Findings Citing § 200.302

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.

2025 – 038. Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: Department of the Treasury Federal Program Title: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing: 21.027 Federal Grant ID Number: None Provided Pass-Through Entity: Not applicable Award Period: March 3, 2021, through December 31, 2026 Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 45 CFR § 75.403 (a) costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 CFR § 200.302 (b)(3) states each recipient’s and subrecipient’s financial management system must provide maintaining 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. 2 CFR § 200.303 requires that the recipient and subrecipient 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. Condition: Amounts charged to the program did not agree to the supporting invoices. Cause: The Department’s review process and internal controls did not detect discrepancies between the invoiced amounts and the amounts recorded and charged to the grant. Effect: Program expenditures were not accurately recorded in the Department’s financial records. Questioned Costs: None, as this finding relates to an underpayment. Context: One out of four transactions tested, the amount charged to the Federal program did not agree to the amount reflected on the supporting invoice. The Department recorded and reimbursed an amount that was less than the invoiced amount, resulting in an underpayment totaling $313. This is a repeat finding from the fiscal year 2024 Single Audit. The Office stated on its Summary Schedule of Prior Year Audit Findings that this issue was “Fully Corrected with Previously Reported Corrective Action Implemented”. Due to this issue repeating for fiscal year 2024, this issue has not been fully corrected. Prior Year Single Audit Report Finding Number: 2024-026 Recommendation: We recommend that the Department strengthen controls to ensure the review process includes verification that amounts charged to the grant agree to the supporting invoices prior to reimbursement. Views of responsible officials and planned corrective actions: See management’s response on page 206.

Grants to States for Medicaid—Medical Status Code Errors Background: The U.S. Department of Health and Human Services provides funding to DHS for Grants to States for Medicaid (MA Program). Funding under this program provides financial assistance to states in maintaining and expanding healthcare coverage to residents meeting eligibility criteria. DHS partners with local agency caseworkers who are responsible for verifying that MA participants meet program eligibility requirements. Caseworkers perform eligibility determination functions, such as obtaining information from MA applicants that is then recorded into the CARES system. Information from CARES related to eligible participants is then used by the Medicaid Management Information System (MMIS) to process payments to providers and managed care organizations. Criteria: Under 2 CFR 200.302, DHS is responsible for maintaining financial management systems that are sufficient to permit the preparation of required reports and to track expenditures to establish that funds have been used in accordance with federal statutes, regulations, and the terms and conditions of the award. DHS uses CARES to determine eligibility for the MA Program and has programmed CARES to assign a medical status code, which is a two-digit code indicating the eligibility and program status of the participant. For example, a medical status code can indicate that an eligible participant is an adult participating in the State’s BadgerCare program, which provides services to participants through managed care organizations. The medical status code assigned by CARES to a participant is used along with other information by MMIS to determine the fund code for each provider claim payment. In turn, these fund codes determine the coding for the expenditure in the State’s accounting system and the reporting line for the expenditures on required federal reports. Condition: We found 3 of the 40 provider claims we reviewed had an incorrect medical status code assigned to the participant on the claim. In each instance, the incorrect medical status code assigned indicated that the participant was a parent or caretaker in the BadgerCare program who had no income. However, the correct medical status code should have indicated that the participant was a parent or caretaker in the BadgerCare program that had income greater than zero but less than 100.0 percent of the federal poverty level. Although both medical status codes related to BadgerCare, each case represented a different eligibility condition. Based upon our request, DHS performed an additional review and reported that the error affected approximately 171,000 MA participants. Context: MA provides healthcare coverage to approximately 1.3 million eligible participants. During FY 2024-25, DHS expended $8.3 billion in federal funds under the MA Program, which included $7.9 billion in benefit payments processed through MMIS. We selected a sample of 40 provider claim payments processed by MMIS for testing and assessed the accuracy of the participant’s medical status code on these claims through a review of eligibility information included in CARES. We discussed with DHS the process used by CARES to assign a medical status code and the errors in the assigned medical status code for the three participants we identified in our testing. Questioned Costs: None. Effect: Errors in the medical status code for MA Program participants could result in inaccurate coding of the expenditure in the State’s accounting system or incorrect reporting of expenditures in required federal reports. Cause: The medical status code is assigned by CARES based upon the eligibility information entered into it. DHS reported that in March 2023, an update to CARES resulted in the errors we identified in the assigned medical status code for the three participants we reviewed. DHS did not have sufficient procedures to identify errors in the assignment of the medical status codes when the updates occurred. DHS indicated that CARES will be updated in February 2026 to correct the errors. DHS should consider the effect of these errors and make any necessary corrections. Further, DHS should implement sufficient procedures to test the accurate assignment of medical status codes by CARES when future CARES changes are made. Recommendation: We recommend the Wisconsin Department of Health Services ensure the accuracy of the medical status code by: -implementing and testing the needed updates to CARES to correct the errors in the assigned medical status code; -completing an assessment of the effect of the identified errors in the medical status code on accounting entries, required federal reporting, and making any necessary corrections; and -implementing procedures to test the accuracy of the medical status code when making future changes in CARES. Finding 2025-304: Grants to States for Medicaid—Medical Status Code Errors Grants to States for Medicaid (Assistance Listing number 93.778) Award Numbers Award Years 2405WI5MAP 2024 2505WI5MAP 2025 Questioned Costs: None Type of Finding: Significant Deficiency, Noncompliance Response from the Wisconsin Department of Health Services: The Wisconsin Department of Health Services agrees with the audit finding and recommendations.

(2025-028) Title: Internal control over National Guard cash management and the related financial reporting needs improvement Prior Year Findings: None State Department: Defense, Veterans and Emergency Management State Bureau: Military Federal Agency: U.S. Department of Defense Assistance Listing Title: National Guard Military Operations and Maintenance (O&M) Projects Assistance Listing Number: 12.401 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302; 32 CFR 33.20 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and assets related to the Federally-funded activities. Fiscal control and accounting procedures of the State must be sufficient to permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes and must permit preparation of required reports. Condition: The National Guard Military Operations and Maintenance Projects (National Guard O&M Projects) program supports the Army and Air National Guard in minor construction, maintenance, repair, or operation of facilities, and provides mission operational support to be performed by the State. The Department submits a Request for Advance or Reimbursement Form (SF-270) to the Federal government to process the National Guard O&M Projects program’s reimbursement request. The program is funded utilizing estimated revenue; estimated revenue represents the estimated amount of funds needed to process expenditures, where the Department utilizes State funds prior to receiving Federal reimbursement, and is limited to the amount requested and approved by the Office of the State Controller. As a result, the program carries a negative cash balance while waiting for the reimbursement requests to be approved by the Federal National Guard Bureau. Delays in receiving Federal approval have led to larger negative cash balances for the program. The negative cash balances should be comprised of all submitted but unapproved SF-270 requests and total expenditures that have not been submitted for reimbursement. The Department tracks outstanding SF-270 requests utilizing a spreadsheet; however, the spreadsheet is not periodically reconciled to the State’s accounting system to ensure all expenditures are included. Additionally, the Department does not have documented policies and procedures to follow up on outstanding reimbursement requests to facilitate more timely reimbursements from the Federal government. Context: In fiscal year 2025, the National Guard O&M Projects program expenditures totaled approximately $30.1 million. The June 30th negative cash balances for the previous 4 fiscal years were as follows: • $(6.7) million for fiscal year 2022 • $(12.4) million for fiscal year 2023 • $(13.3) million for fiscal year 2024 • $(12.4) million for fiscal year 2025 Cause: • Lack of adequate policies and procedures, including reconciling reimbursement activity to the State’s accounting system • Lack of supervisory oversight Effect: • Due to a lack of monitoring cash balances, the Department cannot readily determine if specific Federal expenditures are reimbursed timely. • Sustained negative cash balances limit the program’s ability to continue operations without additional State funding. Recommendation: We recommend that the Department develop and implement policies and procedures and enhance oversight to adequately monitor the National Guard O&M Projects program’s cash balances, including requesting the status of delayed reimbursement requests with the Federal National Guard Bureau to ensure that Federal funds are received as timely as possible. Corrective Action Plan: See F-117 Management’s Response: The Department partially agrees with this finding and will implement the “Corrective Action Plan.” The Auditor states the cause of the findings is a ‘lack’ of adequate policies and procedures and a ‘lack’ of supervisory oversight. We agree that the procedures are not adequate but there are established procedures and oversight. Contact: Diane Dunn, Commissioner, DVEM, 207- 430-5158 Auditor’s Concluding Remarks: The Office of the State Auditor acknowledges that the Department has established procedures and oversight; however, they were not adequate to prevent, or detect and correct, on a timely basis the exception noted in the Condition. The finding remains as stated. (State Number: 25-1503-01)

(2025-048) Title: Internal control over Child Support Services expenditures needs improvement Prior Year Findings: None State Department: Health and Human Services Administrative and Financial Services Judicial Branch State Bureau: Office for Family Independence Health and Human Services Service Center Administrative Office of the Courts Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Child Support Services Assistance Listing Number: 93.563 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 and .403; Cooperative Agreement between the State of Maine Department of Health and Human Services (DHHS) and Maine State Judicial Branch for State Fiscal Years 2024 and 2025, Article V, Section B.3 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Costs must be adequately documented. The State’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 determine that such funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. The Administrative Office of the Courts (AOC) must provide a report to the DHHS Division of Support Enforcement and Recovery (DSER) for all Judicial Branch estimated expenditures. This report must detail costs that are eligible for Federal financial participation and must be provided within 60 calendar days after the close of the quarters ending in March, June, September, and December. These estimated expenditures are calculated using the per minute rate that was in effect for the prior fiscal year. By November 30th, the Judicial Branch will update the per minute rate and provide DSER a report with actual expenditures for the State fiscal year. Condition: The Child Support Services (CSS) program is administered by DSER. DHHS has a cooperative agreement with AOC that defines roles, relationships, and responsibilities of the parties, and sets forth a basis for financial reimbursement for court services provided to DHHS by AOC. These services include conducting paternity hearings; hearings to establish, modify, or enforce support orders; civil and criminal complaint hearings related to CSS; providing mediation services; and conducting proceedings related to income withholding responsibilities. AOC sends monthly invoices to the DHHS Service Center (DHHS SC) with estimated costs for work performed for the CSS program. DHHS SC is responsible for transferring funds from the CSS program to AOC on the following schedule: • On a quarterly basis, AOC provides DHHS SC with a reconciliation of estimated costs based on assigned caseload. This quarterly reconciliation utilizes the per minute rate that was in effect for the prior fiscal year and is due 60 days after the close of the quarter. • Annually, the per minute rate is updated and AOC provides DHHS SC with a final report of actual costs with the updated per minute rate. This final report is due by November 30th each year. Upon receipt of the final report, a final payment/reimbursement will be issued to reconcile to actual costs. The Office of the State Auditor (OSA) tested 7 transfers from DHHS SC to AOC and found that costs incurred for court services were not adequately supported, as follows: • DHHS SC did not receive 1 quarterly report from AOC; therefore, court expenditures were based on estimated costs rather than actual costs. • The annual report and reconciliation of estimated costs to actual costs was not complete; AOC updated minutes charged but the actual cost per minute rate was not updated. Therefore, expenditure amounts reported by the CSS program are not based on actual costs and the submitted final report used the estimated cost per minute rate. OSA selected a non-statistical random sample. Context: The CSS program expended $17.7 million in Federal funds during fiscal year 2025, of which $2.7 million was used for court services. Cause: • Lack of supervisory oversight • Lack of adequate policies and procedures Effect: Since DSER is utilizing the estimated cost per minute instead of the actual cost per minute: • CSS program expenditures could be misstated; and • the State may not be in compliance with State matching requirements of 34 percent of actual costs. Recommendation: We recommend that the Departments strengthen policies and procedures and increase oversight to ensure that the CSS program is in compliance with Federal regulations. Corrective Action Plan: See F-26 Management’s Response: The Departments agree with this finding. The Office of the Courts will strengthen policies, procedures, and oversight to ensure that the Child Support Servies program remains in full compliance with Federal regulations by March 31, 2026. Contact: Jerry Joy, Director, Division of Support Enforcement and Recovery, DHHS, 207-624-6985 (State Number: 25-1128-01)

(2025-058) Title: Internal control over Foster Care and Adoption Assistance cash management needs improvement Prior Year Findings: None State Department: Health and Human Services Administrative and Financial Services State Bureau: Office of Child and Family Services Health and Human Services Service Center Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Adoption Assistance – Title IV-E Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Cash management Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302; 31 CFR 205.33; State Administrative and Accounting Manual (SAAM) Section 50.40.80 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. Financial records must adequately identify the source and application of funds and provide accountability for all funds, property, and other assets related to the Federally-funded activities. The Department must minimize the time between the drawdown of Federal funds and the disbursement of these funds for Federal program purposes. The timing and amount of fund transfers must be as close as administratively feasible to the Department’s actual cash outlay for program costs. Section 50.40.80 of the SAAM has defined administratively feasible as no more than 7 business days. Condition: The Office of Child and Family Services administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State. The programs are designed to help states provide safe and stable out-of-home care for children under its jurisdiction until the children are returned home safely, placed with adoptive families, or placed in other planned arrangements for permanency. The Department of Health and Human Services’ Service Center (DHHS SC) is responsible for the drawdown of Federal funds and grant accounting and reporting for the Foster Care and Adoption Assistance programs. Though DHHS SC monitors compliance with Federal cash management requirements by utilizing a cash on hand analysis, the analysis combines the following Title IV-E programs: • Foster Care • Adoption Assistance • Title IV-E Prevention Program • Guardianship Assistance As a result, Department procedures do not ensure that each individual program is in compliance with Federal cash management requirements. The Office of the State Auditor performed individual analyses for the Foster Care and Adoption Assistance programs and determined that both programs complied with cash management requirements for fiscal year 2025. Context: In fiscal year 2025, there were: • 52 Federal grant drawdowns totaling $21.5 million for the Foster Care program. • 50 Federal grant drawdowns totaling approximately $35 million for the Adoption Assistance program. Cause: • Lack of adequate procedures to ensure that the cash balance for each Title IV-E program is considered separately before requesting Federal funds • Lack of supervisory oversight Effect: Department policies and procedures would not identify noncompliance with cash management requirements, which could result in: • the Federal government imposing more stringent program-specific cash management requirements based on noncompliance. • the State incurring an interest liability on excess Federal cash balances. • noncompliance with Federal regulations. Recommendation: We recommend that the Department enhance existing procedures and increase oversight to ensure that Federal program cash balances are tracked by program in accordance with Federal requirements. Corrective Action Plan: See F-29 Management’s Response: The Departments agree with this finding. The DHHS Financial Service Center will update existing procedures and increase oversight to ensure that Federal program cash balances are tracked by program in accordance with Federal requirements by 3/31/2026. Contact: Sarah Gove, Director, DHHS Service Center, DAFS, 207-458-6626 (State Number: 25-1109-01)

(2025-070) Title: Internal control over DG – PA program financial reporting needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Defense, Veterans and Emergency Management State Bureau: Maine Emergency Management Agency Federal Agency: U.S. Department of Homeland Security Assistance Listing Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) (COVID-19) Assistance Listing Number: 97.036 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Reporting Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.302 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. The Department must maintain accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with reporting requirements. Condition: The Maine Emergency Management Agency (MEMA) administers the Disaster Grants – Public Assistance (DG – PA) program for the State. MEMA is required to submit quarterly DG – PA program Federal Financial Reports (FFRs) to the Federal Emergency Management Agency (FEMA) Regional Office. FFRs provide FEMA with the status of funds for the award, Federal expenditures, and cost-sharing requirements. The Office of the State Auditor (OSA) tested 7 FFRs due in fiscal year 2025 and found deficiencies in 6, as follows: • 1 FFR inaccurately reported total Federal funds authorized as $442,026,321 when the correct total was $442,015,638, and the recipient share of expenditures as $19,499,834 when the correct share was $7,338,371; • 1 FFR inaccurately reported total Federal funds authorized as $16,582,190 when the correct total was $16,560,302, and the recipient share of expenditures as $13,249,493 when the correct share was $5,367,072; • 1 FFR inaccurately reported total Federal funds authorized as $17,805,320 when the correct total was $17,142,335; • 1 FFR inaccurately reported the recipient share of expenditures as $13,077,332 when the correct share was $13,081,295; • 1 FFR inaccurately reported the recipient share of expenditures as $4,698,599 when the correct share was $3,893,046; and • 1 FFR inaccurately reported the recipient share of expenditures as $778,776 when the correct share was $199,157. OSA selected a non-statistical random sample. Context: During fiscal year 2025, 45 FFRs were required to be filed by MEMA for the DG – PA program. Cause: • Lack of adequate policies and procedures to ensure data used for financial reporting is complete and accurate • Lack of supervisory oversight Effect: • Noncompliance with Federal reporting requirements • Inaccurate tracking of subawards may result in noncompliance with Federal matching requirements. Recommendation: We recommend that MEMA enhance policies and procedures to ensure that FFRs are accurate and include all required information for compliance with Federal reporting requirements. Corrective Action Plan: See F-34 Management’s Response: The Department agrees with this finding. The Department will publish and implement a revised Federal Financial Reporting procedure to fully preserve reporting/validation source material and clearly document the justification for any variances from the source material. Contact: Sunny Cyr, MEMA Business Office Director, DVEM, 207-707-2507 (State Number: 25-1502-04)

FEDERAL PROGRAM (ALN 93.356) HEAD START DISASTER RECOVERY FROM HURRICANES HARVEY, IRMA, AND MARIA U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 02td000223 (Federal Award Year June 1, 2021 – December 31, 2025) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY CRITERIA 2 CFR Section 200.302 (a) establishes that 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 funds. All recipient and subrecipient 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. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. In addition, 2 CFR §200.303 (a) 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. 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). STATEMENT OF CONDITION As part of our audit procedures for evaluating internal controls and compliance with reporting requirements, we selected three (3) reports that were submitted during our fiscal year audit. During our review of the data related to Grant Award 02TD000223, we noted the following deficiency: the total Federal expenditure reported on line (e) of the report does not match the data provided by the client in the database, with a difference of $250,000. QUESTIONED COSTS None PERSPECTIVE INFORMATION This deficiency represents a systemic issue attributable to inadequate review procedures, which has resulted in the inaccurate reporting of Federal expenditures. STATEMENT OF CAUSE The discrepancy may be due to an error in the data collection process or a failure to properly transfer data between the database and the Federal expenditure report, or a lack of proper reconciliation between the two. POSSIBLE ASSERTED EFFECT This discrepancy could affect the accuracy of the financial reports, compromising transparency and the Municipality's compliance with Federal reporting requirements. It could also lead to misunderstandings regarding the proper use of the Federal funds awarded. IDENTIFICATION OF REPEAT FINDING This is not a repeat finding. RECOMMENDATIONS We recommend that the Municipality reviews their processes for reporting and recording Federal expenditure to ensure that the data reported on the system matches the database used during the audit. Additionally, we suggest implementing a regular reconciliation process between the reporting system and the database to prevent future errors and ensure compliance with Federal reporting requirements.

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-005 Federal Agency: U.S. Department of Homeland Security Pass-through Agency: P.R. Central Office for Recovery, Reconstruction and Resiliency (COR3) Program: Disaster Grants - Public Assistance (Presidentially Declared Disasters (Assistance Listing No. 97.036) Compliance Requirement: Reporting (L) Type of Finding: Significant Deficiency in Internal Controls (SD), Instance of Noncompliance (NC) Statement of Condition In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of seven (7) projects for two quarters of fiscal year 2024-2025. During our audit procedures, we identified that the reports did not agree with the accounting records. During our audit procedures, we identified that the reports noted that the reports did not agree with the accounting 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 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 the Program Administrators reconcile the differences between the quarterly report and the accounting records before the following submissions to the pass-through entity. Questioned Cost None. Prior Year Finding No. Views of Responsible Officials and Planned Corrective Action We concur with the finding. Adopted Measures • Expense Synchronization: A protocol will be implemented requiring contracted consultants to record and report incurred expenses only when a validated disbursement voucher is available, thereby ensuring the integrity of the financial flow. • Reconciliation: The office will conduct a detailed comparison between the draft quarterly report and the general ledger to identify and correct any discrepancies prior to final submission. • Compliance Timeline: An internal deadline will be established for the submission of the report, ensuring attainment of the minimum percentage required under the Quality Activities category through accurate financial data. Expected Outcome To ensure that all financial information submitted is complete, accurate, and fully aligned with the Municipality’s accounting records, thereby eliminating the risk of audit findings. Implementation Date: March 2026. Responsible persons: • Person responsible for the implementation: Mr. Carlos Flores, Federal Program’s Subdirector • Person responsible for the supervision: Mrs. Yolanda Maldonado, Federal Program’s Director

2025-001 U.S. Department of Housing and Urban Development Community Development Block Grant Cluster Entitlement/Special Purpose Grants – ALN 14.218 HOME Investment Partnership Program – ALN 14.239 Significant Deficiency in Internal Controls Over Compliance Criteria: Per 2 CFR section 200.302(b)(2), the City’s financial management system must provide for the accurate, current and complete disclosure of the financial results of each Federal award or program. Condition: The subsidiary ledger for loans funded by the Federal award programs maintained by the Department did not agree to the City’s general ledger. Cause: The subsidiary loans receivable ledger has not been fully reconciled to the City’s general ledger, although substantial progress was made during the year to complete these reconciliations. Effect: The general ledger was potentially understated by $571,995 and $346,68 for Community Development Block Grant Cluster Entitlement/Special Purpose Grants loans and HOME Investment Partnership Program loans, respectively. Questioned Costs: None Repeat Finding from Prior Year: No. Recommendation: The City should fully reconcile its subsidiary loan ledger to the City’s general ledger. The City should also consider implementing software specifically designed for the maintenance of loans. Views of Responsible Official: Management agrees with the finding.

2025-001 Unallowable Costs CFDA No: 93.434 Program Name: Preschool Development Grants Award Number: 25FPDGCN-510841-01A Federal Agency: U.S. Department of Health and Human Services (HHS) Pass-Through Grantor: Arizona Department of Education Compliance Requirement: A. Activities Allowed or Unallowed, B. Allowable Costs/Cost Principles Questioned Costs: $1,034.75 Summary of Finding: Material weakness in internal controls over compliance and compliance Repeat Finding? No Condition During testing of expenses charged to the Preschool Development Grants program (PDG), Assistance Listing Number 93.434, we identified two of 33 expenses tested totaling $1,467.53 that were determined to be unallowable under the Federal award. A nonstatistical sample of 33 expenditures was selected for testing from the PDG program. The total sample amount tested was $164,654. Criteria Uniform Guidance 2 CFR §200.403 – Factors Affecting Allowability of Costs establishes that costs charged to a Federal award must meet the following criteria to be allowable:  Be necessary and reasonable for the performance of the Federal award and be allocable to the award.  Be adequately documented and consistent with the terms and conditions of the Federal award. Additionally, non-Federal entities must maintain financial management systems that ensure Federal award expenditures comply with Federal statutes, regulations, and the terms and conditions of the Federal award. (2 CFR §200.302 – Financial Management) The PDG was authorized under Section 9212 of the Every Student Succeeds Act (ESSA), Public Law 114-95, and funds must be used only for allowable program activities consistent with the grant’s objectives and federal cost principles. Cause Controls over the review and approval of expenditures charged to the Federal program were not sufficient to ensure that all costs incurred complied with Federal cost principles and program requirements prior to being charged to the grant. Effect As a result of the control deficiency, the District charged costs to the PDG program that did not meet Federal allowability requirements. This resulted in questioned costs totaling $1,467.53 and increases the risk that additional unallowable expenditures could be charged to the program without proper review. Recommendation We recommend that the District strengthen controls over the review and approval of expenditures charged to Federal programs by:  Implementing procedures to ensure expenditures charged to the PDG B-5 program are reviewed for allowability prior to being charged to the grant.  Providing training to personnel responsible for grant administration regarding Federal cost principles and allowable expenditures.  Reviewing current-year expenditures charged to the program to determine whether additional unallowable costs were incurred

Criteria or Specific Requirement: Per 2 CFR 200.302(b)(3) a grant recipient must maintain adequate financial records that identify the source and application of funds for federally funded activities. These records must contain information pertaining to federal awards, authorizations, obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. Condition: Federally funded expenditures were comingled with expenditures paid for with non federally funded sources in the accounting records. Questioned Costs: None. Context: Non federally funded expenditures were recorded in the accounts specifically designated for a federal grant. Effect: The District may be unable to accurately determine the federally funded expenditures for a specific period. Cause: The District did not accurately maintain separate accounts for federal grant expenditures. Recommendation: The District should accurately maintain separate accounts for federal grant expenditures in accordance with 2 CFR 200.302(b)(3). Management's Response: The District agrees with the finding and will review their accounting records and implement a corrective action plan.

Section III – Major Federal Award Program Findings and Questioned Costs Finding Reference 2025-003 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) 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) Statement of Condition: In our Reporting Test, we evaluated the Quarterly Progress Reports of a total of four (4) 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 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 the Program Administrators reconcile the differences between the quarterly report and the accounting records before the submission to the pass-through entity. Questioned Costs: None. Prior Year Findings: Yes. This finding is similar to prior-year finding 2024-003 and 2023-003. Views of Responsible Officials and Planned Corrective Actions: We concur with the findings. During the past year, the Corrective Action Plan (PAC) has been implemented and expense reconciliation efforts have been ongoing. Currently, we are in the process of collecting all supporting documentation related to work performed for projects funded by FEMA. It is expected that the reconciliation of expenses will be completed over the next few quarters, and that expense reporting will continue during the quarters in which payments are made. Implementation Date: Fiscal Year 2025-2026. Responsible Person: José A. Torres Otero Program Accountant

Written Policies and Procedures Related to Federal Awards - Condition: The Town does not have written policies and procedures to ensure compliance with federal award requirements. Specifically, written procedures are missing for: Allowability of Costs (2 CFR 200 Subpart E), Procurement Standards (2 CFR 200.318), Financial Management (2 CFR 200.302). Criteria: 2 CFR §200.303(a) requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms of the award. Cause of Condition: The organization lacked dedicated administrative staff or training to develop these documents, relying on informal processes.Effect: Without written policies, the Town cannot ensure that costs are consistently treated as allowable, reasonable, and allocable in accordance with federal requirements, potentially leading to questioned costs or disallowance. Recommendation: The Town should develop and formally adopt comprehensive, written, and up-to-date policies and procedures that explicitly address 2 CFR 200 requirements for procurement, allowable costs, and financial reporting. Views of Responsible Officials and Planned Corrective Actions: We will reach out to MTAS to help the Town write and implement a policy for the Federal Award Program.

Condition: The Organization did not have written procedures regarding federal cash management, allowability of costs pertaining to federal funds, procurement procedures, or written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award and administration of federal contracts. Neither did the Organization have evidence of verication that the providers of covered transactions were not suspended, debarred or otherwise excluded. Criteria: In accordance with 2 CFR Section 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, the Organization must have written procedures regarding federal cash management (Section 200.302(b)(6)), allowability of costs pertaining to federal funds (Section 200.302(b)(7)), procurement procedures (Section 200.318(a)), and written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award and administration of federal contracts (Section 200.318(c)(1)). In accordance with 2 CFR Section 180, OMB Guidelines to Agencies on Government-Wide Debarment and Suspension (Nonprocurement), the Organization must have verified that the provider of covered transactions is not suspended, debarred or otherwise excluded (Section 180.300). Effect: The Organization was not in compliance with procurement provisions in 2 CFR Section 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and 2 CFR Section 180, OMB Guidelines to Agencies on Government-Wide Debarment and Suspension (Nonprocurement). Cause: The Organization had no internal control structure in place to implement the procurement provisions of 2 CFR Section 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and 2 CFR Section 180, OMB Guidelines to Agencies on Government-Wide Debarment and Suspension (Nonprocurement). Recommendation: The Organization should create an internal control structure in place to implement the procurement provisions 2 CFR Section 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and 2 CFR Section 180, OMB Guidelines to Agencies on Government-Wide Debarment and Suspension (Nonprocurement), create required written procedures and adhere to them. Repeat Finding: No Views of Responsible Officials: Management of Challenger Learning Center of Northwest Indiana, Inc. acknowledges the findings identified in the audit and is in agreement with the condition as stated. We recognize that certain deficiencies were identified related to donor-restricted grants, and federal grant compliance requirements. As this was the Organization’s first experience managing federal funding, some compliance requirements were not fully understood at the time; however, all actions taken were in good faith and with the intent to appropriately steward funds. Management is committed to strengthening internal controls and ensuring full compliance moving forward. Corrective actions have already been initiated, including the liquidation of remaining federal funds in accordance with grant requirements and the development of formalized policies and procedures to address procurement, financial tracking, and documentation practices.

Federal agency: U.S. Small Business Administration Federal program name: Congressional Grants Inclusive Ventures Small Business Program Assistance listing number: 59.059 Pass-through agency: Anne Arundel County, Maryland Pass-through number: SBAHQ23I0140 Award Period: September 1,2023 through August 31, 2028 Compliance Requirement: Cash Management/Program Income Type of Findings: Material Weakness in Internal Control over Compliance, Material Noncompliance (Modified Opinion) Criteria or specific requirement: Compliance: 2 CFR 200.305(b)(8) requires that non-Federal entities must maintain advance payments in interest-bearing accounts and must remit interest earned on Federal advances in excess of $500 annually to the Federal agency. 2 CFR 200.80 defines program income as gross income earned that is directly generated by a supported activity or earned as a result of the Federal award. 2 CFR 200.307(e) requires program income to be properly accounted for, used, and reported in accordance with the terms and conditions of the Federal award. 2 CFR 200.302(b)(3) requires entities to maintain records that identify the source and application of funds, including program income. Condition The Corporation did not track, record, or report program income generated from interest earned on Federal funds received in advance. Interest accumulated in the bank account holding Federal advances was not segregated, monitored, or reported to the Federal awarding agency. As a result, the Corporation could not determine whether interest exceeded the $500 annual threshold requiring remittance. Questioned Costs Total program income identified during the audit was $61,226. Context The Corporation received Federal funds in advance for program activities but did not implement procedures to track interest earned on those funds. Cause The Corporation has not historically received federal funding so tracking program income earned from funds received in advance was not deemed necessary. Effect The Corporation may have retained Federal interest income that should have been remitted to the awarding agency. The Federal awarding agency was not informed of program income generated. Repeat Finding No Recommendation We recommend that management develop and implement written procedures to track, record, and report program income, including interest earned on Federal advances. Views of Responsible Officials Management agrees with finding. See corrective action plan for additional information.

REPORTING Reference Number: 2025-004 (2024-006) Category of Finding: Reporting Type of Finding: Material Noncompliance and Material Weakness State Administering Department: Homeland Security and Emergency Management Assistance Listing Number: 93.036 Federal Program Title: Disaster Grants – Public Assistance Federal Award Numbers and Years: 5184DRNMP5SNM500 4529DRNMP5SNM500 4625DRNMP5SNM500 5281DRNMP5SNM500 5430DRNMP5SNM500 4795DRNMP5SNM500 4843DRNMP5SNM500 5461DRNMP5SNM500 Assistance Listing Number: 93.039 Federal Program Title: Hazard Mitigation Grant Program Federal Award Numbers and Years: 5184FMNMP5SNM500 4529FMNMP5SNM500 4625FMNMP5SNM500 5281FMNMP5SNM500 5430FMNMP5SNM500 4795FMNMP5SNM500 4843FMNMP5SNM500 5461FMNMP5SNM500 Assistance Listing Number: 93.042 Federal Program Title: Emergency Management Performance Grant Federal Award Numbers and Years: EMT2023EP00002; 2023 EMT2024EP05014; 2024 Assistance Listing Number: 93.067 Federal Program Title: Homeland Security Grant Program Federal Award Numbers and Years: EMW2023SS00015; 2023 EMW2024SS05231; 2024 Criteria Title 2 - Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D - Post Federal Award Requirements, Standards for Financial and Program Management, §200.328 Financial Reporting (2 CFR 200.328):(c) The recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semi-annually must be due no later than 30 calendar days after the reporting period. Title 2 - Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D - Post Federal Award Requirements, Standards for Financial and Program Management, §200.302 Financial Management (2 CFR 200.302): (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 funds. All recipient and subrecipient 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 Condition The Department did not submit the required SF-425 financial status reports by the required submission date, 30 calendar days from the end of the reporting period as follows: • 97.036 Disaster Grants Public Assistance, 4 of 8 reports sampled were not submitted timely. • 97.039 Hazard Mitigation Grant Program, 2 of 8 reports sampled were not submitted timely. • 97.042 Emergency Management Performance Grants, 2 of 4 reports sampled were not submitted timely. • 97.067 Homeland Security Grant Program, 3 of 5 reports sampled were not submitted timely. Management made some progress. Identification as a Repeat Finding Finding 2024-006 is repeated and modified. Cause The Department experienced a high level of turnover in financial division personnel, during which time the processes in place did not allow for the timely preparation and submission of required quarterly SF-425 Financial reports. Effect Untimely report submissions can result in ineffective oversight by the federal oversight agency. Questioned Costs Questioned costs were not identified. Context The Department is required to submit financial status reports quarterly for all federal grant programs. The turnover in staffing resulted in delayed submissions for approximately half of the fiscal year, primarily impacting reporting periods ended March 31, 2025 and June 30, 2025. Recommendation The Department should ensure that as part of the revisions to policies and procedures over the financial reporting of the Department’s federal grants, there are practices in place that provide for alternate personnel that can compile, review and submit financial status reports in the event of unexpected vacancies or absences from the positions designated primary reporting responsibilities.

Criteria: Health centers receiving federal funding under the Health Center Program (93.224) and Ryan White Part C (93.918) are required to maintain and consistently apply a sliding fee discount program in accordance with federal regulations and program guidance. Specifically, 42 CFR §51c.303(f) requires health centers to have a schedule of fees and discounts based on patients’ ability to pay and to apply the schedule consistently. The HRSA Health Center Program Compliance Manual, Chapter 9, mandates documented eligibility determinations, defined timeframes for eligibility reassessment, proper application of the sliding fee scale, and retention of documentation. Similarly, the Ryan White HIV/AIDS Program Part C Manual requires eligibility determinations and fee assessments consistent with approved policies and program requirements. Additionally, federal standards under 2 CFR §200.303 require non-federal entities to establish and maintain effective internal controls over federal awards, 2 CFR §200.302(b) requires financial management systems to adequately identify and document eligibility determinations, and 2 CFR §200.328 requires accurate programmatic reporting and monitoring. Condition: During testing of the sliding fee discount program for the fiscal year ended June 30, 2025, we identified multiple instances of noncompliance with established policies and federal program requirements. Specifically, patient financial information was updated over prior evaluations, which eliminated historical tracking and resulted in files not being properly closed in accordance with the health center’s policies. Effect: As a result of these deficiencies, NeoMed Center Inc. is at increased risk of improper fee discounts being applied to patients who may not meet eligibility requirements, noncompliance with federal and program-specific requirements, inaccurate financial reporting related to patient service revenue, lack of proper and accurate collection of services provided and potential loss of federal funds awards. Cause: The noncompliance is caused by inadequate implementation of internal controls policies and procedures designed over the sliding fee program. Also, it caused by lack of appropriate staff training and missing standardized monitoring policies and procedures, as well as inadequate supervisory review of eligibility determinations and documentation. Recommendations: We recommend that the Institution implement the following corrective actions: 1. Review current policies and procedures to improve and establish robust internal controls to ensure that patient financial information is updated without overwriting prior evaluations, preserving historical tracking and maintaining properly closed files. 2. Provide training to staff responsible for eligibility determinations and fee assessments to ensure consistent application of the sliding fee scale and compliance with federal program requirements. 3. Implement standardized monitoring and supervisory review procedures to verify that eligibility determinations, fee assessments, and documentation are accurate, complete, and retained in accordance with program requirements. 4. Implement and perform, on a recurrent basis, audit and/or review of patient files to ensure ongoing compliance, timely reassessment, and proper application of the sliding fee discount program. 5. Maintain clear records and documentation to support all eligibility determinations and fee discounts, ensuring the entity can demonstrate compliance during internal reviews or external audit

Federal Agency: 11 – Department of Commerce, 12 – Department of Defense, 15 – Department of the Interior, 16 – Department of Justice, 43 – National Aeronautics and Space Administration, 47 – National Science Foundation, 81 – Department of Energy, 84 – Department of Education, 93 – Department of Health and Human Services Federal Program Title: R&D Cluster and TRIO Cluster Assistance Listing Number: R&D and 84.TRIO Award Period: July 1, 2024, through June 30, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: In accordance with 2 CFR §200.403(a), costs charged to Federal awards must be necessary, reasonable, and allocable to the Federal award. Additionally, 2 CFR §200.309 requires costs to be incurred during the approved period of performance of the Federal award. Further, 2 CFR §200.302(a) requires non‑Federal entities to maintain financial management systems that provide for accurate, current, and complete disclosure of the financial results of each Federal award, and 2 CFR §200.303 requires non‑Federal entities to establish and maintain effective internal control over Federal awards. Condition/Context: The population sizes below are presented only for programs in which exceptions were identified for the applicable compliance test. Cash Disbursement Testing – TRIO Cluster (Control Finding Only): • For 2 of the 40 TRIO samples tested, the related expenses were allowable and incurred within the awards’ approved periods of performance; however, the expenses were improperly recorded in fiscal year 2025. Specifically, 1 expense related to fiscal year 2024, and 1 expense represented a prepayment for a fiscal year 2026 cost. The resulting misstatement to the Schedule of Expenditures of Federal Awards (SEFA) totaled $5,260, which is less than program materiality. Payroll Testing – R&D Cluster (Control Finding Only): • For 10 of the 40 R&D samples tested, timesheets were not submitted timely, resulting in variances between the payroll register and the recalculated gross wages for the applicable pay periods. No unallowable payroll costs were identified; however, controls over timely payroll documentation and reconciliation did not operate effectively. • For 1 of the 40 R&D samples tested, the timesheet was not signed by the supervisor, indicating that payroll review controls were not consistently applied. Questioned Costs: None. Effect: Although the costs tested were allowable and incurred within the approved periods of performance, improper period recognition and untimely or incomplete payroll documentation increase the risk that Federal expenditures are not recorded in the proper fiscal period and that Federal financial reporting is not accurate. Cause: The UEC’s internal controls were not designed or implemented to consistently ensure that expenditures are recorded in the proper fiscal period and that payroll documentation is submitted, reviewed, and approved timely. Repeat Finding: No. Recommendation: We recommend the UEC strengthen its controls over expenditure recognition to ensure costs are recorded in the appropriate fiscal period and enhance payroll review procedures to ensure timesheets are submitted and reviewed timely to support accurate payroll reporting. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding.

Federal Agency: 11 – Department of Commerce, 12 – Department of Defense, 15 – Department of the Interior, 16 – Department of Justice, 43 – National Aeronautics and Space Administration, 47 – National Science Foundation, 81 – Department of Energy, 84 – Department of Education, 93 – Department of Health and Human Services Federal Program Title: R&D Cluster, Child Care Access Means Parents in School, TRIO Cluster, and Higher Education Institutional Aid Assistance Listing Number: R&D, 84.335, 84.TRIO, and 84.031 Award Period: July 1, 2024, through June 30, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or Specific Requirement: In accordance with 2 CFR §200.305(b), when using the reimbursement method, Federal drawdowns must be limited to allowable costs that have been incurred and supported. Additionally, 2 CFR §200.302(a) requires non Federal entities to maintain financial management systems that provide for accurate, current, and complete disclosure of the financial results of each Federal award. Condition/Context: During our testing of Cash Management, we selected a sample of 85 reimbursement requests, consisting of 40 R&D Cluster samples, 12 Child Care Access Means Parents in School samples, 23 TRIO Cluster samples, and 10 Higher Education Institutional Aid. The following exceptions were noted: R&D Cluster, TRIO Cluster, and Higher Education Institutional Aid: For 4 of the 40 R&D samples tested, 9 of the 23 TRIO samples tested, and 1 of the 10 Higher Education Institutional Aid samples tested, instances of noncompliance were identified. • For 4 of the 4 R&D samples, 8 of the 9 TRIO samples, and 1 of the 1 Higher Education Institutional Aid samples with instances of noncompliance noted, a portion of the reimbursement drawn down during fiscal year 2025 related to expenses incurred outside to the current fiscal year. Additionally, 1 of the 4 R&D samples included expenses incurred as far back as October 2020. • For 1 of the 9 TRIO samples with instances of noncompliance noted, supporting documentation (such as invoice support, indirect cost recalculations, or payroll registers) was not provided for a portion of the expenses included in the reimbursement requests. As a result, we were unable to determine the period to which the funds drawn down related. Child Care Access Means Parents in School (Control Finding Only): • For 1 of the 12 samples tested, the UEC was ultimately in compliance with cash management requirements; however, internal controls did not operate effectively. Specifically, there was an approximate six‑month delay between the incurrence of program costs and the submission of the reimbursement request. Questioned Costs: $68,759 Effect: Reimbursement requests that include costs incurred outside the applicable fiscal period or costs that are not supported increase the risk that Federal expenditures are not recorded in the proper accounting period and that Federal financial reporting is not accurate. Additionally, delays in submitting reimbursement requests increase the risk that expenditures are not timely reported in accordance with Federal requirements. Cause: The UEC’s internal controls were not designed or implemented to consistently ensure that costs included in reimbursement requests are recorded in the appropriate fiscal period, supported by adequate documentation, and submitted timely in accordance with Federal cash management and financial reporting requirements. Repeat Finding: No. Recommendation: We recommend the UEC strengthen its cash management and financial reporting procedures to ensure reimbursement requests include only costs incurred in the appropriate fiscal period, are supported by adequate documentation, and are submitted timely. The UEC should also enhance review controls to verify proper period recognition of costs prior to submission of reimbursement requests. Views of Responsible Officials: Management agrees with the finding and has developed a plan to correct the finding. Further, 2 CFR §200.303 requires non Federal entities to establish and maintain effective internal control over Federal awards to ensure transactions are recorded in the proper accounting period and in accordance with applicable Federal requirements.

U.S. Department of Agriculture (“USDA”) Passed through Colorado Department of Education National School Lunch Program (Child Nutrition Cluster) / ALN 10.555 Compliance Requirement: Reporting Significant Deficiency in Internal Control over Compliance and Other Non- Compliance Criteria: Federal regulations require that recipients of federal awards maintain adequate records to support amounts claimed for reimbursement. Under 2 CFR 200.403 and 2 CFR 200.302, costs must be adequately documented and supported, and financial management systems must provide accurate, current, and complete disclosure of the financial results of each federally funded program. Additionally, USDA program guidance requires entities to retain documentation supporting daily meal counts and reimbursement claims. Condition: During testing of National School Lunch Program reimbursements, the District was unable to provide adequate supporting documentation for a sample of meal reimbursement claims relating to sack lunches/field meals during the District’s football season. As a result, we were unable to verify that the reimbursement amounts claimed were fully supported and allowable under program requirements. Questioned Costs: Estimated questioned costs for which there is projected to be no support for totals $53,772, which is an extrapolation of the $6,140 that did not have support in the $48,798 we tested for a sample month, multiplied by the total National School Lunch Program expenditures of $427,357 in 2025. Context: A non-statistical sample of 1 month of reimbursements from the fiscal year were selected for testing. Effect: Because sufficient documentation was not available, the allowability and accuracy of certain National School Lunch Program reimbursements could not be fully substantiated. This resulted in questioned costs related to unsupported reimbursements. Cause: The District did not have a formalized process to ensure that all required supporting documentation for meal counts and reimbursement calculations was retained and centrally maintained. In addition, staff turnover and reliance on manual processes contributed to missing or incomplete records. Identification as a repeat finding: Not applicable. Recommendation: We recommend that the Entity strengthen internal controls over the National School Lunch Program by implementing formal procedures to ensure that daily meal counts, edit checks, and reimbursement calculations are properly documented, reviewed, and retained in accordance with federal requirements. Management should also ensure that reimbursement claims are reconciled to supporting records prior to submission. Views of Responsible Officials and Planned Corrective Action: The District agrees with the finding. See separate corrective action plan at page for planned corrective action.

Finding No: 2025-003– Internal control deficiencies over accounting and identification of federal funds received from the Federal Emergency Management Agency (FEMA) that should be included on SEFA Federal Programs ALN 97.036, Disaster Grants - Public Assistance (Presidentially Declared Disasters) Name of Federal Agency U.S. Department of Homeland Security (Pass-through program from The Central Office of Recovery, Reconstruction and Resiliency) Category Internal Control; Compliance. Compliance Requirement Activities Allowed/Unallowed, Allowable Costs/Cost Principles, Period of Performance, Project Accounting. Criteria 2 CFR Part 200 Subpart D Subsection 200.302 states the following: The recipient's and subrecipient's financial management system must provide for the following: 1. Identification 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, year the Federal award was issued, and name of the Federal agency or pass-through entity. 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. When a federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. 3. Maintaining 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. 4. Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure 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 and the terms and conditions of the Federal award. Condition During our procedures concerning the Administration’s funds received from FEMA we noticed that the reimbursement funds received from FEMA were not recognized as income during the year ended June 30, 2025. Cause The Administration recognized the reimbursement as an accrual and not as income during the year ended June 30, 2025. They have recognized only the amount that they disbursed during the year at their discretion. This accounting is correct when the funds received are capital advances. Effect This can result in amounts not to be included in the Schedule of Expenditures and Federal Awards in the correct period and understate SEFA. Also, the Administration could be subject to penalties or sanctions from the Federal Grantor. Context The Administration identified $6,543 as federal expenditures from prior years capital advances of FEMA awards but did not identify as expended the amount of $11,063 from advances. In addition, the Administration received reimbursements of $1,413,451 in the fiscal year, however management did not identify this amount as federal expenditures until the audit procedures was performed. Identification of repeat finding None. Questioned costs None, as adjustments were made during the audit to correct the misstatement. Recommendation We recommend validating, with the staff in charge of Engineering, the type of funds received from FEMA, if they are reimbursements or capital advances. When the funds received are reimbursements they should be recognized as income in the year received. If the funds are capital advances they should be recognized as unearned revenue and as income in the year in which they are disbursed. Views of responsible officials and planned corrective actions We agreed with the auditors’ finding and recommendation. See further details regarding this matter within the Corrective Action Plan.

Finding Number - 2025-003 Cash Management; Allowable Costs Federal Agency Department of Health & Human Services Federal Program Epidemiology and Laboratory Capacity for Infectious Diseases ALN 93.323 Grant Number Various Compliance Requirement Cash Management / Unallowable Costs Type of Findings Internal Control over Compliance / Compliance Category Significant Deficiency Criteria 2 CFR 200.302 states that 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 accordance with 2 CFR §200.303, non-federal entities are required to establish and maintain effective internal control over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the award. Such controls should include procedures to ensure expenditures are timely identified and included in reimbursement requests. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Condition During our testing of expenditures charged to the Epidemiology and Laboratory Capacity (ELC) program, we identified instances in which expenditures incurred and paid during fiscal year 2022 were included in reimbursement requests submitted during 2025. Although the expenditures appear to relate to allowable program activities, the significant lapse of time between the payment date and the reimbursement request indicates weaknesses in the monitoring and tracking of expenditures pending reimbursement. Also, because the expenditures were originally incurred and paid in 2022, and supporting documentation for prior reimbursement requests was not readily available for the period under audit, we were unable to determine whether these costs had been previously requested for reimbursement. Drawdown No. Type Receipt Date Document No. Check Issuance Date Amount 1525250884 Reimbursement 11-Apr-25 426878 7/21/2022 $ 491,400 428005 8/25/2022 249,960 428049 8/25/2022 558,600 433231 10/11/2022 525,000 440140 11/7/2022 211,803 440145 11/7/2022 248,660 440156 11/7/2022 204,941 429703 6/24/2022 767,102 435438 8/12/2022 745,039 447617 12/8/2022 211,312 $ 4,213,817 Cause Management explained that, in prior periods, drawdown requests were processed manually and on an advanced basis. Subsequently, the Department implemented an electronic system to submit drawdown requests and transitioned the process to a reimbursement method. As part of this transition, certain advance requests that had been processed manually were not properly cleared in the new system and remained recorded as if they had not been requested. Because these requests appeared as pending in the system, they were later submitted again through the new reimbursement process, resulting in duplicate requests in the system records. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Effect As a result, these requests appeared as outstanding in the electronic system and were later submitted again through the reimbursement process. This situation created duplicate drawdown requests in the system records and increased the risk of misstated drawdown activity and potential over-requesting of federal funds if not properly identified and reconciled. Questioned Costs None Perspective Information During our procedures, management explained that prior to the implementation of the current electronic drawdown system, requests for federal funds were submitted manually on an advanced basis. Subsequently, the Department implemented an electronic system to process drawdown requests and transitioned the funding methodology from advances to a reimbursement basis. As part of this transition, certain drawdown requests that had already been submitted manually were not properly cleared or recorded in the new system and remained reflected as pending. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management implement procedures to reconcile manual drawdown requests processed prior to the implementation of the electronic system with the transactions recorded in the system. In addition, management should conduct a comprehensive and detailed review of all legacy transactions that originated before the system transition to ensure that any requests previously processed manually are properly identified, cleared, and supported by adequate documentation. This review should be performed with heightened scrutiny to detect any duplicate or unreconciled drawdown requests. Furthermore, management should establish ongoing controls to periodically review outstanding balances in the system and ensure that all drawdown records are accurate, complete, and appropriately supported. Section III- Findings and Questioned Costs Relating to Federal Awards – (continued) Finding Number - 2025-003 Cash Management; Allowable Costs – (continued) Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.

Finding Number - 2025-005 Rebates Agency Department of Health & Human Services Federal Program Medicaid Cluster ALN 93.778 Compliance Requirement Allowable Costs / Activities Cash Management Reporting Type of Finding Internal Control over Compliance / Compliance Category Significant Deficiency Criteria Pursuant to Section 1927 of the Social Security Act (42 U.S.C. § 1396r-8) and implementing regulations at 42 C.F.R. Part 447, Subpart I, states must: ✓ Report quarterly drug utilization data to manufacturers within 60 days after the end of each quarter; and ✓ Ensure that manufacturers remit rebate payments within 30 days after receipt of utilization data; and ✓ Properly identify, record, and credit rebate collections to the Medicaid program in a timely manner. Department of Health of the Commonwealth of Puerto Rico Schedule of Findings and Questioned Costs – (Continued) For the Fiscal Year Ended June 30, 2025 - 47 - Section III- Findings and Questioned Costs Relating to Federal Awards– (continued) Finding Number - 2025-005 Rebates – (continued) Criteria – (continued) In addition, 2 C.F.R. § 200.302 (Financial Management) requires non-federal entities to maintain effective financial management systems that provide accurate, current, and complete disclosure of financial results and ensure proper accounting for program income and federal funds. Further, 2 C.F.R. § 200.305 (Payment) requires that federal funds be minimized between drawdown and disbursement and that program income and recoveries be properly accounted for and applied. Condition During our audit, we identified that the Medicaid Cluster Program (the Program) returned Medicaid drug rebates outside of the federally required timeframes established under the Medicaid Drug Rebate Program. Specifically, rebates received from pharmaceutical manufacturers were not identified, recorded, and returned to the Medicaid program in accordance with the regulatory deadlines prescribed by federal law and regulation. As a result, federal Medicaid funds were not reconciled and credited in a timely manner, and program expenditures were overstated for the applicable reporting periods. Quarter End period Due date Remmitance date Late Q1 FFY2024 3/31/2024 6/29/2024 9/20/2024 83 Q1 FFY2024 3/31/2024 6/29/2024 12/5/2024 159 Q1 FFY2024 3/31/2024 6/29/2024 4/25/2025 300 Q2 FFY2023 6/30/2023 9/28/2023 9/20/2024 358 Q2 FFY2023 6/30/2023 9/28/2023 12/5/2024 434 Q2 FFY2023 6/30/2023 9/28/2023 4/25/2025 575 Q2 FFY2024 6/30/2024 9/28/2024 12/5/2024 68 Q2 FFY2024 6/30/2024 9/28/2024 4/25/2025 209 Q3 FFY2023 9/30/2023 12/29/2023 9/20/2024 266 Q3 FFY2023 9/30/2023 12/29/2023 12/5/2024 342 Q3 FFY2023 9/30/2023 12/29/2023 4/25/2025 483 Q3 FFY2024 9/30/2024 12/29/2024 4/25/2025 117 Q4 FFY2023 12/31/2023 3/30/2024 9/20/2024 174 Q4 FFY2023 12/31/2023 3/30/2024 12/5/2024 250 Q4 FFY2023 12/31/2023 3/30/2024 4/25/2025 391 Cause The Program relies on information provided by the actuaries of Puerto Rico Health Insurance Administration (PRHIA) to identify and calculate Medicaid drug rebates. PRHIA is responsible for compiling and providing the necessary rebate data to the Program. Based on the information received from PRHIA, management processes the corresponding reimbursements once the data is received. However, the Program does not maintain independent monitoring procedures to verify the completeness and timeliness of the information provided by PRHIA, nor does it perform periodic reconciliations between rebate information received and program expenditures to ensure that all applicable rebates are properly identified and credited to the Medicaid program in accordance with federal requirements. Effect As a result of this condition: ✓ The Program was not in compliance with federal Medicaid Drug Rebate Program requirements and Uniform Guidance financial management standards; and ✓ There is an increased risk of questioned costs and federal disallowances. Questioned Costs Indeterminable Perspective Information Under the program, state Medicaid agencies are required to submit quarterly drug utilization data to participating manufacturers. Based on this data, manufacturers calculate and remit rebate payments to the state. These rebate revenues constitute program income and must be applied to reduce Medicaid expenditures in accordance with federal law and Uniform Guidance. Prior Year Audit Finding This is not a repeat finding. Recommendation We recommend that management establish formal monitoring and reconciliation procedures to ensure that all Medicaid drug rebate information received from PRHIA is complete and accurately recorded. This should include periodic reconciliations between rebate data provided by PRHIA, rebate receipts, and related Medicaid program expenditures. Also, management should implement a formal follow-up process with PRHIA to periodically confirm that all applicable rebate information has been provided and processed in a timely manner. We also recommend that management: ✓ Implement written policies and procedures governing the identification, recording, reconciliation, and return of Medicaid drug rebates; ✓ Establish periodic reconciliation controls to ensure rebate receipts are timely credited to the Medicaid program; ✓ Strengthen oversight and monitoring of rebate activity to ensure compliance with Section 1927 of the Social Security Act and 42 C.F.R. Part 447; and ✓ Provide training to financial and program staff regarding federal rebate compliance requirements. Views of Responsible Officials and Planned Corrective Actions The PRDH’s management agrees with this finding. Please refer to the corrective action on pages 57-60.