Corrective Action Plans

Finding 2025-003 AL number: 10.561 AL title: Supplemental Nutrition Assistance Program Federal award or contract: FFY 2026 SNAP Employment and Training Contract No. 26 IHGA 202955 Questioned costs: None Torch Technology Solutions, a subsidiary of CrossPurpose, and charged amounts to the FFY 2026 SNAP Employment and Training Program for compliance and reporting, finance and cost allocation, program delivery, technology infrastructure, and participant-support functions. The Organization did not retain sufficient documentation to demonstrate that the amounts billed represented actual costs incurred during the applicable periods, were necessary and reasonable for the federal award, were directly attributable to program administration or participant services, or were allocated using a reasonable and documented methodology. Torch Technology Solutions also lacked sufficient documentation for certain subcontractor and service-provider expenditures. Available records did not adequately demonstrate the services provided, when they were performed, the benefit to the federal program, or the allocation methodology. Certain gift card payments also lacked documentation showing participant need, redemption, and allowable program-related use. The Colorado Department of Human Services identified similar concerns in its fiscal management evaluation. Management recorded a liability for the repayment obligation, reversed the related program revenue, and excluded the associated costs from the Schedule of Expenditures of Federal Awards. The Organization subsequently terminated its Employment First Program contract with Torch Technology Solutions, terminated the staff, and ceased operations. The Organization returned $283,425 requested in connection with the State's findings. Corrective Action Plan Management agrees with the finding. CrossPurpose has developed a process to review any future reimbursement requests submitted by subsidiaries and require supporting documentation showing that the costs are allocable, reasonable, necessary, and connected to benefits provided to eligible participants. For Torch Technology Solutions, all employees were terminated effective May 15, 2026, and the Organization terminated the subsidiary's contract with the Department. The Organization fulfilled the Department's requests arising from the fiscal management evaluation, returned $283,425, and ceased all operations of the subsidiary.The closure of Torch Technology Solutions is disclosed as a subsequent event in the notes to the financial statements. As of now, there are no existing grant awards held by subsidiaries. Anticipated completion date: May 15, 2026

Finding 2025-002 AL number: 10.561 AL title: Supplemental Nutrition Assistance Program Federal award or contract: FFY 2026 SNAP Employment and Training Contract No. 26 IHGA 206885 Questioned costs: $412,100 The Department-approved Employment First Program Operator Plan incorporated into Contract No. 26 IHGA 201182 included a Launch licensing materials cost of $2,600 per participant. The plan described the participantbased fee and related services, and the executed contract incorporated the methodology. Related budget documents also contemplated billing at established component rates rather than reimbursement based solely on actual costs incurred. The Organization billed $412,100 under the participant-based licensing methodology. Based on the approved plan, supporting budget schedules, and executed contract, management believed the methodology was approved by the Department, was reasonable and necessary, and complied with program requirements.After the program began, the Organization engaged with a reputable independent firm to perform a transferpricing and fair value study to evaluate and support the methodology and contribute the technology to a separate legal entity. The Colorado Department of Human Services later questioned whether the retained documentation adequately supported the participant-based fee and the allocation of charges to the federal program. The Department had approved invoices and reimbursed these costs before raising concerns during its fiscal management evaluation. Management recorded a liability for the amounts identified by the State pending final resolution. Corrective Action Plan Management has established a separate legal entity to hold the technology associated with these charges. On May 4, 2026, before the fiscal management evaluation, management engaged an accounting firm to benchmark the fee and independently evaluate the participant-based pricing methodology. Management is also working to value the developed technology for contribution to the separate legal entity. Although documentation was retained, management has developed a plan to enhance the documentation supporting the methodology under federal cost principles. The enhanced records will describe the basis for the participant fee, the supporting assumptions and analyses, and the benefit received by the federal program. Anticipated completion date: October 30, 2026

Finding 2025-001 AL number: 10.561 AL title: Supplemental Nutrition Assistance Program Federal award or contract: FFY 2026 SNAP Employment and Training Contract No. 26 IHGA 206885 Questioned costs: $155,141 During the audit, the Organization reported $155,141 of contractual expenditures under the FFY 2026 SNAP Employment and Training Program. The expenditures primarily related to technology, outsourced IT support, operations, consulting, and other program support provided by third-party service providers and contractors. The Organization retained invoices and supporting records, but the documentation did not provide enough detail to demonstrate how certain contractual costs were allocated to eligible participants of the federal program, and whether time-and-effort records, utilization metrics, or other records supported the charges. Management submitted an Employment First Program Operator Plan to the Department at the beginning of the contract including the estimated contractual costs, but did not retain documentation showing whether the selected contractors were communicated to or approved by the Department as modifications to the approved plan. The Department had approved invoices and reimbursed these costs before raising concerns during its fiscal management evaluation. Management recorded a liability for the amounts identified by the State pending final resolution. Corrective Action Plan CrossPurpose has implemented a revised cost allocation plan consistent with federal cost principles. Because the Organization serves people throughout Denver neighborhoods regardless of eligibility for government benefits, certain shared costs cannot always be tied directly to eligible participants. The revised plan pools those costs and allocates them based on eligible participants as a proportion of total participants served, using participant data the Organization already tracks. CrossPurpose has also implemented a process to review contractors whose costs are charged to grants and confirm that each contractor has completed the applicable approval process required by the grant before reimbursement requests are submitted. Anticipated completion date: August 1, 2026

Finding 2025-003 — LIHEAP Allocation of Multi-Period Costs (DocuSign) Description of Finding: The preliminary audit reports that a full annual DocuSign subscription expense was charged to the LIHEAP grant period January 1 through December 31, 2025, although the subscription term extended beyond that period. The finding cites $25,641 in tested expenditures and indicates that $15,385 could have been charged outside the authorized period of performance. The auditor designates the matter a repeat of 2024-004. Statement of Concurrence: Management concurs with the recommendation that prepaid subscriptions and other multi-period expenditures be allocated to the periods receiving the benefit and charged only to eligible award periods. Corrective Action: WCAI implemented procedures during 2026 to review subscription agreements and multi-period service contracts before posting costs to grants. Prepaid or multi-period costs are to be recorded on a supporting schedule, allocated over the benefiting service period, and expensed monthly. Accounting staff will verify award eligibility and period of performance before charging grant funds, and will document any required correction or reallocation identified through review. Responsible Party: Accounting Manager, with review by the Chief Financial Officer. Implementation Status / Timeline: Implementation began during the FY2024 audit process, was formalized by April 2026, and was targeted to be fully operational by May 2026 under the FY2024 plan; ongoing review. Monitoring and Evidence: Subscription contracts and invoices; prepaid expense amortization schedules; award-period verification; monthly reconciliations; review and approval of any correcting entries. Any grant-specific resolution of the cited amount should be documented separately.

FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding No. 2025-002: Payroll Costs Charged to Federal Awards Were Not Supported by Actual Time and Effort Documentation - Material Weakness Condition and Context During testing of payroll expenditures charged to the Education Innovation and Research Program (ALN 84.411), exceptions were identified where payroll costs allocated among funding sources were not supported by documentation reflecting actual time and effort performed. Specifically, 12 exceptions totaling approximately $6,600 were identified within a sample of payroll transactions tested. As a result, certain payroll costs charged to federal awards were not supported in accordance with Uniform Guidance requirements applicable to compensation for personal services. Recommendation We recommend that the Organization strengthen policies and procedures governing payroll costs charged to federal awards. Such procedures should require adequate documentation supporting actual work performed, management review and approval of payroll allocations, periodic reconciliations between payroll records and expenditures charged to federal programs, and training for employees responsible for grant administration and payroll processing. Views of Responsible Officials and Planned Corrective Actions Arts for Learning Maryland has existing procedures for allocating payroll costs to federal and non-federal funding sources. However, the Organization acknowledges the need to enhance documentation and monitoring procedures to ensure compliance with Uniform Guidance requirements. The Organization will formally document payroll allocation policies and procedures, including requirements for contemporaneous support demonstrating actual work performed by employees whose compensation is charged to multiple funding sources. Management will implement enhanced review and approval procedures for payroll allocations and will perform periodic reconciliations between payroll records and expenditures charged to federal awards. In addition, the Organization will provide training to employees involved in payroll processing, financial reporting, and grant administration regarding applicable Uniform Guidance requirements. Management will also perform periodic internal reviews to identify and address compliance issues on a timely basis. These improvements will be implemented during fiscal year 2026 to strengthen compliance with federal award requirements and prevent recurrence of similar findings.

All RMS’s will be accepted by RMS Coordinators within 72 hours of the observation moment. RMS coordinators will regularly complete training with RMS section chiefs, supervisors, and participants on the importance of timely completion of RMS observations. RMS coordinators will provide RMS tips and hints to participants and supervisors regarding the importance of timeliness of RMS. RMS “Passport” training will be conducted with Top Management in March of 2027. A new RMS Dashboard was created to advise Program leadership of RMS data and participant trends. RMS Supervisor validation data will be reviewed and shared with HCJFS leadership on a quarterly basis. The issues noted in RMS Audit will be shared with the RMS stakeholders. New Fiscal Analyst with be trained as RMS Backups to help ensure timeliness. The 8-minute RMS training video offered on the Beacon and an RMS “one pager” refresher was shared with RMS participants, supervisors, section chiefs on 09/08/2026. Guidance was provided to review both materials by 09/31/2026. HCJFS will implement this on a yearly basis moving forward. The RMS Supervisor and RMS Coordinators will have a better understanding to accept RMS’s timely, no matter who initially started the RMS correction conversation with the participant. The RMS Supervisor will conduct monthly spot checks of each cost pool to ensure timely completion of RMS observations.

FINDING 2025-003 Finding Subject: Highway Planning and Construction- Activities Allowed or Unallowed, Allowable Costs/Cost Principles Contact Person Responsible for Corrective Action: Stan Heil Contact Phone Number and Email Address: 812-542-0506-sheil@floydcounty.in.gov Views of Responsible Officials: We concur with the finding. Description of Corrective Action Plan: The Corrective Action Plan for this identified material weakness modified opinion, is first to recognize that strengthened internal controls will reduce/eliminate non-compliance submissions, thereby resulting in potential loss of Federal awards to the County of Floyd. The Commissioners have realigned and separated the Operations and Financial functions of Operations, to ensure greater attention to compliance. The identified material weakness with modified opinion occurred prior to the County’s realignment. It is desirous of the Floyd County Commissioners that compliance to all federal/state/and local awards are strictly adhered to and the separation of Operations and Finance strengthen this commitment. The Internal Controls will require that both the Chief Operations Officer and Chief Financial Officer review and sign as approval, ensuring that cross-referencing ledger expenditures for filing of reimbursement to Federal awards are compliant. The process will also ensure that any duplication of any reimbursements are eliminated. Anticipated Completion Date: The anticipated completion date of the Corrective Action Plan identified above will occur September 30, 2026 reporting as the exposure of this finding-weakness, is being addressed. Commissioners actions to ensure compliance and oversight were strengthened with the separation of Operations and Finance.

Responsible contacts: Laura, CFO; Agnes, Controller; Steve, Staff Accountant - AR; the Program Director responsible; Staff Accountant - AP (vacant). Interim AP: Trina performs the coding check under Agnes' review until AP is filled and trained. Program staff supply expense support; Trina supports historical review. AEA will evaluate each expenditure based on its documented business purpose, the nature of the activity supported, and the benefit received by the Federal award. The approved budget will guide classification but will not, by itself, establish that a cost is allowable or allocable. Expenses supporting administrative activities will be classified under the applicable award’s administrative-cost requirements, with consistent direct or indirect treatment and no duplicate recovery. Classification decisions and supporting documentation will be retained. 1. Budgeted Expenses visibility. The Program Director will provide the current approved detailed budget, category definitions, and coding instructions to staff who request, incur, or approve expenses, and to AP, Steve, and Agnes. Approved amendments will be shared promptly. Program staff will document each expense's purpose, benefiting activity, fund/award, and proposed category. Evidence of budget distribution and staff instruction will be retained. 2. Expenses coding. AP should also review the invoice, business purpose, benefiting activity, and allocation support. A cost should not pass review merely because it fits an available budget line. Costs must satisfy award restrictions, budget category, receive consistent treatment, and be adequately documented. AP will compare each expense and its support with the approved budget categories and coding instructions before accepting grant coding. Incorrect, unclear, or unsupported submissions will be rejected as coded and returned to Program staff. AP will work with the Program to document corrections and escalate unresolved disagreements to Agnes, then Laura as needed. Disputed coding will not support an award charge or claim until resolved. 3. Budget – Actual expense review. Monthly and before each financial report, Steve will prepare an expense report with the approved budget, current-period and cumulative actual expenses, remaining budget, and variance by category. Actuals will reconcile to the general ledger. Program will review the transaction-level coding. AP and Program staff will investigate variances and classification errors, including administrative costs in program categories. Agnes will review the analysis and proposed corrections; Steve will update reports after approved entries are posted. Program retains financial-review responsibility. Steve or the designated submitter will release only the approved version; later coding changes require renewed review. Oversight and historical correction. Agnes, the Program Director, and Trina will review the expenditures and similar 2026 charges through implementation, document conclusions, and process supported corrections through the journal-entry approval workflow. Laura will oversee implementation and address significant classification judgments, required funder resolution, and report revisions. Anticipated completion For awards ending, Sept 30, 2026, historical review will be completed by October 15, 2026. Interim controls begin October 1, 2026; procedures and training by October 30, 2026; historical review by November 30, 2026. Anticipated completion: January 15, 2027. Monthly monitoring and pre-submission approvals continue thereafter.

Responsible contact(s): Agnes, Controller, for methodology and review; Laura, CFO, for approval; Program Managers for benefit evidence. Participating staff: AP Staff Accountant after onboarding; Trina for interim AP documentation; Steve for claim reconciliation; Trina for allocation-workpaper checks. During 2026, management has been working on a documented, consistently applied allocation methodology. 1. Approve a written allocation plan. Agnes will finalize shared-cost pool, the activities benefiting, the allocation driver, calculation, source records, update frequency, and approval responsibility. Program Managers will substantiate benefit, and Laura will approve the plan. Personnel allocations will follow actual activity under finding 2025-006, not budget availability. 2. Use supportable drivers. Potential drivers include occupied square footage for space-related costs, assigned users for licenses, and documented usage for shared services. These are proposed examples, not AEA's established methodology. The selected basis must fit the benefit received, include all benefiting Federal and non-Federal activities, and be documented. Available grant balances will not determine the allocation. 3. Support each calculation. Trina, and subsequently the AP Staff Accountant, will retain the invoice and approved allocation worksheet showing the full cost, driver quantities, proportions, allocated amounts, and fund/category coding. Agnes and later Trina will check calculations and reconciliation to the source amount; Laura and subsequently Agnes will approve. Steve will reconcile the approved allocation to billed costs and retain supporting references. 4. Prevent inconsistent or duplicate recovery. Agnes will review changes in space, staffing, users, or program activity and update the basis when warranted, with formal quarterly review. Directly charged costs will be excluded from any indirect recovery of the same cost. General administrative pools will follow the applicable indirect-cost method and award limitations; costs will not be shifted to another award to overcome a funding deficiency. 5. Resolve the historical population. Agnes and Program Managers will review 2026 allocations through final implementation. Any reconstructed basis will use credible period-specific evidence, not unsupported hindsight percentages. Laura will approve supported corrections and direct funder resolution where needed. Training will cover invoice preparation, benefit documentation, and approval. Anticipated completion Documented review of all new shared-cost allocations: October 15, 2026. Written allocation plan and training: October 30, 2026. Review of cited items and similar allocations: November 30, 2026. Anticipated completion: February 15, 2027.

duties and responsibilities performed by the Family Children First Council Coordinator. Due to the audit resolution from 2024 not being finalized with ODJFS until early 2026, the transfer of FCFC funds to the social services cost pool has not occurred for 2025. The transfer will be completed for 2025 and 2026. The ODJFS has approved the new job description.

A formal cost allocation plan is being finalized and will be presented to the Board for approval no later than the November 2026 meeting. The cost allocation plan is expected to be e􀀁ective retroactively as of January 1, 2026, and the organization has already implemented the plan’s allocation methodologies in the general ledger and grant reporting since that date.

Corrective action steps taken and/or planned: There are 2 primary reasons for the delay in submitting cross charges. One, an EA authorizing cross charges for specific programs had not been submitted. The EA has been submitted and approved and all outstanding cross charges are being processed at the time of this response. The second reason is due to the reimbursement process for some of the programs that the Department staff administers. The department, for many programs, acts as the sponsoring applicant, on behalf of non-profit agencies because certain programs disallow non-profits to apply on their own. Many of the programs do not pay costs up front to the department, requiring that the non-profits pay from their local funds, therefore delaying the ability to cross-charge costs to reimburse the CDBG program immediately. It was discovered after the former Senor Fiscal Manager left that billing for many projects had not occurred. The department has developed a process to bill the non-profits for the allowable administrative costs as soon as work on the projects begins to be able to reimburse CDBG timelier. Timetable of dates for performance of planned corrective action steps including completion date: At the time of this response cross-charges are being processed. Do. It is anticipated that all outstanding cross charges will be completed by the end of June 2026. E. Description of monitoring to be performed to ensure corrective action steps are taken: The Assistant Director, Operations and Assistant Director, Finance will work closely to ensure cross charges are completed in a timely manner now that processes have been established for all funding sources.

The County will implement a documented review and approval process for expenditures included in reimbursement requests. Supporting documentation will be reviewed prior to submission to verify that amounts claimed agree to underlying records, including invoices, force account equipment records, and other applicable supporting documentation. Evidence of the review and approval will be retained with the reimbursement documentation. The County has reached out to the Minnesota Department of Public Safety to update the claimed costs as necessary for the mathematical error. Responsible Person: Joe Martin, County Administrator & Carol Blaschko, Finance Director Anticipated Completion Date: 12/31/26

Panthera continued strengthening its internal controls through 2025 and early 2026 by expanding its use of Rippling to support more consistent HR workflows, documentation, and approval tracking. We also transitioned portions of our international workforce from DEEL to Safeguard, which offers stronger compliance monitoring and country‑specific employment controls. This shift enhances our ability to maintain complete personnel files, ensure accurate payroll processing, and meet federal requirements for allowability of labor costs. In addition, the new timesheet module implemented across 2024–2025 continues to improve documentation of personnel activity and verification of payroll‑related charges. The organization also experienced a leadership transition with the departure of our CAO in late 2025 and the onboarding of a new Chief People Officer in early 2026. This change has brought renewed focus to HR governance, process standardization, and long‑term workforce planning, further reinforcing Panthera’s commitment to strong internal controls over federal expenditures.

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.

AUDIT FINDINGS Finding No. 2025-002: Allocation of Shared costs Corrective Action: Pro Bono Resource Center of Maryland (PBRC) is looking into an upgrade to its system to ensure correct allocations of all cost taking advantage of the latest Accounts Payable software. Name of Contact Person: Amy M Smitherman, amy.smitherman@gmail.com, 646-240-3185 Projected Completion Date: 10/15/2026 ___________________________________________________________________________________________________ Finding Reference Number: Finding No. 2025-001: Audit Adjustments Corrective Action: Pro Bono Resource Center of Maryland (PBRC) will work with our accounting firm to ensure that the appropriate steps are taken. Name of Contact Person: Amy M Smitherman, amy.smitherman@gmail.com, 646-240-3185 Projected Completion Date: 10/1/2026

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.

Finding #2025-005 - Allowable Costs/Cost Principles - Non-Payroll Corrective Action Planned: Management identified an inappropriate benefit cost allocation from March through June 2025 during an independent internal review, corrected the allocation, and reported the reduction in federal expenditures on the reimbursement request submitted in April 2026. Beginning this fiscal year, the annual financial statement audit fee is being charged entirely to the grant supporting general operations rather than allocated across federal awards, removing the proportionality question for this cost going forward. Anticipated Completion Date: Already implemented. Responsible Party: Finance Manager, with oversight by the President.

Corrective Action Plan: Management is in the process of working with HHS to renew the Provisional Rate agreements. The anticipation is that the agreement will be completed by the end of 2026. Anticipated Completion Date: December 31, 2026

· Review current cost allocation plan and policy to determine if all information presented and needed is included in the policy document · Work with outside agency to review top down approach to cost allocation philosophy and determine if revisions are warranted · Work to payroll vendor to review the process to re-establish time-and-effort reporting through the timesheet entry process and the consolidation of time-and-effort information into reporting that can be easily summated by department/project and uploaded to MIP · Determine the allocation and cost distribution methods needed and the resulting detail reporting needed to substantiate the allocation methods used for propriety · Reinstitute the timesheet entry process by project/cost code and train staffing at an upcoming All Staff meeting to reset the view of timesheets and their importance of timesheet tracking to minimize errors for cost allocation purposes · Have staff begin using timesheets in Paylocity (by December 1st) · Complete update of Fiscal Policies Manual (inclusive of Cost Allocation methodology and philosophy) and timely reviews (i.e. at a minimum semiannually or with major program changes/contracts) to ensure no substantive changes needed to policy or actions needed to ensure appropriate accounting updates

The Society of American Foresters has enhanced their exis􀆟ng expense recogni􀆟on controls for event-related invoices by reques􀆟ng more detailed vendor invoices that clearly iden􀆟fy the event and applicable service period, implemen􀆟ng addi􀆟onal review for vendors with recurring or overlapping billing arrangements, and reinforcing current invoice review procedures to ensure that the period of benefit is adequately documented, par􀆟cularly for transac􀆟ons occurring near year-end. These enhancements are intended to further strengthen the Society’s already effec􀆟ve control environment and support consistent and accurate recogni􀆟on of event expenses in accordance with federal requirements and GAAP.

View of Responsible Officials and Corrective Action Plan WESST acknowledges this finding, remains committed to continuous improvement, and has already taken proactive, substantive corrective action. During the fiscal year under review, the organization experienced a leadership transition when a new Chief Executive Officer assumed responsibility following the departure of a CEO who had served for 33 years. At the same time, WESST faced significant and sudden changes in long-term funding sources, requiring prompt financial and operational adjustments. A significant finance department change occurred in October 2025. As noted in the Statement of Condition above, no exceptions were identified after that point. In connection with this change, WESST implemented key control processes, including: o All expenses will be reviewed for allowability, allocability, and reasonableness before being charged to the grant. o Payroll charges recorded in the general ledger will be reconciled to employee time records or approved allocation schedules each month. Variances will be investigated and corrected in a timely manner. o All changes to payroll allocations require documented justification and formal review and approval. o Monthly expense reviews will be performed by the: • Staff Accountant • Program Director • Accounting Controller o These reviews will support proper classification of direct and indirect costs and help prevent inconsistent treatment Corrective Action Plan Timeline Completed implementation in March of 2026. Designation of Employee Position Responsible for Meeting Deadline Chief Executive Officer

VIEWS OF RESPONSIBLE OFFICIALS As a result of a Specific Conditions letter issued by the United States Department of Education (USDE), in March 2021 the Puerto Rico Department of Education (PRDE) signed a contract with a Third-Party Fiduciary Agent (“TPFA”) to oversee the administration of federal funds. As this was the first time the PRDE was required by the USDE to contract a TPFA, the PRDE received support and guidance from the USDE. The USDE reviewed and approved the key procurement terms of the RFP, including the stipulated fixed fee provision for payment of TPFA services and expenses. The following is the PRDE's response to Finding Reference Number 2025-003. Statement of Condition 1 — Reasonableness of the Average Hourly Rate The PRDE does not agree with the implication, in Statement of Condition 1, that the average hourly rate is unreasonable. As the contract stipulates a fixed monthly fee, the reasonableness of the hourly rate should be calculated over an extended performance period, as the hours worked during a particular month fluctuate depending upon the level of work required to be performed. In the sample of invoices examined for the twelve-month period beginning June 2024 and ending May 2025, the total invoice amounts over the twelve-month period, less related expenses and the 1.5% contribution fee to the Government of Puerto Rico, divided by the total hours worked, results in an average hourly rate of $407.83, which is slightly above the noted “reasonable” rate which was addressed over 5 years ago in the RFP. Adjusting for a cumulative inflation rate of 24.48% since 2020, the RFP range of rates would have been between $81 and $438, so the average hourly rate of $407.83 is within that range. However, it should be noted that the rates in the RFP were expected to be local billing rates and not rates of a global consulting firm providing TPFA services from a team of experienced international senior professionals. The range of rates noted in the invoice template, i.e., $195–$695, and highlighted in each TPFA monthly invoice, approximates rates of the US General Services Administration (GSA). The PRDE does not agree with the recommendation that contract terms with the vendor should be revised before the contract expires. As this was the first time the PRDE was required to contract the services of a TPFA, the PRDE received guidance from the USDE, which reviewed and approved the key procurement terms of the RFP, including the stipulated fixed fee provision for the payment of TPFA services and expenses. The fixed fees were a result of extensive negotiations between the PRDE and the selected vendor and, although the hours and expenses are disclosed in each monthly invoice, this is provided for informational purposes only and, as stated in each invoice, “is not to be used to calculate the Total Amount Due,” which in each month is the applicable fixed fee. In addition, the PRDE does not agree with the recommendation that the TPFA submit supporting evidence for the reimbursement of expenses because (i) the TPFA contract is a fixed fee that is inclusive of all professional service fees and expenses, (ii) the TPFA provides an explanation of major expenses incurred within each monthly invoice, and (iii) the monthly fixed fee invoice is not requesting any specific reimbursement for expenses incurred. Statement of Condition 2 — Allocability Between Federal and Non-Federal Funds The PRDE does not agree with the finding that there is no basis for the allocation of costs between Federal and non-Federal funds. The funding of TPFA invoices from various federal funds was a result of (i) reasonable discussions between the PRDE and the USDE, (ii) the USDE's authorization for the availability of federal funds to pay TPFA invoices, and (iii) the actual availability of both federal and state funds at the PRDE from which to pay TPFA invoices. Furthermore, the TPFA services are applicable to all federal funds under the TPFA's administration, and its work is not directly tied to any specific grant. The funding for TPFA services is divided between federal and state funds as agreed to between the PRDE and the USDE, and payment for those services is determined based upon the availability of both federal and state funds. TPFA services are conducted for the benefit of the entire PRDE organization and, as such, are overhead costs not directly tied to any specific program or purpose. In addition, funds used to pay TPFA invoices are sourced from grant administration accounts that are specifically designated for the payment of overhead costs. Auditor Comment on Management Response for Finding No. 2025-003 The 2 CFR 200.1 establishes that: “Indirect [facilities & administrative (F&A)] costs mean those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.” This information was not provided for our evaluation. Also, we made reference to the Program Determination Email for ALNs. 84.938 and 84.425 dated September 18, 2024 (Audit Control Number 02-21-39634), received from Ms. Catherine Miers of the Office of Elementary and Secondary Education of the US Department of Education (USDE), in which they required that the PRDE provide documentation for the following corrective actions: “revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration; requested that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE; and develop an adequate review of the vendors invoice to properly identify the actual hours of services that benefited the Federal programs so a correct allocation of the costs incurred can be made within Federal programs and state funds”. IMPLEMENTATION DATE None RESPONSIBLE PERSON Jullymar Octtaviani Vega Sub-Secretary of Administration Edgar Delgado Serrano Interim Director of Federal Affairs Office

Provide funder-led training sessions for management and staff, maintain current budget tracking incorporated federal program compliance into relevant staff performance evaluations, implement a dual-storage documentation methodology combining a shared drive and a document management system (DMS) and update the Finance Manual.