Findings Citing § 200.303

Reference Number: 2024-024 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Agency: Department of Human Services Federal Program: Refugee and Entrant Assistance State Administered Programs Assistance Listing Number: 93.566 Award Number and Year: 2201MDRSSS (10/1/2021 – 9/30/2024) 2301MDRSSS (10/1/2022 – 9/30/2026) 2301MDRCMA (10/1/2022 – 9/30/2024) 2401MDRCMA (10/1/2023 – 9/30/2025) Compliance Requirement: SEFA Reporting Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: 2 CFR, Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart F, §200.510(b) requires that auditees 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 §200.502. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: A material error was made by the Department of Human Services (Department) in the amount reported for the program on the Schedule of Expenditures of Federal Awards (SEFA). Context: The Department made a late adjustment to their SEFA reporting for the program which reduced total expenditures by $3.77 million, or approximately 10%. Cause: The General Accounting Department consulted with Department to “reasonably” determine the current year federal program expenditures. However, the Department incorrectly accounted for and reported the federal program expenditures as part of their closing reporting package and subsequently reduced expenditures by approximately 10%. Effect: The SEFA was not prepared in accordance with OMB requirements which could impact the major program risk assessment. Questioned costs: None noted. Recommendation: We recommend that the Department review and enhance its reporting procedures and internal controls to ensure that expenditures reported on the SEFA are accurate. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-025 Prior Year Finding: No Federal Agency: Department of Health and Human Services State Agency: Department of Human Services Federal Program: Low-Income Home Energy Assistance Program Assistance Listing Number: 93.568 Award Number and Year: 2401MDLIEA (10/1/2023-9/30/2025) Compliance Requirement: Period of Performance Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: The Department of Human Services (Department) charged costs to the federal grant prior to the allowable start of the period of performance. The expenditures were incurred from one to twenty-six days prior to the start of the award period. Context: Seventeen of forty transactions selected for testing were incurred prior to the allowable start of the period of performance. Cause: The Department’s procedures were not operating sufficiently to ensure that expenditures charged to the program were incurred within the awards’ period of performance. Internal controls did not prevent or detect the errors. Effect: Costs could be deemed unallowable by the awarding agency if funds are expended outside of the allowable period of performance. Questioned costs: $778,473, which represents the total of the expenditures incurred prior to the awards’ period of performance. Recommendation: The Department should review and enhance its procedures and internal controls to ensure that it charges expenditures to the program that are incurred within an award’s allowable period of performance. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-026 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Agency: Department of Health Federal Program: Children’s Health Insurance Program, Medicaid Cluster Assistance Listing Number: 93.767, 93.775, 93.777, 93.778 Award Number and Year: 2205MD5021 (10/1/2021 – 9/30/2023) 2305MD5021 (10/1/2022 – 9/30/2024) 2405MD5MAP (10/1/2023 – 9/30/2024) 2405MD5ADM (10/1/2023 – 9/30/2024) 2305MD5MAP (10/1/2022 – 9/30/2023) 2305MD5ADM (10/1/2022 – 9/30/2023) Compliance Requirement: Special Tests and Provisions – Refunding of Federal Share of Medicaid Overpayments to Providers Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 42 CFR 433 Subpart F, State Medicaid Agencies (SMAs) are required to refund the federal share of Medicaid overpayments made to providers. States have up to one (1) year from the date of discovery of the overpayment to recover or attempt to recover the overpayment before the federal share must be refunded to CMS via Form CMS-64 regardless of whether recovery is made from the provider. The state must credit the federal share to CMS as outlined under 42 CFR 433.320(a)(2) either in the quarter in which the recovery is made or in the quarter in which the one-year period following discovery ends, whichever is earlier, with limited exceptions. Under 42 CFR 433.316(d), for overpayments resulting from fraud, if not collected within one year of discovery, the SMA has until 30 days after the final judgment of a judicial or administrative appeals process to return the federal share. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: The Department of Health (Department) did not report an overpayment timely. The overpayment should have been reported on the 12/31/2023 quarterly CMS-64 report, but the Department did not report it until FY 2025. Context: One of eight overpayments selected for testing was not reported timely to CMS. Cause: The Department’s procedures were not sufficient to ensure that overpayments were reported timely. Internal controls did not detect or prevent the error. Effect: Overpayment reporting and return of Medicaid funds to CMS was untimely. Questioned costs: Undetermined. Recommendation: We recommend that the Department enhance its procedures and internal controls to ensure that overpayments are reported to CMS either in the quarter in which the recovery is made or in the quarter in which the one-year period following discovery ends, whichever is earlier. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-027 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Agency: Department of Health Federal Program: Medicaid Cluster Assistance Listing Number: 93.775, 93.777, 93.778 Award Number and Year: 2405MD5MAP (10/1/2023 – 9/30/2024) 2405MD5ADM (10/1/2023 – 9/30/2024) 2305MD5MAP (10/1/2022 – 9/30/2023) 2305MD5ADM (10/1/2022 – 9/30/2023) Compliance Requirement: Special Tests and Provisions – Medicaid Recovery Audit Contractors (RACs) Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Compliance: States are required to establish programs to contract with one or more Medicaid Recovery Audit Contractors (RACs) to identify underpayments and overpayments, and recouping overpayments under the state plan and under any waiver of the state plan with respect to all services for which payment is made to any entity under such plan or waiver. States must establish these programs in a manner consistent with State law, and generally in the same manner as the Secretary contracts with contingency fee contractors for the Medicare Fee-For-Service RAC program under Section 1893(h) of the Act (42 USC 1395ddd). The Medicaid State Plan requires the State to conduct a desk audit on every provider each year and to conduct periodic field audits based on the results of annual desk audits. Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: RAC desk audits and field audits were not performed timely. The Department procured and contracted a vendor to perform the audits in August 2022 (fiscal year). The contractor is currently performing desk audits for 2021, which is the last time the audits were performed. Context: For 60 of 60 providers selected for testing, the RAC contractor engaged by the Department of Health (Department) did not perform timely audits. Cause: The Department’s procedures and internal controls are not sufficient to ensure that annual desk audits and periodic field audits are performed timely. Effect: Failure to perform RAC audits timely could result in underpayment and overpayment errors to be undetected which could result in overpayments not being recouped timely. Questioned costs: Undetermined. Recommendation: We recommend that the Department enhance its procedures and internal controls to ensure that RAC desk and field audits are performed timely and that overpayments are recouped. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-028 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Agency: Department of Health Federal Program: Opioid-STR Assistance Listing Number: 93.788 Award Number and Year: 5H79TI085742 (9/30/2023 – 9/29/2024) 6H79TI085742 (9/30/2023 – 9/29/2024) Compliance Requirement: Reporting – Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: The Department of Health (Department) was not in compliance with FSRS reporting requirements. Subawards were not reported timely to FSRS. Context: Eight of eight subawards selected for testing were not reported timely to FSRS. The subawards were issued in September 2023 but were not reported to FSRS until August 2024. SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR CHART/TABLE Cause: The Department’s procedures and internal controls are not sufficient to ensure that subawards are reported timely to FSRS. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the Department review and enhance internal controls and procedures to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-029 Prior Year Finding: 2023-024 Federal Agency: U.S. Department of Health and Human Services State Agency: Department of Health Federal Program: Block Grants for Substance Use Prevention, Treatment, and Recovery Services Assistance Listing Number: 93.959 Award Number and Year: 24B1MDSAPT (10/1/2023 – 9/30/2025) B08TI085811 (10/1/2022 – 9/30/2024) Compliance Requirement: Reporting – Federal Funding Accountability and Transparency Act (FFATA) Type of Finding: Material Weakness in Internal Control Over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: Per the Federal Funding Accountability and Transparency Act (FFATA), prime (direct) recipients of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Reports must be filed in FSRS by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. If the initial award is below $30,000 but subsequent grant modifications result in a total award equal to or over $30,000, the award will be subject to the reporting requirements as of the date the award exceeds $30,000. If the initial award equals or exceeds $30,000 but funding is subsequently de-obligated such that the total award amount falls below $30,000, the award continues to be subject to FFATA reporting requirements. The following key data elements must be reported: Subawardee Name and Data Universal Numbering System (DUNS) number; Amount of Subaward (inclusive of modifications); Subaward Obligation/Action Date; Date of Report Submission; Subaward Number; Project Description; and Names and Compensation of Highly Compensated Officers. (Names and Compensation of Highly Compensated Officers must only be reported when the entity in the preceding fiscal year received 80 percent or more of its annual gross revenues in Federal awards; and $25,000,000 or more in annual gross revenues from Federal awards; and the public does not have access to this information about the compensation of the senior executives of the entity through periodic reports filed under section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. §§ 78m(a), 78o(d)) or section 6104 of the Internal Revenue Code of 1986.) Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: The Department of Health (Department) was not in compliance with FSRS reporting requirements. Subawards were not reported timely to FSRS. Context: Eight of eight subawards selected for testing were not reported timely to FSRS. The subawards were issued in October 2022 but were not reported to FSRS until August 2024. SEE SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR CHART/TABLE Cause: The Department’s procedures and internal controls are not sufficient to ensure that subawards are reported timely to FSRS. Effect: Subawards were not reported to FSRS in accordance with FFATA requirements. Questioned costs: None noted. Recommendation: We recommend the Department review and enhance internal controls and procedures to ensure that all required subawards are reported timely and accurately to FSRS no later than the end of the month following the month of issuance. Views of responsible officials: Management agrees with the finding.

Reference Number: 2024-030 Prior Year Finding: No Federal Agency: U.S. Department of Education State Agency: Morgan State University (MSU) Federal Program: Higher Education Institutional Aid Assistance Listing Number: 84.031B, 84.031E, 84.031K Award Number and Year: P031B220083 (10/1/2022-9/30/2024), P031E200073 (10/1/2022-9/30/2024), P031K190016 (10/1/2022-9/30/2024) Compliance Requirement: Cash Management Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Internal Control: Per 2 CFR section 200.303(a), a non-Federal entity must: 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 comply 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). Condition: It was observed that the University did not maintain supporting documentation supporting the review and approval process over cash management. Context: The condition occurred for the two drawdowns selected for testing. Cause: The University’s process over review and approval for cash management was not documented. Effect: Federal funds may be incorrectly drawn. Questioned costs: None. Recommendation: We recommend the institution implement a formal process for conducting and documenting regular reviews of cash management. Views of responsible officials: There is no disagreement with the audit finding.

Criteria or Specific Requirement: Per 2 CFR 200.303 - Internal Controls and the OMB Compliance Supplement: the District is required to have internal controls over reporting of monthly reimbursement claims. Condition: The Board of Education designated a limited number of individuals to authorize transactions. However, a signature stamp with the signatures of board designated individuals was available for use by non-designated individuals. Questioned costs: None. Context: The use of the signature stamp could subvert internal controls that were designed for District expenditures. Effect: Expenditures could be made without proper authorization by a board designated individual via the use of a stamped signature. Cause: Signature stamps were implemented for administrative convenience to avoid the manual signing of numerous amounts of purchase orders and checks. Recommendation: Signature stamps should not be used, or if used, should be retained and used only by the board designated individual. Management's Response: The District no longer uses signature stamps.

Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Number: 21.027 Federal Award Identification Number and Year: Unknown Pass-Through Agency: Norfolk County Pass-Through Number(s): Unknown Award Period: July 1, 2023 to June 30, 2024 Type of Finding: - Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Recipients of Coronavirus State and Local Fiscal Recovery Funds (SLFRF) must comply with Treasury’s Final Rule, Award Terms and Conditions, and the Uniform Guidance (2 CFR Part 200), including §200.303 on Internal Controls. This requires recipients to establish and maintain effective internal controls to ensure: - Funding decisions are for eligible uses and properly documented. - All expenses are accurately recorded and reported in the correct fiscal quarter’s financial statements. Condition: 1 of the 16 reports tested did not accurately report expenditures for the year ended June 30, 2024. These expenses were subsequently reported in FY25. Questioned costs: None Context: Per 2 CFR Part 200 and Treasury’s SLFRF Compliance and Reporting Guidance, recipients must implement internal controls to ensure accurate and timely reporting of all eligible expenses in the correct reporting period. Cause: The omission occurred due to the accounting software expenditure report used to prepare the report did not capture the activity. Effect: The report did not reflect the full expense amount, resulting in understated expenses for that period. Recommendation: The Town should review and improve internal controls over the review and reconciliation procedures at quarter-end to ensure all expenses are captured in the correct reporting period. Views of responsible officials: There is no disagreement with the audit finding.

2024-001 SEFA REPORTING Federal Program Information: Federal Agency and Program Name U.S. Department of Health and Human Services Every Student Succeeds Act/Preschool Development Grants Grant Award G240352 Federal Assistance Listing Number 93.434 Criteria: 2 CFR 200.303 requires that a 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 and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.510(b) states that “the auditee must also 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.” Condition: The Organization’s internal controls are not adequate to ensure that the schedule of expenditures of Federal awards (SEFA) accurately reports Federal assistance. The Organization did not identify its expenditures under Assistance Listing 93.434 in fiscal year 2024. Questioned Costs: $0 Context: Total federal expenditures for Assistance Listing 93.434 were $2,860,000 for the year ended June 30, 2024. Cause: The Organization does not have adequate internal controls in place to ensure the accuracy of the SEFA. Effect: The Organization is not reporting accurate financial information in its SEFA. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization implement additional controls over financial reporting, including the SEFA, to ensure accuracy of financial data. Views of Responsible Officials: Management acknowledges the finding. See corrective action plan.

The Estill County Fiscal Court Failed To Implement Adequate Internal Controls Over Federal Programs Federal Program: Assistance Listing # 97.040 Chemical Stockpile Emergency Preparedness Program Award Number and Year: Multiple Years- CSEPP Grants Name of Federal Agency: United States Department of Homeland Security Pass Through Agency: Kentucky Department of Military Affairs Compliance Requirements: Allowable Costs/Cost Principles and Equipment and Real Property Management Finding: Material Weakness, Noncompliance Amount of Questioned Costs: None COVID Related: No The Estill County Fiscal Court did not establish and maintain effective internal controls over compliance with Chemical Stockpile Emergency Preparedness Program (CSEPP) requirements, resulting in the fiscal court being non-compliant with federal regulations. Additionally, during testing we noted one expenditure in the amount of $412,662 was not paid within 30 working days and there were 23 instances where equipment or property purchased was not added to the master inventory list as required. The master inventory list has not been updated since September 2022. The fiscal court believed that it had appropriate procedures in place and did not realize that they were not sufficient. As a result, there is an increased risk that the Estill County Fiscal Court is in noncompliance with the requirements that have a direct and material effect on CSEPP. 2 CFR § 200.303, titled Internal Controls, states 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 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). Additionally, 2 CFR § 200.313(d)(2), states, “A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years.” We recommend the fiscal court design and implement internal controls that ensure material compliance with applicable requirements for all federal awards.

FA 2024-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Reporting Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $819,799.49 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan (ARP) Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $3,951,662.00 were expended and reported on the Hancock County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. LEA personnel must also provide program-specific assurances related to the ESSER program within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation- Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Lastly, provisions included in the Uniform Guidance, Section 200.302(a) state in part that “the non- Federal entity’s financial management systems must… be sufficient to permit the preparation of reports required by general and program-specific terms and conditions.” In addition, provisions included in the Uniform Guidance, Section 200.302(b)(2) state in part that the non-federal entity’s financial management system must provide for “accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements.” Condition: A review of the School District’s accounting records and approved expenditures reflected within the ESSER program Consolidated Application reviewed the following deficiencies: • A sample of 13 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for two expenditures totaling $505,229.40 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A sample of 37 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for 29 expenditures totaling $181,761.00 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A review of indirect cost amounts charged to the ESSER program revealed that the total indirect cost amount budgeted by the School District, which totaled $600,000.00, was recorded as indirect cost expenditures during the period under review. However, the School District should have applied the indirect cost rate approved by the GaDOE to actual expenditures incurred during the fiscal year to calculate a maximum indirect cost amount of $467,190.96. Therefore, unallowable indirect costs totaling $132,809.04 were recorded within the ESSER fund. • Expenditures reported on the ARP ESSER completion report for the period July 1, 2023 through September 30, 2024 were not supported by the general ledger for several functions and objects reflected in the amended consolidated application. Questioned Costs: Upon testing a sample of $690,319.93 in nonpersonal services expenditures, known questioned costs of $505,229.40 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $2,507,902.88, we project the likely questioned costs to be approximately $1,835,476.87 In addition, upon testing a sample of $418,831.17 in personal services expenditures, known questioned costs of $181,761.05 were identified for expenditures not approved in the consolidated application. Using the total personal services expenditures population of $1,303,995.07 (excluding benefits payments), we project the likely questioned costs to be approximately $565,897.50. Furthermore, known questioned costs $132,809.04 were identified for unallowable indirect costs charged to the ESSER program. Therefore, the known and likely questioned costs identified for all unallowable payments totaled $819,799.49 and $2,534,183.41, respectively. The following Assistance Listing Numbers were affected by known and likely questioned costs: 84.425D & 84.425U. Cause: In discussing this deficiency with the School District, they stated that they did not consider the expenditure purchases unallowable and recorded them in the wrong account number due to oversight. Indirect costs were charged according to the budget without regard of the appropriate indirect cost rate. Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER Program. Failure to accurately develop and amend budget information through the Consolidated Application process and verify compliance with applicable policies and regulations prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unapproved and unallowable expenditures. Recommendation: The School District should evaluate current internal control procedures related to the ESSER Program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.

Finding 2024-002: Lack of Internal Controls Over Key Compliance Requirement Significant Deficiency Federal Agency: U.S. Department of Homeland Security Program Name: Transit Security Grant Programs ALN Number: 97.075 Award Number: 97.075 Award Year: 2024 Criteria: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, (Uniform Guidance) requires compliance with provisions of procurement, suspension, and debarment. Non-federal entities are prohibited from contracting with or making subawards under covered transactions to parties that are suspended or debarred. When a nonfederal entity enters into a covered transaction with an entity at a lower tier, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.985 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. 2 CFR § 200.303, also states non-Federal entities must establish and maintain effective internal control over federal awards to ensure compliance with applicable statutes, regulations, and the terms and conditions of the award. Condition: During the audit of the Transit Security Grants Program, we identified a deficiency in the design of internal controls related to the suspension and debarment compliance requirement, particularly concerning certain external government entities. Specifically, the Authority had not established documented procedures, oversight mechanisms, or review processes sufficient to ensure compliance on funded special agreements, including these Memorandums of Understanding, negotiated independent of the procurement process. This design gap limited the entity’s ability to potentially prevent or detect noncompliance effectively. Cause: The Authority had not sufficiently developed or implemented internal control procedures to verify suspension and debarment status for funded memorandums of understanding with external governments involved in the grant. These contracts were negotiated without the participation of the Office of Procurement and Materials of the Authority and therefore were not subject to the procurement process, which includes such controls Effect or Potential Effect: The internal controls insufficiency creates a reasonable possibility that material noncompliance with the suspension and debarment requirement could occur and not be prevented or detected and corrected in a timely manner. As a result, this represents a significant deficiency in internal control over compliance. Although no federal funds were disbursed to an excluded party, the lack of timely verification represents noncompliance with federal requirements and increases the risk of future violations. Context: Of the five items tested during the FY24 restatement test work completed in 2026, two lacked documented procedures, and sufficient oversight and review processes to potentially prevent or detect noncompliance. Additionally, two other government entities were identified that may fall under the same compliance gap. Question Costs: None Repeat Finding: No Recommendation: We recommend the Authority design and implement internal control procedures to ensure compliance with the suspension and debarment requirements for federal grants. This may include developing written policies, assigning responsibilities, and establishing monitoring and reviewing processes. View of Responsible Officials: Management agrees with the finding: As this deficiency was identified concurrently with the FY25 audit cycle, management will implement corrective actions based on recommendations prospectively to prevent future occurrences starting from the FY26 reporting year. The Authority acknowledges that controls established in the procurement process are not consistently followed for funded special agreements if they are negotiated without participation of the Procurement and Materials. While Procurement and Materials has controls in place to verify whether entities, including government entities, are suspended or debarred prior to awarding any contract, it does not perform these checks for funded special contracts for which they do not participate in the process. The condition identified pertains specifically to funded transactions executed by the Metro Transit Police Department through Memorandums of Understanding in accordance with the Compact and Policy Instructions (PI) 9.6 Delegation of Authority - Special Agreements, which did not go through the standard procurement process. The Authority will revise PI 9.6 to provide clarity on roles, responsibilities, and compliance steps. including a documented process requiring verification of suspension and debarment status through SAM.gov or other appropriate mechanism for all funded transactions under delegated authority. This requirement will be communicated to all departments and integrated into standard operating practices. Additionally, targeted training sessions will be provided to staff on the revised PI 9.6 and SAM.gov verification procedures to ensure consistent application across the Authority.

2024-012 (2023-006) PAYROLL Federal Agency: U.S. Department of Education Federal Program Title and Assistance Listing Number: Higher Educational Institutional Aid, 84.031 Type of Finding: Significant Deficiency in Internal Controls over Compliance/Material Non-compliance Compliance Area: Activities Allowed or unallowed, Allowable cost/cost principles Federal Award Year: 2024 Questioned Costs: None Condition The College’s supporting documentation did not agree to the amount of employee’s pay charged to grant. Of the 40 payroll disbursement samples tested, 10 samples (25%) lacked time sheets with evidence of supervisory approval or review. Management indicated that the College no longer has access to ADP, the payroll system used during the first half of FY2024, and therefore was unable to provide the required supporting documentation Criteria Per 2 CFR 200.303(a), the non-federal entity must 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). Per 2 CFR section 200.430(i)(1) – Compensation – personal services, Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Cause The College does not have sufficient controls in place to ensure the accuracy of the amounts paid to employees nor include appropriate approvals documented to be allowable to be charged to the federal grant. Effect Lack of approval and inaccurate documentation for costs charged to grants puts the College at risk of charging unallowable costs, which in turn could result in required repayment to grantor agencies.

2024-013 (2023-008) PROCUREMENT, ABOVE SIMPLE ACQUISITION THRESHOLD Federal Agency: U.S. Department of Energy Federal Program Title and Assistance Listing Number: Environmental Remediation and Waste Processing and Disposal, 81.104 Type of Finding: Significant Deficiency in Internal Controls over Compliance Compliance Area: Procurement and suspension and debarment Federal Award Year: 2024 Questioned Costs: None Condition During our review of procurement testing, the College acquired a training simulator through a sole source procurement. The College displayed on their website the “vendor’s determination”, not the “College’s determination”. In 2024, the College prepaid $1,577,250 on this procurement. Criteria Per 2 CFR 200.303(a), the non-federal entity must 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). Per 2 CFR 200.318(i), non-federal entities must retain documentation sufficient to detail the history of procurement decisions. Cause The College did not provide their own independent sole source determination. Effect The College may unintentionally charge expenses to the program that do not qualify and in turn lead to questioned costs and/or repayment of funds to the grantor agency.

Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Procurement and Suspension and Debarment Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.371C – Comprehensive Literacy Development Federal Award Number: S371C190016-19A (Years: 2017-21) Questioned Costs: $12,921.61 Repeat of Prior Year Findings: FA 2022-002, FA 2023-001 Description: A review of expenditures and journal entries charged to the Comprehensive Literacy Development program revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred and the School District’s procurement procedures were followed. Background Information: The Comprehensive Literacy Development Program (CLD) was authorized under Sections 2222-2225 of the Elementary and Secondary Education Act of 1965 to create a comprehensive literacy program to advance literacy skills, including pre-literacy skills, reading, and writing, for children from birth to grade 12, with an emphasis on disadvantaged children, including children living in poverty, English learners, and children with disabilities. CLD funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the expenditure of funds by LEAs. CLD funds totaling $454,278.20 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Lastly, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: Auditors performed a review of various expenditure activity associated with the CLD program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were identified: • A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. Evidence of review and approval was not reflected for 17 expenditures, and adequate evidence of receipt was not maintained for 20 expenditures. • A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for either journal entry tested. • A sample of 45 procurement transactions was randomly selected for testing using a non-statistical sampling approach. Four procurement transactions did not reflect evidence of supervisory review and approval, and the School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for 13 small purchase procurements reviewed. Questioned Costs: Upon testing a sample of $45,625.42 in procurement transactions, known questioned costs of $12,921.61 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $327,567.83 in procurement transactions, we project the likely questioned costs to be approximately $92,770.73. Cause: The School District did not maintain evidence of review and approval of expenditures, journal entries, and procurement transactions as a result of oversight. Small purchase procurement transactions did not follow the School District’s procurement policy because the Federal Programs Director was unaware that it was necessary to follow these procedures for the purchase of instructional materials. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability and journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, failure to appropriately follow applicable procurement procedures exposes the School District to unnecessary risk of error and misuse of federal funds. Lastly, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the CLD program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures, journal entries, and procurement transactions reflect evidence of review for associated compliance requirements. In addition, expenditure voucher packages should contain all required components. Furthermore, the School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly identified, safeguarded, and retained. Management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review and approval was not reflected for 17 expenditures. While 3 invoices were not approved, 14 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Additionally, all expenditures charged to the grant were submitted to the Georgia Department of Education for review and approval for reimbursement of expenditures. All expenditures were approved and reimbursed. The finding states adequate evidence of receipt was not maintained for 20 expenditures; however, 10 of the expenditures were not for tangible items. Instead, the expenditures were for dues and fees and travel. Dues and fees and travel expenditures do not have packing slips due to the nature of the activity. Of the remaining 10, all but 1 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Approval for payment isn’t granted unless items are received. The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. Both of the journal entries were usual in nature and occurred in the normal course of business including a journal entry to reverse accounts receivable from the prior year and a journal entry to record accounts receivable in the current year. Both journal entries are annual, standard journal entries that are required under Generally Accepted Accounting Principles. While not approved by the Director in charge of the grant, the journal entry was appropriate, allowable, and necessary to ensure revenues were accurately recorded in the proper accounting period. The finding states 4 procurement transactions did not reflect evidence of supervisory review and approval. While 4 transactions included invoices that were not approved by the Director in charge of the grant, 2 invoices were approved by the building level Principal and the Superintendent, and 1 was approved by the Superintendent. Three of the transactions included purchase orders that were properly approved by the Director in charge of the grant. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Procurement and Suspension and Debarment compliance requirements, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the transactions identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.

Compliance Requirement: Equipment and Real Property Management Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D200012 (Year: 2021), S425U2100012 (Year: 2021) Questioned Costs: None Identified Repeat of Prior Year Findings: FA 2022-001, FA 2023-002 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over equipment and real property management as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $4,167,690.48 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.313(d)(1) state, “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.” In addition, the Uniform Guidance, Section 200.313(d)(2) states, “A physical inventory of the property must be taken, and the results reconciled with the property records at least once every two years.” Condition: The following deficiencies were noted when reviewing the ESSER program equipment listing and physically locating equipment items: • Property records maintained by the School District did not include the FAIN (Federal Award Identification Number) for one asset. • One piece of equipment could not be physically located based on information included in the property records. • There was no evidence that a physical inventory had been performed in either the current fiscal year or the previous three fiscal years. Cause: ESSER program personnel did not perform a separate physical inventory, as they mistakenly believed that all equipment items, including those purchased with ESSER funds and listed on the overall capital asset listing, had already been inventoried. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER program. Failure to maintain a complete and accurate equipment listing and reconcile results of the physical inventory performed to the property records exposes the School District to unnecessary risk of error and misuse of equipment and/or federal funds. Recommendation: The School District should develop and maintain an equipment listing that reflects all required information, including a description, an identifying number, the source of funding, the title holder, the acquisition date, the cost, the percentage of federal participation in the project costs, the location, the use and condition, and any ultimate disposal data for each piece of equipment. In addition, management should implement controls to ensure that a complete physical inventory of equipment is performed, and the results are reconciled back to the equipment listing at least once every two years. Views of Responsible Officials: We concur with this finding.

Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D200012 (Year: 2021), S425U2100012 (Year: 2021) Questioned Costs: $328.00 Description: A review of expenditures related to the Elementary and Secondary School Emergency Relief program revealed that the School District’s internal control procedures were not operating appropriately to ensure that appropriate reviews and approvals occurred. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $4,167,690.48 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. Lastly, LEA personnel must also provide program-specific assurances related to the ESSER programs within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Condition: A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For four expenditures, evidence of review and approval was not reflected within the voucher package. • Prior approval was not appropriately obtained from GaDOE for one expenditure totaling $328.00 as this expenditure was not reflected in the approved budget or subsequent amendment within the Consolidated Application system, as required. Questioned Costs: Upon testing a sample of $552,789.52 in nonpersonal expenditures, known questioned costs of $328.00 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $3,601,591.01, we project the likely questioned costs to be approximately $2,137.02. Cause: The School District did not maintain evidence of review and approval of expenditures as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability exposes the School District to unnecessary risk of error and misuse of federal funds. Recommendation: The School District should review current internal control procedures related to the ESSER program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review for associated compliance requirements and potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. Management should develop a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.

Compliance Requirement: Period of Performance Internal Control Impact: Material Weakness Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States COVID-19 – 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants Federal Award Numbers: H027A220073 (Year: 2023), H027230073 (Year: 2024) H027X210073 (Year: 2022), H027A230081 (Year: 2024) Questioned Costs: None Identified Repeat of Prior Year Finding: FA 2023-003 Description: A review of journal entries charged to the Special Education Cluster revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred, as required. Background Information: The Special Education Cluster (SEC), which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was authorized under the Individuals with Disabilities Education Act (IDEA). Special Education Cluster funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. SEC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. SEC funds totaling $1,323,542.89 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Condition: A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach to determine if appropriate internal controls were implemented and applicable compliance requirements were met. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for those journal entries. Cause: The School District did not maintain evidence of review and approval of journal entries as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Special Education Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries reflect evidence of review for associated compliance requirements. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. While not approved by the Director in charge of the grant, both journal entries were reclassifications of expenditures that were allowable and occurred during the period of performance. Both of the journal entries were usual in nature and occurred in the normal course of business. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Period of Performance compliance requirement, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the journal entries identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.

Criteria: Federal awarding agencies and pass-through entities require recipients to submit periodic financial and performance reports, including but not limited to cash reconciliation reports, quarterly reports, and final expenditure reports, within specified deadlines. These reports must be accurate, complete, and supported by underlying accounting records. Additionally, recipients are required to establish and maintain effective internal controls to ensure the accurate preparation, reconciliation, and timely submission of all required federal reports in accordance with 2 CFR 200.302 and 2 CFR 200.303. Condition: The District did not consistently file required federal reports within established deadlines. Specifically, certain required quarterly cash reconciliation reports were submitted after the required due dates, and in some instances, required reports were not submitted. Additionally, the District was unable to provide adequate supporting documentation to reconcile reported expenditures to the general ledger for certain federal reports. Furthermore, required final expenditure reports were not always submitted after funds were fully expended. These issues were noted across multiple federal programs, indicating deficiencies in the District’s overall internal controls over federal reporting. Cause: The District's internal controls and review process over federal reporting were not operating effectively. There was a lack of adequate supervisory review and monitoring to ensure that all federal reports were prepared accurately, reconciled to the general ledger, and submitted in a timely manner. Effect: The District is not in compliance with federal reporting requirements. Failure to submit accurate and timely reports could result in delayed reimbursements, increased scrutiny by federal and pass-through agencies, or potential withholding or loss of federal funding. Questioned Costs: None Recommendation: We recommend that the District strengthen internal controls over federal reporting for all federal programs. The District should implement formal procedures to ensure that all required federal reports are prepared accurately and completely, reconciled to the general ledger, reviewed by appropriate supervisory personnel, and submitted timely in accordance with federal and pass-through agency requirements. Additionally, the District should provide training to personnel responsible for federal reporting and implement a monitoring process to ensure ongoing compliance with federal requirements. Views of Responsible Officials: Management is in agreement with the finding. Prior Year Finding: 2023-02

Federal Program(s): SEFA Reporting (all programs) Compliance Area: Reporting (SEFA completeness and accuracy) Type of Finding: Material Weakness in Internal Control over Financial Reporting and Compliance Criteria 2 CFR §200.510(b) requires the auditee to prepare a complete and accurate Schedule of Expenditures of Federal Awards (SEFA) that includes the total federal awards expended for the period, identified by federal agency, pass-through entity (as applicable), assistance listing number (ALN), and other required elements. 2 CFR §200.303 requires the auditee to establish and maintain effective internal controls over federal awards to provide reasonable assurance of compliance with statutes, regulations, and the terms and conditions of federal awards. Under GAGAS and Uniform Guidance, internal controls should ensure that federal expenditures are properly accumulated, reconciled, reviewed, and reported in the SEFA. Condition Our audit of the SEFA for the year ended June 30, 2024, federal expenditures totaling approximately $6,048,485 were omitted from the SEFA initially prepared by management. The omitted amount represented approximately 54% of total federal expenditures for the year and included activity under the CoronaVirus Capital Project Fund, ALN 21.029. The SEFA was subsequently adjusted to include these expenditures. Our audit of the SEFA for the year ended June 30, 2024, federal expenditures totaling approximately $2,786,421 were omitted from the SEFA initially prepared by management. The omitted amount represented approximately 55% of total federal expenditures for the year and included activity under the CoronaVirus State and Local Fiscal Recovery Program, ALN 21.027. The SEFA was subsequently adjusted to include these expenditures. Cause The entity’s SEFA preparation process did not include sufficient procedures to ensure completeness. Specifically: • The SEFA was prepared using incomplete grant tracking reports that were not reconciled to the general ledger and grant agreements. • There was no formal secondary review by personnel independent of the preparer. • Subrecipient and pass-through activity (as applicable) was not fully captured in the SEFA compilation. Effect The omission resulted in an initially materially misstated SEFA and noncompliance with SEFA reporting requirements under 2 CFR §200.510(b). The deficiency required significant auditor proposed adjustments to correct the SEFA. This control deficiency constitutes a material weakness because it indicates that the entity’s internal controls over SEFA preparation were not effective to prevent or detect a material misstatement on a timely basis. In addition, the incomplete SEFA could lead to inaccurate reporting to oversight agencies and may affect risk assessments for program compliance. Questioned Costs None. (Reporting finding only; no direct noncompliant costs identified. Perspective Information This issue reflects a systemic control deficiency affecting the SEFA as a whole rather than a single program. The magnitude of the omitted expenditures indicates a pervasive weakness in reporting controls. Identification as a Material Weakness We consider this deficiency a material weakness in internal control over financial reporting and compliance related to SEFA preparation because it resulted in a material misstatement of the SEFA and required significant auditor intervention to correct. Recommendation 1. Comprehensive Reconciliation: Reconcile federal grant activity (drawdowns, expenditures, indirect costs) to the general ledger, grant agreements, and agency/portal records. 2. Program Inventory & Certifications: Maintain a centralized inventory of all federal awards (by ALN, pass-through, award number) with program manager certifications of completeness at year-end. 3. Formal Review Workflow: Establish a documented secondary review by finance leadership independent of the preparer, with checklists covering ALNs, pass-throughs, subrecipient disclosures, notes to SEFA, and indirect cost treatment. 4. Subrecipient & Pass-Through Controls: Implement procedures to capture and verify all subrecipient amounts, pass-through activity, and required subrecipient disclosures on the SEFA. 5. Close Calendar & Training: Adopt an annual SEFA close calendar with milestones and provide training on Uniform Guidance reporting requirements to staff involved in SEFA compilation and review. Views of Responsible Officials and Planned Corrective Action (2 CFR §200.511(c)) Management Response: Management agrees with the finding. The omission resulted from incomplete reconciliation of grant activity and insufficient review controls.

U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Activities Allowed/Unallowed and Allowable Costs/Cost Principles Material Non-compliance Material Weakness in Internal Control Criteria: Per 2 CFR §200.303, non-federal entities must establish and maintain effective internal control over federal awards to provide reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Per 2 CFR §200.403, costs must be adequately documented to be allowable under federal awards Condition: During our testing of allowable costs under Uniform Guidance, we noted that the client did not provide evidence of internal controls over the review and approval of costs charged to the federal program. Additionally, for 3 out of 4 sampled transactions, the client was unable to provide supporting documentation (invoices) for the expenditures tested. Cause: The client has not implemented sufficient procedures to ensure documentation is retained and controls are evidenced for allowable costs. Effect: Without evidence of internal controls and supporting documentation, there is an increased risk of noncompliance with Uniform Guidance requirements and potential questioned costs. Questioned Costs: $1,124,156 Context/Sampling: A nonstatistical sample of four invoices were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the client implement and document internal control procedures over allowable costs, including maintaining invoice support for all expenditures charged to federal programs. Controls should include documented review and approval processes to ensure compliance with Uniform Guidance. Views of Responsible Officials: Agree.

U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Procurement, Suspension and Debarment Material Non-compliance Material Weakness in Internal Control Criteria: • 2 CFR §200.303 requires non-federal entities to establish and maintain effective internal control over federal awards. • 2 CFR §200.318 requires non-federal entities to have and follow written procurement procedures that conform to applicable federal laws and standards. • 2 CFR §200.320 outlines requirements for procurement to be followed depending on the purchase threshold. • 2 CFR §200.213 requires non-federal entities to ensure that entities with which they contract are not suspended or debarred from federal programs. Condition: The District does not have documented internal controls over procurement activities. Additionally, the District did not follow procurement methods including obtaining quotes or bids as necessary or perform any of the required suspension and debarment procedures for vendors, such as verifying that vendors were not excluded from federal programs. Further, the District does not have a written procurement policy as required by Uniform Guidance. Cause: The District has not implemented documented internal controls or written procurement policies and did not perform suspension and debarment checks. Effect: Failure to implement these requirements increases the risk of noncompliance with Uniform Guidance and may result in unallowable costs or questioned costs. Questioned Costs: $1,124,156 Context/Sampling: A nonstatistical sample of three vendors were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the District: • Develop and adopt a written procurement policy that complies with Uniform Guidance requirements. • Implement documented internal controls over procurement activities, including procedures for suspension and debarment checks. • Train staff responsible for procurement to ensure compliance with federal requirements. Views of Responsible Officials: Agree.

U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Reporting Material Non-compliance Material Weakness in Internal Control Criteria: • 2 CFR §200.303 requires non-federal entities to establish and maintain effective internal control over federal awards. • 2 CFR §200.328 requires recipients to submit accurate financial reports and maintain records that support the data reported. Condition: The District does not have documented internal controls over the preparation and review of federal financial reports. During our testing, we noted: • For one quarterly report, the District used an incorrect reporting period. • For both sampled reports, the District did not maintain the required supporting documentation in the reporting package to substantiate the amounts reported to the cognizant agency. Cause: The District has not implemented documented internal controls over the reporting process and did not ensure that supporting documentation was retained for amounts reported. Effect: Failure to maintain accurate reporting and supporting documentation increases the risk of noncompliance with Uniform Guidance and may result in questioned costs or misreporting to the cognizant agency. Questioned Costs: None to report. Context/Sampling: A nonstatistical sample of two reports were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the District: • Develop and implement documented internal controls over the reporting process, including review procedures to ensure accuracy of reporting periods. • Maintain complete supporting documentation in the reporting package for all amounts reported to the cognizant agency. • Provide training to staff responsible for preparing and reviewing reports to ensure compliance with Uniform Guidance requirements. Views of Responsible Officials: Agree.

Assistance Listing Number, Federal Agency, and Program Name: 93.600 Head Start Federal Award Identification Number and Year: across all major programs. Pass-through Entity – N/A Finding Type – Material weakness in internal control over compliance Repeat Finding – No Criteria – Per 2 CFR § 200.303, the non-Federal entity must 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). Condition – During our testing for Activities Allowed - Allowable Cost-Cost Principles, it was noted the client could not provide evidence of approval to charge the grant for 13 out of 42 expenditures selected for testing. Identification of How Questioned Costs Were Computed – N/A Cause/Effect – Management could not provide the evidence of approval for the data requested due to changes in personnel who were responsible for monitoring and managing the records for the federal program compliance requirement. Recommendation – We recommend management monitor the Federal program compliance requirements on a regular basis. In addition, we recommend that management review its procedures and controls in place to ensure that all disbursements are reviewed and approved and include proper evidence of the review and approval. View of Responsible Officials and Corrective Action Plan –There was turnover in the finance department, and its filing systems were not consistently followed by accountants from contracted staffing agencies. It should be noted that both documentation for expenditures for personnel and non-personnel costs were examined for propriety and allowability by the program director and board treasurer as check signers, prior to disbursement of federal funds.

Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 93.600, Head Start Federal Award Identification Number and Year: 05HP000378-05-01 Pass-through Entity – N/A Finding Type – Significant deficiency in internal control over compliance and noncompliance with reporting requirement filing deadline Repeat Finding – No Criteria – Per 2 CFR § 200.303, the non-Federal entity must 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). Condition – During our testing for Reporting compliance, it was noted the client failed to submit the semi-annual financial report for the period ended 02/29/2024 within the required time frame. Identification of How Questioned Costs Were Computed – N/A Questioned Costs – None Cause/Effect – Management noted that the accounting staff were not completing necessary accounting tasks in a timely manner and, therefore required reports were not submitted on time. Recommendation – We recommend management increase awareness of federal program compliance requirements and monitor compliance with the requirements on regular basis. In addition, we recommend that management review its procedures and controls in place to ensure that reports are completed and submitted by the required due dates. View of Responsible Officials and Corrective Action Plan –The Agency filed both semiannual and annual financial reports for three grants during the fiscal year on a timely basis. The one semi-annual report was inadvertently filed late. However, upon notice by the Payment Management System of it being overdue, it was immediately filed. The Agency will prepare a checklist of required federal reports by the finance department, which will be monitored by the Program Director.

Finding 2024-003 U.S. Department of Housing and Urban Development (HUD) Assistance Listing Number 14.218 – CDBG - Entitlement Grants Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, The non-federal entity must: (a) Establish and maintain effective internal controls 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 In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition and Context: For the 3 out of 3 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets do not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report

Finding 2024-008 U.S. Department of Health and Human Services Assistance Listing Number 93.224, 93.527 – Health Center Program Cluster Significant Deficiency and Noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Payroll) Repeat Finding: No Criteria: In accordance with 2 CFR §200.303, 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 In accordance with 2 CFR 200.430: (i) Standards for Documentation of Personnel Expenses (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass both federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (v) Comply with the established accounting policies and practices of the non-federal entity; and (vi) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition and Context: For the 4 out of 4 employees selected for testing, the timesheet does not support the allocation of work performed to be funded by the federal program. Cause: Timesheets does not report hours by program, so payroll expenses are not allocated to the federal programs based off actual time spent on the grant program. Effect or Potential Effect: Failure to allocate employee pay in accordance with federal requirements could result in a loss of funding. Unallowed costs could be charged to the grant. Section III - Federal Award Findings and Questioned Costs (continued) Finding 2024-008 (continued) Questioned Costs: Unknown. Recommendation: The department should maintain support and rationale for all allocations of payroll costs for employees charged to federal awards. Additionally, employees should earmark their timesheets with the number of hours worked on each program. Views of Responsible Officials: Management agrees with the finding. Refer to the Corrective Action Plan Section of this report.

Finding Reference: 2024-004 – Other finding – SEFA Preparation Federal Program Information Federal Agencies: Department of Treasury Awards: Assistance Listing 21.027 – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Periods: July 1, 2023 – December 31, 2026 Description: Preparation of Schedule of Expenditures of Federal Awards Criteria The Uniform Guidance 2 CFR section 200.303 states, “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).” The Uniform Guidance 2 CFR section 200.510 states, “(b) Schedule of expenditures of Federal awards. The auditee must also prepare the Schedule for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.” Condition The Corporation did not have appropriately designed internal controls in place to determine the correct amount of federal expenditures to be included on the Schedule. The Corporation omitted the expenditures related to the Assistance Listing Number 21.027 – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds as well as expenditures related to seven other assistance listing numbers. Cause The Corporation did not design internal controls to completely and accurately report expenditures within the Schedule. Effect or potential effect The Schedule prepared by the Corporation was misstated but was subsequently corrected. A misstated Schedule could result in the improper selection of federal award major programs or an incorrect percentage of coverage being calculated resulting in a restatement of a previously issued Uniform Guidance report. Questioned costs None. Identification of a repeat finding This is a repeat finding of Finding 2023-002. Context Expenditures for Assistance Listing 21.027 of approximately $339,000 were excluded from the Schedule. In addition, expenditures totaling approximately $261,000 for seven other assistance listing numbers were also excluded from the Schedule. Recommendation The Corporation should update its policies and procedures and internal controls to ensure accurate reporting of the Schedule as required by the Uniform Guidance. View of responsible officials There is no disagreement with the audit finding.

Finding Reference: 2024-006 – I. Procurement, Suspension and Debarment Federal Program Information Federal Agencies: Department of Treasury Awards: Assistance Listing 21.027 – COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award Periods: July 1, 2023 – December 31, 2026 Description: Incomplete Federal Requirements within Procurement Policies Criteria In accordance with Title 2 U.S. Code of Federal Regulations, Part 200.303, Internal controls, “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).” Part 200.320 Methods of procurement to be followed states the following: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319” regarding the methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. Condition As part of our testing over the operating effectiveness of internal controls over the Procurement, Suspension and Debarment assertion for our major programs, we noted that the Corporation did not have a procurement policy that conforms to all applicable standards contained in the Uniform Guidance, when purchasing goods or services with the federal funds. Cause The Corporation did not comply and maintain a procurement policy that conforms to the provisions required by the Uniform Guidance upon receiving such federal funds related to their federal programs. Effect or potential effect Purchasing of goods and/or servicing with the major federal programs may not be in compliance with the Uniform Guidance. Questioned costs None. Identification of a repeat finding This is a repeat finding of Finding 2023-001. Context Management has not established a procurement policy in line with the applicable standards contained in the Uniform Guidance based on review of the existing policy and discussions with management, however, no other instances of noncompliance with procurement standards identified in 2 CFR part 200 were noted as the amount of purchases exceeding the micro-purchase threshold was not direct and material to this program and therefore no further testing over procurement was performed. Recommendation The Corporation should update its procurement policy to include the provisions required by the Uniform Guidance for purchasing goods and/or services with federal funds. View of responsible officials There is no disagreement with the audit finding.

Finding No. 2024-006 – Purchases and disbursement cycle Federal Program ALN 93.498 Provider Relief Fund - CARES Act Name of Federal Agency U.S. Department of Health and Human Services Category Non-compliance / Material Weakness in internal controls over compliance Compliance Requirement Activities Allowed/Cost Principl Criteria The Purchasing Procedures Manual or “Reglamento de compras” of the Corporation, in its articles 14 “Inicio de las gestiones de compra” and 15 “Subastas informales”, establishes the parameters and process to begin a purchase, that includes the issuance of a purchase requisition as well as of the requirement of a quotation for determined purchases. In addition, 2 CFR §200.302 – Financial Management, states that management 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. Also, 2 CFR §200.334 – Retention Requirements for Records, states that the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. Records to be retained include but are not limited to, financial records, supporting documentation, and statistical records. Finally, 2 CFR §200.303 – Internal Controls state that the recipient and subrecipient must 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 During testing of internal control procedures over purchases and cash disbursements of Provider Relief Funds, we examined processed invoices and payments that lacked properly approved purchase requisitions and quotations. The documents could not be located by management and thus, were not made available for examination. Cause This deficiency is the result of lack of knowledge from the employees and overall absence of implementation, monitoring and proper compliance with internal controls of the Corporation’s procedures. Effect The Corporation did not comply with its purchasing procedures manual. This condition increases the risk of improper or fraudulent purchases, the selection of higher-cost vendors, and other procurement irregularities. Because these transactions were funded with federal awards, this condition also increases the risk of noncompliance with federal requirements and the potential for questioned costs. Questioned cost None. Context During the audit of substantive tests of compliance related to Provider Relief Fund disbursements, from a sample of twenty-five (25) disbursements, we examined twenty-five (25) invoices, in which, six (6) of them lacked an approved requisition, and proper documentation of quotations. Identification of a repeat finding A similar condition was found in the previous audit on Finding 2023-003 which was an Internal Control over Financial Reporting finding. Recommendation We recommend that the Corporation strengthen its internal controls over the purchasing and disbursement processes to ensure compliance with its established policies and procedures. Specifically, all supporting documentation for purchases and cash disbursements should be reviewed for completeness, accuracy, and compliance with procurement requirements prior to the approval and signing of checks. Any exceptions or unusual items should be resolved and documented before payment is processed. In addition, management should implement supervisory review and monitoring procedures to ensure that procurement activities are performed in accordance with the Corporation’s policies and applicable federal requirements. All supporting documentation should be properly maintained to support transactions and facilitate audit and internal review purposes. Views of responsible officials and planned corrective actions The Corporation’s management and responsible officers agree with this finding. Please refer to the corrective action plan section for the Corporation’s response on pages 85 to 90.

MATERIAL WEAKNESSES 2024-002 - Allowable Costs/Cost Principles Federal Program Information: ALN - 10.760 - Water and Waste Disposal Systems for Rural Communities ALN - 66.202 - Congressionally Mandated Projects Criteria: The following CFR(s) apply to this finding: 2 CRF 200.303 Condition: During audit procedures, it was identified that the Town does not have invoices and board warrants approved before issuing checks. Cause: The Town does not have the necessary internal controls over compliance. Effect: Expenses may not be properly allocated to the grant; this could result in unallowable expenses being charged and subsequently improperly reimbursed by federal funds Identification of Questioned Costs: None identified. Context: The sample selection consisted of 11 out of 34 transactions. Of the 11 samples, 2 did not have consistent documented approvals from the Town Manager to ensure that only allowable costs were being charged to the program and 4 out of 11 were lacking Select Board approvals. Repeat Finding: This is a repeat finding of 2022-003 and 2023-003 Recommendation: It is recommended that the Town develop and implement policies and procedures for documented approval process to ensure that only allowable costs are charged to the program. Views of Responsible Officials and Corrective Action Plan: Client agrees with finding and a version of their response can be found in the Corrective Action Plan. Please see the Corrective Action Plan issued by the Town of Livermore Falls.

Finding 2024-002: Internal Controls Criteria and Condition: The Urban League should follow more closely its written control procedures, and the controls mandated under the Uniform Guidance. During testing of internal controls, we noted the Urban League does not consistently complete or maintain documentation demonstrating that required controls related to reviewing check runs, proper check signatures, invoice approvals and proper channels for purchase orders. 2 CFR 200.303 requires nonfederal entities to establish and maintain effective internal controls over federal awards, including documentation that key control activities-such as review and approval of disbursements-are performed. - 32 - Cause: During the year ended June 30, 2024, the Urban League went through substantial changes within their accounting department including but not limited to a complete change in oversight and leadership. During this time there was insufficient controls in place and a lack of follow through on the controls that existed. Questioned Costs: None – No instances of unallowable costs were identified; however the absence of documentation a strong control environment represents a control deficiency that could lead to noncompliance. Recommendations: We recommend that management implement new procedures and improve upon accounting leadership and training to ensure that in the future accounting records are complete, accurate and timely.

State Agency: Illinois Governor’s Office of Management and Budget (GOMB) Federal Agency: U.S. Department of Agriculture (USDA), U.S. Department of Justice (DOJ), U.S. Department of Labor (DOL), U.S. Department of Transportation (DOT), U.S. Department of the Treasury (TREAS), U.S. Department of Education (USDE), U.S. Department of Health and Human Services (USDHHS), U.S. Department of Homeland Security (USDHS) Program Name: WIC Special Supplemental Nutrition Program for Women, Infants and Children, Cild and Adult Care Food Program (CACFP), Crime Victims Assistance Program (CVA), WIOA Cluster (WIOA), Highway Planning and Construction (Highway Planning), Coronavirus State and Local Fiscal Recovery Funds (SLFRF),Title I Grants to Local Educational Agencies (Title I), Special Education Cluster (IDEA), Twenty-First Century Community Learning Centers (Twenty-First Century), Supporting Effective Instruction State Grants (SEISG) Education Stabilization Fund (ESF), Aging Cluster, Epidemiology and Laboratory Capacity for Infectious Diseases (ELC), Temporary Assistance for Needy Families (TANF), Child Support Services, Low-Income Home Energy Assistance (LIHEAP), Child Care and Development Fund (CCDF) Cluster, Social Services Block Grant (SSBG), Block Grants for Prevention and Treatment of Substance Abuse (SAPT), Homeland Security Grant Program (Homeland Security) ALN and Program Expenditures: 10.557 ($181,526,312), 10.558 ($170,354,298), 16.575 ($53,095,634), 17.258/17.259/17.278 ($142,310,788), 20.205 ($2,192,857,212), 21.027 ($230,448,761), 84.010A ($696,900,040), 84.027/84.173 ($639,950,722), 84.287C ($61,131,992), 84.367A ($79,837,486), 84.425 ($2,176,294,000), 93.044/93.045/93.053 ($68,210,944), 93.323 ($94,269,102), 93.558 ($583,126,272), 93.563 ($135,029,923), 93.568 ($205,171,791), 93.575/93.596 ($747,612,292), 93.667 ($55,634,435), 93.959 ($114,897,412), 97.067 ($78,892,342) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-002: Inadequate Monitoring of Subrecipient Single Audit Reviews Condition Found: The State of Illinois did not establish adequate controls to monitor the completion and documentation of the review of single audit reports for its subrecipients of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), Child and Adult Care Food Program (CACFP), Crime Victims Assistance Program (CVA), WIOA Cluster (WIOA), Highway and Planning Construction (Highway), Coronavirus State and Local Fiscal Recovery Funds (SLFRF), Title I Grants to Local Education Agencies (Title I), Special Education Cluster (IDEA), Twenty-First Century Community Learning Centers (Twenty-First Century), Supporting Effective Instruction State Grants (SEISG), Education Stabilization Funds (ESF), Aging Cluster (Aging), Epidemiology and Laboratory Capacity for Infectious Diseases (ELC), Temporary Assistance for Needy Families (TANF), Child Support Services (CSS), Low-Income Home Energy Assistance (LIHEAP), Child Care and Development Fund (CCDF) Cluster, Social Services Block Grant (SSBG), Block Grants for Prevention and Treatment of Substance Abuse (SAPT), and Homeland Security Grant (Homeland Security) programs in the State's Grant Accountability and Transparency Act (GATA) Audit Report Review Management System (ARRMS). The State of Illinois established the Grant Accountability Transparency Unit (GATU) to implement the provisions of GATA on a centralized basis. GATU has established standardized reporting requirements for subrecipients of the various Federal programs administered by the State through its various departments. Subrecipients of the State are required to certify whether they expended more than $750,000 in federal awards during the fiscal year and submit their single audit reporting packages to the Federal Audit Clearinghouse (if required). GATU is then responsible for obtaining the single audit reporting package, verifying the report meets the single audit requirements, and assigning, to the applicable state agency, any findings attributable to amounts passed through to the subrecipient(s) by the State and working with program personnel to issue management decisions on findings. The State utilizes a contractor to perform the centralized functions of obtaining the single audit report, verifying the report meets the requirements, and assigning findings to the applicable State agency. During our testing of subrecipient single audit desk review files for our 2024 major programs, we noted instances where single audit desk reviews were still in process and had not been finalized within GATA ARRMS as of the date of our testing (July 10, 2025). Upon further review of data contained within GATA ARRMS, we identified 637 single audit reviews were identified as incomplete in GATA ARRMS for grantees who: (1) reported expenditures under fiscal year 2024 major programs, (2) had an audit report with a Federal Audit Clearinghouse acceptance date between January 2, 2023 and January 2, 2024 (requiring the report to be reviewed during fiscal year 2024) and (3) were not sanctioned (placed on the Illinois Stop Payment List) by the State for noncompliance with reporting requirements. These 637 reviews were in varying stages of completion with the majority (587 audits) pending documentation supporting the issuance of a final completion letter by the cognizant agency. The remaining 50 audits (7.8%) were pending receipt of documentation, pending a review, or had another error requiring follow-up. These 637 audits included 295 audits (46.3%) with one or more findings potentially requiring a management decision to be issued. We noted the cognizant agencies for the 637 incomplete single audit reviews in GATA ARRMS were as follows: "See Table in the Audit Report" The 637 incomplete single audit reviews in GATA ARRMS pertained to subrecipients of the following major programs: "See Table in the Audit Report" While in many instances there was evidence the State agencies had completed the necessary procedures outside of GATA ARRMS, the purpose of GATA ARRMS is to reduce the duplication of effort across State agencies and to provide a single submission point for the State’s subrecipients. The lack of monitoring controls around this centralized process may result in noncompliance with subrecipient single audit desk review requirements. The State’s subrecipient expenditures under the federal programs for the year ended June 30, 2024 were as follows: "See Table in the Audit Report" Criteria or Requirement: According to 2 CFR 200.332(d), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure the federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. Further, 2 CFR 200.332(d)(3) and 2 CFR 200.521 state that a pass-through entity is required to issue a management decision on audit findings within six months of acceptance of the audit report by the FAC and ensure that the subrecipient takes timely and appropriate corrective action on all audit findings. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include implementing procedures to monitor whether single audit reports are reviewed, management decision letters are issued, and single audit desk review files are closed out in GATA ARRMS in a timely manner. Cause: In discussing these conditions with GOMB officials, management stated that the incompleteness of the State’s audit reviews in GATA ARRMS was due to oversight. Possible Asserted Effect: Failure to complete and document reviews of subrecipient single audit reports in GATA ARRMS in a timely manner may result in noncompliance with the State’s obligation as a pass-through entity to appropriately monitor its subrecipients. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2024-002. (Finding Code 2024-002, 2023-002) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend GOMB establish procedures to monitor the completion and documentation of single audit report reviews in GATA ARRMS to ensure the State complies with its obligation as a pass-through entity. Views of GOMB Officials: GOMB agrees with the finding.

State Agency: Illinois Governor’s Office of Management and Budget (GOMB) Federal Agency: U.S. Department of the Treasury (TREAS) Program Name: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN and Program Expenditures: 21.027 ($230,448,761) Award Numbers: Various - see table of award numbers Federal Award Year: Various - see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-003: Failure to Accurately Prepare Performance Reports for the COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Program Condition Found: GOMB did not prepare accurate federal project and expenditure reports (Paperwork Reduction Act (PRA) 1505-0271) for the COVID-19 – Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) program. The State was required to prepare quarterly federal project and expenditure reports (PRA 1505-0271) for the CSLFRF program. To assist the State agencies, GOMB prepared these reports. According to the U.S. Treasury’s SLFRF Compliance and Reporting Guidance, expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. During our testing of two quarterly PRA 1505-0271 reports submitted during State fiscal year ended June 30, 2024, we noted that GOMB did not consistently apply cash or accrual basis for reporting and noted the following errors on the cash basis: "See Table in the Audit Report" Supervisory review procedures of the PRA 1505-0271 reports have not been designed to operate at an appropriate level of precision to ensure the financial reports are accurately prepared. Criteria or Requirement: 2 CFR 200.328 requires grantees to submit PRA 1505-0271 reports with the frequency required by the terms and conditions of the federal award. The State and Local Fiscal Recovery Funds: Project and Expenditure Report User Guide requires grantees to submit quarterly reports with current financial information, including current period and cumulative obligations and expenditures. In addition, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure financial information reported in required financial reports is complete and accurate prior to submission. Cause: In discussing these conditions with GOMB officials, management stated the reporting errors were a result of inaccurate information submitted to GOMB by other State agencies which were not detected. Possible Asserted Effect: Failure to prepare complete and accurate financial reports prevents the U.S. Treasury from effectively monitoring the CSLFRF program. Repeat Finding: A similar finding was reported in the prior year audit as finding code 2023-003. (Finding Code 2024-003, 2023-003) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend GOMB implement more precise review procedures to ensure the reports submitted to the U.S. Treasury are complete, accurate, and agree or reconcile to its financial records. Views of GOMB Officials: GOMB agrees with the recommendation. GOMB will continue to work with the State agencies to produce accurate financial reporting for the CSLFRF program.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of the Treasury (TREAS) Program Name: COVID-19 – Coronavirus State and Local Fiscal Recovery Funds ALN and Program Expenditures: 21.027 ($230,448,761) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Subrecipient Monitoring Finding 2024-004: Inadequate Monitoring of Subrecipients of the CSLFRF Program Condition Found: Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) program during the year ended June 30, 2024. Multiple State agencies are involved in awarding, expending, and administering funding under the CSLFRF program in Illinois. As a result, each State agency is responsible for monitoring the subrecipients they award CSLFRF funding. As a pass-through entity of the CLSFRF program, IDHS was responsible for: • Identifying the awards and applicable requirements, • Evaluating each subrecipient’s risks of noncompliance for purposes of determining the appropriate monitoring procedures related to the subaward, • Monitoring the activities of each subrecipient as necessary to ensure the subaward is used for authorized purposes, the subrecipients comply with the terms and conditions of the subawards, and the subrecipients achieve performance goals, and • Issuing a management decision for audit findings pertaining to the federal award provided to each subrecipient, if applicable. IDHS requires CSLFRF subrecipients to provide periodic performance reports which contain performance measures and program accomplishments to permit IDHS to monitor CSLFRF program results. During our testing of documentation provided by IDHS for 28 CSLFRF grantees (with expenditures of $23,703,366), IDHS could not provide evidence periodic performance reports were obtained or reviewed during the audit period by IDHS for 26 of the subrecipients tested. Because the CSLFRF program funds a variety of State programs operated by various program areas and bureaus within IDHS, we noted a variety of report templates were received and methods were used to document reviews. Accordingly, we noted the date certain periodic performance reports were received and reviewed by IDHS could not be validated as they were documented electronically in a spreadsheet which can be modified. Amounts passed through by IDHS to CSLFRF subrecipients totaled $28,591,405 during the year ended June 30, 2024. Criteria or Requirement: According to 2 CFR 200.332(c), a pass-through entity must evaluate each subrecipient's risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. According to 2 CFR 200.332(e), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. 2 CFR 200.332(e)(3) requires pass-through entities to issue management decisions for applicable audit findings pertaining to the federal awards provided to the subrecipient and 2 CFR 200.332(e)(4) requires pass through entities to resolve audit findings through corrective action plans (CAP). In addition, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include performing monitoring procedures in accordance with Uniform Guidance and program requirements. Cause: In discussing these conditions with IDHS officials, management stated IDHS was unable to produce all requested Periodic Performance Reports (PPR) and evidence of review due to inconsistency in applied procedures, staffing changes, and the lack of a central repository. Possible Asserted Effect: Failure to adequately monitor subrecipients may result in the subrecipient not properly administering the federal program in accordance with laws, regulations, and the grant agreement. Repeat Finding: 2024-004, 2023-018) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS implement subrecipient monitoring procedures in accordance with federal regulations. Views of IDHS Officials: The Department accepts the recommendation. IDHS recognizes the importance of performance monitoring and will implement additional controls to ensure evidence is maintained to support that PPRs are obtained from subrecipients and are appropriately reviewed by IDHS.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Agriculture (USDA) Program Name: Food Distribution Cluster ALN and Program Expenditures: 10.565/10.568/10.569 ($67,875,839) Award Numbers: Various - see table of award numbers Federal Award Year: Various - see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Special Tests and Provisions – Accountability for USDA Foods Finding 2024-005: Inadequate Review of Recipient Agencies of the Food Distribution Cluster Program Condition Found: IDHS did not adequately review the recipient agencies of the Food Distribution Cluster (FDC) program. IDHS has entered into agreements with seven subrecipients (recipient agencies) that operate the FDC program locally across the State of Illinois. The USDA purchases and provides food and administrative funds to IDHS, which in turn provides the USDA foods and a portion of the administrative funds to the recipient agencies. IDHS has implemented procedures where FDC program staff perform annual reviews of the storage facilities operated by the recipient agencies. These annual reviews include inspecting the annual inventory records of USDA foods maintained by the recipient agency. During State fiscal year 2024, we noted IDHS did not perform annual reviews for five recipient agencies (with food commodities of $61,824,064), including the two largest recipients of USDA food commodities in the State (with food commodities of $40,050,222). Additionally, during our testing of the annual reviews for two recipient agencies (with food commodity expenditures of $5,786,867), we noted IDHS’ review procedures did not include a reconciliation of the annual inventory count performed by the recipient agency to USDA food records as required by program regulations. IDHS passed through $67,620,931 to the seven recipient agencies during the year ended June 30, 2024. Criteria or Requirement: In accordance with 7 CFR 247.28(b), a physical inventory of all USDA Foods must be conducted annually at each storage and distribution site where USDA Foods are stored. Results of the physical inventory must be reconciled with inventory records and maintained on file by the State or local agency. In addition, 7 CFR 250.12 states on an annual basis the distributing agency must conduct a physical review of donated food inventories at all storage facilities used by the distributing agency (or by a subdistributing agency), and must reconcile physical and book inventories of donated foods.2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include procedures to reconcile recipient agency food inventory records to USDA food records and ensure all recipient agencies are reviewed annually. Cause: In discussing these conditions with IDHS officials, management stated that IDHS was unaware of an annual requirement to obtain year-end inventory counts performed by recipient agencies and to reconcile the counts to USDA food records. IDHS was obtaining and reconciling inventory records during the on-site Quality Assurance Reviews. Possible Asserted Effect: Failure to obtain and reconcile physical inventory records for all recipient agencies could result in food commodities not being used in accordance with program requirements and results in noncompliance with federal program requirements. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-005) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS update procedures and controls to ensure the annual review of recipient agencies includes reconciling the inventory records of the recipient agency to USDA food records or establish a separate process to obtain and reconcile physical inventory records. Views of IDHS Officials: The Department accepts the recommendation. IDHS employees responsible for The Emergency Food Assistance Program (TEFAP) will update the current procedure manual to require annual inventory counts and reconciliation of inventory records be submitted for all recipient agencies at the end of each state fiscal year. IDHS will implement procedures to ensure that the records obtained from recipient agencies are reconciled to USDA Food records annually.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost Principles Finding 2024-006: Inadequate Process for Monitoring Interagency Program Expenditures Condition Found: IDHS does not have an adequate process for monitoring interagency expenditures claimed under or used to meet maintenance of effort (MOE) requirements of the Temporary Assistance for Needy Families (TANF) and CCDF Cluster (CCDF) programs. Federal and State expenditures under the TANF and CCDF Cluster programs are comprised of programs operated by various State agencies. As the State agency responsible for administering these programs, IDHS has executed interagency agreements with each of the State agencies expending federal and/or State program funds. The interagency agreements require periodic reporting of a summary of the agency’s “allowable” expenditures to IDHS for preparation of the financial reports required for each program. As the State agencies expending program funds do not determine under which program IDHS reports their expenditures, IDHS is responsible for establishing procedures to ensure the expenditures reported by the expending State agencies meet the specific requirements applicable to the federal program. During the year ended June 30, 2024, IDHS reported expenditures from other agencies that were claimed for reimbursement or used to meet MOE requirements as follows: "See Table in the Audit Report" IDHS’ procedures to monitor other State agencies expending program funds reported by IDHS include the following: • Interagency agreements were reviewed and updated (where necessary) to include all State programs claimed under or used to meet MOE requirements of the TANF and CCDF Cluster programs in its interagency agreement. • Program questionnaires were updated where necessary and distributed to each of the State agencies to assist in documenting the nature of the expenditures provided to IDHS and the internal controls established to ensure compliance with the applicable federal regulations. • Quarterly certification reports were collected from each of the State agencies to support amounts reported in the federal reports required for each federal program. • Expenditure details were obtained from each of the State agencies and were reconciled to the quarterly certifications. However, during our test work over the documentation of the monitoring procedures discussed above, we noted the following deficiencies: • Program questionnaires describing internal control procedures for the CCDF program were not obtained by IDHS from the Illinois Student Assistance Commission, Illinois Board of Higher Education, and Illinois Community College Board. Rather, a more limited questionnaire was obtained in the State's Grant Accountability and Transparency Act (GATA) Audit Report Review Management System (ARRMS) which is used to complete risk assessments procedures for the State’s subrecipients. • Quarterly certification reports were not prepared during the period for the CCDF program by the Illinois Student Assistance Commission, Illinois Board of Higher Education, and Illinois Community College Board. IDHS did not perform a detailed review of costs claimed from expenditures reported by any of the other State agencies to ensure they met the specific program requirements. The other State agencies do not necessarily know which federal program or maintenance of effort requirement the costs they are providing to IDHS will be claimed or used and are not able to assess whether the costs are allowable. Further, IDHS did not assess whether the expenditures reported by other State agencies were paid during State fiscal year 2024 to ensure the amounts reported to the Illinois Office of Comptroller (IOC) and used to prepare the schedule of expenditures of federal awards (SEFA) were cash basis expenditures. • During our detailed testing over CCDF funds expended by the Illinois Student Assistance Commission and Illinois Community College Board, we noted the amounts passed through to ISAC that were initially reported on the final expenditure questionnaire received for audit did not reconcile to the amount of expenditures on a cash basis for SEFA reporting. Further, we noted the amounts were reported as subrecipient expenditures, however, ultimately were reclassified as beneficiary payments, resulting in a SEFA error. Criteria or Requirement: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statement which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Among other things required by 2 CFR 200.510(b), the SEFA must include the total amount provided to subrecipients from each Federal program. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately reported on the SEFA and to other State agencies, where applicable. Cause: In discussing these conditions with IDHS officials, management stated the current monitoring process was not adequate to ensure interagency expenditures and MOE of federal monies from other State agencies met applicable program regulations as they relate to TANF and CCDF. Possible Asserted Effect: Failure to properly monitor interagency expenditures may result in claiming of expenditures that are inconsistent with the objectives of the federal program and federal funds being expended for unallowable purposes. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-017. (Finding Code 2024-006, 2023-017) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its current process for identifying and reporting interagency expenditures and implement monitoring procedures to ensure that federal and state expenditures expended by other State agencies meet the applicable program regulations. Views of IDHS Officials: IDHS accepts the recommendation. IDHS will establish additional controls to ensure expenditures related to federal grants (including those made by other agencies and those made to subrecipients) are accurately reported. IDHS will implement additional monitoring procedures over interagency expenditures to include sampling and review of supporting documentation to ensure the expenditures meet federal program requirements.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care Development Fund (CCDF) Cluster, Social Services Block Grant, Block Grants for Prevention and Treatment of Substance Abuse ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292), 93.667 ($55,634,435), 93.959 ($114,897,412) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Subrecipient Monitoring Finding 2024-007: Failure to Follow Established Program Subrecipient Monitoring Procedures Condition Found: IDHS did not follow its established program monitoring policies and procedures for subrecipients of the Temporary Assistance for Needy Families (TANF), Child Care Development Fund Cluster (CCDF), Social Services Block Grant (SSBG), and Block Grants for Prevention and Treatment of Substance Abuse (SAPT) programs. IDHS has implemented procedures whereby program staff perform periodic program on-site and desk reviews of IDHS subrecipient compliance with regulations applicable to the federal programs administered by IDHS. IDHS also has implemented procedures whereby staff perform periodic on-site and desk reviews of IDHS subrecipient compliance with fiscal and administrative requirements applicable to multiple State and federal programs. Generally, these reviews are formally documented and include the issuance of a report of the review results to the subrecipient summarizing the procedures performed, results of the procedures, and any findings or observations for improvement noted. IDHS’s policies require the subrecipient to respond to each finding by providing a written corrective action plan. Additionally, IDHS program staff perform reviews of expenditure reports submitted by subrecipients. IDHS subrecipient monitoring procedures are subject to the review and approval of a supervisor. During our test work over program on-site review procedures performed for 82 subrecipients of the TANF, CCDF, SSBG, and SAPT programs, we noted IDHS did not follow its established program monitoring procedures as follows: We tested the program on-site review procedures and fiscal administrative review procedures performed by IDHS during the year ended June 30, 2024 for a sample of subrecipients of the TANF, CCDF, SSBG, and SAPT programs comprised of the following: "See Table in the Audit Report" We noted the following exceptions in our testing of program on-site reviews performed during the year ended June 30, 2024: ● IDHS did not perform on-site monitoring reviews of subrecipients in fiscal year 2024 in accordance with IDHS’ planned monitoring schedule and/or could not provide support for the review. Specifically, we noted the following exceptions: "See Table in the Audit Report" ● IDHS did not provide timely notification (within 60 days) of the results of the programmatic on-site reviews. We noted the following exceptions: "See Table in the Audit Report" ● IDHS did not complete their quality review on a timely basis (within 60 days). We noted the following exceptions: "See Table in the Audit Report" ● IDHS did not receive a corrective action plan from the subrecipient after findings were identified during the review. We noted the following exceptions: "See Table in the Audit Report" During our testing of 31 fiscal and administrative reviews performed for subrecipients of all IDHS’ federal and State programs, we noted IDHS did not provide timely notification (within 180 days) of the results of the fiscal and administrative reviews. Specifically, we noted the delays in the reporting of results to two subrecipients tested ranged from 32 days to 50 days. IDHS could not provide documentation evidencing communication or follow up being performed for these subrecipients during the extended review period. In addition, we noted the SAPT program requires subrecipients to submit periodic reports to allow IDHS to monitor certain programmatic performance metrics. These reports are reviewed quarterly by IDHS program personnel. Any subrecipients who meet less than 80% of the performance metrics reported are also required to submit a corrective action plan to IDHS. During our testing, we noted IDHS was unable to provide documentation evidencing monitoring of the quarterly program reports for our sample of 25 subrecipients (with expenditures of $52,116,654 during the year ended June 30, 2024). Further, IDHS did not have adequate policies or procedures to ensure fiscal and administrative reviews were completed timely to detect potential non-compliance. Criteria or Requirement: According to 2 CFR 200.332(d), a pass-through entity is required to monitor the activities of subrecipients as necessary to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. According to 2 CFR 200.332(b), a pass-through entity must evaluate each subrecipient’s risk of noncompliance for purposes of determining the appropriate subrecipient monitoring related to the subaward. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include ensuring on-site program procedures and expenditure reviews are performed in a timely manner and adequate documentation is maintained. Cause: In discussing these conditions with IDHS officials, management stated that the deficiencies noted are due to a combination of factors including operational constraints due to staffing, oversight, system transitions, and a need to strengthen governance over timeliness, monitoring and documentation controls. Possible Asserted Effect: Failure to adequately perform and document program on-site monitoring reviews of subrecipients and notify subrecipients of findings in a timely manner may result in subrecipients not properly administering the Federal programs in accordance with laws, regulations, and the grant agreement. Failure to properly review subrecipient expenditures may result in inaccurate payments or unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-010. (Finding Code 2024-007, 2023-010, 2022-008, 2021-017, 2020-015, 2019-013, 2018-012, 2017-013, 2016-012, 2015-011, 2014-008, 2013-009, 12-07, 11-09) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS ensure programmatic on-site and expenditure report reviews are performed and documented for subrecipients in accordance with established policies and procedures. In addition, we recommend IDHS review its process for reporting and following up on program findings relative to subrecipient on-site reviews to ensure timely corrective action is taken. Views of IDHS Officials: The Department accepts the recommendation. IDHS will work to ensure programmatic on-site and expenditure report reviews are completed and documented in accordance with policies and procedures and review its process for reporting and follow up on program findings resulting from on-site reviews. IDHS will continue to work to fill vacancies, administer training programs, increase oversight, develop automated processes, and revise procedures to improve internal controls over these functions.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Social Services Block Grant ALN and Program Expenditures: 93.667 ($55,634,435) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-008: Inadequate Procedures to Determine Accuracy of the Post Expenditure Report Condition Found: IDHS failed to provide supporting documentation for the post-expenditure report including a key line item, the number of eligible individuals who received services paid for in part or in whole with federal funds under the Social Services Block Grant (Title XX) program. During our testing of the 2023 post-expenditure report, we noted the total individuals served was reported as 216,991. This line item represents services provided by various departments and third parties. In reviewing the summary schedule used to support these line items, we noted supporting documentation was not available to identify the individuals served for certain line items or did not match the individuals reported on the summary schedule. As a result, testing a sample of individuals to verify the individual was eligible for the service received could not be performed. We noted the following exceptions in our testing of the 2023 post-expenditure report: "See Table in the Audit Report" Internal controls have not been established to ensure required supporting documentation is maintained. Criteria or Requirement: 42 USC 1397e requires states to submit to the federal administering agency an annual post-expenditure report. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include retaining support for the post-expenditure report and a formalized methodology to ensure the reporting is consistent and accurate. Cause: In discussing these conditions with IDHS officials, management stated uniform procedures were still being implemented to track client listings and retain documentation supporting the annual report. Possible Asserted Effect: Failure to completely and accurately report SSBG individuals served could result in incomplete and/or inaccurate data being submitted to the federal administering agency. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-006. (Finding Code 2024-008, 2023-006) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS establish procedures to maintain documentation supporting the post-expenditure report. IDHS should also establish supervisory review procedures to ensure the report is complete, accurate, and properly supported. Views of IDHS Officials: The Department accepts the recommendation. IDHS will work to establish uniform procedures to ensure the maintenance of documentation supporting the post-expenditure report. Additionally, IDHS will establish a supervisory review process to ensure the report is complete, accurate, and properly supported.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Agriculture (USDA) U.S. Department of Health and Human Services (USDHHS) Program Name: SNAP Cluster, Temporary Assistance for Needy Families, Children’s Health Insurance Program, Medicaid Cluster ALN and Program Expenditures: 10.551/10.561 ($4,687,993,367), 93.558 ($583,126,272), 93.767 ($510,412,808), 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Eligibility, Special Tests and Provisions – Penalty for Refusal to Work, Special Tests and Provisions – ADP System for SNAP Finding 2024-009: Missing Documentation in Beneficiary Files Condition Found: IDHS could not locate case file documentation supporting certain eligibility and special test requirements for beneficiaries of the Temporary Assistance for Needy Families (TANF) program and Children’s Health Insurance Program (CHIP). During our test work, we selected 50 TANF and 80 CHIP eligibility files to review for compliance with eligibility requirements and for the allowability of the related benefits provided. We also selected 40 Penalty for Refusal to Work (Refusal to Work) beneficiaries to review for compliance with the respective special test and provision requirements. We noted the following exceptions: • In one of 50 TANF cases (with a payment sampled of $255), IDHS could not provide the completed and signed redetermination by the beneficiary covering the payment date. Total TANF cash assistance paid to this beneficiary during the year ended June 30, 2024 totaled $590. • In six of 40 TANF Refusal to Work special test cases, IDHS could not provide evidence that a Responsibility Service Plan (RSP) was obtained and signed by the beneficiary. TANF cash assistance paid to these beneficiaries during the year ended June 30, 2024 totaled $30,309. • In one of 80 CHIP cases (with a sampled medical expenditure of $7,483), the case was classified as eligible due to the beneficiary having a disability; however, the case record did not include documentation supporting the determination of a disability. Total payments made on behalf of this beneficiary under the CHIP program were $14,229 during the year ended June 30, 2024. Details of the beneficiary payments selected in our samples for the TANF program are as follows: "See Table in the Audit Report" We also noted IDHS does not have adequate resources to perform and document eligibility determinations. Additionally, IDHS has not established appropriate monitoring procedures to ensure eligibility determinations are properly documented in accordance with program requirements. Because the State uses a single application and eligibility determination process for the Supplemental Nutrition Assistance Program Cluster (SNAP), TANF, Medicaid Cluster, and State Children’s Health Insurance Program (CHIP) programs, the TANF and CHIP eligibility compliance exceptions and the inadequate internal control matters discussed above also impact the SNAP Cluster and Medicaid Cluster programs. "See Table in the Audit Report" Criteria or Requirement: According to 42 USC 602(a)(1)(B)(iii) (the State Plan for TANF), IDHS is required to determine client eligibility in accordance with eligibility requirements defined in the approved State Plans. The TANF State Plan amended December 2022, Section L Personal Responsibility, requires all adults and minor parents applying for or receiving assistance be required to sign a RSP and follow through with its provisions. The TANF State Plan also required an application to be completed to apply for assistance. For refusal to work, the State must reduce or terminate the assistance payable to the family if an individual in a family receiving assistance refuses to work, subject to any good cause or other exemptions established by the State (42 USC 609(a)(14); 45 CFR sections 261.14, 261.16, and 261.54). In accordance with 42 CFR 435.948 through 435.956 and the OMB Compliance Supplement, dated May 2024, the State is required to verify financial and nonfinancial factors of eligibility in accordance with eligibility requirements defined in the approved State Plans for the CHIP and Medicaid programs. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include maintaining adequate controls over beneficiary case files to ensure all required documentation is obtained, and appropriate sanctions applied. Cause: In discussing these conditions with IDHS officials, IDHS management stated the exceptions noted were due to completing the TANF Responsibility and Service Plans (RSP’s) by telephone. The current process is to send a manual RSP signature page and manually track it for return. Possible Asserted Effect: Failure to maintain RSPs, applications, or other eligibility documentation may result in inadequate documentation of a recipient’s eligibility and in federal funds being paid to ineligible beneficiaries. Repeat Finding: A similar finding was reported in prior year audit as finding number 2023-007. (Finding Code 2024-009, 2023-007, 2022-005, 2021-011, 2020-010, 2019-005, 2018-004, 2017-004, 2016-004, 2015-004, 2014-004, 2013-004, 12-04, 11-04, 10-06, 09-06, 08-08, 07-19, 06-16, 05-30, 04-18, 03-20, 02-26, 01-15) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its current process for collecting and maintaining TANF/CHIP eligibility support and documentation to support the appropriate TANF application of sanctions. Views of IDHS Officials: IDHS accepts the recommendation and will work to ensure support for all eligibility items is properly retained in the record.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families ALN and Program Expenditures: 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $78,162 Compliance Requirement: Eligibility Finding 2024-010: Improper TANF Beneficiary Payments Condition Found: IDHS made improper payments to beneficiaries of the Temporary Assistance for Needy Families (TANF) program. During our testing of 50 TANF program beneficiary payments (with total payments sampled of $19,049), we noted one beneficiary (with a sampled payment of $262) received supplemental payments that were improperly calculated using amounts inconsistent with information contained in the beneficiary’s case file. As a result of the calculation error, the beneficiary was not eligible to receive the monthly supplemental payment. Total supplemental payments made to this beneficiary under the TANF program totaled $2,358 during the year ended June 30, 2024. We also noted two TANF beneficiary payments sampled (totaling $581) that were improperly calculated due to a diverted income system error. Diverted income occurs in dependent eligible only TANF cases where an ineligible working adult in the household has income which is allocated to the eligible members of the household to determine the overall TANF program benefit payment. The State’s benefit system was erroneously excluding the ineligible working adult in the diverted income calculation potentially resulting in an overpayment of TANF benefits on cases with diverted income. As a result of this error, the monthly payments made to these two beneficiaries were overstated by $244. Total payments made to these two beneficiaries under the TANF program were $5,130 for the year ended June 30, 2024. In response to the error identified in our testing, IDHS identified benefit payments paid during the year ended June 30, 2024 for 1,956 beneficiaries (totaling $7,238,104) were calculated using diverted income. The system calculation error related to these benefit payments resulted in total TANF overpayments of $75,804 during the year ended June 30, 2024. The payment errors identified above had not been corrected by IDHS or refunded to USDHHS (if required) as of the date we communicated our findings to IDHS (December 22, 2025). We further noted IDHS did not establish control procedures at an adequate level of precision to ensure TANF program benefits were accurately calculated based on the beneficiary’s case file supporting documentation. Payments made to beneficiaries of the TANF cash assistance program totaled $45,021,831 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation.In accordance with the OMB Compliance Supplement, dated May 2024, IDHS is required to determine eligibility in accordance with eligibility requirements defined in the approved State Plan. The current State Plan requires payments to be made to eligible beneficiaries in accordance with payment levels established within the State Plan. Further, the State Plan requires an excluded or ineligible individual’s income to be considered in the calculation of the payment level of the TANF unit. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include establishing internal control at an appropriate level of precision to identify benefit payment errors in a timely manner. Cause: In discussing these conditions with IDHS officials, management stated the exceptions noted were due to an oversight to secure or upload supporting documentation adequately and case actions not being thoroughly reviewed. Possible Asserted Effect: Failure to properly calculate benefit payments may result in unallowable costs being charged to the TANF program. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-016. (Finding Code 2024-010, 2023-016) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its current process for calculating beneficiary payments and consider changes necessary to ensure payments are properly calculated and paid. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review its current process for calculating beneficiary payments and make changes to ensure payments are properly calculated and paid.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $1,317 (TANF Federal), $1,527 (TANF MOE), $1,174 (CCDF Federal), $372 (CCDF MOE) Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost Principles Finding 2024-011: Unallowable Costs Charged to the TANF and CCDF Cluster Programs Condition Found: IDHS could not provide documentation to support payments made on behalf of beneficiaries of the Temporary Assistance for Needy Families (TANF) and Child Care and Development Fund (CCDF) Cluster programs. The State of Illinois operates the Child Care Assistance Program (CCAP) which provides eligible families child care services at approved, licensed providers. Payments are made by IDHS directly to the child care provider on behalf of an eligible family. Providers submit billings to IDHS detailing the name of the recipient of the services and the number of days for which services were received. IDHS performs monitoring reviews of childcare providers on a rotational basis. During these monitoring reviews, IDHS reviews provider records to ensure services billed are adequately documented. During our testing of CCAP beneficiary payments claimed under the TANF program (40 payments totaling $8,555 in federal claim and $34,968 in MOE claim) and CCDF (40 payments totaling $108,666 in federal claim and $3,882 in MOE claim), we noted four TANF payments and three CCDF payments for which IDHS could not provide documentation supporting the services provided to eligible beneficiaries which are unallowable costs. These unallowable expenditures were reported and claimed to federal programs as follows: "See Table in the Audit Report" Additionally, we noted IDHS has not performed a monitoring review in 2024 or either of the previous two fiscal years to ensure billing information provided by the child care providers is accurate for 50 of the 62 unique providers sampled. As a result, IDHS does not have adequate controls in place to ensure information provided by providers is accurate and the related child care payments made were appropriate. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation. Additionally, 45 CFR 98.67 requires lead agencies to expend and account for CCDF funds in accordance with their own laws and procedures, and for fiscal control and accounting procedures to be sufficient to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of those laws and procedures. IDHS CCAP Policy Memo 07.10.01 requires the agency to perform monitoring reviews over all Child Care Resource and Referrals (CCR&Rs), site administered, and non-contracted child care providers who participate in the IDHS Child Care Assistance Program. These reviews are conducted to ensure that services billed to the Department are adequately documented and contractual obligations are fulfilled. 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should be designed to ensure that supporting documentation for CCAP payments is obtained and maintained. Additionally, effective internal controls should be designed to ensure that billing information provided by providers is complete and accurate. Cause: In discussing these conditions with IDHS officials, management stated that submission of billing certificates to IDHS or its contracted agencies is not a condition of payment. Additionally, CCAP payments cited were entered by the providers through the IDHS Child Care Telephone Billing System - Integrated Voice Response (IVR) and IDHS did not have established procedures for monitoring these recipients. Possible Asserted Effect: Failure to maintain documentation that supports payments to TANF and CCDF beneficiaries of the Child Care Assistance Program and adequately monitor these beneficiaries results in noncompliance and unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-014. (Finding Code 2024-011, 2023-014) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review the process and procedures in place for collecting and maintaining documentation to support amounts paid to beneficiaries of the CCAP. Further, we recommend IDHS ensure monitoring reviews are performed for CCAP beneficiaries under the CCDF and TANF programs in accordance with established policies and procedures. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review the processes and develop procedures for collecting and maintaining documentation supporting payments to CCAP beneficiaries. Additionally, IDHS will establish, review, and revise policies and procedures to ensure monitoring reviews are conducted with appropriate management oversight.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Block Grants for Prevention and Treatment of Substance Abuse ALN and Program Expenditures: 93.959 ($114,897,412) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $472,620 Compliance Requirement: Level of Effort Finding 2024-012: Failure to Meet the SAPT MOE Requirement Condition Found: IDHS did not maintain the required aggregate State expenditures for the maintenance of effort (MOE) requirements for the Block Grants for Prevention and Treatment of Substance Abuse (SAPT) program. As a condition of receiving federal funding under the SAPT program, USDHHS requires the State to maintain the level of State and locally funded expenditures for substance abuse prevention and treatment activities at an amount that is at least equal to the average level of these same amounts for the prior two years. During the current fiscal year, we noted IDHS did not maintain the necessary aggregate expenditures to meet the SAPT MOE requirement. The table below illustrates the shortfall: "See Table in the Audit Report" In addition, IDHS has not established internal control procedures to monitor whether maintenance of effort requirements are met. Criteria or Requirement: According to 45 CFR 96.30(a), the fiscal control and accounting procedures of the State must be sufficient to permit tracing funds to a level of expenditure adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of the statute authorizing the block grant. Further, 45 CFR 96.134(a) states with respect to the principal agency of a State for carrying out authorized activities, the agency shall for each fiscal year maintain aggregate State expenditures by the principal agency for authorized activities at a level that is not less than the average level of such expenditures maintained by the State for the two-year period preceding the fiscal year for which the State is applying for the grant. In addition, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include establishing procedures to ensure MOE requirements are achieved with allowable expenditures. Cause: In discussing these conditions with IDHS officials, management stated that the review of the MOE to date was not occurring on a regular basis until reporting to the federal entity was complete. A revised methodology for calculating MOE was submitted and approved by SAMHSA in December 2023 and required updates to the MOE calculations were made between 2020 through 2024. Possible Asserted Effect: Failure to maintain required State expenditure levels for MOE results in noncompliance with program requirements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-008. (Finding Code 2024-012, 2023-008, 2022-006, 2021-012, 2020-012, 2019-009, 2018-007, 2017-008, 2016-008, 2015-009, 2014-010) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its process for identifying expenditures to achieve the SAPT MOE and implement controls to appropriately monitor whether the MOE requirement has been met. Views of IDHS Officials: The Department accepts the recommendation. Moving forward with the new methodology that was approved by SAMHSA, IDHS will be able to correctly calculate and meet the MOE in the coming fiscal years.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care and Development Fund (CCDF) Cluster, Social Services Block Grant, Block Grants for Prevention and Treatment of Substance Abuse ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292), 93.667 ($55,634,435), 93.959 ($114,897,412) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-013: Failure to Report Subaward Information Required by FFATA Condition Found: IDHS failed to report information required by the Federal Funding Accountability and Transparency Act (FFATA) for awards granted to subrecipients of the Temporary Assistance for Needy Families (TANF), Child Care and Development Fund (CCDF) Cluster, Social Services Block Grant (SSBG), and Block Grants for Prevention and Treatment of Substance Abuse (SAPT) programs.The State is required to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information required to be reported, the following key data elements are required to be audited: 1. Subawardee Name 2. Subawardee Unique Entity Identifier 3. Amount of subaward 4. Subaward obligation or action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that IDHS did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. During our testing of 57 subawards and 25 amendments, we noted the following exceptions: "See Table in the Audit Report" Additionally, during our testing of 25 subawards (totaling $53,372,381) for the SAPT program, we noted FFATA reporting was not completed for any of the subawards. IDHS’s subrecipient expenditures under the federal programs for the year ended June 30, 2024 were as follows: "See Table in Audit Report" Criteria or Requirement: In accordance with 2 CFR 170.200, Federal awarding agencies are required to publicly report Federal awards that equal or exceed the micro-purchase threshold and publish the required information on a public-facing, OMB-designated, governmentwide website and follow OMB guidance to support Transparency Act implementation. Consistent with the Federal Acquisition Register (FAR) threshold for subcontract reporting, OMB raised the reporting threshold for subawards that equal or exceed $30,000. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include complying with FFATA. Cause: In discussing these conditions with IDHS officials, management stated that FFATA reports cannot be submitted until the federal agency publishes the award and the award information is transmitted to FSRS/SAM.gov. The reporting of incorrect signature dates is due to a periodic delay between the day the contract is signed and the day the contract is recorded in the State’s financial records. A lack of appropriate oversight resulted in the SAPT subawards not being reported. Possible Asserted Effect: Failure to identify awards subject to FFATA and to report subawards in accordance with FFATA results in noncompliance with federal requirements. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-009. (Finding Code 2024-013, 2023-009, 2022-007, 2021-014, 2021-015) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS establish procedures to identify awards subject to FFATA reporting requirements and report required subaward information in accordance with the FFATA. Views of IDHS Officials: The Department partially agrees with the findings. The late reporting of IDHS’s subaward contracts is due to a timing difference between the state fiscal year (July 1 to June 30), when subaward contracts are obligated, and the federal fiscal year (October 1 to September 30), when new federal awards are obligated. FFATA reports cannot be submitted until the federal agency publishes the award and the award information is transmitted to FSRS/SAM.gov. IDHS will revise its procedures to address the timely recording of contract signature dates in SAP and the reporting of new federal awards in FSRS/SAM.gov. Procedures will be reviewed to ensure the timely completion of FFATA reporting. Auditors' Comment: The State is required to report subcontracts no later than the last day of the month following the month in which the subaward was made or modified. The exceptions noted in our testing were not reported within required timeframes.

State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Agriculture (USDA), U.S. Department of Health and Human Services (USDHHS) Program Name: Supplemental Nutrition Assistance Program Cluster, Special Supplemental Nutrition Program for Women, Infants, and Children, Food Distribution Cluster, Rehabilitation Services – Vocational Rehabilitation, Temporary Assistance for Needy Families Child Care and Development Fund (CCDF) Cluster, Social Services Block Grant, Block Grants for Prevention and Treatment of Substance Abuse, Disability Insurance/SSI Cluster ALN and Program Expenditures: 10.551/10.561 ($4,687,993,367), 10.557 ($181,526,312), 10.565/10.568/10.569 ($67,875,839), 84.126A ($138,992,957), 93.558 ($583,126,272), 93.575/93.596 ($747,612,292), 93.667 ($55,634,435), 93.959 ($114,897,412), 96.001/96.006 ($75,260,007) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: None Finding 2024-014: Inaccurate Reporting of Federal Expenditures Condition Found: IDHS did not accurately report Federal expenditures, including amounts provided to subrecipients, under the Supplemental Nutrition Assistance (SNAP) Cluster, Supplemental Nutrition for Women, Infants, and Children (WIC) programs, Food Distribution Cluster (FDC), Vocational Rehabilitation (VR), Temporary Assistance for Needy Families (TANF), Child Care Development Funds (CCDF) Cluster, Social Services Block Grants (SSBG), Block Grants for Prevention and Treatment of Substance Abuse (SAPT), and Disability Insurance/SSI (SSDI) Cluster.Federal expenditures, including amounts provided to subrecipients, reported to the Illinois Office of Comptroller (IOC) which were used to prepare the schedule of expenditure of federal awards (SEFA) did not agree to IDHS’ financial records provided for audit. Specifically, we noted the following differences between amounts provided for audit by IDHS and the SEFA amounts reported to the IOC for each program for the year ended June 30, 2024: "See Table in the Audit Report" The following differences were also identified relative to amounts provided to subrecipients for the following major programs: "See Table in the Audit Report" Additionally, we noted the cash basis expenditures provided by IDHS for our audit procedures included accrued (not paid) expenditures. We also noted these same amounts were reported to the IOC and were used to prepare the SEFA. Specifically, we noted expenditures that were not paid as of June 30, 2024, were erroneously reported as cash basis expenditures for the year ended June 30, 2024: "See Table in the Audit Report" We also noted the interagency expenditures provided by IDHS for our audit procedures included out of period expenditures. These same amounts were reported to the IOC and were used to prepare the SEFA. Specifically, we noted TANF Emergency Assistance (EA) payments which were claimed in fiscal year 2024 but reported in fiscal year 2023 totaling $14,275,633, and we noted EA payments which were claimed in fiscal year 2025 but were reported in fiscal year 2024 totaling $14,742,262. The net impact is an overstatement of TANF expenditures of $466,629 for the year ended June 30, 2024. Finally, we noted IDHS’ controls over reporting federal expenditures were not designed at a sufficient level of precision to ensure complete and accurate reporting in a timely manner. Criteria or Requirement: According to 2 CFR 200.510(b), a recipient of federal awards is required to prepare a schedule of expenditures of Federal awards (SEFA) for the period covered by the entity’s financial statement which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. Among other things required by 2 CFR 200.510(b), the SEFA must include the total amount provided to subrecipients from each Federal program. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure federal expenditures are accurately reported on the SEFA and to other State agencies, where applicable. Cause: In discussing these conditions with IDHS officials, management stated that the differences in the amounts of federal expenditures in IDHS’ records compared to the IDHS SEFA were due to inclusion of accrued expenditures in IDHS’ records and some slight differences related to vouchers in transit at the end of the fiscal year. Differences in the amounts passed through to subrecipients were also related to vouchers in transit at the end of the fiscal year, and IDHS’ records for one federal grant program did not initially include non-cash expenditures which had been included on the IDHS SEFA. Possible Asserted Effect: Failure to accurately report federal expenditures hinders the completion of an audit in accordance with the Uniform Guidance which may result in the suspension of federal fund Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-012. (Finding Code 2024-014, 2023-012, 2022-010) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS establish procedures to accurately report federal expenditures (including subrecipient expenditures) used to prepare the SEFA to the IOC. Views of IDHS Officials: The Department accepts the recommendation. IDHS will establish additional procedures to ensure federal expenditures (including subrecipient expenditures) are accurately reported.

State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Medicaid Cluster ALN and Program Expenditures: 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: None Compliance Requirement: Reporting Finding 2024-015: Failure to Report Drug Rebates on the Medicaid CMS-64 Report in a Timely Manner Condition Found: DHFS did not accurately report certain Medicaid Cluster program drug rebates on quarterly federal financial (CMS-64) reports. DHFS is the State Medicaid agency and is responsible for calculating drug rebates, billing pharmaceutical companies for drug rebates, and reporting drug rebates on the quarterly CMS-64 reports. pharmaceutical companies which were reported on quarterly CMS-64 reports submitted to USDHHS. Specifically, DHFS determined the data used to calculate drug rebates beginning in the quarter ended September 30, 2019 through June 30, 2024 erroneously included Medicare Part D drug data which did not pertain to beneficiaries of the Medicaid Cluster program. The data error resulted in drug rebates billed to and paid by pharmaceutical companies reported on the quarterly CMS-64 reports being overstated. Consequently, Medicaid Cluster expenditures were understated on both the quarterly CMS-64 reports and on the State’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024.DHFS management estimated the federal portion of the drug rebate error to be $815,984,264, of which $98,623,995 pertained to amounts reported in fiscal year 2024. The estimated impact of the drug rebate error on CMS-64 reports filed in or related to quarters within fiscal year 2024 are as follows: "See Table in the Audit Report" DHFS was unable to process and report drug rebates beginning in the quarter ended March 31, 2024 due to a cyberattack impacting a third party servicer for drug rebates. As a result, no drug rebates were reported for the quarter ended March 31, 2024 and limited drug rebates were reported for the quarter ended June 30, 2024. The State revised the Medicaid Cluster expenditures reported on the 2024 SEFA to increase the reported expenditures by the estimated drug rebate error related to the year ended June 30, 2024. A revised SEFA was provided in July 2025 to correct for this matter.We also noted adequate internal controls have not been established to ensure the data used to calculate drug rebates reported on the quarterly CMS-64 reports are complete and accurate. Specifically, the supervisory reviews and analytical procedures performed over the quarterly CMS-64 reports were not designed at an appropriate level of precision to detect the drug rebates errors. Criteria or Requirement: 42 CFR 430.30(c) requires States to submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office not later than 30 days after the end of each quarter. This report is the State’s accounting of actual recorded expenditures. According to the Center for Medicaid and CHIP Services Information Bulletin dated July 24, 2014, CMS requires drug rebates to be reported in the quarter in which the State incurs the expenditure. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include procedures to ensure information used in calculating drug rebates is complete and accurate and required financial reports are accurately prepared. Cause: In discussing these conditions with DHFS officials, they noted DHFS began receiving the impacted managed care encounter data files in 2019. IT programming to allow for the identification and exclusion of Medicare Part D drug claims from rebate invoices was not included. As a result, Medicare Part D drug claims that were not eligible for rebates were included in invoices DHFS sent to pharmaceutical manufacturers. Possible Asserted Effect: Failure to accurately report drug rebate amounts and program expenditures on the CMS-64 inhibits USDHHS’ ability to monitor the Medicaid Cluster program. Additionally, failure to accurately report federal expenditures in a timely manner inhibits the completion of an audit in accordance with the Uniform Guidance which may result in the suspension of federal funding. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-019. (Finding Code 2024-015, 2023-019) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS evaluate its process for calculating drug rebates reported on the CMS-64 and implement the necessary procedures to ensure amounts reported in the quarterly CMS-64 reports are complete and accurate. Views of DHFS Officials: DHFS accepts the recommendation. DHFS identified and implemented the programming necessary to omit the Medicare Part D drugs in August 2024. DHFS continues to monitor quarterly variances within the drug rebates included in CMS-64. The Drug Rebate Unit verifies Form CMS-64.9R – Medicaid Drug Rebate Schedule (64.9R) using data from separately ran reports such as the Invoice Activity Summary Report, Rebate Summary Report, and Check Apply Summary Report to verify that amounts included in the 64.9R are accurate.

State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Children’s Health Insurance Program ALN and Program Expenditures: 93.767 ($510,412,808) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $88,490,404 Compliance Requirement: Eligibility Finding 2024-016: Failure to Discontinue CHIP Benefits for Ineligible Individuals Condition Found: DHFS improperly continued providing benefits under the Children’s Health Insurance Program (CHIP) program to individuals who were over the age of 18. The CHIP program provides benefits to children under the age of 19 at an enhanced federal participation (FFP) rate. CHIP benefits should be discontinued when a beneficiary turns 19; however, if they meet all other eligibility criteria, these beneficiaries are allowed to transition to benefits under the Medicaid Cluster program. During our testing of 80 payments (totaling $145,446) made on behalf of CHIP beneficiaries during the year ended June 30, 2024, we identified nine individuals receiving CHIP benefits who were over the age of 18. DHFS performed a review of all medical payments made under the CHIP program during the year ended June 30, 2024 and identified 52,557 CHIP beneficiaries over the age of 18 for whom medical payments totaling $88,490,404 were made during the year ended June 30, 2024.In addition, we noted DHFS has not established adequate controls to identify and remove individuals over the age of 18 from the CHIP program and to determine if they are eligible for benefits under the Medicaid Cluster program.Medical payments made on behalf of CHIP beneficiaries during the year ended June 30, 2024 totaled $504,533,794. Criteria or Requirement: In accordance with 42 CFR 435.10 and the OMB Compliance Supplement, dated May 2024, the State is required to determine client eligibility in accordance with eligibility requirements defined in the approved State Plans for the CHIP program. Specifically, 42 CFR 457.320(a) requires the State CHIP agency to provide benefits for groups of children up to, but not including, the age 19 in addition to other eligibility criteria. State Plan Amendment IL-14-0009 includes general eligibility considerations which allows benefits to be provided for children up to the age of 19 which is consistent with 42 CFR 457.320(a). In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include establishing and maintaining adequate controls over processes to perform and document beneficiary eligibility determinations. Cause: In discussing these conditions with IDHS officials, management stated they failed to identify and redetermine eligibility for 19-year-olds. Possible Asserted Effect: Failure to properly perform eligibility determinations in accordance with State Plans may result in federal funds being awarded to ineligible beneficiaries, which are unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-022. (Finding Code 2024-016, 2023-022, 2022-016) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS review its current process for performing eligibility decisions and consider changes necessary to ensure benefits are discontinued when individuals reach the age of 18 in accordance with program regulations and guidelines set forth by the State Plan. Views of DHFS Officials: DHFS agrees with the finding.

State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Children’s Health Insurance Program Cluster, Medicaid Cluster ALN and Program Expenditures: 93.767 ($510,412,808), 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Eligibility Finding 2024-017: Inadequate Procedures to Determine and Document Beneficiary Eligibility Condition Found: DHFS does not have adequate procedures to determine and document eligibility for beneficiaries of the Children’s Health Insurance Program (CHIP) and the Medicaid Cluster programs. The CHIP and Medicaid programs provide medical benefits to individuals who meet certain eligibility criteria for each respective program. During our testing of 120 Medicaid and 80 CHIP beneficiaries, we identified the following exceptions: • One Medicaid beneficiary (with a sampled medical expenditure of $7,601) had their eligibility cancelled within the Integrated Eligibility System (IES) in 2019 but the individual was still receiving Medicaid payments through the Medicaid Management Information System (MMIS) due to human error inputting the incorrect eligibility end date within the transmission from IES to MMIS. Total payments made on behalf of this beneficiary under the Medicaid program were $14,453 during the year ended June 30, 2024. • One Medicaid beneficiary (with a sampled medical expenditure of $52) received benefits, but supporting documentation was not included in IES case record to support the eligibility determination was properly performed. Total payments made on behalf of this beneficiary under the Medicaid program were $99 during the year ended June 30, 2024. Details of the beneficiary payments selected in our samples for the CHIP and Medicaid programs are as follows: "See Table in the Audit Report" We also noted DHFS does not have adequate resources to perform and document eligibility determinations. Additionally, DHFS has not established appropriate monitoring procedures to ensure eligibility determinations are properly documented in accordance with program requirements. Medical payments made on behalf of CHIP and Medicaid beneficiaries during the year ended June 30, 2024 totaled $504,533,794 and $19,742,854,768, respectively. Criteria or Requirement: In accordance with 42 CFR 435.948 through 435.956 and the OMB Compliance Supplement, dated May 2024, the State is required to verify financial and nonfinancial factors of eligibility in accordance with eligibility requirements defined in the approved State Plans for the CHIP and Medicaid programs.In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, 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. Effective internal controls should include establishing and maintaining adequate controls over processes to perform and document beneficiary eligibility determinations. Cause: In discussing these conditions with DHFS officials, management stated exceptions were the result of the inability of the system to reject claims when there is no match on full Medicaid coverage coding. Additionally, there was a lack of knowledge of the program staff at the waiver agency about being able to identify those codes that indicate no full Medicaid coverage. Possible Asserted Effect: Failure to properly perform eligibility determinations in accordance with State Plans may result in federal funds being awarded to ineligible beneficiaries, which are unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-017) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS review its current process for performing eligibility determinations and consider changes necessary to ensure all initial determinations and subsequent redeterminations are performed in accordance with guidelines set forth in the State Plan. Views of DHFS Officials: The Department accepts the recommendation. DHFS has reviewed its current process for performing eligibility determinations and setting controls to ensure they meet the guidelines set forth in all federal and state mandates. The corrective actions described within (system edits, monthly systematic reports and training) will assist with minimizing and identifying these case anomalies.

State Agency: Illinois Department of Healthcare and Family Services (DHFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Names: Medicaid Cluster ALN and Program Expenditures: 93.775/93.777/93.778 ($20,707,079,599) Award Numbers: Various - see table of award numbers Federal Award Year: Various - see table of award numbers Questioned Costs: $24,347,998 Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost Principles, and Matching Finding 2024-018: Improper Calculation of Qualified Incentive Payments Claimed under the Medicaid Cluster Condition Found: DHFS incorrectly calculated qualified incentive payments charged to the Medicaid Cluster program using the enhanced federal medical assistance percentage (FMAP) rate applicable to payments under the Affordable Care Act (ACA) rather than its regular FMAP rate. Qualified incentive payments are financial incentive payments to healthcare providers to encourage improvements to the quality of and access to medical care. During our testing of over 40 payments to managed care organizations (totaling $349,112,247) charged to the Medicaid Cluster program, we identified one sampled expenditure (totaling $437,018) for a qualified incentive payment that was calculated using the enhanced ACA FMAP rate of 90% instead of the standard FMAP rate of 51.09% (Federal fiscal year 2024). In response to the exception noted in our testing, DHFS reviewed the population of qualified incentive payments calculated during the year ended June 30, 2024 (totaling $57,387,135) and determined a spreadsheet error caused the incorrect FMAP rate to be used to calculate the federal portion of qualified incentive payments claimed for certain quarters during State fiscal year 2024. As a result, DHFS overclaimed $24,347,998 of qualified incentive payments under the Medicaid Cluster as follows: "See Table in the Audit Report" Additionally, we noted the supervisory review procedures related to the calculation of the qualified incentive payments were not designed to and did not operate at a level of precision to identify an error of this nature. Criteria or Requirement: 2 CFR 200.400(b) sets forth the general allowable costs standards stating that recipients of federal awards are responsible for administering Federal funds in a manner consistent with Federal statutes, regulations and the terms and conditions of the Federal award. Additionally, 42 CFR 433.10(a) states sections 1903(a)(1), 1903(g), 1905(b), 1905(y), and 1905(z) provide for payments to States on the basis of a FMAP, for part of their expenditures for services under an approved State plan. FMAP percentages are published in the Federal Register each federal fiscal year. Additionally, 2 CFR 200.303 requires non-Federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should include establishing adequate supervisory review procedures to ensure the quarterly calculations of qualified incentive payments claimed under the Medicaid Cluster program are accurate. Cause: In discussing these conditions with DHFS officials, they stated the cause of this error was an oversight made when creating a new calculation spreadsheet for the Quality Incentive Payment add-on (QIP). The percentage for the ACA and FMAP were switched when adding to the spreadsheet causing calculated cells to be incorrect. The cause of this error was an oversight made when creating a new calculation spreadsheet for the Quality Incentive Payment add-on (QIP). The percentage for the ACA and FMAP were switched when adding to the spreadsheet causing calculated cells to be incorrect. Possible Asserted Effect: Failure to ensure payments to providers are properly calculated using the correct FMAP rate may result in noncompliance and unallowable costs being charged to the Medicaid Cluster program. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding Code 2024-018) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DHFS evaluate the level of precision of the supervisory review procedures over qualified incentive payments to ensure the payments are properly calculated using the correct FMAP rate. Views of DHFS Officials: The Department accepts the finding. DHFS has reviewed the process and implemented safeguards to ensure the calculations are accurate.