; for awards issued before that date, the corresponding provisions are 2 CFR 200.332(b), (d), and (e). Under 2 CFR 200.332(c), a pass‑through entity must evaluate each subrecipient’s risk of noncompliance and risk of fraud to determine the appropriate level of subrecipient monitoring. Under 2 CFR 200.332(e), the required monitoring activities include reviewing financial and performance reports, following up on deficiencies and ensuring the subrecipient takes timely and appropriate action, and issuing management decisions on audit findings. Under 2 CFR 200.332(f), additional tools such as training and technical assistance, on‑site reviews, and agreed‑upon procedures engagements may be used depending on the risk assessment. The regulation does not require transaction level or receipt level documentation for all subrecipient expenditures as a condition of reimbursement. The department acknowledges that the auditors identified expenditures for which receipt‑level support was not on file at the time of review. The department’s position is that the controls described above, rather than universal receipt‑level retention, are the level of monitoring 2 CFR 200.332 requires given the risk profile of the Women, Infants, and Children (WIC) local agency network, and that the department retains the documentation it obtains when additional support is requested. Based on the department’s understanding of the audit results, the auditors did not report any unallowable costs during their review, and their finding focused solely on whether every cost was fully supported by receipt‑level documentation. Extending receipt‑level submission and retention to every expenditure would add substantial administrative work for the department and its local agencies without a corresponding improvement in the department’s ability to detect unallowable costs, which the existing expense report review and biennial on‑site review already address. For these reasons, the department does not concur with the recommendations. As provided in 2 CFR 200.511(c), the discussion above is the department’s detailed explanation of why it believes the recommended corrective action is not required. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - N/A

Inadequate Supporting Documentation - Title 1 - OPI - The Montana Office of Public Instruction partially concurs with this finding. The prior audit was not completed in time for the Office to implement changes before the fiscal years reviewed in the current audit. More stringent criteria for cash requests from schools were put in place in late 2024, and these requirements have been followed since that time. Although there was considerable pushback from local education agencies, the Office remained firm on the information required. The Office audits cash requests quarterly against submitted budget documents, and any issues identified are addressed. The more stringent criteria are fully implemented, and no further corrective actions are needed beyond continuing the current process. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Inadequate Support for Federal Reimbursement - Title I - OPI - The Montana Office of Public Instruction partially concurs with this finding. Training and new process documentation were implemented in April 2025 to correct the issue. The previous audit was not completed until October 2024, with the final audit committee meeting held in December 2024, and the new process was put in place and communicated as quickly as possible. The process is now functioning correctly. The Office has implemented a tracking mechanism to ensure appropriate time reporting. For fiscal year 2027, the Office has added an additional monthly review of each federal budget to confirm that time reported aligns with expected and allocated time for each project. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Noncompliant Fixed-Amount Subawards - Immunization - DPHHS - The Montana Department of Public Health and Human Services does not concur. All subawards, including those referenced in the finding, were explicitly listed in the federally approved budget documents and the Notice of Award (NOA). These materials contained the subaward amounts that the auditors questioned and were formally reviewed and approved by the Centers for Disease Control and Prevention (CDC). The approval included the fixed-amount subaward methodology and the department’s planned use of funds. In addition, the CDC conducted a technical review during the same period and identified no findings or compliance issues, including none related to fixed-amount subawards or internal controls. In September 2025, the department consulted program officials at the CDC, who reaffirmed that the approved NOAs and budgets are sufficient evidence of federal approval and compliance. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - N/A

Inadequate Supporting Documentation - Foster Care - DPHHS - The Montana Department of Public Health and Human Services reviewed the fiscal year 2024 payment error and will address the affected reimbursement. The department will continue applying its improved internal control procedures to ensure compliance. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 7/1/2024

Inadequate Supporting Documentation - Transit - MDT - The Montana Department of Transportation’s Transit Section will continue working closely with subrecipients to ensure proper documentation is consistently provided and retained. The fully staffed Transit Section is reviewing reimbursement submissions more thoroughly, reinforcing documentation expectations and strengthening the department’s internal controls. Cost principle training is now part of the onboarding process for Transit Section staff, and additional training will be provided as new regulations or guidance become available. Responsible Party - Kimberly Doherty, Accounting Systems Supervisor, Montana Department of Transportation Target Implementation Date - 12/31/2026

Noncompliant Duplicate Expenditure Recording - ESSER - OPI - The Montana Office of Public Instruction concurs with this finding. The Office has created a procurement unit to ensure contract terms meet program needs. The Office has also implemented approval workflows for contract funding to ensure budgets are aligned before contracts are executed. Internal controls between procurement, programs, and accounting will continue to be strengthened to prevent future overpayments. 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 Contractor Overpayments and Unallowable Charges - ESSER - OPI - The Montana Office of Public Instruction concurs with this finding. The Office and the University of Montana - Western established a teacher residency program originally funded with Elementary and Secondary School Emergency Relief funds. The agreement set a fixed amount per student, but the University billed the Office for fringe benefits for each participant, which caused total costs to exceed the contract amount. The current agreement and program structure have been updated to prevent this issue. The Office has created a procurement unit to ensure contract terms support program needs. The Office has also implemented approval workflows for contract funding to confirm that budgets are aligned before agreements are executed. Internal controls between procurement, programs, and accounting will continue to be strengthened to prevent future overpayments. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Noncompliant Direct and Indirect Cost Charges - ESSER - OPI - The Montana Office of Public Instruction partially concurs with this finding. Spreadsheets supporting items 0005169673 and 0005227738 were provided to the Legislative Audit Division on August 11, 2026. The Central Services Division spent direct time on the Elementary and Secondary School Emergency Relief (ESSER) reporting, and those hours were charged directly to that program. Administrative and management staff also spent time preparing reports for quarterly briefings, presentations to community partners, responses to school and community inquiries, and newsletter submissions. The Office charged those hours to the ESSER program as they were directly related to the required reporting. However, the Office concurs with the questioned indirect cost charges in addition to personal services. The Office has implemented a tracking mechanism to ensure appropriate time reporting. For fiscal year 2027, the Office has added a monthly review of each federal budget to confirm that time reported aligns with the expected and allocated time for each project. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Inadequate Support for Federal Reimbursement - ESSER - OPI - The Montana Office of Public Instruction has already implemented more stringent criteria for cash requests from schools. Although this has created additional burden for local education agencies, the Office has remained firm on the information required. These criteria were implemented in late 2024 and have been required since that time. Cash requests are audited quarterly by the Internal Control Auditor against the budget documents submitted, and any issues identified are addressed. No further action is needed other than continuing the current process. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Inadequate Supporting Documentation - Disaster Grants - DMA - The Montana Department of Military Affairs, Disaster and Emergency Services Division partially concurs. The Division validated the reviewed project costs through its internal review and through additional Federal Emergency Management Agency (FEMA) processes, including the Validate As You Go procedure, and determined the costs to be allowable. The division acknowledges the cited federal compliance criteria and recognizes the opportunity to strengthen the consistency, accessibility, and retention of project documentation. To enhance existing processes, the division has implemented a standardized project file structure that clearly identifies the location of supporting documentation and ensures official grant files are complete rather than relying solely on documentation stored within federal systems. This process is being applied to the disasters that occurred in December 2025 and were federally declared in April 2026. The division will continue to evaluate and refine its documentation practices while maintaining appropriate controls, reviews, validations, payments, and closeout procedures for federally funded projects. Responsible Party - Janae Brower, Chief Financial Officer, Montana Department of Military Affairs Target Implementation Date - 10/31/2026

Erroneous Beneficiary Payments - CHIP - DPHHS - The Montana Department of Public Health and Human Services does not concur. The department identified an interface issue with its contractor and promptly corrected the affected payments. The unadjusted claim amount totaled approximately $26,000 and affected 48 beneficiaries out of $146.6 million in total contractor‑paid claims during the audit period, representing approximately 0.018 percent of total claims paid. The department determined this amount to be immaterial to the fiscal year‑end financial statements. Had the amount been significant, the department would have corrected the affected payments before fiscal year‑end. The department worked with its contractor to resolve the interface issue, which was fully corrected in April 2026. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - N/A

Inaccurate Subsidy Payments - Adoption Assistance - DPHHS - The Montana Department of Public Health and Human Services agrees that its prior method for tracking subsidy rate changes was manual and was not sufficient to ensure all scheduled rate changes were applied. The practice of including multiple rates in adoption subsidy agreements was discontinued in 2023. When the error was identified, the department conducted a full review of the affected activity to determine the scope of the issue, identified additional errors, and reported those errors to the auditors. The department corrected all payment errors, repaid the affected federal funds, and implemented tracking controls over the remaining scheduled subsidy rate changes. The department completed this corrective action in March 2026. Responsible Party - Brenda Crawford, Internal Control and Compliance Officer, Montana Department of Public Health and Human Services Target Implementation Date - 3/20/2026

Inadequate Supporting Documentation - SPED - OPI - The Montana Office of Public Instruction partially concurs with this finding. The prior audit was not completed in time for the Office to implement changes before the fiscal years reviewed in the current audit. The Office implemented more stringent criteria for cash requests from schools in late 2024, and those requirements have been in place since that time. Although there has been considerable pushback from local education agencies due to the added burden, the Office has remained firm on the information required. Cash requests are audited quarterly by the Internal Control Auditor against submitted budget documents, and any issues identified are addressed. These criteria are fully implemented, and no further corrective action is necessary beyond continuing the current process. Responsible Party - April Grady, Chief Financial Officer, Montana Office of Public Instruction Target Implementation Date - 12/31/2026

Views of Responsible Officials: Management agrees with the finding. Management identified the VAT overcharge prior to the audit and requested a refund from the staffing agency. The staffing agency issued a credit of approximately $200,000 in 2026. Management identified approximately $40,000 that could have been allocated back to certain affected awards. However, because some awards were closed, actual credits or adjustments program expenses and budgets were not applied. Management will enhance its review process over staffing agency invoices and vendor credits to ensure costs and related credits are reviewed for allowability, allocability, and proper award-level treatment. Name and Title of Responsible Officials: Oliver Rivers, Chief Operating Officer and Deniz Sarkinovic, Senior Director of Compliance Anticipated Completion Date: September 30, 2026

Condition During testing of cash disbursements, the audit team was unable to locate adequate supporting documentation for selected transactions sufficient to determine whether the costs charged were allowable and the activities were allowed under the applicable federal award(s). Documentation such as invoices, receipts, contracts, approvals, or evidence linking the expenditure to an allowable activity could not be located or provided by the Institute. Criteria Per 2 CFR § 200.403, costs charged to a federal award must be necessary, reasonable, and adequately documented. Per 2 CFR § 200.302 and § 200.334, non-federal entities must maintain financial records, including source documentation (e.g., invoices, receipts, canceled checks, time and effort records) that support the allowability, allocability, and reasonableness of costs charged to federal awards, and these records must be retained and readily accessible for a minimum of three years. Additionally, 2 CFR § 200.404 and § 200.405 require that costs be allocable and consistently applied to allowable program activities. Cause The Institute's recordkeeping and document retention practices did not ensure that supporting documentation for cash disbursements was consistently maintained, organized, or readily retrievable. This may be attributable to insufficient internal controls over document retention, lack of a centralized filing/records system, or turnover in staff responsible for maintaining disbursement records. Effect Without adequate supporting documentation, the Institute cannot demonstrate that disbursed funds were used for allowable costs and allowed activities in accordance with the terms of the federal award(s). This exposes the Institute to the risk of questioned costs, disallowed expenditures, required repayment to the funding agency, and potential findings of noncompliance in future audits. It also limits the Institute's ability to demonstrate accountability and stewardship over federal funds. Recommendation We recommend that the Institute strengthen internal controls over cash disbursements to ensure supporting documentation (invoices, receipts, approvals, and evidence of allowable activity) is obtained and retained for every transaction prior to disbursement. The Institute should implement a centralized, organized recordkeeping system (physical or electronic) for disbursement documentation, with clear responsibility assigned for maintenance and retrieval. The Institute should also provide training to relevant staff on documentation retention requirements under 2 CFR Part 200. Management’s Response Management agrees with the finding and recommendation. The Institute recognizes that complete and readily retrievable supporting documentation is necessary to demonstrate the allowability, allocability, and reasonableness of costs charged to all awards. Management will strengthen its cash disbursement and record-retention procedures to ensure invoices, receipts, approvals, contracts, and other applicable supporting documentation are maintained for each transaction. Action Taken The Institute implemented a centralized electronic recordkeeping process for cash disbursement documentation and assigned responsibility for maintaining and retrieving supporting records. Documentation supporting the expenditure and applicable approvals are retained with the transaction records. Relevant staff have been instructed on documentation and record-retention requirements applicable to federal awards. Management will hold an annual training at the beginning of the new fiscal year available to all ERI employees.

Responsible Official’s Response and Corrective Action Planned: Management has implemented a new process to include financial oversight and review of all documents prior to submission to FEMA for reimbursement going forward. Since the Finding last year, we have not had the opportunity to utilize this new process as the FEMA expenditures in question were prior to last year’s Finding. We will continue to meet with all leadership staff to discuss documentation requirements necessary for FEMA reimbursements. Lastly, Management will only sign off on reimbursed costs after all changes to FEMA requests have been adequately documented.

THE COALITION WILL MAINTAIN A CENTRALIZED GRANT REGISTER IDENTIFYING EACH AWARD NUMBER, PROJECT CODE, BEGINNING DATE, ENDING DATE, AND APPROVED PERIOD OF PERFORMANCE. FINANCE WILL USE THE REGISTER DURING MONTHLY CLOSE AND GRANT REVIEW TO VERIFY THAT PAYROLL AND NON-PAYROLL EXPENDITURES ARE CHARGED TO THE CORRECT ACTIVE GRANT/PROJECT. BEFORE AND AFTER AN AWARD END DATE, FINANCE WILL REVIEW PROJECT ACTIVITY FOR COSTS POSTED OUTSIDE THE APPROVED PERIOD, CONFIRM WHETHER ANY PRE-AWARD OR CLOSEOUT COST IS AUTHORIZED, AND RECLASSIFY MISCODED TRANSACTIONS BEFORE GRANT REPORTING IS FINALIZED. NEW AWARD/PROJECT CODES WILL BE ESTABLISHED AND COMMUNICATED BEFORE COSTS ARE CHARGED TO A SUCCESSOR AWARD. IN ADDITION, AFTER THE MONTHLY CLOSE PROCESS IS COMPLETE, FINANCE WILL DISTRIBUTE GRANT STATEMENTS TO ADMINISTRATION TO REVIEW EXPENDITURES AND REMAINING GRANT BALANCES FOR REASONABLENESS. THIS PROVIDES AN ADDITIONAL LAYER OF OVERSIGHT TO VERIFY THAT GRANT-RELATED EXPENSES HAVE BEEN RECORDED ACCURATELY.

Management appreciates the opportunity to respond to Finding 2025-001. The questioned cost relates to payment for CRE’s federally required financial audit for the year ended December 31, 2025. The costs of the audit were in fact liquidated by virtue of an audit engagement letter received. The audit procedures addressed financial activity, finalyear expenditures, financial reporting, internal control, and compliance requirements associated with the five-year ACF award that concluded in 2025. The payment was not intended to support future program operations, future service delivery, or activities to be performed under a subsequent award period. Management respectfully requests that ACF evaluate the questioned cost based on the purpose of the expenditure, the benefit received by the federal award, and the documentation supporting the transaction. The audit was required because of the financial activity conducted under the completed ACF award. The audit tested costs incurred, funds drawn, financial reporting, internal control, and compliance obligations arising from that award. Management does not believe the cost provided a programmatic or administrative benefit to a later federal award. CRE charged the audit cost to the award that received the benefit of the audit services because management determined that award to be the appropriate cost objective. Charging the cost to a subsequent award solely because the audit work or payment occurred after the award end date would have resulted in a different federal award, and potentially a different federal agency, bearing the cost of audit procedures performed on activity attributable to the completed ACF award. Management acknowledges that the period-of-performance requirements are an important compliance consideration and does not assert that the allocation rationale alone overrides those requirements. However, management believes the facts and circumstances distinguish this transaction from an advance payment or prepayment for future program services. The audit was completed, the amount was supported by documentation, the cost was not charged to another federal award, and the Federal Government received the intended financial oversight and compliance benefit associated with the completed award. Accordingly, management respectfully requests that ACF consider allowing the portion of the audit cost that is reasonably attributable to the completed ACF award. If ACF determines that a portion of the cost is not allowable based on the period of performance, management requests that the final determination clearly distinguish any disallowance based on timing from the allowability, reasonableness, allocability, and documentation of the audit service itself. Management also requests that the final finding accurately describe the nature of the questioned cost as a federally required financial audit of activity for the year ended December 31, 2025. The current characterization of the payment as a prepayment to a third party for services to be provided in 2026 does not fully describe the purpose of the expenditure and may imply that the payment supported 2026 program activity, which management believes is inconsistent with the underlying purpose and benefit of the audit services. CRE has procedures to review both the period in which contracted services are performed and the award that receives the benefit of those services. As a corrective action, for future grants approaching expiration, CRE will obtain written guidance from the awarding agency before charging audit, closeout, or other post-award professional service costs to an expiring award. CRE will also document the basis for any allocation decision, including the applicable award, period of performance, benefit received, and supporting documentation retained for audit review.

Beginning with FY2026, a new Federal Programs Supervisor/Director was hired by the Board, and a Fiscal Administrator was appointed on August 27, 2025. These new designees will ensure that all federal programs operate within their allowable costs, activities, procurement, suspension and debarment guidelines. Approved budgets will be reviewed and complied with as purchases are made and reviewed monthly thereafter.

Beginning with FY2026, a new Federal Programs Supervisor/Director was hired by the Board, and a Fiscal Administrator was appointed on August 27, 2025. These new designees will ensure that all federal programs operate within their allowable costs, activities, procurement, suspension and debarment guidelines. Approved budgets will be reviewed and complied with as purchases are made and reviewed monthly thereafter.

FA 2025-002 Strengthen Controls over Expenditures Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: Assistance Listing Number and Title: Federal Award Number: Questioned Costs: Repeat of Prior Year Finding: Description: Activities Allowed or Unallowed Allowable Costs/Cost Principals Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education COVID-19 - 84.425U -American Rescue Plan Elementary and Secondary School Emergency Relief Fund S425U210012 (Year: 2024) $20,928.34 FA 2024-002, FA 2023-002, FA 2022-002 A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund Program revealed that the School District's internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Corrective Action Plans: • The CFO will ensure that every journal entry has all the supporting documentation that will show appropriate approval before entering into PCG and that the documentation explains clearly the purpose for journal entry. • Payroll will reorganize how documentation is kept of each pay period to ensure it makes a complete monthly folder. Payroll will not process any timesheets that need signatures for approval. If not able to get signed in time for current pay period, it will be processed in the next one. CFO will review all salaries after they have been entered into PC Genesis to ensure that they are being processed correctly. Estimated Completion Date: December 18, 2026 Contact Person: Torrence H. Freeman Ill, CFO Telephone: 706-665-8577 Email: tfreeman@talbot.k12.ga.us

FA 2025-001 Strengthen Controls over Expenditures Compliance Requirement: Internal Control Impact: Compliance Impact: Federal Awarding Agency: Pass-Through Entity: Assistance Listing Number and Title: Federal Award Number: Questioned Costs: Repeat of Prior Year Finding: Description: Activities Allowed or Unallowed Allowable Costs/Cost Principals Material Weakness Material Noncompliance U.S. Department of Education Georgia Department of Education 84.010 - Title I Grants to Local Educational Agencies S010A230010 (Year: 2024), S010A240010 (Year: 2025) $127,026.07 FA 2024-001, FA 2023-001, FA 2022-001 The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it related to the Title I Grants to Local Educational Agencies program. Corrective Action Plans: • The CFO will make sure that the voucher packets are properly prepared before the final steps. The packets must include approved requisition forms with school admin level approval, secondary approval from federal director if federal funds are used, and a completed purchase order signed by superintendent. • The CFO and Board Office Secretary will make sure that payments match the invoices. If there are any changes, those changes are documented correctly. • The CFO and payroll clerk will ensure all salary sheets are attached to contracts and are available for review. • The CFO will run a report to check additional payments against additional time sheets and will sign off on it. Estimated Completion Date: December 18, 2026 Contact Person: Torrence H. Freeman Ill, CFO Telephone: 706-665-8577 Email: tfreeman@talbot.k12.ga.us