Findings Citing § 200.302

Condition: The Board has written fiscal policies but they do not meet the financial management system requirements established in the regulations. Criteria: 2 CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Cause and Effect: The Board has processes and procedures in place to administer grant funds but written policies do not contain compliance requirements. The Board is not in compliance with financial management system requirements. Recommendation: The Board should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Management and Planned Corrective Action: See Corrective Action Plan included at the end of the report.

Condition: The City has not adopted written policies or procedures regarding the determination of allowable costs in accordance with Uniform Guidance. Criteria: CFR 200.302(b)(7) Cause of Condition: Unfamiliarity with requirements stated in 2 CFR 200 of Uniform Guidance. Effect of Condition: Effect is a state of non-compliance which may impact future grant awards or failure to identify and reject un-allowed costs charged to grant programs. Recommendation: Adopt policies and procedures to become compliant with Uniform Guidance.

2025-003 – Written Policies Year Initially Occurring: 2025 CONDITION: The Town does not have certain written policies required by the Uniform Guidance. CRITERIA: 2 CFR 200.302 (b) (6) states, in part, “written procedures to implement the requirements of section 200.305” and (7) states, in part, "Written procedures for determining the allowability of costs…” CAUSE: The condition results from the failure to design and implement policies and procedures which are in accordance with the Uniform Administrative Requirements. EFFECT: The Town is not in compliance with the Uniform Administrative Requirements. RECOMMENDATION: We recommend that the Town adopt written policies required under the Uniform Guidance.

U.S. Department of Justice/Passed-Through Texas Office of the Governor Crime Victim Assistance Federal Assistance Listing Number: 16.575 – Common Thread - Texas Award Number: 3853406 Award Year: September 1, 2024 – October 31, 2025 Criteria or Specific Requirement: Matching – Under 2 CFR § 200.306, cost sharing/matching must be allowable, verifiable, properly valued, within the period of performance, and adequately documented. 2 CFR § 200.302 requires accurate, current, complete financial records. 2 CFR § 200.430 requires records that support compensation and time worked. Texas Office of the Governor's (OOG) program guidance further requires set rates, timekeeping, and preconditions when employee on‑call is used as in‑kind (not the same or similar duties; voluntary participation). Condition: BCFS HHS did not comply with matching requirements. Reported match included (1) unpaid employee on‑call hours without required timekeeping and (2) over‑valued volunteer/intern hours, including some ineligible activities. Subsequent discussions with OOG indicate approximately $850,000 of match is unallowable and will require correction through repayments and/or budget reductions. Cause: The prior program executive director deviated from using the in-kind match plan that had been previously approved by the public safety officer (PSO) – utilizing exempt personnel; taking “on-call” (answering phones) after hours, performing duties different from their normal work duties, could be considered as volunteer hours and count towards in-kind match. During 2022 (COVID-19 pandemic), PSO waived match requirements, the program executive director hired overnight on-call workers, believed to be due to increase in call volume. Following the pandemic, the PSO discontinued the match wavier in October 2024. The program executive director failed to reassign the on-call workers, resulting in a compromise of the in-kind match plan. BCFS HHS’ documentation and valuation practices in place during the period were not fully aligned with the specific documentation, rate‑setting, and classification requirements outlined in Office of the Governor’s (OOG) monitoring guidance. Effect or Potential Effect: Reported match was overstated, requiring budget and reporting corrections in the E-grants system, and may result in repayment or additional local match to cure the deficit. Questioned Costs: $853,982. Calculated from OOG’s identification of disallowed/questioned match related to on‑call, volunteer, and intern match; and BCFS HHS’ internal calculation of anticipated corrections, including indirect cost adjustments and the expected reclassification of mileage and training amounts. Context: Match claimed on FSRs for period 10/1/2024–8/31/2025 under Grant 3853406; OOG review covered 10/1/2024–2/28/2025 with extrapolation through August for cash match. Repeat Finding: None. Recommendation: We recommend BCFS HHS 1) Implement a board‑approved on‑call policy that complies with OOG and Uniform Guidance; 2) Re‑value all in‑kind hours using approved rates; 3) Remove or reclassify any unallowable match; 4) Obtain pass‑through approval for unrecovered indirect used as match; and 5) Strengthen internal controls over timekeeping, valuation, and reporting. Views of Responsible Officials and Corrective Action: Management concurs with the finding and is working with the OOG on an approved remediation plan that includes application of unrecovered indirect, and reduction of other allowable costs to cure the match deficit. See further information on the corrective action plan provided by management.

2025-001: Accounting Records and Documentation (Significant Deficiency) Federal Program: Child Nutrition Cluster – School Breakfast Program (AL No. 10.553) and National School Lunch Program (AL No. 10.555) Condition: During our audit of compliance with federal program requirements, we noted that the District did not consistently maintain accounting records and supporting documentation for Child Nutrition Program reimbursement transactions in a manner that ensured timely accessibility for audit testing. Certain reimbursement requests and related supporting documentation were not readily available during audit fieldwork. As a result, we were required to perform expanded audit procedures, including additional reconciliations and alternative testing, to obtain sufficient appropriate audit evidence supporting the reported reimbursement amounts. Criteria: Uniform Guidance (2 CFR §200.302 and §200.303) requires nonfederal entities to maintain accurate, complete, and adequately supported financial records and to establish effective internal controls to ensure compliance with federal program requirements. Cause: The deficiency appears to be attributable to weaknesses in the District’s documentation retention, organization, and supervisory review procedures related to Child Nutrition reimbursement reporting. Effect: Although documentation was not fully sufficient at the outset of audit testing, expanded audit procedures allowed us to obtain reliable support for the reimbursement amounts tested. No questioned costs or audit differences were identified as a result of this condition. Testing of reimbursement activity disclosed no variances between amounts reported and amounts received, based on a tested population totaling $793,987.13. Recommendation: We recommend that the District strengthen its internal controls over the preparation, review, organization, and retention of Child Nutrition Program reimbursement documentation to ensure that complete and accurate supporting records are maintained and readily available for audit and monitoring purposes. Views of Responsible Officials: The District’s management concurs with the finding and plans to implement procedures to improve the completeness and accessibility of accounting records and supporting documentation related to federal program reimbursements.

Finding 2025-002: Reportable finding considered a significant deficiency - Noncompliance with Payroll Allocation Controls Program name: Headstart Cluster Assistance Listing: 93.600 Federal awarding agency: U.S. Department of Health and Human Services Award identification numbers: 03CH012075-04-00, 03CH012075-05-00, 03CH012317-02-00, 03CH012317-03-00 Award Years: 2024/2025 Criteria: Under 2 CFR § 200.430(g)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. The records must also support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: Certain employees allocate time to the various projects within the headstart cluster, however, incorrect allocations resulted in payroll costs being charged to Federal awards using the wrong allocation percentages for approximately six months before the error was detected. The errors were mostly identified and corrected by the Organization; however, this correction occurred roughly six months after the incorrect allocation began. Management processed correcting entries such that the total payroll costs charged to the Head Start Federal awards for the fiscal year were corrected in the accounting records. Cause: The error resulted from a combination of data entry errors when setting up the allocation in the payroll allocation system; and insufficient review and monitoring controls over payroll allocation setup and ongoing allocations, including the lack of a documented, periodic review to confirm that allocations continue to reflect actual time and effort and the relative benefits received by Head Start and other programs. As a result, an incorrect allocation remained in place for several months before being identified and corrected. Effect: For approximately six months, payroll costs were allocated among the various Head Start awards and other programs using incorrect allocation percentages. This resulted in a control deficiency in the Organization’s internal control over compliance with Federal requirements for payroll and payroll allocations, including the requirement for effective control over and accountability for all funds in 2 CFR § 200.302(b)(4) and periods during which costs charged to the Head Start Federal awards were not aligned with the relative benefits received by the program, which is inconsistent with the allocability requirements of 2 CFR § 200.405(a). Although management corrected the year-end totals charged to the Head Start Federal awards, the delayed detection of the error indicates that similar errors could occur and remain undetected, potentially resulting in unsupported or unallowable payroll charges in future periods. Management’s response and corrective action plan (unaudited): See corrective action plan. Repeat finding: This is not a repeat finding. Questioned costs: None identified, as the expenditure appeared otherwise allowable. However, the control deficiency presents a risk for future noncompliance. Perspective: In our original sample of 40 payroll allocation transactions related to the Head Start program (ALN 93.600), we noted 5 errors impacting 2 employees. We did not increase our sample size because the error was pervasive across multiple employees. Additional testing over compliance was performed and noted that the errors were materially corrected by management during the year. Recommendation: We recommend that the Organization: • Strengthen payroll allocation setup and review controls by implementing and documenting a review and approval process (by someone independent of the preparer) for new or modified payroll allocation setups in the payroll system for employees whose salaries are charged in whole or in part to Head Start. • Implement periodic after-the-fact reviews of payroll allocations for employees whose salaries are allocated to Head Start and other programs to confirm that allocations remain consistent with actual time and effort and the relative benefits received by each program, and that necessary adjustments are recorded timely. • Enhance documentation and training related to payroll allocations, including: o Written procedures describing how allocations affecting Head Start are established, reviewed, and monitored; and o Training for staff responsible for entering and reviewing payroll allocations on the requirements of 2 CFR § 200.302, § 200.405, and § 200.430, and the importance of timely identification and correction of errors. These actions should help ensure that payroll costs charged to the Head Start Federal award are accurate, properly supported, and allocable in accordance with Federal requirements.

Reporting – ACF-196R Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Temporary Assistance for Needy Families (TANF) ALN: 93.558 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 2401TXTANF October 1, 2023 – September 30, 2024 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: Per 2 CFR §200.303(a), Health and Human Services Commission (HHSC) must establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that it is managing the Federal award in compliance with federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Pursuant to 45 CFR §265.3(a)(1) each State must collect on a monthly basis, and file on a quarterly basis, the data specified in the TANF Data Report and the TANF Financial Report (or, as applicable, the Territorial Financial Report). More specifically, Form ACF-196R is used by States administering the Temporary Assistance for Needy Families (TANF) program to report quarterly expenditure data and to request quarterly grant funds. The ACF-204 report (Annual Report on State Maintenance-of-Effort Programs) must be completed and submitted in accordance with the requirements at 45 CFR §265.9(c). The report includes several line items that contain critical information, including “Total State MOE Expenditures.” Input for the Total State MOE expenditures line item is provided by the Texas Education Agency (TEA), the Texas Workforce Commission (TWC), and HHSC. The MOE amounts in the ACF-204 report are to agree to the amounts in the final ACF-196R report. For the FY2024 ACF-196R report, the contributing agencies reported State MOE expenditures on various line items including but not limited to: HHSC – Line 6a (Basic Assistance (excluding Relative Foster Care Maintenance Payments and Adoption and Guardianship Subsidies) TEA – Line 11b (Pre-Kindergarten/Head Start) Condition: All key line items in the FY 2024 ACF‑204 report were tested and agreed to supporting documentation without exception. However, the Total State Maintenance of Effort (MOE) Expenditures reported in the ACF‑204 by HHSC and the Texas Education Agency (TEA) did not reconcile to the amounts reported in the ACF‑196R as shown below: Amounts reported in the ACF‑204 were accurate and supported; the variances occurred because the ACF‑196R reflected higher MOE expenditures than those reported on the ACF‑204. Questioned costs: None. Context: See “Condition.” Cause: The variance in line 11b was due to miscommunication between the relevant HHSC personnel regarding revisions to an initial submission. The variance in line 6a was due to the HHSC Federal Reporting Team incorrectly including period 1 of 2025 in the MOE calculation. The agency did not perform a complete reconciliation between the ACF‑204 and ACF‑196R prior to submission, resulting in inconsistent MOE reporting across the required reports. Effect: Inaccurate or inconsistent reporting of MOE expenditures increases the risk of noncompliance with federal reporting requirements under 2 CFR §200.302 (financial management) and 2 CFR §200.329 (performance and financial reporting). These discrepancies may impair the federal awarding agency’s ability to evaluate program performance, assess State MOE compliance, and rely on the accuracy of reported financial information. Repeat Finding: No. Recommendation: HHSC should strengthen their financial reporting controls to ensure consistency between the ACF‑204 and ACF‑196R reports. Specifically, the agency should implement a formal reconciliation process that: • Compares all MOE expenditure amounts reported on the ACF‑204 to those reported on the ACF‑196R prior to submission; • Requires documented review and approval of the reconciliation by management; and • Ensures any discrepancies are researched, resolved, and corrected before the reports are finalized. Views of responsible officials: HHSC concurs with the recommendation.

Finding 2025-001: Allowable Costs/Cost Principles – Improper expenditure recognition Federal Program Name: Title II, Part A, Teacher & Principal Training and Recruiting Assistance Listing Number: 84.367A Federal Agency Name: U.S. Department of Education Passed-Through Agency Name: Texas Department of Education Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement Per 2 CFR 200.302 and 200.303, management is responsible for ensuring the accuracy and completeness of all financial records and related information, as well as for establishing and maintaining effective internal controls over grant reporting and compliance. Condition During the current fiscal year, grant expenditures initially included $291,666 for services scheduled to be provided in the subsequent fiscal year. Cause In preparing its financial records for the year ended June 30, 2025, the District did not identify expenditures recorded in the incorrect fiscal year. The failure to detect these errors in a timely manner indicates that closing procedures— specifically the monitoring and review of financial information—were not performed effectively. Effect or Potential Effect The District’s internal control system did not prevent, or timely detect and correct, misstatements in its financial records. Ineffective monitoring and closing procedures increase the risk that errors or irregularities may occur and remain undetected. Questioned Costs None Context or Perspective Information Improper recognition of expenditures could result in misstatements reported to awarding agencies and inaccuracies in the Schedule of Expenditures of Federal Awards, potentially affecting the determination of major programs subject to single audit testing. The expenditures identified above were ultimately removed from current year activity and were excluded from the year-end reimbursement request. Recommendation We recommend that the District provide additional training to staff responsible for preparing year-end grant expenditure reports to strengthen accuracy. Views of Responsible Officials and Planned Corrective Actions See corrective action plan

Specific Requirements: 2 CFR 200.302(b) requires non-Federal entities to provide the following – 1) identification, in its accounts, of all Federal awards received and expended; 2) accurate, current, and complete disclosure of the financial results of each Federal award program; 3) records that identify adequately the source and application of funds for federally-funded activities; 4) effective controls over, and accountability for all funds, property, and other assets; 5) comparison of expenditures with budget amounts for each Federal award; 6) written procedures to implement the requirements of the Federal payment section of Uniform Guidance (200.305); 7) written procedures for determining the allowability of costs in accordance with the cost principles as listed in Uniform Guidance. Best practices under generally accepted accounting principles require an organization to establish internal controls over financial reporting over federal awards, which includes tracking of federal dollars within the detailed general ledger by federal programs. Condition: We noted that internal controls over tracking federal funds in the general ledger by federal programs was not being executed to clearly identify which expenditures were for the federal program. Program expenses included both federal and non-federal dollars which made it difficult to ensure the expenditures for federal programs were accurately presented on the SEFA and to identify the specific expenditure to test for compliance. Cause: For the second year the accounting department had significant turnover and went through a software conversion in the current year. The software was not set up to track the expenditures by Federal grant. Effect or Potential Effect: Lack of controls over coding federal programs in detailed general ledger may result in either overstating or understating federal expenditures which could cause a material misstatement of the financial statements and SEFA. Repeat Finding: No Recommendation: We recommend the Organization update its coding process in their financial system. Begin including Project codes for expenses for all federal programs. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding. See Corrective Action Plan.

Congressional Directives, U.S Department of Health and Human Services, Federal Assistance Listing #93.493; Contract No. 90XP0658-01-00 Condition: The amount of expenditures covered by the report period were inaccurately reported to the federal granting agency. Criteria: In compliance with Title 24 CFR Subpart D Post Federal Award Requirements §200.302 Financial management (b): The financial management system must provide for (2) Accurate, current, and complete disclosure of the financial results of each Federal award program in accordance with the reporting requirements set forth in SS 200.328 and 200.329.” Cause: The error stems from a clerical oversight related to evaluating the amount of expenditures at the wrong date, as the transactions in the final month of the reporting period had not been closed out by the Organization at the time the report was prepared. Effect: The Organization failed to report the actual amount of expenditures in accordance with the program requirements, resulting in an understatement of $85,195 on the report. Failure to submit accurate funding and financial data could result in loss of future funding. Recommendation: Management should perform an internal review over inputs into federal financial reports before they’re submitted, to verify that inputs are accurate and cover the appropriate reporting period.

2025-001: Significant Deficiency - Reporting U.S. Department of Education Pass-through Oregon Department of Education Child Nutrition Cluster – AL #s 10.553, 10.555, 10.559 and 10.582 Criteria – Management is responsible for ensuring reporting meets the Reporting Principles as required by 2 CFR §200.302, §200.328 and program regulations, where information reported is complete, accurate and timely. Monthly claim reports submitted through the state reporting system must accurately reflect reimbursable meals served Condition – The District submitted monthly child nutrition reimbursement claims that contained inaccurate meal counts for multiple months during the fiscal year. Specifically, the District overstated reimbursable meal counts due to errors in including nonreimbursable meals served. Additionally, the claims were not subject to an independent review prior to submission to ensure accuracy and completeness. Cause – The District did not have a formalized review and reconciliation process for monthly child nutrition claims and responsibilities for claim preparation and review were not adequately segregated. Effect or potential effect – As a result, the District received federal reimbursements in excess of allowable meals served. Based on audit procedures performed, the resulting questioned costs were less than $25,000, which is below the Uniform Guidance reporting threshold and therefore not required to be reported. Recommendations – We recommend the District enhance internal controls by implementing an independent review to the reporting process to ensure meal counts are properly calculated prior to submission. Views of Responsible Officials and Planned Corrective Actions – Management agrees with this finding. Management will revisit internal controls and independent review processes to ensure meal counts reported are in accordance with requirements as defined in 2 CFR §200.302, §200.328 and program regulations.

Criteria: Under Uniform Guidance (2 CFR §200.302, §200.303, §200.305, §200.318–§200.326, and §200.430), a non-federal entity must establish, document, and maintain written policies and procedures for the management of federal awards. Effective internal control over federal awards provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the awards. Condition: The Town did not have written policies and procedures required by Uniform Guidance (2 CFR 200) for the administration of its federal programs. Specifically, the Town has not formally documented policies and procedures addressing key areas required under the Uniform Guidance, including but not limited to allowable and unallowable costs and cost principles, procurement standards, suspension and debarment, conflicts of interest, cash management, and reporting and record retention requirements. While informal processes exist, they are not sufficiently documented to ensure consistent application or compliance with federal requirements. Cause: The Town has not developed or formally adopted written federal grant management policies and procedures. Effect: Without formal written policies and procedures, there is an increased risk of noncompliance with federal program requirements. This condition exposes the Town to potential noncompliance with federal regulations, increases the risk of unallowable costs being charged to federal awards, and may affect the Town’s ability to properly administer, monitor, and report federal program activity. Additionally, the lack of documentation may impair continuity of compliance in the event of change in key personnel. Recommendation: The Town should develop, formally adopt, and implement written policies and procedures to comply with Uniform Guidance (2 CFR 200). The policies should address all major compliance areas, including but not limited to allowable and unallowable costs and cost principles, procurement standards, suspension and debarment, conflicts of interest, cash management, and reporting and record retention requirements. The Town should ensure that staff responsible for federal grant administration are properly trained to ensure adherence to these policies and that the policies are reviewed periodically and updated as needed. Views of responsible officials: See management’s responses to findings on Page 78.

FINDING 2025-002 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425U, 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation did not have an effective system of internal controls over federal award requirements that would have ensured that expenses charged to the grant were for activities and costs that were allowable under the federal award. The School Corporation designed a process for vendor claims in which all purchase orders were approved by either the Superintendent of Schools or a member of his staff who was knowledgeable of the requirements of the federal program, with the associated claim vouchers, then reviewed by another employee who was also knowledgeable of the requirements of the federal program prior to submission to the School Board for final approval for payment and inclusion on the reimbursement requests submitted for the program. Out of a sample of 25 claims selected for internal control testing, the School Corporation was unable to provide 5 claim vouchers to show the aforementioned review and approval. We were therefore unable to verify that the stated internal control was properly implemented and operated effectively for those claims to ensure the expenditures were for activities and costs allowed under the federal award. INDIANA STATE BOARD OF ACCOUNTS 17 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation also designed a process for payroll claims where the Superintendent of Schools reviewed and approved the detailed payroll distribution reports which included employees with payroll expenses charged to the federal award. However, the internal control was not adequately designed and did not detect noncompliance with the allowable cost requirements of the award. During compliance testing of vendor and payroll claims, one payroll claim for a Certified Intervention Teacher was selected for testing. The School Corporation was unable to provide documentation to support the determination of the amount of the teacher's total salary that was allocated to the federal award. We then reviewed all payroll expenses associated with the Certified Intervention Teacher position paid out of the federal award during the audit period and determined that a total of $22,416 was charged to the federal award without proper documentation to support the amount of the teacher's salary allocated to the federal award. We consider the $22,416 to be questioned costs. The lack of effective vendor internal controls was systemic to both awards but was isolated to fiscal year 2023-2024 prior to the appointment of the current Treasurer. The lack of effective payroll internal controls was systemic to both awards, while the noncompliance was isolated to award number S425U210013. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, asses, expenditures, income and interest and be supported by source documentation. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (g) Be adequately documented. . . ." Cause The School Corporation experienced turnover in a key position related to the internal controls over the federal award, resulting in issues with organization and retention of supporting documentation to verify the key internal control over vendor claims. In addition, the School Corporation's policies and procedures were not properly designed to show the determination of how employees' compensation would be allocated to multiple cost centers. As a result, the key internal control over payroll claims was unable to prevent, or detect and correct, noncompliance with the allowable costs requirement of the federal award. Effect Without proper implementation of an effectively designed system of internal controls, noncompliance that resulted in questioned costs remained undetected. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs We identified $22,416 in known questioned costs as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for activities and costs allowed per the terms and conditions of the federal award and in compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. We also recommended that the School Corporation strengthen its policies and procedures to ensure that appropriate supporting documentation is retained and available for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

2025-001 – Significant Deficiency– Coronavirus State and Local Fiscal Recovery Funds Compliance Requirement(s): Period of Performance and Reporting ALN 21.027 U.S. Department of the Treasury Criteria: The District was a subrecipient of Ohio’s K-12 School Safety Grant Program. Under Uniform Guidance, 2 CFR §§200.77 and 200.309 require that all costs be incurred within the grant’s period of performance, and §200.344 mandates liquidation of obligations by the specified deadlines, which were December 31, 2023 for encumbrances and September 30, 2024 for liquidation. For reporting, §§200.302(b) and 200.328 require accurate financial and programmatic reporting to the pass-through entity. Condition: The District liquidated $72,970 in expenditures after September 30, 2024, which was beyond the grant’s period of performance. In addition, quarterly reports did not accurately reflect the timing of expenditures, resulting in discrepancies between reported and actual activity between quarters. Context: Our testing focused on expenditures near the end of the performance period and included a review of all four quarterly reports. Multiple reports contained errors in the timing of reported expenditures compared to actual disbursements. Cause: The District lacked controls to prevent expenditures beyond the grant’s performance period and did not have adequate review procedures for quarterly reporting. Effect: The questioned costs may be subject to disallowance, creating a potential liability for the District. Inaccurate financial reporting also increases the risk of improper drawdowns, misinformed oversight, and potential impact on future funding decisions. Questioned Costs: $72,970 Repeat Finding: No Recommendation: We recommend that the District establish and enforce controls to ensure all expenditures are incurred and liquidated within the grant’s period of performance, implement a documented review process for quarterly grant reporting that includes reconciliation to the general ledger prior to submission, and develop a documented training schedule to ensure staff understand Uniform Guidance requirements for compliance with period of performance and reporting. Views of Responsible Officials: See management’s response in the District’s Corrective Action Plan.

SIGNIFICANT DEFICIENCY IN INTERNAL CONTROL OVER COMPLIANCE – U.S. DEPARTMENT OF EDUCATION, PASSED THROUGH MINNESOTA DEPARTMENT OF EDUCATION, SPECIAL EDUCATION CLUSTER – ALN NOS. 84.027 AND 84.173 2025-001 Internal Control Over Compliance With Federal Allowable Costs Requirements Criteria – 2 CFR § 200.302(b)(3) requires Independent School District No. 911 (the District) to maintain records that adequately identify the source and application of funds for federally funded activities in accordance with 2 CFR 200 Subpart E – Cost Principles. Condition – During our audit, we noted that the District did not have sufficient controls to ensure adequate and timely documentation of time and effort was created and retained to support salary costs charged to federal programs and ensure compliance with the Uniform Guidance allowable costs standards. Questioned Costs – None noted. Context – For three of three employees tested whose time was charged to this program, the supporting time and effort documentation was not completed in a timely manner, and for one of the three, the salary costs charged to this federal program did not agree to the supporting time and effort documentation. This was not a statistically valid sample. Repeat Finding – This is a current year finding for this program. Cause – This was an oversight by district personnel. Effect – This could be viewed as a violation of the award agreement. Recommendation – We recommend that the District review its internal control procedures relating to time and effort documentation of allowable costs. View of Responsible Official and Planned Corrective Actions – The District agrees with the finding. The District will review and update its policies and procedures relating to allowable costs for its federal programs to ensure compliance with the Uniform Guidance in the future. The District has separately issued a Corrective Action Plan related to this finding.

ELMWOOD PARK COMMUNITY UNIT SCHOOL DISTRICT 401 06-016-4010-26 SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ending June 30, 2025 SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Year originally reported? 3. Federal Program Name and Year: Title I Grants to Local Education Agencies 4. Project No.: 24-4300-00, 25-4300-00, 24-4331-PL & 25-4331-00 5. AL No.: 84.010 6. Passed Through: 7. Federal Agency: Illinois State Board of Education U.S. Department of Education 8. Criteria or specific requirement (including statutory, regulatory, or other citation) Federal regulations (2 CFR §200.302 and Title I program requirements) require recipients to maintain accurate and verifiable records to support data submitted in funding applications. 9. Condition The District receives Title I funding and determines eligibility for schoolwide programs based on attendance numbers derived from free and reduced lunch counts. During the audit, we noted that the district’s process for compiling these attendance numbers involves the grant manager obtaining a report from the Business Office, which is generated from the food service platform as of a specific day. However, the district was unable to reproduce the report used to complete the Title I application and supporting documentation for the reported figures was not available for review. 10. Questioned Costs No reportable questioned costs identified. 11. Context The District receives Title I funding, which is allocated based on student poverty levels. To determine eligibility for schoolwide programs, the District includes attendance numbers in its Title I application, calculated using free and reduced lunch counts. These counts are critical because they establish whether a school meets the threshold for operating a schoolwide program under Title I guidelines. As part of the audit, we selected a non-statistical sample of schools included in the application to review the underlying support for the reported attendance numbers. This approach was intended to verify whether the district maintained documentation to substantiate the data submitted. 12. Effect Without adequate documentation, the District cannot demonstrate the accuracy of the attendance numbers used to determine eligibility for schoolwide programs. This increases the risk of noncompliance with Title I requirements and could impact funding determinations. 13. Cause The District does not have a formal process to retain or archive the specific report used to populate attendance numbers in the Title I application. Additionally, the food service data fluctuates due to student enrollments and withdrawals, and the system does not maintain historical snapshots of these counts. 14. Recommendation The District should implement procedures to retain supporting documentation for all data submitted in Title I applications. This may include saving a copy of the food service report used, maintaining historical records, and establishing a formal review process to ensure data accuracy and reproducibility. 15. Management's response The District will maintain all reports used to compile attendance figures for the Title I grant.

Finding 2025.002: Cash Management - Significant Deficiency Grantor: U.S. Department of Health and Human Services Federal Program Name: Block Grants for Community Mental Health Services Federal Assistance Listing Number: 93.958 Federal Award Identification Number and Year: 24MHA2102 Criteria In accordance with §200.305, Federal Payment, grantees and subgrantees that receive grant funds are responsible for maintaining controls regarding the management of federal program funds under the Uniform Guidance in 2 CFR 200.302 and 200.303. Condition The Organization's drawdowns did not illustrate review and approval by management. Cause The Organization did not have adequate controls to ensure drawdowns were properly approved and such approval is documented. Effect or Potential Effect The condition may lead to inaccurate or improper drawdowns. Questioned Costs None Context We selected three drawdowns for testing of cash management procedures. We noted that for all three drawdowns, there was no formal approval or evidence of review. Identification of Repeat Finding No Recommendation The Organization should develop written procedures to review all drawdowns that occur in order to ensure accuracy. Views of Responsible Officials and Planned Corrective Actions Management and the Board of Directors agree with the finding and will implement additional controls to ensure there is formal evidence of review being performed.

Coronavirus State and Local Fiscal Recovery Funds (Federal Assistance Listing No. 21.027) Criteria: In accordance with 2 CFR §200.302(a) of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), non-federal entities must maintain financial management systems that provide for the identification, in their accounts, of all federal awards received and expended, and must ensure accurate, current, and complete disclosure of financial results. Additionally, according to Governmental Accounting Standards Board (GASB) Statement No. 54, special revenue funds are used to account for specific revenue sources that are restricted or committed to expenditures for specified purposes other than debt service or capital projects. Since funds received under Assistance Listing 21.027 are restricted for specific uses, they should be accounted for in a special revenue fund. Condition: During our audit for the fiscal year ended June 30, 2025, we noted that the District did not record $4,860,733 in transactions related to the Coronavirus State and Local Fiscal Recovery Funds (Assistance Listing 21.027) in the appropriate fund. Instead of recording this activity in the Special Revenue Fund, the transactions were recorded in the General Fund. Based on grant receipts received by the District of $4,860,733 in the fiscal year ended June 30, 2025 it was determined that expenditures relating to the grant were incurred in the General Fund in the fiscal years ended June 30, 2025 and 2024 in the amounts of $1,017,513 and $3,843,220 respectively. The receipts in the amount of $1,017,513 related to expenditures incurred in the year ended June 30, 2025 were reclassified to the Special Revenue Fund. Questioned Costs: None Context: $4,860,733 in transactions related to the Coronavirus State and Local Fiscal Recovery Funds were recorded in the General Fund instead of the Special Revenue Fund. Effect: Recording of the $4,860,733 in federally restricted grant activity in the General Fund instead of the Special Revenue Fund reduces the transparency of the financial statements and may obscure the tracking of federal expenditures. This misclassification increases the risk of noncompliance with federal grant reporting requirements, and may result in inaccurate reporting on the Schedule of Expenditures of Federal Awards (SEFA), which could impact audit results or federal program oversight. The expenditures incurred in both years were subject to a single audit in the fiscal year ended June 30, 2025. Cause: Unknown. Recommendation: We recommend that management establish procedures to ensure that all federal grant activity is recorded in the appropriate fund, consistent with GASB and Uniform Guidance requirements. Specifically, all activity related to Assistance Listing 21.027 should be accounted for in the Special Revenue Fund to maintain proper accountability. View of Responsible Officials and Planned Corrective Action: Management has reviewed this finding and has indicated a corrective action plan will be developed to address this finding and recommendation.

Condition: District did not submit the required ARP ESSER FS-10F Final Expenditure Report by the required deadline. The reporting filing deadline was extended to 10/15/2024, the District submitted the report on 11/25/2024. Criteria: Under the OMB Compliance Supplement (Education Stabilization Fund – 84.425), recipients must submit required ARP ESSER financial reports accurately and within deadlines established by the State Education Agency (SEA). Federal regulation (2 CFR §200.302) requires recipients to maintain effective internal controls and ensure that all required federal reports are submitted timely, complete, and accurate. Cause: The late submission resulted from insufficient internal controls to monitor required federal reporting deadlines. In particular, the District did not maintain a centralized compliance calendar to track and manage these obligations. Effect: Failure to submit the ARP ESSER reports timely puts the District at risk of noncompliance with federal requirements, may impair the U.S. Department of Education’s and the SEA’s ability to monitor program performance and expenditures, and may affect future funding decisions. Questioned Costs: None. This finding relates to reporting timeliness only and does not involve unallowable costs. Perspective: This issue is considered a systemic noncompliance for the fiscal year ended 2025, based on testing of the one mandatory FS-10F Final Expenditure Report required for 84.425U. Repeat: This is not a repeat finding. Recommendation: We recommend that the District implement a formal federal reporting compliance calendar that includes ARP ESSER deadlines as well as develop written procedures requiring periodic review of upcoming deadlines. Auditee’s Response: The District agrees with the finding. See attached corrective action plan.

U.S. Department of Homeland Security Direct Funding FFAL# 97.083 Staffing for Adequate Fire and Emergency Response (SAFER) Cash Management, Reporting Significant Deficiency in Internal Control Criteria: In accordance with 2 CFR 200.302, non-Federal entities must establish and maintain effective internal controls over Federal award compliance, including controls over cash management and Federal financial and performance reporting. Additionally, 2 CFR 200.327–200.329 require accurate, complete, and timely submission of performance and financial reports. Condition: The City did not have adequate internal controls to ensure the accuracy, completeness, and proper authorization of submissions to the Federal agency. Specifically: 1. Financial and performance reports submitted to the Federal agency did not undergo a secondary (independent) review prior to submission. 2. Reimbursement requests submitted to the Federal agency did not undergo a secondary (independent) review prior to submission. Cause: The City has not implemented or enforced a formalized review process that requires supervisory-level approval prior to the submission of reports or reimbursement requests. Effect: Without a secondary review, there is an increased risk that inaccurate, incomplete, or unsupported information may be submitted to the Federal agency. This could result in: • Reporting errors or omissions, • Noncompliance with Federal requirements, • Potential questioned costs, and • Increased risk of funding delays or corrective action requirements. Questioned Costs: None to report Context/Sampling: Out of a total population of three reports and reimbursement requests, three were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend that the City design and implement formal internal controls requiring documented secondary review and approval for all financial and performance reports, and all reimbursement requests submitted to Federal agencies. Views of Responsible Officials: Agree.

21-027 - Coronavirus State and Local Fiscal Recovery Funds Criteria 2 CFR Part 200.302(b)(7) requires the financial management system to include written procedures for determining the allowability of costs. Condition The City has not developed written procedures for determining the allowability of costs for departments outside of transit. Cause Administration did not have written procedures for determining the allowability of costs. Effect Unallowable costs could be charged to the program. Questioned Costs None Perspective Written procedures for determining the allowability of costs is integral to the proper design of internal controls. However, the results of audit procedures did not detect any unallowable costs charged to the program. Recommendations Management should develop written procedures as required by 2 CFR Part 200.302(b)(7) for all departments within the City. Views of Responsible Officials Management will incorporate written procedures for determining the allowability of costs into the City’s Financial Plan document, which already includes a section for City-wide policies related to grant administration.

SA 2025-002: Develop Written Policies and Procedures Assistance Listing Number: 20.509 Federal Program/Cluster Name: Formula Grants for Rural Areas and Tribal Transit Federal Agency: U.S. Department of Transportation – Federal Transit Administration Federal Award Number: 64BA24-02507/64CA17-02442/64HC22-02180/64RO21-01648/64TO21-01865/64MO21-01910/64HC21-01500 Federal Award Year: July 1, 2024 to June 30, 2025 Compliance Requirement Others Criteria 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal control over federal awards to provide reasonable assurance that organizations who manage the federal award: • Understand and comply with the federal statutes, regulations, and terms and conditions of the award; • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance is identified. These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, the Uniform Guidance requires non-federal entities to develop written procedures related to the following areas: 1. Cash Management 2 CFR 200.302(b)(6) states that the financial management system of each non-Federal entity must provide for the written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. 2. Equipment Management Requirements Non-federal entities other than states must follow 2 CFR sections 200.313(c) through (e). Condition MARTA does not have comprehensive written policies and procedures concerning the following key compliance areas which are required by the Uniform Guidance: Cash Management MARTA does not have written procedures to implement the requirements of 2 CFR 200.305 Federal Payment. Equipment and Real Property Management MARTA has an Asset Inventory Policy and Procedures, however, it does not clearly define the policies and procedures that are in place for the use, management and disposition of equipment acquired under a Federal award in accordance with 2 CFR sections 200.313(c) through (e). Cause MARTA’s reliance on informal business practices leads to inconsistencies in its internal controls. Effect The absence of formal policies and procedures in the key compliance areas could result in non-compliance with federal regulations, which may lead to unnecessary sanctions. Additionally, without formal written policies and procedures, it is difficult to ensure consistent practices across the organization. Questioned Costs None Repeat Findings Yes, see the Summary Schedule of Prior Year Audit Findings, SA 2024‑001. The Cash Management and Equipment and Real Property Management policies have not been updated since last year’s audit. Recommendation MARTA should develop and implement formal written policies and procedures for the specific areas required by the Uniform Guidance. These policies and procedures must clearly delineate the requirements of Uniform Guidance. Personnel responsible for these areas should receive adequate training and apply the policies effectively. Regular reviews should be conducted to update the policies and procedures as needed. Views of Responsible Officials and Planned Corrective Action MARTA has grown substantially in the last several years. This progress includes identifying areas that need to be updated or developing new processes and documentation. MARTA has an Asset Inventory Policy and Procedures in which the purpose is to ensure that fixed assets are properly accounted for, identified, and tracked. MARTA also has Cash Handling Policy and Procedures which addresses safeguarding public funds and maximizing the available resources. This is designed to reduce the risks associated with the collection, receipts storage and reporting of cash transactions and to safeguard and maintain the security and integrity of MARTA's fiscal assets. MARTA will review and update these policies and/or create new policies to make sure that they are compliant with the Uniform Guidance. Personnel responsible: Sandy Benson, General Manager Anticipated completion date: October 2026

III. FEDERAL AWARDS FINDINGS FINDING 2025-003: Material Weakness in Internal Control over Compliance – Activities Allowed or Unallowed Federal Award Identification Assistance Listing Program Title: Public Housing Operating Fund Assistance Listing Program Number: 14.850 Federal Award ID Number and Year: N/A Federal Agency: U.S. Department of Housing and Urban Development Criteria Under 2 CFR Section 200.302: Recipient's and subrecipient's financial management system must sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Condition See Finding 2025-001. Repeat Finding No Questioned Costs See Finding 2025-001. Effect or Potential Effect The Authority was not in compliance with 2 CFR Section 200.302. Cause See Finding 2025-001. Recommendation See Finding 2025-001. Auditee Response/ Corrective Action Plan See page 50.

Condition: The SEFA was inaccurately prepared and did not fully reconcile to the general ledger. Cause: Insufficient reconciliation and review procedures over SEFA preparation. Effect: Federal expenditures may be misstated, resulting in noncompliance with reporting requirements. Criteria: 2 CFR 200.510(b) and 200.302 require the SEFA to be accurate and supported by underlying accounting records. Recommendation: Implement documented reconciliation and review procedures to ensure the SEFA agrees to the general ledger prior to issuance.

FINDING 2025-004 Subject: COVID-19 - Education Stabilization Fund - Cash Management Federal Agency: Department of Education Federal Program: COVID - 19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U200013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Cash Management Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-009. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the Cash Management compliance requirement. Reimbursement requests for the program were prepared by one employee and reviewed by another employee; however, the supporting documentation that was provided to the reviewer did not give a clear distinction as to what expenditures were included in the reimbursement. As the documentation provided was not adequate that accompanied the reimbursement request, and the reimbursement requests, as noted below, did not agree to the ledger, the reviewer could not have ensured expenses were paid prior to requesting reimbursement. For 5 of 25 expenditures tested, the School Corporation was unable to provide supporting documentation traceable to the reimbursement request. There were 2 of those expenditures, totaling $1,715, that were for ESSER II's final reimbursement which requested the remainder of the grant award and expenses could not be traced to the documentation provided for the reimbursement amount. There were 3 of the expenditures, totaling $6,665, that were not traceable to an ESSER III reimbursement request. Therefore, as the expenditure could not be traced to a reimbursement request, it could not be determined if the School Corporation paid for the expense prior to requesting reimbursement. INDIANA STATE BOARD OF ACCOUNTS 21 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, 1 of 25 expenditures tested, for $154, was an expense that occurred after the School Corporation requested reimbursement. The lack of internal controls and noncompliance were systemic issues throughout the audit period for ESSER II and ESSER III. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.305(b) states in part: "For non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. . . . (3) Reimbursement is the preferred method when the requirements in this paragraph (b) cannot be met, when the Federal awarding agency sets a specific condition per § 200.208, or when the non-Federal entity requests payment by reimbursement. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." Cause A proper system of internal controls was not designed and implemented by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. The School Corporation had not developed any policies that would have ensured compliance or that supporting documentation would have been maintained and available for audit related to the Cash Management compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 22 SILVER CREEK SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The failure to retain and provide appropriate supporting documentation prevented the determination of the School Corporation's compliance with the Cash Management compliance requirement. Noncompliance with the grant agreement and the Cash Management compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure that documentation will be maintained and available for audit and comply with the grant agreement and the Cash Management compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Finding 2025-044 Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles for the Coronavirus Capital Projects Fund The Department administers the federal Coronavirus Capital Projects Fund program (CCPF) [ALN 21.029] for non-entitlement municipalities, counties, and subcontractors to carry out capital development and infrastructure activities related to increasing awareness, education, and monitoring of the Coronavirus emergency by developing broadband infrastructure. Examples of activities related to CCPF include the development of fiber-optic broadband infrastructure and investments in improving broadband infrastructure within a municipality, addressing affordability and access to broadband infrastructure, and the development and improvement of buildings that directly enables work related to the education and monitoring of the Coronavirus emergency. The Department’s accounting section records all financial transactions within CORE and must ensure the accurate reporting of federal award expenditures and reimbursements and maintain adequate supporting documentation related to transactions recorded in CORE. The Department’s accounting section is also responsible for providing information through the submission of exhibits to the Office of the State Controller (OSC) to assist in preparation of the State’s financial statements, required note disclosures, and the State’s Schedule of Expenditures of Federal Awards (SEFA). For Fiscal Year 2025, the Department reported $33.7 million in expenditures for CCPF. What was the purpose of our audit work and what work was performed? The purpose of the audit work was to review the Department’s internal controls over the CCPF payment processes and to determine whether payments were processed and paid in accordance with state regulations and federal “allowable cost” requirements during Fiscal Year 2025. As part of our audit work, we obtained from the Department the Fiscal Year 2025 expenditures listing for CCPF, comprised of eight transactions. We tested five transactions as part of our testing of the Department’s compliance with federal allowable cost requirements for the CCPF program. We also reviewed the Department’s Exhibit K1, Schedule of Federal Assistance, which it submitted to the OSC for Fiscal Year 2025 year-end reporting, and the related supporting documentation, including CORE transaction detail for revenues and expenditures associated with CCPF, to determine whether Department accounting staff prepared the exhibit in accordance with the OSC’s Fiscal Procedures Manual (Manual), and to determine whether the Exhibit K1 was accurate and complete. How were the results of the audit work measured? We measured the results of our audit work against the following requirements: • Federal regulations [2 CFR 200.403] require that costs under federal awards must be necessary, reasonable, and allocable; conform to any limitations or exclusions; be consistent with policies and procedures; receive consistent treatment; adhere to GAAP; not be used for cost sharing of other programs; and be adequately documented. • Federal regulations [2 CFR 200.302] require that recipients must expend and account for the federal award in accordance with State laws and procedures for expending and accounting for the State’s funds. All recipients’ financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with federal statutes, regulations, and the terms and conditions of the federal award. • The OSC’s Manual contains instructions for the completion of exhibits. Specifically, the Exhibit K1 is used to report federal expenditure information to the OSC for inclusion in the State’s SEFA. • Federal regulations [2 CFR 200.303] state that each recipient of federal funds must establish and maintain effective internal controls over its federal awards, which provide reasonable assurance that the recipient is managing its federal grants in compliance with federal statutes, regulations, and the award terms and conditions. The OSC has adopted the Green Book as the State’s standard for internal controls, which all state agencies must follow. Green Book, Paragraphs 3.09 and 3.10, states that management is to develop and maintain documentation of its internal control system, establishing the who, what, when, where, and why of internal control execution to personnel. What problem did the audit work identify? Through our audit testwork, we identified an error with 1 of the 5 expenditures (20 percent) tested. Specifically, the Department recorded the expenditure transaction, which totaled $3,266,662, twice in CORE. Further, because CORE is programmed to automatically record earned federal revenue when a federal expenditure is recorded, the Department also recorded federal revenue in CORE to match the duplicate federal expenditure. As a result, the Department overstated both revenues and expenditures for CCPF by $3,266,662. In addition, the Department overstated its Fiscal Year 2025 CCPF expenditures on its Exhibit K1 by $3,266,662. After we notified Department staff of the errors, they provided a corrected Exhibit K1 to the OSC. The Department passed on correcting the overstated expenditures and revenues in CORE because, based on discussions with the auditors, the amount was not material. Why did this problem occur? The Department lacked sufficient internal controls during Fiscal Year 2025 over its financial management and federal allowable cost compliance requirements for the CCPF program. Specifically, the Department lacked sufficient training over the calculation of its year-end accrued liabilities. The Department incorrectly calculated and recorded the year-end accrual entry in CORE, and lacked adequate internal review processes, including a supervisory review process, to ensure the program’s accrued expenditures—and ultimately amounts reported on the Exhibit K1—were accurate and complete. Why does this problem matter? By failing to have strong internal controls over the recording and monitoring of federal expenditures and revenues, the Department cannot ensure that financial records are accurate, complete, and recorded in a timely manner. Internal review and approval processes reduce the risk of material misstatements affecting federal awards. Additionally, insufficient controls over federal program requirements can lead to a lack of accountability, making it difficult to demonstrate compliance and potentially resulting in further scrutiny or penalties from federal oversight bodies. Finally, failing to properly report expenditures of federal funds on its Exhibit K1, if uncorrected, could cause the State’s overall SEFA to be inaccurate and out of compliance with federal regulations. See "Schedule of Findings and Questioned Costs" for table/chart. Recommendation 2025-044 The Department of Local Affairs should strengthen its internal controls over the financial management of federal Coronavirus Capital Projects Fund grant expenditures by implementing an adequate supervisory review process and training for staff over year-end estimates/accruals to ensure transactions are accurately recorded in the Colorado Operations Resource Engine (CORE), the State’s accounting system; and that the Exhibit K1, Schedule of Federal Assistance, is accurate and complete. Response Department of Local Affairs Agree Implementation Date: April 2026 The Department of Local Affairs (Department) agrees with the recommendation to strengthen internal controls over the financial management of federal Coronavirus Capital Projects Fund grant expenditures and the accuracy and completeness of the Exhibit K1, Schedule of Federal Assistance. The Department will develop a corrective action plan that includes enhanced procedures for the performance of year-end estimates/accruals. The Department will create and implement staff training for staff that are responsible for preparing and reviewing the estimates/accruals, the Exhibit K1, grant transactions and enhancements.

2025-003. Payroll and Disbursement (Allowable Costs/Cost Principles) United States Department of Education, Passed-through New York State Department of Education: Special Education Cluster: Special Education Grants to States: IDEA Part B ALN: 84.027 Education Stabilization Funds COVID 19: American Rescue Plan – Elementary and Secondary School Emergency Relief ALN: 84.425U Criteria: Ensure that costs charged to federal awards are allowable, reasonable, and allocable in accordance with terms and conditions of the federal award and the approved grant budget, and maintain a financial management system that provides accurate, current, and complete disclosure of expenditures charged to federal awards prescribed by Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Condition: As required under Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302, which require a financial management system to provide effective control over accountability for federal funds, and to identify the source and application of funds. During the year, we noted that the District recorded journal entries transferring payroll and disbursement related expenditures from the General Fund to the Special Aid Fund under the Special Education Cluster and Education Stabilization Funds grant codes. These journal entries lacked adequate supporting documentation to demonstrate approvals and if the costs were allowable and allocable to the applicable federal awards. Consequently, we were unable to obtain sufficient appropriate audit evidence to conclude whether the journalized transactions were properly charged to the federal programs in order to comply with Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Cause: All journalized transactions should include adequate supporting documentation to substantiate the transfer of funds, especially when recorded to federal awards, as prescribed in Subpart E, 2 CFR §200.430 and Subpart D, 2 CFR §200.302. During the current year, we noted the District did not consistently retain or attach original source documentation to journal entries reallocating General Fund expenditures to the Special Aid Fund. Additionally, internal controls were not in place to ensure that such journal entries were reviewed to confirm allowability, reasonableness, allocability, and compliance with the approved budgets for the Special Education Cluster and Education Stabilization Funds prior to being posted, as required by Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Effect: Due to the lack of supporting documentation and approvals, there is an increased risk that unallowable or unsupported costs may have been charged to the Special Education Cluster and Education Stabilization Funds and included in reimbursement requests. As a result, the District could be subject to disallowed costs and potential repayment to the grantor agencies, if costs are determined to be unallowable. Questioned Costs: The dollar amount was undetermined at the time of the audit due to insufficient documentation to support the allowability of the journalized expenditures. Context: For the Special Education Cluster and the Education Stabilization Funds, based on a sample of journal entries, we noted instances where supporting documentation was insufficient. For the Special Education Cluster, one (1) of three (3) journal entries lacked adequate documentation for payroll-related transactions, as original timesheets were not available to verify the employee’s work activity or confirm alignment with the grant’s approved budget. Similarly, for the Education Stabilization Funds, two (2) of three (3) journal entries lacked sufficient supporting documentation. The District did not provide time and effort records for payroll-related transactions or supporting invoices for disbursement transactions, limiting the ability to confirm that these costs were properly documented and consistent with grant requirements. Identification of a Repeat Finding: This is not a repeat finding. Recommendation: The District should implement procedures to ensure all journal entries made that reallocate payroll and disbursement expenditures charged to federal grants are supported by complete and adequate documentation and approvals, including time and effort documentation for payroll, and supporting invoices for disbursements as support for the journal entries in accordance with the requirements of Uniform Guidance at Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302. Views of Responsible Officials of Auditee: The District acknowledged the finding and noted that procedures have been implemented to prevent recurrence. These procedures are intended to ensure all journal entries contain adequate supporting documentation and approvals, including time and effort records for payroll, and supporting invoices for disbursements. Additionally, documentation will be consistently maintained and reviewed for all payroll and disbursement expenditures reallocated through journal entries and charged to federal grants in compliance with Subpart E, 2 CFR §200.403 through §200.405 and §200.430, and Subpart D, 2 CFR §200.302.

2025-013: Improve Financial Management of Federal Grants Applicable to: Department of Wildlife Resources Assigned Topic: Federal Grants Management Prior Finding Number: N/A Finding Type: Internal Control and Compliance Finding Severity: Material Weakness Financial Statement Finding: No Federal Awards Finding: Yes ALPT - ALN: Sport Fish Restoration - 15.605; Wildlife Restoration and Basic Hunter Education and Safety - 15.611; Enhanced Hunter Education and Safety - 15.626 Federal Award ID (Year): F20AF10048 (2020); F20AF11897 (2020); F21AF02409 (2021); F22AF01121 (2022); F23AF00654 (2023); F23AF03173 (2023); F23AF03185 (2023); F24AF02770 (2024); F24AF02896 (2024); F24AF02903 (2024) Federal Agency: U.S. Department of the Interior Compliance Requirement: Allowable Costs/Cost Principles - 2 CFR § 200.302; 2 CFR § 200.303(a); 2 CFR § 200.305; 2 CFR § 200.510(b); 31 CFR § 205.33 Known Questioned Costs: $0 The Department of Wildlife Resources (Wildlife Resources) should improve its financial management of federal grants and documentation of internal controls to ensure compliance with state and federal requirements. Wildlife Resources has experienced recent turnover in its grants staff positions. Wildlife Resources has hired new staff; however, there was no transition period with the previous staff, and the previous grants staff did not sufficiently document internal controls over the federal programs. Staff have started documenting desk procedures, but agency-wide policies and procedures remain lacking. As such, grants staff did not appear to have sufficient knowledge of statewide policies and procedures to adequately perform the federal grants management processes in accordance with federal regulations and the Commonwealth Accounting Policies and Procedures (CAPP) Manual. We identified the following issues: Wildlife Resources should amend its procedures to comply with CAPP Manual requirements for cash management of federal funds. CAPP Manual Topic 20605 states that two methods of recording "split" funded expenses are acceptable. The method preferred by the State Comptroller is to establish procedures to "split code" the expenses by allocating the disbursement between a state fund and the federal fund at the matching ratio prescribed by the grant or contract. A second, and temporary, funding method allows the agency to charge the original expense to a state fund and subsequently, within seven business days, prepare and submit a general ledger journal in the Commonwealth’s accounting and financial reporting system to charge the federal fund for the federal portion of the original expense, referencing the original voucher in the journal reference line for transparency. If a state agency cannot comply, the agency must request approval from the State Comptroller. Wildlife Resources follows the temporary funding method to record its federal expenses. Wildlife Resources spends from state funds and then performs journal entries to move transactions to the federal fund in bulk with some journal entries representing hundreds of individual transactions, which does not allow for transparency regarding the nature of Wildlife Resources federal expenses. Further, our analysis found that Wildlife Resources enters journal entries for federal drawdowns up to three months after the original transaction date which is not consistent with the seven-day requirement in CAPP Manual Topic 20605. Per 2 Code of Federal Regulations (CFR) § 200.302, a recipient must comply with state laws and procedures for expending and accounting for the State's funds. Additionally, the untimely performance of these extensive journal entries may result in Wildlife Resources recording journal entries in the wrong fiscal year, which could result in inaccurate information within the Commonwealth’s Annual Comprehensive Financial Report. Wildlife Resources does not maintain adequate support for its journal entries. CAPP Manual Topic 20405 requires the agency to retain sufficient supporting documentation to provide auditable records containing evidence of required coding elements for journal entries. Wildlife Resources’ journal entries lack documentation related to changes in coding. Further, Wildlife Resources does not maintain supporting documentation for journal entries in one accessible location which would allow for sufficient supervisory review. Not maintaining adequate supporting documentation over journal entries increases the risk of inaccurate or fraudulent transactions. Wildlife Resources also does not have policies and procedures in place that detail how it creates the journal entries, what type of documentation to retain to support journal entries, or how Wildlife Resources ensures it only moves allowable costs to the federal fund. Title 2 CFR § 200.303(a) requires recipients to establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. During fiscal year 2025, in response to our Office’s 2024 Internal Control Questionnaire Review, Wildlife Resources established a bimonthly drawdown and journal entry schedule to ensure timely drawdown of federal funds to reimburse expenses originally incurred within state funds and to assist in remediation of its cash flow issues. Per 31 CFR § 205.33, a state must minimize the time between the drawdown of federal funds from the federal government and their disbursement for federal program purposes in accordance with the actual, immediate cash requirements of the state. The timing and amount of funds transfers must be as close as is administratively feasible to a state's actual cash outlay for direct program costs and the proportionate share of any allowable indirect costs. However, based on our analysis of drawdowns, while Wildlife Resources has made progress in the rate of drawdowns since the previous review, due to staff shortages, Wildlife Resources has not fully followed its drawdown schedule to ensure timely drawdowns of federal funds, which could exacerbate the agency’s cash flow issues. Specifically, the drawdown schedule included twenty planned drawdowns, however Wildlife Resources completed only eleven (55%) in accordance with that schedule. Furthermore, Wildlife Resources does not have policies and procedures in place over the completion of drawdowns as required by 2 CFR § 200.302, which requires a recipient to have written procedures to implement the requirements of 2 CFR § 200.305 regarding federal drawdowns. Wildlife Resources did not record program income revenue of approximately $2.3 million in the correct fiscal year for the Fish and Wildlife Cluster. Wildlife Resources recorded the program income received in fiscal year 2025 in a suspense account and did not distribute the income to the proper revenue account until fiscal year 2026. CAPP Manual Topic 20205 requires recording of all state receipts in the Commonwealth’s accounting and financial reporting system in a timely manner within three business days of the deposit. Additionally, the Department of Accounts (Accounts) Fiscal Year-End Closing Procedures require agencies to certify that they properly distributed balances to the correct accounts before final close of Commonwealth’s accounting and financial reporting system. By not properly recording program income, Wildlife Resources may misrepresent financial information to the federal government and report information that does not agree with its accounting records. Wildlife Resources reported federal expenses on its Schedule of Expenditures of Federal Awards (SEFA), a schedule that details Wildlife Resources’ federal expenses for fiscal year 2025, that did not agree to its underlying accounting records. Wildlife Resources reported federal expenses in the SEFA that it recorded as state funds in the Commonwealth’s accounting and financial reporting system due to considering journal entries that they did not record in the system until the next fiscal year. Due to these issues and preparation of the SEFA by a member of management on long-term leave who was not available during the audit, Wildlife Resources could not support amounts totaling over $660,000 in its SEFA. Additionally, Wildlife Resources does not have documented procedures outlining its process for preparing the SEFA in accordance with 2 CFR § 200.510(b), which states that the auditee must prepare a schedule of expenditures of federal awards for the period covered by the auditee’s financial statements which must include the total federal awards expended as determined in accordance with 2 CFR § 200.502. Accounts’ Office of the Comptroller’s Directive No. 1-25 (Comptroller’s Directive) also provides specific directions for compiling the SEFA and supporting schedules to support its preparation of the Commonwealth’s SEFA and related disclosures. Furthermore, the Comptroller’s Directive states that an agency must ensure that it has internal controls in place to avoid material misstatements and/or misclassifications in the attachments and other financial information submitted to Accounts for inclusion in the Commonwealth’s Single Audit. By not implementing adequate internal controls over financial reporting, Wildlife Resources cannot provide reasonable assurance that the financial information it submits to Accounts for inclusion in the Commonwealth’s Single Audit is free of material misstatements. Because of the scope of the matters and errors noted above, we consider this finding to be a material weakness in internal control. Wildlife Resources should improve its financial management of federal funds and documentation of internal controls to ensure compliance with state and federal requirements. The need for strong internal controls is especially important given that Wildlife Resources is exploring additional federal funding opportunities. Wildlife Resources should work with Accounts to develop and implement a federal grants management process that complies with the CAPP Manual. Wildlife Resources should improve its process and controls related to federal fund drawdowns to ensure timely reimbursement of expenses within federal limitations. Further, Wildlife Resources should also improve its controls and procedures related to journal entry processing to ensure it retains adequate support for all entries and enters the entries timely. Additionally, Wildlife Resources should perform a thorough review of its SEFA before submitting it to Accounts and retain supporting documentation to support the SEFA. Finally, Wildlife Resources should develop policies and procedures over all federal grants processes including all compliance requirements. These improvements combined are necessary to ensure accurate accounting and financial reporting in accordance with the CAPP Manual, the Code of Federal Regulations, the Comptroller’s Directives, and applicable accounting standards. Views of Responsible Officials: The views of responsible officials are included in the report related to their organization, which can be found at www.apa.virginia.gov and, in summary, do not express disagreement with the finding.

Criteria In accordance with 2 CFR 200.302 (b)(3), the recipient must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Condition We selected 25 drawdowns across all agencies for testing. Of these 25, 1 drawdown selection was approved 1 day after the drawdown request was submitted, but prior to receiving the draw amount. However, this 1 drawdown selection was prior to the remediation period performed by management. As such, it is included as a repeat finding, but as there were no exceptions in the remediation period, the finding is considered remediated. Cause During the audit period, the University experienced a transition in leadership within the Office of Research Administration. As part of this transition, the Associate Vice President for Research Administration was responsible for reviewing and approving drawdown requests, which was overlooked in certain instances. Effect The University processed drawdowns prior to supervisory approval. Questioned Costs None. Repeat Finding Yes Recommendation We recommend management revisit existing internal control procedures to ensure requested reimbursements are approved prior to the request

Name: Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii, ASL#: 14.228; Federal Grantor: U.S. Department of Housing and Urban Development; Pass Through Entity: State Department of Housing and Community Development; Award No.: 21-CDBG-CV-TRIB; Year: 2024/2025; Compliance Requirement: Other; Criteria: 2CFR Section 200.302 (Financial Management) and 2 CFR Section 200.334 (Retention Requirements for Records) require that non-federal entities maintain documentation that adequately supports federal expenditures, including original invoices, receipts, and approvals demonstrating that costs were allowable, necessary, and reasonable. Condition: During our testing of 40 disbursements for the Community Development Block Grants/State's Program and Non-Entitlement Grants in Hawaii, we identified two instances (5% error rate) totaling $24.98 where the disbursement was not supported by an original vendor invoice or receipt. Cause: Controls were not consistently followed before processing payments. Effect: The lack of supporting documentation increases the risk that unauthorized, unallowable, or fraudulent expenditures could be charged to the federal program without detection. Questioned Cost: As a result, we are questioning costs of $24.98. Context: The sample was intended to be a systematically valid sample from a population of 556 transactions. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the management strengthen controls over disbursements by ensuring that no payment is processed wihtout a valid, itemized invoice thta has been approved by authorized personnel. Furthermore, all supporting docuemtnation should be attached to the payment voucher and retained for audit purposes. Views of Responsible Officials and Planned Corrective Action: Refer to separate Management's Corrective Action Plan for view of responsible officials and management's responses.

Finding Reference 2025-005 Federal Agency: U.S. Department of Homeland Security Pass-Through Agency: Central Office of Recovery, Reconstruction and Resiliency of Puerto Rico (COR3) Program: Disaster Grants – Public Assistance (Presidentially Declared Disaster) (ALN 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) This finding is similar to prior-year finding 2023-005 and 2024-005. Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of eleven (11) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports did not agree with the accounting and project records. Criteria 2 CFR 200.302 (a) stated that the state’s and the other non-Federal entity’s financial management system, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Cause of Condition The Municipality accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. Effect of Condition The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. Recommendation We recommend that Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission of the next submission to the pass-through entity. Questioned Cost None Prior Year Finding Yes. This finding is similar to prior-year finding 2023-005 and 2024-005. Views of Responsible Officials and Planned Corrective Action We concur with the finding. We understand that only two reports did not agree with the accounting records. We have consultants that are responsible for the preparation of these reports. Instructions were given to the consultants in order to correct the reports that do not agree with the accounting records. There was a misunderstanding with the reports, in which the pass-through entity instructed that purchase orders and expenditures incurred should be reported. As subsequently clarified, only the expenditures incurred should be reported as expended. Implementation Date: June 30, 2026 Responsible Person: Meyleen Hernández Rivera Finance Director

Program: AL 12.401 – National Guard Military Operations and Maintenance (O&M) Projects – Cash Management & Reporting Grant Number & Year: Appendices – W91243-23-2-1001, FFY 2023; W91243-24-2-1001, FFY 2024; W91243-25-2-1024, FFY 2025; W91243-25-2-1001, FFY 2025; W91243-25-2-1021, FFY 2025 Federal Grantor Agency: U.S. Department of Defense Criteria: Per 2 CFR § 1128.100 and 2 CFR § 1128.200 (January 1, 2024, and January 1, 2025), the Department of Defense adopted the Uniform Administrative Requirements, Cost Principles, and Audit Requirements set forth at 2 CFR parts 200.302, 200.303, and 200.305. Per 2 CFR § 200.303 (January 1, 2024, and January 1, 2025), a non-Federal entity must establish and maintain effective internal control over the Federal award to provide reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State be sufficient to permit preparation of required reports and permit the tracing of funds to expenditures adequate to establish the use of these funds were in accordance with applicable regulations. EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Per Title 2 CFR § 200.305(a) (January 1, 2024, and January 1, 2025), payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205. National Guard Policy (NG Policy) 5-1, National Guard Grants and Cooperative Agreements, Section 11-5, Advance Payment Method, Section (5), states in part, “[T]he grantee agrees to minimize the time elapsing between the transfer of funds from the U.S. Treasury and their disbursement by the State. (no more than 45 days).” GCAPL 20-02 AQ-A Policy (February 4, 2020) turned NGR 5-1 into NG Policy 5-1. It generally maintained the principles and operational aspects of NGR 5-1, except as provisions of the document were adjusted in the AQ-A Policy. The AQ-A Policy did not make any changes to the 45-day requirement found in NGR 5-1. The instructions for OMB Standard Form 270 (REV. 1/2016) include the following for line 11a: Enter program outlays to date (net of refunds, rebates, and discounts), in the appropriate columns. For requests prepared on a cash basis, outlays are the sum of actual cash disbursements for goods and services, the amount of indirect expenses charged, the value of in- kind contributions applied, and the amount of cash advances and payments made to subcontractors and subrecipients. A good internal control plan would include procedures to ensure the time between the drawdown of Federal funds and disbursements is minimized and in compliance with National Guard Regulations. Condition: The Agency was noncompliant with the Federal cash management requirements during the fiscal year and did not properly report program outlays on the OMB Standard Form (SF) 270. A similar finding was noted in the prior audit. Repeat Finding: 2024-066 Questioned Costs: None Statistical Sample: No Context: We tested five drawdowns of Federal funds to support the Agency’s operations. We tested to determine whether the Agency had expended the cumulative amounts drawn down for the awards tested within the required timeframe and noted the following: • Three drawdowns were noncompliant with NG Policy 5-1. Cumulative drawdowns for one of the draws were expended 63 days after the drawdown of the Federal funds. Cumulative draws for the other draws had yet to be fully expended as of January 8, 2026. The table below provides a summary of the three draws: See Schedule of Findings and Questioned Costs for chart/table. • For 5 of 5 SF-270’s tested, the Agency did not properly report total program outlays on the OMB SF-270 report. The Agency reported the total drawdowns for the program to date, rather than actual cash disbursements, as total program outlays. The variance between what was reported and what should have been reported ranged from an overreporting of $2,764 to an overreporting of $3,530,797, with a net total overreporting of expenditures by $4,074,284 for the five reports tested. Cause: Inadequate procedures for estimating fund needs for the upcoming month. Regarding SF-270 reporting, the Agency has stated it agrees with the finding; however, it has yet to implement corrective action. Effect: The Agency is noncompliant with Federal cash management and reporting requirements, which could result in sanctions. Additionally, there is an increased risk for the loss of Federal funding. Recommendation: We recommend the Agency ensure the amount of time between the Federal draw and the disbursement of funds by the State is minimized and in compliance with National Guard requirements. We also recommend the Agency report total program outlays in compliance with Federal requirements. Management Response: The Agency agrees with the finding. The drawdown timeline is a partial result of the variances in federal reimbursement functionalities and the advance state requirement function. Program obligations and liquidations are reconciled and reported on at least a quarterly basis with federal constituents.

Program: AL 84.126 – Rehabilitation Services Vocational Rehabilitation Grants to States – Reporting Grant Number & Year: H126A240039, FFY 2024; H126A250039, FFY 2025 Federal Grantor Agency: U.S. Department of Education Criteria: Per 2 CFR § 3474.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Education adopted the OMB Uniform Guidance in 2 CFR part 200, except for 2 CFR § 200.102(a) and 200.207(a). 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) requires financial management systems of the State to be sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 34 CFR § 76.707 (July 1, 2024), personal services performed by an employee of the State are obligated when the services are performed. Good internal control and sound accounting practices require adequate policies and procedures to ensure that information included in Federal reports is correct and accurate. Condition: The Agency lacked procedures to ensure that the unliquidated obligations and administrative costs were reported accurately on the RSA-17 reports. Repeat Finding: 2024-033 Questioned Costs: None Statistical Sample: No Context: We tested two RSA-17 reports submitted by the Agency. We noted the following: Grant H126A240039, Quarter Ended March 31, 2025 • The Federal Share of Unliquidated Obligations reported on line 18 was $3,760,436. The amounts reported were not correct due to the following: o The Agency did not report $190,628 of payroll costs charged to the grant on April 2, 2025, which was associated with work performed during the period March 10, 2025, through March 23, 2025. o The Agency reported $626,761 of unliquidated payroll obligations for payroll costs charged to the grant on April 16, 2025, which was associated with work performed during the period March 24, 2025, through April 6, 2025. Work performed during the period April 1, 2025, through April 6, 2025, would not constitute an obligation as of March 31, 2025. Grant H126A250039, Quarter Ended March 31, 2025 • The Non-Federal Share of Unliquidated Obligations reported on line 29 was $110,371. The amount reported was incorrect, as it excluded $441,446 in payroll costs for vocational rehabilitation services performed from March 10, 2025, through March 23, 2025, which were coded to non-Federal funds on April 2, 2025. • The Administrative Expenditures reported on line 37 was $1,533,909. The amount reported was incorrect because it counted indirect costs twice, resulting in an overstatement of $244,108. Cause: Inadequate review and documentation of amounts reported. Effect: Increased risk for errors and noncompliance with Federal requirements. Recommendation: We recommend the Agency update its procedures to ensure that obligations and expenditures are being properly reported in accordance with reporting requirements. Management Response: H126A2400390 - Federal Share of Unliquidated Obligations: Agency error in noting that 3/23/25 payroll had not posted by 3/31/25, and inclusion of partial payroll (4/1-4/6) in unliquidated obligations. H126A2500390 - Non-federal Share of Unliquidated Obligations: While these payroll costs were obligated to H126A2500390 on the 4/2/2025 payroll, Nebraska VR anticipated a JE from H126A2500390 to H126A2400390 would be completed because the match requirement for H126A2500390 had been met, and an overmatch of general funds would have resulted in an MOE penalty. Based on the information at that time and the assumption the costs would be paid from H126A2400390, they were included as an unliquidated obligation on the H126A2400390 RSA17. Due to an opportunity to capture additional federal dollars via the re-allotment process, it was later determined to leave the payroll costs coded to H126A2500390 and draw down additional federal funds. For future reports, unliquidated obligations will be reported as is. Administrative Expenditures: When providing documentation for the audit, Nebraska VR discovered this error and reported it to the auditor. The federal report has been re-opened and the error corrected.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2201NETANF, FFY 2022; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2301NECCDD, FFY 2023; 2401NECCDD, FFY 2024; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “maintain effective internal control over the Federal award that provides reasonable assurance that the [State] is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per Title 471 NAC 25, Attachment A, Claiming Issues, C. Offset of Revenues (eff. 10/4/2020) and the Medicaid School-Based Administrative Claiming Guide provided by the Centers for Medicare and Medicaid Services (May 2003), Section V (“Claiming Issues”), C. (“Offset Revenues”), “[a] government program may not be reimbursed in excess of its actual costs, i.e., make a profit.” EnterpriseOne is the official accounting system for the State of Nebraska, and all expenditures are generated from it. Good internal control requires procedures to ensure that amounts charged to Federal funds are proper. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that, when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: Inadequate procedures to ensure the accuracy of journal entries and adjustments to the Public Assistance Cost Allocation Plan (PACAP), resulting in multiple Federal programs being overcharged. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as completed. Repeat Finding: 2024-037 Questioned Costs: $3,986,559 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We selected 14 journal entries related to the PACAP. We noted the following: • Four journal entries to reconcile Foster Care Title IV-E expenditures to the PACAP contained multiple errors, including using aid amounts as administrative costs, miscalculating the portion of the Bridge to Independence (B2I) program that can be charged to the grant, not accounting for all amounts already charged to the grant, and adding in additional amounts earned that did not exist or were calculated incorrectly. For one entry, the Agency not only calculated the wrong amounts to charge to the grant, but then posted the exact same entry from the previous quarter instead of the current quarter’s entry. In total, $306,667 was overcharged to the Foster Care Title IV-E grant due to these errors. We consider this amount to be Federal questioned costs. • Another journal entry for Foster Care Title IV-E was posted to correct an error in previous quarters’ journal entries. The Agency was charging program-related training costs at a 50% Federal financial participation rate (FFP), while such activity is allowable at a 75% FFP. However, the Agency did not correctly account for all the costs that had already been charged to the grant for training costs. This error led to the Agency charging an additional $1,777,318 in costs to the Federal award that was already charged to the grant. We consider this amount to be Federal questioned costs. • One journal entry was to reconcile Supplemental Nutrition Assistance Program (SNAP) expenditures to the PACAP. The Agency’s calculation included costs earned by the Summer EBT program but failed to include amounts already charged to the Summer EBT Federal grant of $72,292. Additionally, the Summer EBT program is a separate Federal grant from SNAP and should have been accounted for separately. The full $72,292 is the Federal portion and is considered questioned costs. • One journal entry to reconcile Medicaid administrative expenditures to the PACAP did not properly account for $35,114 in personnel costs that had already been charged to the grant. As a result, the Federal funds were overcharged this amount and are considered questioned costs. • One journal entry to allocate costs related to Field Office Administration to various programs across the Agency for the month of March 2025 was calculated incorrectly and did not account for all programs involved. Each quarter, Field Office Administration costs are allocated in the PACAP to various programs based on hours worked in the field offices. The journal entry tested was meant to do the same calculation, but on a monthly basis, so programs can keep track of their budgets more timely. When calculating the amounts to allocate, however, the Agency used six months of costs, or $1,798,755, rather than just the costs that occurred in March 2025, or $171,255. Further, the Agency did not move the costs to all of the applicable programs, such as Foster Care and SNAP. Lastly, the Agency used the Labor Hours from the quarter ending December 31, 2023, rather than the quarter ending March 31, 2025. Due to these errors, Medicaid was overcharged $131,637, which are considered Federal questioned costs. • For one journal entry to move costs from the State General Fund to a Cash Fund for $1,766,949, the Agency used the incorrect business units within EnterpriseOne, which resulted in multiple Federal programs being overcharged through the PACAP, as listed below. We consider these to be Federal questioned costs. See Schedule of Findings and Questioned Costs for chart/table. We also selected six adjustments made to the PACAP and noted the following: • Two adjustments tested were related to the Medicaid School-based Administration program. The Agency uses a contractor to determine the allowable Medicaid activities by school district, and the amounts owed to each school district, for the Federal share of expenses. Schools are responsible for covering matching funds. The Agency makes an adjustment to the Cost Allocation Plan to account for the matching funds that are not shown on the State Accounting records. However, we noted that the Agency is calculating this adjustment based on the amount of allowable expenses provided by the contract, and not the actual amount of Federal funds paid to the schools. The Agency reduces the amount to pay to the schools for missing provider enrollment, negative claims, and/or recoupments. We then reviewed the CMS-64 reports and noted that the Agency is claiming the entire amount of allowable expenses provided by the contractor, and not just the amount paid to the schools. It is not reasonable to claim costs on the CMS-64 reports that are not actually spent. We recalculated the amounts that should have been reported based on the actual amounts paid to the schools and noted that the Agency overclaimed $566,018 in Federal costs. Of the $566,018, $110,970 is due to a 3% fee for administration that the Agency subtracts from each school’s payment. The Agency then essentially pays itself this amount through a reconciliation journal entry. Administrative costs of the Agency are distributed through the PACAP to benefiting programs and would include charges to Medicaid; therefore, the Federal portion of the 3% administrative fee should have been credited back to Medicaid, but it was not. The $566,018 is considered Federal questioned costs. • Two adjustments tested were to correct prior period allocation errors. Both errors were due to a finding from the Fiscal Year 2024 Single audit. The Agency’s calculations to correct allocations included errors, such as using the incorrect statistics, using the incorrect amounts, and inputting the incorrect amounts into the cost allocation system. These errors resulted in the following programs being overcharged. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that adjustments to the PACAP are proper, and journal entries are appropriate for each program. Effect: Unallowable expenditures were charged to Federal funds and an increased risk for errors, fraud, and noncompliance with Federal regulations. Recommendation: We recommend the Agency strengthen procedures to ensure adjusting entries are complete and accurate. We further recommend the Agency strengthen procedures to ensure compliance with Federal regulations. Management Response: The Agency agrees with the finding.

Program: AL 10.561 – State Administrative Matching Grants for the Supplemental Nutrition Assistance Program; AL 93.090 – Guardianship Assistance; AL 93.558 – Temporary Assistance for Needy Families; AL 93.563 – Child Support Services; AL 93.566 – Refugee and Entrant Assistance State/Replacement Designee Administered Programs; AL 93.575 Child Care and Development Block Grant; AL 93.658 – Foster Care Title IV-E; AL 93.659 – Adoption Assistance; AL 93.767 – Children’s Health Insurance Program; AL 93.778 – Grants to States for Medicaid – Allowable Cost/Cost Principles Grant Number & Year: 243NE406S2514, FFY 2024; 253NE406S2514, FFY 2025; 2501NEGARD, FFY 2025; 2201NETANF, FFY 2022; 2401NESCSS, FFY 2024; 2501NESCSS, FFY 2025; 2401NERCMA, FFY 2024; 2401NECCDD, FFY 2024; 2501NECCDD, FFY 2025; 2401NEFOST, FFY 2024; 2501NEFOST, FFY 2025; 2401NEADPT, FFY 2024; 2501NEADPT, FFY 2025; 2405NE5021, FFY 2024; 2505NE5021, FFY 2025; 2405NE5ADM, FFY 2024; 2505NE5ADM, FFY 2025 Federal Grantor Agency: U.S. Department of Health and Human Services and U.S. Department of Agriculture Criteria: Per 2 CFR § 400.1 (January 1, 2024, and January 1, 2025), the U.S. Department of Agriculture adopted the OMB Uniform Guidance as its policies and procedures for uniform administrative requirements, cost principles, and audit requirements for Federal awards. 45 CFR § 75.303 (October 1, 2024) and 2 CFR § 200.303 (January 1, 2024, and January 1, 2025) require the State to “maintain effective internal control over the Federal award that provides reasonable assurance that the [State] is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 45 CFR § 75.403 (October 1, 2024) and 2 CFR § 200.403 (January 1, 2024, and January 1, 2025) require costs to be necessary, reasonable, and adequately documented. 45 CFR § 75.302 (October 1, 2024) and 2 CFR § 200.302 (January 1, 2024, and January 1, 2025) require financial management systems of the State sufficient to permit both preparation of required reports and tracing of funds to a level of expenditures adequate to establish that the use of those funds was in accordance with applicable regulations. Per 45 CFR § 75.405(a) (October 1, 2024) and 2 CFR § 200.405(a) (January 1, 2024, and January 1, 2025), costs are allocable to Federal awards or other cost objectives if the costs involved are assignable to those Federal awards or other cost objectives in accordance with relative benefits received. Good internal control and sound accounting practices require policies and procedures to ensure that all administrative costs are allocated to the proper funding source for activities performed. 45 CFR § 75.511 (October 1, 2024) and 2 CFR § 200.511 (January 1, 2024, and January 1, 2025) require the auditee to prepare a summary schedule of prior audit findings. Subsection (b)(2) of both regulations also requires that when the audit findings were not corrected or only partially corrected, the auditee must describe the reasons for the findings recurrence and planned corrective action. Condition: The Agency did not properly charge Federal programs for 9 of 27 allocations tested. A similar finding has been noted since 2013. Repeat Finding: 2024-038 Questioned Costs: $2,743,946 known See Schedule of Findings and Questioned Costs for chart/table. Statistical Sample: No Context: We tested 27 PACAP allocations. We noted errors for 9 of 27 allocations tested, resulting in various programs undercharged or overcharged. We consider the overcharged to be questioned costs. We noted the following: RMTS Allocations For four of four allocations tested based on the Random Moment Time Study (RMTS) observations, the RMTS Summary report was not allocated correctly to the various State and Federal programs. Additionally, costs were included in the allocations that were either misassigned or unrelated to the cost centers being allocated. The following RMTS allocations were tested: See Schedule of Findings and Questioned Costs for chart/table. • RMTS observations were not properly determined. We reviewed two quarters to determine if observations were correctly counted. The September quarter allocation included 4,481 activity observations and the March quarter included 4,402 observations. We noted the following: o Four responses were invalidated by supervisors; however, these responses were originally left blank as they were not completed by employees. This resulted in four additional responses being created as activities funded by the State. o For two responses that were not included in the sub-sample for supervisory review, the supervisor performed a review and invalidated the moments. As these were not originally selected for supervisor review, this invalidation resulted in two additional responses being created and recorded as activities funded by the State as well as the original responses remaining under their original funding source. o One response was originally recorded as SNAP and was later invalidated by the supervisor. This moment was incorrectly not moved to “Non-DHHS Activity” and remained coded as SNAP on the final allocation. • The Agency did not properly allocate observations in accordance with the PACAP for 7 of the 81 activities in the quarter ended September 31, 2024, and 2 of the 75 activities in the quarter ended March 31, 2025: o Six of the observations included Child Protection Initial Assessment. Per the PACAP, Child Protection Initial Assessment is allocated to Foster Care, Guardianship, and Adoption. The Agency did not properly update the formula used to calculate each quarterly allocation for Child Protection Initial Assessment from the previous quarter. In both quarters tested, this resulted in overcharges to the Adoption and Guardianship programs and undercharges to the Foster Care program. o Two of the observations should have been allocated evenly between SNAP and the State; however, the observation was incorrectly allocated three ways, between SNAP, the State, and the Social Services Block Grant Program (SSBG). This resulted in overcharges to SSBG and undercharges to SNAP and the State. o One of the observations should have been allocated with two-thirds to the Temporary Assistance for Needy Families Program (TANF) and one-third to SNAP; however, the observation was incorrectly allocated evenly between TANF and SNAP. This resulted in overcharges to SNAP and undercharges to TANF. Additionally, two business units were misassigned to the RMTS allocations. • One business unit with total charges of $125,246 during State fiscal year 2025 was assigned to the Economic Assistance RMTS allocation when it should have been assigned to the P&S RMTS allocation. Impacts of this error included undercharges to Foster Care and overcharges to SNAP. • The second business unit with total charges of $5,433,458 during State fiscal year 2025 was assigned to the P&S RMTS; however, it should not have been assigned to either RMTS allocation as the costs were related to the Youth Rehabilitation Treatment Center in Kearney, Nebraska. This resulted in overcharges to Federal programs, including Foster Care and Adoption Assistance. Questioned costs by Program for RMTS Allocations are as follows: See Schedule of Findings and Questioned Costs for chart/table. Time Study Allocation One allocation tested was based on a time study of the Legal and Regulatory Services Team for the quarter ended March 31, 2025, which allocated $1,126,957 of administrative costs. The time study was completed annually by the attorneys of the Legal and Regulatory Services Team. We noted the following issues regarding the time study and the allocation tested. • The Agency’s processes and procedures for the time study were not adequately defined in the PACAP, and there were no written processes and procedures for how the time study would be completed. • The time study used for the basis of the allocation tested consisted of only 26 of the 33 attorneys that were part of the team, and the time study was only conducted during a two-week period. Additionally, a paralegal also completed the time study, which was against the Agency’s stated procedures. • An Internal Auditor’s payroll costs were also included in the allocation; however, the Internal Auditor was not part of the Legal and Regulatory Services Team. This resulted in $16,281 in misallocated costs. • Hours coded on the time study for “Child Welfare” were all allocated directly to Foster Care; however, the “Child Welfare” hours should have also been allocated to Adoption, Guardianship, and other State programs. • Hours coded on the time study for “TANF” were incorrectly charged to LIHEAP. As the same time study was used for allocations for all four quarters of the State fiscal year 2025, we calculated the impact for all four quarters. Questioned costs by program for the Time Study allocation are as follows: See Schedule of Findings and Questioned Costs for chart/table. Recipient Counts The PACAP includes five cost centers allocated to State and Federal programs based on recipient counts per NFOCUS and MMIS reports. NFOCUS and MMIS are applications used to manage various programs such as SNAP, Child Care, TANF, and Medicaid. Over $39.5 million in costs were allocated using these counts during the State fiscal year 2025. We tested the allocation for the quarter ended September 30, 2024, and noted the following: • The Agency did not maintain the detail for the recipients of Medicaid or the Children’s Health Insurance Program (CHIP). The numbers they used in the allocations for Medicaid and CHIP were maintained on a summary spreadsheet. The counts used for the allocation tested, pulled from the summary spreadsheet, did not include Medicaid Expansion recipients in the count of Medicaid recipients, thus undercharging Medicaid for the quarter tested and overcharging all other programs in the allocation. Furthermore, when we requested detailed reports to support the numbers on the summary spreadsheet, the Agency was unable to provide detailed reports at the time of the allocation. Instead, the reports showed recipients for Medicaid and CHIP, for September 2024 as of August 2025. The detailed report did not agree to the summary spreadsheets. • Other recipient counts were off due to clerical errors: o The recipient count for the TANF Solely State Funded Plan was incorrect. The recipient count used by the Agency was zero, but the supported number was 2,017 recipients. o The recipient count for SNAP included 1,609 more recipients than what was supported. Having recalculated the quarter’s allocation, based on the supported recipient counts available, we have the following questioned costs: See Schedule of Findings and Questioned Costs for chart/table. Labor Hours Statistics The PACAP includes 36 cost centers allocated to State and Federal programs through labor hours. Over $295.6 million in costs were allocated by labor hours during the 2025 State fiscal year. We tested seven of these allocations, and one had errors. Below is a summary of allocations tested: See Schedule of Findings and Questioned Costs for chart/table. For the allocation tested for Cost Center 25C23545, we noted that five business units related to Home and Community Based Services were being incorrectly mapped to Cost Center 25C23545. Additionally, the labor hours statistic should have allocated the costs throughout the Finance and Program Integrity Section, but it only allocated costs to one unit within this section. These errors resulted in CHIP being overcharged $85,174. Time and Effort Report Allocations We tested the allocation of cost center 25C21940 Field Office Resource Development for the quarter ended September 30, 2024, which allocated $1,077,853 of administrative costs, based on Time & Effort reports. During testing, we noted the payroll costs for 71 employees were charged to the cost center; however, four of the employees’ payroll costs should not have been charged to the cost center. The four employees included three Child and Family Services Specialist Supervisors (CFSSS), and a Program Specialist. The three CFSSS employees were, at one time, Resource Developers; however, when their roles changed, their pay source was not updated. The Program Specialist has been a Program Specialist since he was hired in April 2022. Because of this error, the following programs were overcharged. See Schedule of Findings and Questioned Costs for chart/table. Other We tested the allocation of cost center 25C23823 iServe IAPD H971 – Shared, which allocated $17,529,039 in project costs for State fiscal year 2025. The iServe Nebraska Portal, which is an online application for Nebraskans to apply for benefits from Federal and State programs, began implementation in July 2021 and went live in October 2023, replacing ACCESSNebraska. For the implementation phase of the project, the Agency allocated costs only to the following four programs: LIHEAP, TANF, SNAP, and Medicaid. However, there are other Federal and State programs that are utilizing, or intend to utilize, the iServe application. We reviewed documentation obtained in the prior year, including correspondence from the Agency’s Federal contacts, which stated the following: As long as SNAP, Medicaid, LIHEAP, and TANF are the only benefiting programs for the State’s iServe Nebraska Portal project, the State may just include these four programs in the development of its cost allocation plan. If/when the State decides to add other Federal programs that will benefit from enhancements to the portal, it will need to revisit and adjust its cost allocation plan. In addition to SNAP, Medicaid, LIHEAP, and TANF, other programs went live during the previous fiscal year, including Child Care, SSBG, Refugee Assistance, and various State programs. We noted the following: • The allocation method was last updated by the Agency, and approved by the Federal grantor, as of September 28, 2023, to include the Child Care program and some State-funded programs, such as Assistance to the Aged, Blind, or Disabled Program (AABD) and State Disability Program (SDP). However, the Agency-provided implementation date for Child Care, AABD, and SDP was the same as the implementation date for the initial four programs, July 26, 2021. So it remains unclear why all benefiting programs were not being included in the allocation of this cost center from the start of implementation. • The SSBG program began implementation in October 2023 and went live in April 2024, but no costs have been allocated to this program. Similarly, the Refugee Assistance program began implementation in March 2024 and went live in July 2024, but no costs have been allocated to this program either. We were unable to determine questioned costs for the cost center. The total costs allocated from the iServe project for fiscal year 2025 are noted below. See Schedule of Findings and Questioned Costs for chart/table. Cause: Inadequate procedures to ensure that allocations were adequately supported and calculated correctly. Effect: Without adequate documentation to support the allocation of costs, there is an increased risk of programs not being charged the proper amounts. Recommendation: We recommend the Agency improve procedures to ensure the following: employee pay is recorded correctly; system reports are set up correctly, and formatting instructions are followed; and costs are properly allocated and charged, based on supporting documentation. Management Response: The Agency agrees with the finding.

Program: AL 17.225 – Unemployment Insurance – State – Reporting Grant Number & Year: N/A Federal Grantor Agency: U.S. Department of Labor Criteria: Per 2 CFR § 2900.4 (January 1, 2024, and January 1, 2025), the U.S. Department of Labor adopted the OMB Uniform Guidance as its policies and procedures for financial assistance administration. Per 2 CFR § 200.302(a) (January 1, 2024, and January 1, 2025), the State’s financial management systems, including records documenting compliance with Federal statutes, regulations, and terms and conditions of the Federal award, must be sufficient to permit the preparation of required reports and tracing of funds to an adequate level of expenditures to establish that such funds have been used according to Federal statutes, regulations, and the terms and conditions of the Federal award. Per ETA Handbook 401 (5th Edition) (August 16, 2017): The data used in preparing the ETA 2112 must be obtained from the books of the state. A properly completed ETA 2112 will accurately show the net result of all transactions in the three accounts comprising the state unemployment fund as they appear in each state’s records. Good internal control requires adequate procedures to ensure reports are complete and accurate. Condition: During testing of the ETA 2112 reports, we noted the following: • For three reports tested, a reconciliation of the ending balance per the report to the bank statement for each account was not properly completed. • For two reports tested, amounts reported either could not be traced to supporting documentation or used the inaccurate amounts from the supporting documentation provided. Repeat Finding: 2024-062 Questioned Costs: None Statistical Sample: No Context: The ETA 2112 Report is a monthly summary of transactions in a State unemployment fund which consists of the Clearing Account, Unemployment Trust Fund (UTF) Account, and Benefit Payment Account. Agency controls over the ETA 2112 report include completing a reconciliation of the ending balance per the report to the bank statement for each account. For the three months we tested, a reconciliation was completed by the Agency; however, the ending balances per the report did not agree to the reconciled bank account balances. See the table below for a summary of the variances noted. Upon inquiry, it was noted that these variances had been occurring since the April 2024 monthly report. After this issue was brought to the Agency’s attention, the Agency restated all 12 reports for fiscal year 2025. See Schedule of Findings and Questioned Costs for chart/table. In addition to testing the Agency’s reconciliations, we performed detailed testing of two monthly ETA 2112 reports. During this review, the following issues were noted: November 2024 • The beginning benefit account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • The beginning clearing account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was overstated by $1,666. This also resulted in the ending account balance being overstated by the same amount. • The beginning trust account balance agreed to the ending balance from the October 2024 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The three errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. April 2025 • The beginning benefit account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was overstated by $41. This also resulted in the ending account balance being overstated by the same amount. • Net UI contributions reported in the Clearing account were originally understated by $1,854 due to the Agency improperly adjusting for a correction made by the bank for a check that originally cleared for an incorrect amount. • The beginning clearing account balance agreed to the ending balance from the March 2025 report; however, due to the reconciliation issues noted above and the bank correction issue, the beginning balance was overstated by $5,648. This issue, along with the understatement due to the improper adjustment for the bank correction noted above, then resulted in the ending balance being overstated by $3,794. • The beginning trust account balance agreed to the ending balance from the March 2025 report; however, due to the issues noted above, the beginning balance was understated by $41. This also resulted in the ending account balance being understated by the same amount. The errors noted were corrected by the Agency with a reissued report on July 17, 2025, after we questioned the Agency about the amounts reported. Additionally, for both months tested, it was noted that the Daily Payment Register Summary was used to report the amount of disbursements by program. In prior years, it was noted that the Daily Payment Register Summary does not account for cancellations, which causes certain program disbursements to be overstated, such as UCFE, and Net UI Benefits to be understated. Upon inquiry of the Department, it was noted that this issue still existed during the fiscal year ended June 30, 2025. Cause: Inadequate review and reporting procedures. Effect: Without adequate procedures, there is an increased risk of misrepresented amounts being reported for Federal unemployment insurance programs. Recommendation: We recommend the Agency implement procedures to ensure that amounts reported for Federal unemployment programs are accurate. These procedures should include the following: 1) accurate reconciliations between the ending balances on the reports and supporting documentation are completed; 2) duplicate payments for the various programs are accounted for to ensure proper reporting; 3) amounts reported on the 2112 report can be traced to supporting documentation; and 4) amounts reported on the 2112 report are in line with Federal and State guidelines. Management Response: NDOL agrees that the agency should establish and enforce procedures to ensure the accuracy and reliability of amounts reported for Federal unemployment programs. At a minimum, these procedures should include accurate reconciliation, traceability to source documents, and adherence to guidelines.

Program: AL 21.023 – COVID-19 Emergency Rental Assistance Program – Reporting Grant Number & Year: ERAE1185, grant period ending 9/30/2025 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. The Emergency Rental Assistance Program (ERA2) Reporting Guidance (Revised June 16, 2025) issued by the U.S. Department of the Treasury states, in part, the following: Each ERA2 Recipient must report the cumulative obligations and cumulative expenditures for the Recipient’s Rental Assistance Project between date of receipt of the ERA2 award through the end of the current reporting period. This includes all amounts obligated and expended by the ERA2 Recipient and its subrecipients and contractors, as applicable. * * * * iv. Total Cumulative Dollar Amount of the ERA2 Funds Paid (Expended) for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. * * * * v. Total Cumulative Dollar Amount of the ERA2 Funds Obligated for Housing Stability Services in the ERA2 Rental Assistance Project from award date through the end of the reporting period. A good internal control plan requires procedures to ensure that all required information is reported accurately and supported by underlying data. Condition: For two of two quarterly reports tested, expenditures reported as administrative costs were not accurately categorized as housing stability services costs. Repeat Finding: 2024-068 Questioned Costs: None Statistical Sample: No Context: For the quarters ended December 31, 2024, and June 30, 2025, $1,727,607 and $2,371,862 in ERA2 expenditures, respectively, were reported under the category of administrative costs instead of housing stability services costs. We noted during testing that payments made to two vendors, explicitly for housing stability services per their contracts with the Agency, were not properly categorized in data submitted to the U.S. Department of the Treasury. Upon inquiry, the Department confirmed that the amounts were miscategorized. Cause: Inadequate procedures to compile the reporting data. Effect: Without adequate procedures to ensure reports contain accurate information, there is an increased risk of noncompliance with Federal regulations. Recommendation: We recommend the Agency implement procedures to ensure that figures reported in the ERA2 quarterly compliance report are accurately categorized. Management Response: We agree with the finding.

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Reporting Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.3 (July 1, 2024) defines “obligation” to include the following: [A]n order placed for property and services and entering into contracts, subawards, and similar transactions that require payment. 31 CFR § 35.6(b)(4) (July 1, 2024) states, in relevant part, the following: A recipient, other than a Tribal government, must prepare a written justification for certain capital expenditures according to Table 1 to paragraph (b) of this section. Such written justification must include the following elements: (i) Describe the harm or need to be addressed; (ii) Explain why a capital expenditure is appropriate; and (iii) Compare the proposed capital expenditure to at least two alternative capital expenditures and demonstrate why the proposed capital expenditure is superior. See Schedule of Findings and Questioned Costs for chart/table. 2 CFR § 200.302(a) (January 1, 2024) states, in relevant part, the following: [T]he state’s and the other non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions[.] 2 CFR § 200.511(b) (January 1, 2024) states, in relevant part, the following: The summary schedule of prior audit findings must report the status of all audit findings included in the prior audit’s schedule of findings and questioned costs. . . . * * * * (2) When audit findings were not corrected or were only partially corrected, the summary schedule must describe the reasons for the finding’s recurrence and planned corrective action, and any partial corrective action taken. When corrective action is significantly different from corrective action previously reported in a corrective action plan or in the Federal agency’s or pass-through entity’s management decision, the summary schedule must provide an explanation. Good internal control and sound business practices require policies and procedures to ensure that all CSLFRF reporting requirements are met, including the maintenance of written justification on file for projects with expected capital expenditures of more than $1 million and that written justification is submitted to the Treasury, as required, for projects with expected capital expenditures of $10 million or more. Condition: The Department of Administrative Services (DAS) was responsible for preparing the Quarterly Project and Expenditure Reports. DAS lacked procedures to ensure that CSLFRF obligations and expenditures were reported accurately on the Quarterly Project and Expenditure Reports, or written justification was submitted accurately or on file for projects with expected capital expenditures. A similar finding was noted in the prior audit. The Summary Schedule of Prior Audit Findings lists the status as complete. Repeat Finding: 2024-070 Questioned Costs: None Statistical Sample: No Context: We tested the quarters ended December 31, 2024, and June 30, 2025, Project and Expenditure Reports. We selected 11 of 106 projects from the quarter ended December 31, 2024, report and 11 of 109 projects from the quarter ended June 30, 2025, report to test. We noted the following: Cumulative Expenditures Reported Four of the projects tested did not have cumulative expenditures reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative expenditures for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Cumulative Obligations Reported One of the projects tested did not have cumulative obligations reported correctly. See Schedule of Findings and Questioned Costs for chart/table. The APA noted that, while the cumulative obligations for the Hastings Automotive project was overstated by $2,875,500, the Grand Island Welding project was similarly understated by $2,875,500. Capital Expenditures We noted 10 projects that either did not properly report expected capital expenditures, or a proper required written justification was not on file. • NE Rural Healthcare – The State reported $50,000,000 in expected capital expenditures for this project as of December 31, 2024, which uses CSLFRF funds to build a rural health complex in Kearney, Nebraska. The quarterly report included written justification which identified the harm to be addressed and an explanation for why the capital expenditure is appropriate but did not compare the proposed capital expenditure to at least two alternatives and a demonstration of why the proposed expenditure was superior. The APA noted that documentation on file did support that a comparison had been performed. • PH EMS Equipment – The State reported $0 of expected capital expenditures for the project as of December 31, 2024. However, the project uses CSLFRF funds to purchase equipment for emergency medical services and, therefore, it appears that all $6,539,617 of obligated funds would be considered as expected capital expenditures. The Department of Health and Human Services (DHHS), which is administering the program, did have the required written justification on file for this project. • Long-Term Housing Security – Affordable Housing – the State reported the project as having $750,000 of expected capital expenditures as of June 30, 2025. However, the Department of Economic Development (DED), which is the State agency responsible for administering the project, informed the APA that all $36,467,838 of funds obligated for the project are expected to be used for capital expenditures associated with the development of affordable housing. Therefore, expected capital expenditures were underreported by $35,717,838. Additionally, because the project was erroneously reported as having less than $1 million in expected capital expenditures, written justification was not reported to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • PH EMS Ambulance – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that all funds obligated under the project were for purchasing ambulances for rural emergency services. Therefore, all $18,460,383 of funds obligated for the project should be considered expected capital expenditures. Additionally, because the project was erroneously reported as having no expected capital expenditures, written justification was not submitted to the Treasury. The APA noted that written justification was on file and included all required elements. • HVAC – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $5,000,000 obligated for the project was to be used for construction costs related to HVAC improvements at a rehabilitation hospital. Therefore, expected capital expenditures should have been reported as $5,000,000. Written justification was on file and appeared to contain all required elements. • Strong Healthy Communities – The State reported the project as having no expected capital expenditures as of June 30, 2025. However, the APA noted that the $10,000,000 obligated for the project was to be used for rehabilitation and adaptive reuse of vacant and abandoned property. Per DED, the State agency responsible for administering the project, all funds obligated were expected to be used for capital expenditures. Therefore, expected capital expenditures should have been reported as $10,000,000. Additionally, because the State erroneously reported the project as having no expected capital expenditure, written justification was not included in the report to the Treasury. The APA noted that written justification was on file; however, it did not include a comparison to at least two alternatives or a demonstration of how the proposed expenditure was superior. • Hastings Automotive – The State reported the project as having $4,700,000 of expected capital expenditures. However, this did not take into consideration that in quarter ended March 31, 2025, an award amendment was issued that transferred $2,875,500 from the Hastings Automotive project to the Grand Island Welding Center project. Therefore, expected capital expenditures were overreported for the Hastings Automotive project and underreported for the Grand Island Welding Center project. For the projects below, the APA noted that written justification was on file but did not include a comparison to at least two alternatives or demonstrate why the proposed expenditure was superior. See Schedule of Findings and Questioned Costs for chart/table. Lastly, during testing of allowability, the APA identified two additional projects that did not have written justification on file, as follows: • NIFA – The State reported the project as having $20,500,000 in expected capital expenditures. The APA observed that the written justification submitted to the Treasury did not include a comparison to at least two alternative expenditures or a demonstration of why the proposed expenditure was superior. DHHS was unable to provide any additional documentation supporting that such a comparison had been completed. • City of Norfolk Water Projects – The State reported the project as having $2,000,000 of expected capital expenditures. However, the Department of Natural Resources could not provide any documentation to support that a written justification was completed. Cause: Individual agencies were responsible for reporting to DAS what should be reported on the Quarterly Project and Expenditure Report, and DAS did not perform adequate procedures to verify the information reported. Not all information reported by the agencies was accurate, and the agencies had a poor understanding of written justification requirements. Effect: Without adequate procedures, there is increased risk that the quarterly project and expenditure reports will be materially misstated, and required written justification will not be on file. Recommendation: We recommend the Agency strengthen procedures to ensure that all quarterly project and expenditure reports are complete and accurate, and any required written justification is maintained on file or submitted to the Treasury, as required. Management Response: Agency agrees with finding.

Assistance listing number: 21.027 Program name: Coronavirus State and Local Fiscal Recovery Funds Pass-through entity: State of Michigan EGLE Project numbers: A7588-01 and A5817-01 Finding type: Material weakness and material noncompliance with laws and regulations Repeat finding: No Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires non-federal entities to maintain specific written policies to ensure accountability for federal awards. Minimum mandatory policies include procurement procedures, allowability of costs, conflict of interest, cash management, and internal controls. Conditions: The City did not have written policies, as are required by Uniform Guidance, that adhered fully to the requirements of Uniform Guidance. Questioned Costs: None Why Questioned Costs Not Determinable: N/A How Questioned Computed: N/A Context: The City has some written policies or resolutions that address procurement and conflict of interest. The procurement policy, however, did not fully address the requirements of UG Section 200.318. In addition, the City had developed some procedures for cash management, allowability costs and internal control but did not adopt the written policies for cash management, allowability of costs and internal control that would fully address the requirements of UG Sections 200.305, 200.302, 200.400 and 200.303. Cause: The City was not in compliance with the UG requirements to have the correct written policies related to procurement, cash management, allowability costs and internal control. Effect: The absence of those properly prepared written policies increases the potential for further noncompliance because the City’s procedures may not adequately address the relevant compliance requirements. Recommendation: We recommend that the City create and put in place the written policies that address the requirements of 2 CFR 200.318-Procurement, 200.305-Cash Management, 200.302 & 200.400-Allowability of Costs, 200.303-Internal Control. View and Response of Responsible Officials: The City is reviewing existing documents and the requirements of UG for written policies to determine the best course of action to create and put in place the written policies required by UG.

Material Weakness Material Noncompliance Program: Assistance Listing 84.010A - Title I Grants To Local Educational Agencies Assistance Listing: 84.02784.173– Special Education Cluster (IDEA) Assistance Listing: 84.425U– Elementary and Secondary School Emergency Relief Fund (ARP ESSER) Repeat Finding: Yes Criteria: 2 CFR 200.302 and 2 CFR 200.303 outline key requirements for non-federal entities managing federal awards. Section 200.302 mandates that a financial management system be in place to prepare reports as required by both general and program-specific terms and conditions. It also requires tracing funds to a level of expenditure that demonstrates compliance with federal statutes, regulations, and the terms of the federal award, including comparing expenditures with the budget for each federal award. Section 200.303 requires non-federal entities to establish and maintain effective internal controls over federal awards, ensuring reasonable assurance that the entity is managing the award in compliance with federal laws, regulations, and the award's terms and conditions. Condition: The District’s internal controls over budgeting for federal grants are insufficient to ensure compliance with federal regulations and to stay within the budgetary limits established by the federal awards, as specified in the Mississippi Comprehensive Automated Performance-based System (MCAPS), administered through the Mississippi Department of Education. Specifically, the District has not adequately adhered to budgeting restraints outlined for its federal grants. Our audit procedures identified the following instances where actual expenditures appear to exceed the budgeted amounts:  ESSER ARP III grant, totaling $204,010.20.  SPED Cluster - IDEA Part B grant, totaling $12,819.75.  Title I, Part A grant, totaling $10,224.19. Context/ Perspective: This finding is a result of our comparisons of budget items in the Mississippi Department of Education’ MCAPS system to actual amounts spent in major programs. This condition cited appears to be a systematic issue. Cause: The District did not properly monitor budget limits established in MCAPS to ensure that budgeting requirements were fulfilled. Effect: Failure to remain within established budget limits in MCAPS could affect future eligibility for federal award programs or result in a loss or misappropriation of public assets. Questioned Costs: $204,010.20 (ARP ESSER III) Recommendation: The District should establish additional internal controls to ensure that it remains within budget limits for each grant maintained in MCAPS. Views of Responsible Officials: The Auditee’s Corrective Action Plan lists the District’s response to the findings.

FINDING NUMBER 2025-004 FEDERAL AGENCY U.S. DEPARTMENT OF HOMELAND SECURITY PASS-THROUGH AGENCY CENTRAL OFFICE OF RECOVERY, RECONSTRUCTION AND RESILIENCY OF PUERTO RICO (COR3) FEDERAL EMERGENCY MANAGEMENT AGENCY (FEMA) FEDERAL PROGRAM DISASTER GRANTS – PUBLIC ASSISTANCE (PRESIDENTIALLY DECLARED DISASTERS) (ALN 97.036) REQUIREMENT REPORTING (L) TYPE OF FINDING SIGNIFICANT DEFICIENCY (SD) / NONCOMPLIANCE (NC) CONDITION In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of eleven (11) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports did not agree with the accounting and project records. CRITERIA 2 CFR 200.302 (a) states that the states’ and other non-Federal entities’ financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. CAUSE The Municipality’s accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. EFFECT The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. RECOMMENDATION We recommend the Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission to the pass-through entity. QUESTIONED COST None. PRIOR YEAR FINDING No. VIEWS OF RESPONSIBLE OFFICIALS AND PLANNED CORRECTIVE We concur with the auditors’ finding. The Municipality acknowledges the differences identified between the expenses reported in the Quarterly Progress Reports (QPRs) and the accounting records. To address this issue, the Municipality will implement a reconciliation process between the accounting records and the QPRs prior to their submission to the pass-through entity. Additionally, management will perform a supervisory review to ensure that the reported expenses agree with the accounting records and supporting documentation. Implementation Date: Fiscal Year 2026-2027. Responsible Person: Miguel Fonseca, Federal Programs Director

U.S. Department of Transportation, Federal Railroad Administration Assistance Listing 20.325, CRISI Windsor Extension Systems Agreement Number: 69A36519400600CRSCA, Federal Identifying Number: FR-CRS-0013, Award year: 2019, amended 2022 Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Title 2 CFR §200.302 requires non‑Federal entities to establish and maintain internal control over Federal awards that provides reasonable assurance that the entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Title 2 CFR §200.328 and the terms and conditions of the award require recipients to submit financial reports in the form and manner prescribed by the Federal awarding agency, including the Federal Financial Report (SF‑425), prepared in accordance with the form’s instructions. The SF‑425 instructions require federal cash receipts and disbursements to be reported on a cumulative basis and require accurate identification of the basis of accounting. Condition: We identified an instance in which one quarterly SF‑425 did not reflect cumulative federal cash receipts and disbursements as required by the SF‑425 instructions. Instead, the report reflected only current‑quarter federal cash activity. No additional cash reporting errors were identified by the audit, and the other SF-425 lines were prepared correctly. Cause: The condition resulted from limitations in the consistency of review procedures over SF‑425 preparation, particularly during periods of staff absence. While a reporting process was in place, review controls did not consistently ensure that all SF‑425 data elements, including cumulative cash presentation, were verified prior to submission. Effect: The condition resulted in the submission of federal financial reports that did not fully conform to SF‑425 reporting instructions. The errors did not affect allowable costs, cash drawdowns, reimbursements, or the maximum Federal share under the award. However, incomplete or inaccurate reporting increases the risk that federal agencies may rely on information that does not fully reflect the recipient’s financial status for monitoring purposes. Questioned Costs: No questioned costs are associated with this matter. Context/Sampling: No sampling was used. We tested four of four SF-425 reports. Repeat Finding from Prior Year(s): No Recommendation: We recommend that management continue to strengthen review procedures over SF‑425 preparation, including documented review of cumulative cash reporting and verification of all report attributes, particularly during periods when backup personnel are responsible for report preparation. Views of Responsible Officials: See the separately issued Corrective Action Plan.

Finding 2025-002 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Titles: Public and Indian Housing Program Federal Assistance Listing Numbers: 14.850 Noncompliance – A. Activities Allowed or Unallowed Non Compliance Material to the Financial Statements: No Significant Deficiency in Internal Control over Compliance for Activities Allowed or Unallowed Criteria: Uniform Guidance (2 CFR §200.302(b)(3)) requires entities to maintain effective control over and accountability for all funds, property, and other assets and to adequately safeguard all assets used solely for authorized purposes. Additionally, HUD program regulations and the ACC require that Public and Indian Housing program funds be used only for eligible program costs and not commingled with other funds, except as permitted by HUD. Interfund and affiliate receivable/payable transactions recorded in a PHA’s books of account may indicate the existence of temporary loans which introduce the risk for the potential misuse of Operating funds for nonprogram purposes (42 USC 1437g(e)). Condition: Based upon inspection of the Authority’s files and on discussion with management, we noted that the Authority utilized interfund advances between the Public and Indian Housing program and other Authority funds to address short-term cash flow needs. These interfund balances were not consistently supported by formal agreements, repayment terms, or documented HUD approval where required. In addition, several interfund balances remained outstanding for extended periods and were not timely reconciled or settled. Context: Our testing identified multiple interfund balances between the Public and Indian Housing program and other Authority funds that were utilized for short-term cash flow purposes. Several of these balances remained outstanding for extended periods without formal documentation, repayment terms, or evidence of periodic reconciliation. Known Questioned Costs: Unknown Cause: There is a significant deficiency in internal controls over the compliance for the activities allowed or unallowed type of compliance related to misuse of interfunds. The Authority has not properly considered, designed, implemented, maintained and monitored a system of internal controls that reasonably assures the program is in compliance. Effect: The Public and Indian Housing Program is in non-compliance with the activities allowed or unallowed type of compliance related to misuse of interfunds. The Authority was unable to demonstrate that Public and Indian Housing program funds were used exclusively for allowable program purposes. Prolonged outstanding interfund balances increase the risk of fund commingling, noncompliance with HUD requirements, and misstatement of program financial activity. Recommendation: We recommend that the Authority establish and implement formal policies governing interfund activity, including requirements for documentation, approval, repayment terms, and ongoing monitoring. Interfund balances should be reconciled regularly and settled timely. Management should also ensure that Public and Indian Housing program funds are used solely for allowable program purposes and that any interfund transactions comply with HUD and Uniform Guidance requirements.

Finding Reference 2025-004 Federal Agency: U.S. Department of Homeland Security Pass-Through Agency: Central Office of Recovery, Reconstruction and Resiliency of Puerto Rico (COR3) Program: Disaster Grants – Public Assistance (Presidentially Declared Disaster) (ALN 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) It is not a prior-year finding. Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of five (5) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we noted that the reports of two (2) projects did not agree with the accounting and project records. Criteria 2 CFR 200.302 (a) stated that the state’s and the other non-Federal entity’s financial management system, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. Also, 2 CFR 200.302 (b) (2) states that the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. Cause of Condition The Municipality’s accounting controls and procedures fail to ensure accurate, current and complete disclosure of the financial results of federal assisted activities. Effect of Condition The expenses reported in the Quarterly Progress Reports do not agree with the accounting records. Recommendation We recommend that Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission of the next submission to the pass-through entity. Questioned Cost None Views of Responsible Officials and Planned Corrective Action We concur with the finding. During the testing of reports, the Quarterly Progress Reports of five (5) projects, corresponding to two (2) quarters of fiscal year 2024-2025, were evaluated. It was found that in two (2) projects, the quarterly reports did not match the accounting records or the project documentation. Therefore, for the purposes of this audit, the municipal accounting controls and procedures did not ensure that the reported information was accurate, up-to-date, and fully reconciled with the financial records. In light of the above, the reports will be reconciled with the accounting records, and the discrepancies found will be identified, documented, and adjusted in the system where the error originated, as appropriate. Furthermore, from this point forward, once the Quarterly Reports (QPR) are issued, a copy must be sent to the Program Accountant, the Finance Director, and myself for validation and reconciliation prior to official filing, thus preventing situations like this to occur. This process will form part of the internal control required to ensure that the reported information is accurate, current, complete, and consistent with the accounting records, in accordance with applicable federal requirements. Implementation Date: From March 2026. Full implementation is expected in fiscal year 2026-2027. Responsible Person: Mrs. Natasha Vázquez Federal Programs Director

Federal Agency: Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: 1505-0271 - 2021 Award Period: March 3, 2021 – December 31, 2024, liquidated by December 31, 2026 Type of Finding: Material Weakness in Internal Control Over Compliance, Material Non-Compliance (Modified Opinion) Criteria or Specific Requirement: Under 2 CFR 200.302 and 2 CFR 200.328, recipients of federal funds must maintain accurate financial records and ensure that all reports submitted to federal agencies are complete, accurate, and supported by the accounting system. In addition, Treasury guidance requires that expenditures reported in the Project and Expenditure (P&E) Report be accurate and properly classified. Condition: During the audit, it was noted that certain expenditures reported in the Treasury Project and Expenditure (P&E) Report were inaccurate. Specifically, expenditures included in the P&E Report had been reimbursed under another federal or pass-through grant and therefore should not have been reported as expenditures under the Coronavirus State and Local Fiscal Recovery Funds program. The Schedule of Expenditures of Federal Awards (SEFA) was reviewed and found to be accurately stated in all material respects and properly reconciled to the general ledger. The inaccuracy was limited to the P&E Report submitted to the U.S. Department of the Treasury and did not impact the SEFA. Questioned Cost: None. Context: $520,252 of expenditures reported in the P&E Report submitted to the U.S. Department of the Treasury were reimbursed by another grant. Cause: The Town did not have adequate review procedures in place to ensure that amounts reported in the Project and Expenditure Report were reconciled to the accounting system prior to submission and not reported elsewhere. Effect: As a result, expenditures reported in the Treasury P&E Report were overstated. While this did not affect the accuracy of the SEFA or the basic financial statements, inaccurate reporting to the federal awarding agency increases the risk of noncompliance and may result in the need for corrections, repayments, or increased federal oversight. Repeat Finding: No Recommendation: We recommend that the Town implement stronger internal controls over federal reporting, including establishing a formal reconciliation process between the general ledger and the Project and Expenditure Report, requiring Town Administrator’s review and approval of all federal reports prior to submission, and providing additional training to staff on Federal reporting requirements. View of Responsible Officials: Management concurs with this finding.

FINDING 2025-004 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not designed or implemented a system of internal controls, which would have included appropriate segregation of duties, that would have likely been effective in preventing, or detecting and correcting, noncompliance. The School Corporation transferred $313,369 from the School Lunch fund into the Operations fund. This transfer was labeled as an indirect cost transfer; however, indirect costs were not approved to be charged to the program. This transfer was also not approved by the School Board. The issue was identified and corrected by the current Treasurer prior to June 30, 2025. The lack of internal controls and noncompliance over allowable activities was an isolated instance. Criteria 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following . . . (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. INDIANA STATE BOARD OF ACCOUNTS 23 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (4) Effective control over, and accountability for, all funds, property, and other assets. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non- Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: . . . (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost." INDIANA STATE BOARD OF ACCOUNTS 24 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.508 states in part: "The auditee must: . . . (d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and any other information as needed for the auditor to perform the audit required by this part." Federal Register, Vol. 87, No. 18 states in part: "Treasury has divided the Restriction on Use section into . . . (B) other restrictions on use, which include (1) debt service and replenishing reserves, (2) settlements and judgements, and (3) general restrictions. These restrictions apply to all eligible use categories. . . ." Cause The School Corporation had not developed a system of internal controls that would have ensured that all activities and costs were in compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect Without the proper design or implementation of the components of a system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system was not capable of effectively preventing, or detecting and correcting, noncompliance as identified in the Condition and Context. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all activities are allowable. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-005 Subject: Child Nutrition Cluster - Special Tests and Provisions - School Food Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children, Fresh Fruit and Vegetable Program Assistance Listings Numbers: 10.553, 10.555, 10.559, 10.582 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Special Tests and Provisions - School Food Accounts Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 25 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation had not designed or implemented a system of internal controls, which would have included appropriate segregation of duties, that would have likely been effective in preventing, or detecting and correcting, noncompliance. One of the three monthly reimbursement claims tested was receipted into the School Lunch fund twice. The issue was identified and corrected by the current Treasurer prior to June 30, 2025. The lack of internal controls and noncompliance over special tests and provisions - school food accounts is an isolated instance. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." Cause The School Corporation had not developed a system of internal controls that would have ensured that monthly reimbursements were properly credited to the School Food Account. Effect The lack of internal controls prevented the School Corporation's compliance with the Special Tests and Provisions - School Food Accounts compliance requirement and inaccurate crediting of the School Lunch fund as detailed in the Condition and Context. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 26 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reimbursements are properly credited to the School Lunch fund. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-006 Subject: Title I Grants to Local Educational Agencies - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Numbers and Years (or Other Identifying Numbers): S010A220014, S010A230014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation did not have effective internal controls in place to ensure all costs paid from Title I funds and submitted for reimbursement were for allowable activities or allowable costs. As a result, the following compliance issues were noted:  On May 26, 2023, a check for $886 was issued for which supporting documentation could not be provided. As a result, it could not be determined if the expense was for an allowable activity or an allowable cost.  On August 16, 2024, seven stipends were paid to non-Title I administrative staff from Title I grant funds. Two employees received $5,000 each and five employees received $3,000 each.  On December 20, 2024, three stipends for $918 each were paid from Title I grant funds to employees who had previously received a stipend payment on August 16, 2024. These stipends were determined to not be an allowable activity or an allowable cost. The current Treasurer identified the stipend errors. The School Corporation requested and received reimbursement from the seven employees who received these stipends. INDIANA STATE BOARD OF ACCOUNTS 27 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following . . . (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. INDIANA STATE BOARD OF ACCOUNTS 28 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (g) Be adequately documented. . . ." 2 CFR 200.404 states in part: "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non- Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: . . . (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost." 2 CFR 200.508 states in part: "The auditee must: . . . (d) Provide the auditor access to personnel, accounts, books, records, supporting documentation, and any other information as needed for the auditor to perform the audit required by this part." Federal Register, Vol. 87, No. 18 states in part: "Treasury has divided the Restriction on Use section into . . . (B) other restrictions on use, which include (1) debt service and replenishing reserves, (2) settlements and judgements, and (3) general restrictions. These restrictions apply to all eligible use categories. . . ." Cause The School Corporation did not design and implement an effective internal control system to review all payroll expenditures from the Title I funds, ensuring they were for allowable activities. Effect The failure to design and implement an effective internal control system over payroll expenditures caused noncompliance with the compliance requirements as detailed in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 29 PLYMOUTH COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a system of internal controls to ensure that grant award fund compliance requirements are appropriately researched prior to spending. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-005 Subject: Child Nutrition Cluster - Reporting Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY 2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Monthly Sponsor Claims for Reimbursement (Claims) were submitted to the Indiana Department of Education based upon the number of meals served for the month. The Claims were prepared by the School Corporation's Food Service Director and a food service management company (FSMC) employee. The School Corporation maintained manual meal count records. A point-of-sale system (POS) was used to summarize the manual counts. For all four Claims tested, there were differences between the Claims submitted and the School Corporation's detail meal count reports, resulting in over and under reporting and reimbursement. The Claims tested contained the following errors:  The October 2023 claim reported 27 less meals served (11 breakfast and 16 lunch) than the eligible meals per the School Corporation's detail meal count reports, which resulted in an underclaimed reimbursement totaling $100. The School Corporation also overclaimed snacks by 5, which resulted in over reimbursement of $6.  The November 2023 claim reported 2 less lunch meals served than the eligible meals per the School Corporation's detail meal count reports, which resulted in an underclaimed reimbursement totaling $9.  The June 2024 claim reported 666 more breakfast meals served than the eligible meals per the School Corporation's detail meal count reports, which resulted in an overclaimed reimbursement totaling $1,946. The claim also reported 527 less lunch meals served than the eligible meals per the School Corporation's detail meal count reports, which resulted in an underclaimed reimbursement totaling $2,704. The net of the errors was $758 underclaimed. INDIANA STATE BOARD OF ACCOUNTS 28 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)  The May 2025 claim reported 10 less meals served (5 breakfast and 5 lunch) than the eligible meals per the School Corporation's detail meal count reports, which resulted in an underclaimed reimbursement totaling $37. The School Corporation also overclaimed snacks by 10, which resulted in over reimbursement of $12. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." Cause The School Corporation did not have effective internal control procedures in place over the Claims submitted. The Claims contained evidence of an oversight or review process in place; however, they did not prevent, or detect and correct, errors. The Claims were prepared based upon summary sheets prepared by the FSMC employees and were not verified back to the source records. Effect The lack of effective internal controls caused a total of $894 not to be claimed for reimbursement, which projected to a loss of funding of $6,272. Noncompliance with the grant agreement and the compliance requirement could result in the loss or repayment of federal funds. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure compliance with requirements related to reporting. INDIANA STATE BOARD OF ACCOUNTS 29 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-008 Subject: COVID-19 - Education Stabilization Fund - Condition of Records Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U, 84.425W Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013, S425W210015 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Equipment and Real Property Management; Matching, Level of Effort, Earmarking; Special Tests and Provisions - Wage Rate Requirements Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding numbers were 2023-007 and 2023-009 over the compliance requirements Equipment and Real Property Management and Special Tests and Provisions - Wage Rate Requirements, respectively. Condition and Context The School Corporation received reimbursements totaling $30,316,384 from the COVID-19 - Education Stabilization Fund (ESF) federal awards during the audit period. The reimbursements were associated with three separate federal awards, each of which was required to be accounted for in a separate fund within the School Corporation's financial management system. Expenditures were to be made in accordance with the approved grant applications and budgets, with reimbursement requests subsequently submitted to the Indiana Department of Education (IDOE). The School Corporation was responsible for maintaining detailed disbursement ledgers for each grant fund to support the amounts claimed for reimbursement. As is typical with reimbursement-based grants, the ending cash and investment balances of each grant fund were expected to reflect overdrawn balances until the subsequent reimbursements were received from the IDOE. The $30,316,384 received in ESF funds during the audit period was based on 28 reimbursement requests for expenditures incurred between June 1, 2023 through December 13, 2024. Based on our review of grant fund records and inquiry with management, we identified the following deficiencies:  The detailed disbursement ledger for the period of June 1, 2023 through December 13, 2024, excluding June 2024 for Grant #S425U210013 as no reimbursement request was submitted, reflected total expenditures of $23,051,334. This resulted in $7,265,050 in reimbursements that were not adequately supported by detailed records. INDIANA STATE BOARD OF ACCOUNTS 33 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)  A review of the submitted reimbursement requests indicated that $1,069,865 was reimbursed for indirect costs; however, a disbursement from the grant funds to other operating funds was not recorded within the School Corporations records.  Of the 28 reimbursement requests submitted, only 5 were supported by detailed disbursement ledgers that agreed with the dates and amounts claimed. The remaining 23 reimbursement requests could not be directly reconciled to the supporting documentation provided. Upon further inquiry with management, additional records were provided; however, these records lacked sufficient detail, such as fund number, fund name, check numbers, dates, and vendor names to be useable.  Reimbursements received were not posted to each grant fund properly. This resulted in the ARP EESER III fund receipts to be understated by $4,297,935 and the ESSER II and GEER PD funds receipts to be overstated by $4,174,376 and $123,560, respectively.  Since this is a reimbursement-based grant, the ending cash and investment balances of each grant fund should either be zero or overdrawn while awaiting reimbursement. However, as of June 30, 2025, the ESSER II and Geer PD funds reported positive cash and investment balances of $5,047,932 and $404,653, respectively. Due to the deficiencies noted above, the School Corporation was unable to provide sufficient appropriate evidence for us to determine populations, and, therefore, audit and base an opinion on the compliance requirements subject to audit that were determined to have a direct and material effect on the program. As a result, the $30,316,384 in reimbursements received during the audit period were considered questioned costs. The lack of internal controls and noncompliance were material and systemic throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302 states in part: "(a) . . . the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. See also § 200.450. INDIANA STATE BOARD OF ACCOUNTS 34 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) The financial management system of each non-Federal entity must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. (4) Effective control over, and accountability, for all funds, property, and assets. The non- Federal entity must adequately safeguard all assets and ensure that they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award." 2 CFR 200.1 states in part: ". . . Questioned cost means a cost that is questioned by the auditor because of an audit finding: (1) Which resulted from a violation or possible violation of a statute, regulation, or the terms and conditions of a Federal award, including for funds used to match Federal funds; (2) Where the costs, at the time of the audit, are not supported by adequate documentation; or (3) Where the costs incurred appear unreasonable and do not reflect the actions a prudent person would take in the circumstances. (4) Questioned costs are not an improper payment until reviewed and confirmed to be improper as defined in OMB Circular A-123 appendix C. (See also the definition of Improper payment in this section)." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. INDIANA STATE BOARD OF ACCOUNTS 35 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.313(d) states in part: ". . . (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. (4) Adequate maintenance procedures must be developed to keep the property in good condition. . . ." 29 CFR 5.5 states in part: "(a) Required contract clauses. The Agency head will cause or require the contracting officer to require the contracting officer to [sic] insert in full, or (for contracts covered by the Federal Acquisition Regulation (48 CFR chapter 1)) by reference, in any contract in excess of $2,000 which is entered into for the actual construction, alteration and/or repair, including painting and decorating, of a public building or public work, or building or work financed in whole or in part from Federal funds or in accordance with guarantees of a Federal agency or financed from funds obtained by pledge of any contract of a Federal agency to make a loan, grant or annual contribution (except where a different meaning is expressly indicated), and which is subject to the labor standards provisions of any of the laws referenced by § 5.1, the following clauses . . . (1) Minimum wages— (i) Wage rates and fringe benefits. All laborers and mechanics employed or working upon the site of the work (or otherwise working in construction or development of the project under a development statute), will be paid unconditionally and not less often than once a week, and without subsequent deduction or rebate on any account (except such payroll deductions as are permitted by regulations issued by the Secretary of Labor under the Copeland Act (29 CFR part 3)), the full amount of basic hourly wages and bona fide fringe benefits (or cash equivalents thereof) due at time of payment computed at rates not less than those contained in the wage determination of the Secretary of Labor which is attached hereto and made a part hereof, regardless of any contractual relationship which may be alleged to exist between the contractor and such laborers and mechanics. . . . (3) Records and certified payrolls— (ii) Certified payroll requirements— INDIANA STATE BOARD OF ACCOUNTS 36 SCHOOL CITY OF EAST CHICAGO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (A) Frequency and method of submission. The contractor or subcontractor must submit weekly, for each week in which any DBA- or Related Acts-covered work is performed, certified payrolls to the [write in name of appropriate Federal agency] if the agency is a party to the contract, but if the agency is not such a party, the contractor will submit the certified payrolls to the applicant, sponsor, owner, or other entity, as the case may be, that maintains such records, for transmission to the [write in name of agency]. . . ." 2 CFR 200 Appendix II to Part 200 states in part: "In addition to other provisions required by the Federal agency or non-Federal entity; all contracts made by the non-Federal entity under the Federal award must contain provisions covering the following, as applicable. . . . (D) Davis-Bacon Act, as amended (40 U.S.C. 3141-3148). When required by Federal program legislation, all prime construction contracts in excess of $2,000 awarded by non- Federal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 CFR Part 5, 'Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction'). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. . . ." Cause The School Corporation experienced turnover in key personnel over the federal program, which contributed to the lack of appropriate supporting records. A proper system of internal controls was not designed to ensure continuity of policies, procedures, and records when personnel transitions occurred. Effect Noncompliance with the grant agreement and the compliance requirements could result in the repayment of federal funds. Questioned Costs We identified $30,316,384 in known questioned costs as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management develop policies and procedures to ensure continuity of school records during a personnel change and that all reimbursement requests are properly supported by detail records. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.