Findings Citing § 200.303

DEPARTMENT OF HEALTH PROCUREMENT, SUSPENSION AND DEBARMENT Material Weakness Material Noncompliance 2024-030 Strengthen Controls to Ensure Compliance with Procurement, Suspension and Debarment Requirements of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) program ALN Number(s) 10.557 - Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) Federal Award 215MS707W5003 (10/1/2022 – 9/30/2022) 235MS704W1003 (10/1/2022 – 9/30/2023) 235MS704W1006 (10/1/2022 – 9/30/2023) 235MS704W5003 (10/1/2022 – 9/30/2024) 245MS704W1003 (10/1/2023 – 9/30/2024) 245MS704W1006 (10/1/2023 – 9/30/2024) Questioned Costs N/A Criteria The Code of Federal Regulations (2 CFR 200.317) Procurements by states, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. Code of Federal Regulations (2 CFR 200.214) Suspension and Debarment, restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities Code of Federal Regulations (2 CFR 180.300) states that an entity may determine suspension and debarment status by: (a) Checking SAM (System for Award Management) Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person Code of Federal Regulations (2 CFR 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 During testwork performed over procurement, suspension and debarment requirements for the special supplemental nutrition program for women, infants, and children (WIC) program as of June 30, 2024, The Department of Health (Department) was unable to provide documentation that it procured goods and services under the program in accordance with its established procurement policy nor that it ensured vendors were not suspended or debarred Cause The Department’s procedures and internal controls were not sufficient to ensure that it procured goods and services under the program in accordance with its established procurement policy nor that it ensured vendors were not suspended or debarred. Effect The Department did not follow its procurement policy, nor did it verify vendors’ suspension and debarment status prior to procuring services from the vendor. Failure to adhere to procurement and suspension and debarment policies and procedures may result in obtaining goods or services under terms that are not in the best interest of the federal program and/or the Department or with vendors who are ineligible to participate in the program. Recommendation We recommend the department review and enhance controls and procedures to ensure that it follows its procurement policy and federal suspension and debarment regulations for all applicable goods and services purchased for the program. Repeat Finding No. Statistically Valid Yes.

MISSISSIPPI DEVELOPMENT AUTHORITY REPORTING Significant Deficiency Immaterial Noncompliance 2024-008 Strengthen Controls with the Federal Funding Accountability and Transparency Act (FFATA) Reporting Requirements. ALN Number 14.228 – Community Development Block Grant Federal Award No. B-17-DC-28-0001 - 2017 B-18-DC-28-0001 - 2018 B-19-DC-28-0001 - 2019 B-20-DC-28-0001 - 2020 B-21-DC-28-0001 - 2021 B-22-DC-28-0001 - 2022 B-23-DC-28-0001 - 2023 D-21-DZ-28-0001 - 2021 B-06-DG-28-0001 - 2006 B-06-DG-28-0002 – 2006 Questioned Costs N/A Criteria 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 Code of Federal Regulations (2 CFR 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 During Fiscal year 2024, subawards were obligated on February 20, 2024, should have been reported to FSRS by April 30, 2024. MDA could not provide support that required FFATA reporting was completed by April 30, 2024 per Sam.gov, ten of the ten subawards selected for testing were not reported to FSRS until July 31, 2024. TRANSACTIONS TESTED Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 10 0 10 0 0 Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $5,371,619 $0 $5,371,619 $0 $0 Cause MDA cited that errors and data loss occurred during the transitions from FSRS to Sam.gov by the Federal government which resulted in MDA being required to re-upload the FFATA reporting in July 2024. Effect MDA did not timely file the reporting required by FFATA. Recommendation We recommend that MDA develop internal controls and procedures to ensure that all required subawards are reported to Sam.gov in accordance with FFATA reporting requirements. Repeat Finding No. Statistically Valid No.

DEPARTMENT OF EMPLOYMENT SECURITY ELIGIBILITY Significant Deficiency Immaterial Noncompliance 2024-010 Strengthen Controls to Ensure Compliance with Eligibility Requirements for the Workforce Innovation and Opportunity Act Cluster (WIOA). ALN Number (s) 17.258, 17.259, 17.278 – Workforce Innovation and Opportunity Act Cluster Federal Award No. 23A55AA03525; 4/1/2022-6/30/2025 23A55AT000012; 7/1/2023-6/30/2026 23A55AY000006; 4/1/2023-6/30/2026 23A55AW000015; 7/1/2023-6/30/2026 Questioned Costs N/A Criteria The Code of Federal Regulations (20 CFR 680-683), state workforce agencies must ensure that individuals are eligible to participate in the program. The Code of Federal Regulations (2 CFR 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 During testwork performed over eligibility requirements for the Workforce Innovation and Opportunity Act Cluster (WIOA) as of June 30, 2024, the Mississippi Department of Employment Security (MDES) was unable to provide documentation that the eligibility determinations for participants were performed in accordance with federal requirements and state policies and procedures. The auditor noted the following: • For 1 out of 60 samples tested, MDES could not provide documentation that the eligibility determination for the participant had been reviewed and approved. • For 2 out of 60 samples tested, the funding category in the system did not match the approved eligibility checklist. Cause Internal controls were not sufficient to ensure that documentation supporting participant eligibility was maintained or was reviewed and approved by a supervisor. Effect Failure to ensure that all eligibility documentation is maintained and properly reviewed and approved could result in ineligible individuals participating in the program. Recommendation MDES should review and enhance internal controls and procedures to ensure that participant eligibility documentation is properly reviewed and approved by a supervisor and is readily available for audit. Repeat Finding Yes, 2023-012. Statistically Valid No.

DEPARTMENT OF EMPLOYMENT SECURITY REPORTING Significant Deficiency Immaterial Noncompliance 2024-009 Strengthen Controls to Ensure Compliance with the Federal Funding Accountability and Transparency Act (FFATA) Reporting Requirements. ALN Number (s) 17.258, 17.259, 17.278 – Workforce Innovation and Opportunity Act Cluster Federal Award No. 23A55AA03525; 4/1/2022-6/30/2025 23A55AT000012; 7/1/2023-6/30/2026 23A55AY000006; 4/1/2023-6/30/2026 23A55AW000015; 7/1/2023-6/30/2026 Questioned Costs N/A Criteria 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 Code of Federal Regulations (2 CFR 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 During testwork performed over reporting requirements for the Workforce Innovation and Opportunity Act Cluster (WIOA) as of June 30, 2024, the Mississippi Department of Employment Security (MDES) could not provide adequate support that the subaward was reported in a timely manner to the Federal Funding Accountability and Transparency Act Subaward Reporting system (FSRS) in accordance with the Federal Funding Accountability and Transparency Act (FFATA). Transactions Tested Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements 6 0 6 0 0 Dollar Amount of Tested Transactions Subaward not reported Report not timely Subaward amount incorrect Subaward missing key elements $17,766,110 $0 $17,766,110 $0 $0 Cause MDES cited that errors and data loss occurred during the transitions from FSRS to Sam.gov by the Federal government which resulted in the auditors being unable to verify the original submission dates. MDES did not maintain documentation of the original submission dates. Effect MDES was unable to provide documentation supporting the timely filing of the reporting requirements by FFATA. Recommendation We recommend that MDES develop internal controls and procedures to ensure that all required subawards are reported to Sam.gov in accordance with FFATA reporting requirements. Repeat Finding Yes, 2023-010. Statistically Valid No.

DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-031 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Immunization Cooperative Agreements program ALN Number(s) 93.268 – Immunization Cooperative Agreements Federal Award NH23IP922605 (7/1/2019 – 6/30/2024) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: 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; (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. Code of Federal Regulations (2 CFR 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 During testwork performed over allowable costs requirements for the Immunization Cooperative Agreements program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.

DEPARTMENT OF HEALTH ACTIVITIES ALLOWED/ALLOWABLE COSTS Material Weakness Material Noncompliance 2024-032 Strengthen Controls to Ensure Compliance with Allowable Costs Requirements of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program ALN Number(s) 93.323 – Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award NU50CK000550 (8/1/2019 – 7/31/2026) Questioned Costs N/A Criteria Code of Federal Regulations (2 CFR 200.430(8)(i)) Standards for Documentation of Personnel Expenses states that: 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; (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. Code of Federal Regulations (2 CFR 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 During testwork performed over allowable costs requirements for the Epidemiology and Laboratory Capacity for Infectious Diseases program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that payroll costs charged to the program were accurate. The auditor noted the following: • For 40 of 40 timesheets selected for testing, the Department was unable to provide documentation supporting that the recorded time and pay rates were appropriately charged to the grant. • For 40 of 40 employees, who worked 100% or less than 100% and charged to the grant, auditor was unable to obtain evidence supporting the predetermined allocation was appropriately charged to the grant. Cause The Department’s procedures and controls were not sufficient to ensure that time and effort reporting was accurately performed and documented, nor that employee time was properly allocated. Effect There is an increased risk of charging unallowed payroll costs to the program. Recommendation We recommend the Department should reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Department should not seek federal reimbursement unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Repeat Finding No. Statistically Valid Yes.

DEPARTMENT OF HEALTH PROCUREMENT, SUSPENSION AND DEBARMENT Material Weakness Material Noncompliance 2024-033 Strengthen Controls to Ensure Compliance with Procurement, Suspension and Debarment Requirements of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program ALN Number(s) 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award NU50CK000550 (8/1/2019 – 7/31/2026) Questioned Costs N/A. Criteria Code of Federal Regulations (2 CFR 200.317), Procurements by states, when procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. Code of Federal Regulations (2 CFR 200.214), Suspension and Debarment, restricts awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Coder of Federal Regulations (2 CFR 180.300), states that an entity may determine suspension and debarment status by: (a) Checking SAM (System for Award Management) Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person Code of Federal Regulations (2 CFR 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 During testwork performed over procurement, suspension and debarment requirements for the Epidemiology and Laboratory Capacity for Infectious Diseases program as of June 30, 2024, the Department of Health (Department) was unable to provide documentation that it procured goods and services under the program in accordance with established procurement policy nor that it ensured vendors were not suspended or debarred. The auditor noted the following: • For eight of eight contracts selected for testing, the Department was unable to provide documentation that they were issued in accordance with its procurement policy. • For six of six vendors selected for testing, the Department was unable to provide documentation that it had verified the vendors were not suspended, debarred, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Cause The Department’s procedures and controls were not sufficient to ensure that program purchases were made in accordance with its established procurement policy nor that suspension and debarment regulations were followed. Effect The Department did not follow its procurement policy, nor did it verify vendors’ suspension and debarment status prior to procuring services from the vendor. Failure to adhere to procurement and suspension and debarment policies and procedures may result in obtaining goods or services under terms that are not in the best interest of the federal program and/or the Department or with vendors who are ineligible to participate in the program. Recommendation We recommend the Department should review and enhance controls and procedures to ensure that it follows its procurement policy and federal suspension and debarment regulations for all applicable goods and services purchased for the program. Repeat Finding No. Statistically Valid Yes.

DEPARTMENT OF HEALTH REPORTING Material Weakness Material Noncompliance 2024-034 Strengthen Controls to Ensure Compliance with Reporting Requirements of the Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) program ALN Number(s) 93.323 - Epidemiology and Laboratory Capacity for Infectious Diseases (ELC) Federal Award NU50CK000550 (8/1/2019 – 7/31/2026) 19NU50CK00050DMODC3 (8/1/2019 – 7/31/2026) Questioned Costs N/A Criteria Grantees are required to submit annual and final SF-425 Financial Reports which report total funds obligated and expended. Annual financial reports are due within 90 days after the end of the budget period and final financial reports are due within 120 days after the end of the period of performance. Grantees are required to submit annual performance/progress reports within 90 days after the end of the budget period and final performance/progress reports within 120 days after the end of the period of performance. Code of Federal Regulations (2 CFR 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 During testwork performed over procurement, suspension and debarment requirements for the Epidemiology and Laboratory Capacity for Infectious Diseases program as of June 30, 2024, the Department of Health (Department) was unable to provide copies of all reports submitted to the Centers for Disease Control (CDC) through its reporting portal, nor were they able to provide documentation that reports had been reviewed and approved prior to submission. The auditor noted the following: • Five quarterly progress reports, five quarterly financial progress reports, and one annual performance/progress report were selected for testing. The Department did not retain copies of all reports submitted to the CDC through their reporting portal and auditors were unable to verify that reports were submitted accurately, completely, and timely. In addition, the Department was unable to provide documentation that reports had been reviewed and approved prior to submission. Cause The Department’s procedures and internal controls were not sufficient to ensure that reports were reviewed and approved prior to submission, nor that copies of submitted reports were retained Effect The accuracy, completeness and timeliness of financial and programmatic/progress reports could not be verified. A lack of review and approval of reports could allow reporting errors to go undetected and impact the CDC’s ability to monitor the program. Recommendation We recommend the Department should review and enhance controls and procedures to ensure that financial and programmatic/progress reports are reviewed and approved prior to submission. Copies of all reports should be retained and be readily available for audit. Repeat Finding No. Statistically Valid Yes.

Condition: During our test of the annual expenditure report filed by the County for compliance with grant reporting requirements, it was noted that the report listed inaccurate information regarding the actual expenditures. The annual report listed the expenditures totaling $3,765,498; however, the confirmed amount on the financial statement and SEFA indicated the actual expenditures were $4,453,372 resulting in an understatement of $687,874. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal grant requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements for this program and could result in loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of the compliance requirements for federal programs to ensure compliance with the grant requirements and filing accurate quarterly reports. Management Response: Chairman of the Board of County Commissioners and County Clerk: The Creek County Clerk's Office will work with the SEFA preparer to ensure that the correct paid dates are being used when reporting. This should eliminate the actual expenditures differences. We will work to educate all offices involved in the reporting process on financial statement and SEFA. Criteria: Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: 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 Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.

Finding 2024-003 Document Policies and Procedures Over Federal Awards Federal Program(s) Information Cluster/Program: All federal programs Type of Finding: Compliance – Other Matters Internal Control over Compliance – Significant Deficiency Criteria or Specific Requirement: Uniform Guidance (2 CFR Part 200, including § 200.302 and 200.303) requires non-federal entities administering federal awards to establish and maintain effective internal controls over federal programs. Entities must document written policies and procedures covering key areas such as financial management, internal controls, procurement, subrecipient monitoring, and cash management. Condition and Context: The Town has not formalized written policies and procedures related to federal awards required under Uniform Guidance. This includes but is not limited to areas such as financial management, procurement, subrecipient monitoring, and cash management. Cause: The Town has not developed or implemented comprehensive written policies and procedures governing the management and administration of federal awards. Effect or Potential Effect: The absence of written policies and procedures increases the risk of noncompliance with federal regulations, inconsistent administration of grant requirements, and potential mismanagement of federal funds. No questioned costs are noted as the requirement is procedural in nature. Recommendation: Written policies and procedures should be implemented in accordance with the Uniform Guidance. Views of Responsible Official: Management’s corrective action plan is included at the end of this report after the Schedule of Prior Year Findings.

Allowable Costs – Payroll, Fringe, and General Disbursements Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant Operation of a Child Care Resource Center – Baltimore, Harford and Cecil Counties; Professional Development/Quality (688) Operation of a Child Care Resource Center – Baltimore, Harford and Cecil Counties; Infants and Toddlers (689) Operation of a Child Care Resource Center – Baltimore, Harford and Cecil Counties (691) Specialized Training for Caregivers and Child Care Providers (707) Maryland Rebuilds Initiative Grant (708) Infant and early Childhood Mental Health Support Services Grant (709) Assistance Listing Number: 93.575 Award Periods: July 1, 2023 – September 30, 2024 (688, 689, 709) July 1, 2023 – June 30, 2024 (691) August 15, 2022 – June 30, 2025 (707) December 1, 2022 – June 30, 2024 (708) Type of Finding: Material Weakness in Internal Control over Compliance and Material Non-Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Allowable costs must be approved by the awarding agency (2 CFR section 200.407) and necessary and reasonable for the performance of the federal award and allocable under the principles of 2 CFR, Subpart E. Additionally, costs must be adequately documented. Condition: Direct costs incurred were allocated through journal entries to the grant without support of an allocation methodology. Management was unable to provide an understanding of how to trace the allocated amounts to a consistent methodology or to original source documentation. Additionally, credit card costs did not have proper evidence of approval maintained. Lastly, evidence of review for time and effort was not consistently maintained and could not be provided to support selections made. Context: Of the general disbursement population, $51,948 of general disbursements were booked via unsupported journal entry (allocated). Of the payroll and fringe benefit disbursement population, $125,034 were booked via unsupported journal entry (allocated). Additionally, three out of three credit card transactions selected did not have evidence of approval. Lastly, forty out of forty payroll transactions tested did not have proper evidence of the review for time and effort. Questioned Costs: $177,054 Cause: Internal controls surrounding allocations were not properly designed and implemented and an audit trail for allocation journal entries/source documentation was not maintained. Effect: The lack of evidence for audit trail and lack of effective internal controls over allocations provides an opportunity for noncompliance and errors. Repeat Finding: Yes; prior year finding 2023-003 Recommendation: We recommend that the Organization design, implement and monitor internal controls over allocations as well as maintain source documentation to support amounts charged to the grant. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.

Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care and Development Block Grant, Operation of a Child Care Resource Center – Baltimore, Harford and Cecil Counties (691) Assistance Listing Number: 93.575 Award Period: July 1, 2023 – June 30, 2024 (691) Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria: Recipients of federal funds are required to establish and maintain effective internal controls over federal funds received, per 2 CFR section 200.303. Condition: The Organization did not maintain documentation to evidence approval of credit card general disbursements charged to the program. Context: Auditors tested two credit card general disbursement transactions out of a total sample of 50 period of performance transactions, and both lacked evidence of appropriate approval to support that the disbursements were recorded within the proper period of performance. Questioned Costs: None Cause: Internal controls over the approval of credit card transactions were not adequately designed and implemented to ensure supporting documentation was maintained. Effect: The absence of effective internal controls over period of performance increases the risk of noncompliance with federal award requirements and the potential for errors. Repeat Finding: Yes; prior year finding 2023-004 Recommendation: We recommend that the Organization design, implement, and monitor effective internal controls over credit card disbursements and maintain appropriate documentation evidencing review and approval to ensure compliance with period of performance requirements. Views of Responsible Officials of the Auditee: There is no disagreement with the audit finding.

2024-007 - Lack of Documented Federal Policies and Procedures Finding Type: Material weakness in internal control over compliance. Criteria: The Uniform Guidance (2 CFR 200.303) requires that non-Federal entities establish and maintain effective internal control over Federal awards to provide reasonable assurance that the awards are managed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Federal internal control guidance also contemplates that such controls be documented and maintained. Condition: The City did not maintain documented policies and procedures over its Federal awards as of June 30, 2024. No formal documentation was available to evidence the design and implementation of internal controls over compliance. Cause: This condition is the result of the City’s lack of formal procedures to document and maintain internal controls over compliance for Federal awards. Effect: As a result of this condition, the City did not maintain adequate internal control over compliance to provide reasonable assurance that Federal awards were managed in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. Recommendation: The City should establish, document, and implement formal policies and procedures over Federal awards to ensure compliance with Uniform Guidance requirements. Management Response: See Corrective Action Plan.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Material Weakness in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.403 Factors Affecting Allowability of Costs states that: Except where otherwise authorized by statute, costs must meet the following criteria 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 recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost of used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. (g) Be adequately documented. (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approval to carry forward unobligated balances to subsequent budget periods. 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 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). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that authorized signers reviewed and approved expenditures related to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for review and approval of expenditures charged to the federal program. Questioned costs: Undetermined Cause: Authorized signers pre-signed checks and did not review and approve support for cash disbursements. Effect: There is an increased risk of charging unallowed costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. require both check signers to evidence review and approval of supporting documentation for each federal program cash disbursement prior to signing the check. Documentation of that review and approval should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, all checks presented for signatures have supporting documentation attached. Authorized check signers are instructed to review all documentation for appropriate authorization, payee name, and amounts prior to signing checks. No checks are to be signed without supporting documentation. The agency will require check signers to initial the check request page or other supporting documentation when signing checks for expenditures. The Neighborhood Service Center, Inc. is implementing a procedure to provide the Finance Committee of the Board with a listing of all checks issued between Board meetings for their review/reference. The Finance Director keeps all check stock locked in their office to avoid any potential misuse of the check stock.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.430 (g)(i) Standards for Documentation of Personnel Expenses states that: 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; (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 nonFederal 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. 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 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). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that time and effort was dedicated to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for monitoring and obtaining adequate support to validate actual payroll expenses charged to the federal program. Questioned costs: Undeterminable Cause: Controls were not operating effectively to ensure that time and effort reporting was performed and documented in a timely manner, in accordance with federal requirements. Effect: There is an increased risk of charging unallowed payroll costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. reevaluate its current process, implement proper controls, and perform additional training over time and effort reporting. The Neighborhood Service Center, Inc. should not report salaries and wages unless it can substantiate that the time and effort was dedicated to the federal program. Documentation should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, the Neighborhood Service, Inc. will require employees whose salaries are allocated to several funding areas to do periodic (at least 2 times per year) time studies to provide documentation to support how salaries are being allocated in the payroll system to grants and other funding areas. These documents will be signed on June 15 and December 15 of each year.

Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Numbers: 93.569 Federal Award Identification Number and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND=2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Special Tests and Provisions Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: The CSBG Act at 42 USC 9910(a), requires nonprofit organizations administer CSBG through a board comprising: (i) One-third (1/3) of the members be elected representatives in the community or their designee (the elected official must be holding office on the date of selection). There is a provision that allows for appointed government officials, or their designee, to be counted in meeting this requirement. (ii) Not fewer than one-third (1/3) of the board members are chosen in a democratic selection process adequate to assure that these members of the board are representative of the low-income individuals and families served. Additionally, each low-income representative must reside in the neighborhood served. (iii) The remaining board members are officials and members of business, industry, labor, religious, law enforcement, education, or other major groups and interests in the community served. The Community Services Block Grant Agreements between the Maryland Department of Housing and Community Development and the Neighborhood Service Center, Inc. state that if the grantee is other than a local government or agency thereof, it has established at least a 15-member board of directors which acts as the policy making body of the grantee and which is responsible for the expenditure of the grant. The composition of the board of directors is as follows: (i) One third of the members are elected public officials currently holding office, or their representatives, except that if the number of elected officials reasonably available and willing to serve is less than one third of the membership of the board, members on the board who are appointed public officials may be counted in meeting the one third requirements; (ii) At least one third of the members are persons chosen in accordance with democratic selection procedures adequate to assure that they are representative of low-income individuals and families in the neighborhood served, and each such representative of low-income individuals and families selected to represent a specific neighborhood within a community resides in the neighborhood represented by the member; and (iii) The remaining members are officials or members of industry, loan, religious, welfare, education or other major groups and interest in the area served by the grantee. (iv) The grantee will notify the Department in writing of all board vacancies within 30 days of the occurrence and will provide a plan for filling such vacancies. 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 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). Condition/Context: The Neighborhood Service Center, Inc. did not maintain a board comprised of 15 members and was unable to provide documentation to substantiate that appropriate and timely notifications were made to the Maryland Department of Housing and Community Development of board vacancies. Neighborhood Service Center, Inc. did not have effective controls in place for monitoring and reporting on board vacancies. Questioned costs: Undetermined. Cause: Controls were not operating effectively to ensure reporting was performed and documented in a timely manner, in accordance with the requirements. Effect: There is an increased risk of improper oversight of federal funds. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. reevaluate its current process, implement proper controls, and perform additional training over fiduciary duties and responsibilities under the CSBG Act. The Neighborhood Service Center, Inc. should adhere to the board composition and vacancy reporting requirements. Documentation should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, The Executive Director and Deputy Director of the Neighborhood Service Center are actively recruiting individuals to join the Board. The Deputy Director, or their designee, will provide information to the Maryland Department of Housing and Community Development on the Board composition and vacancies on a monthly basis.

Federal Agency: U.S. Department of Education Federal Program Name: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555 Federal Award Identification Number and Year: 10.CNC Child Nutrition Cluster 2024 Pass-Through Agency: Pennsylvania Department of Education Pass-Through Number(s): Unknown Award Period: July 1, 2022 through June 30, 2024 Type of Finding: - Material Weakness in Internal Control over Compliance Criteria or specific requirement: 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 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). Condition/Context: The District is required to submit monthly reimbursement requests to the Pennsylvania Department of Education (PDE). PDE utilizes these reports as reimbursement requests and subsequently submits payment to the District based on reported expenditures. For three of three monthly reimbursements selected for testing, the District was unable to provide documentation that there has been a review and approval process over the report prior to submission to the State. Questioned costs: None Cause: The District has not established formal policies/procedures requiring supervisory review and documented approval of reports prior to submission or reliance for external reporting. Effect: Without documented review controls, there is an increased risk that reporting errors, omissions, or noncompliance could occur and not be detected timely, which could result in incorrect information being used in the District’s external financial reporting and/or submissions to oversight agencies. Repeat Finding: Not a repeat finding. Recommendation: We recommend the District implement a documented review and approval process over reporting, including defined roles and responsibilities, required evidence of review, and retention of supporting documentation. Views of responsible officials: Management concurs with the finding.

2024-004 Wage Rate Requirements - Contract Language ALN and Title: 20.106 - Airport Improvement Program Federal Agency: U.S. Department of Transportation Pass Through Entity: Georgia Department of Transportation Identifying Number: 313SBGP0582023 Award Year: 2023 Special Tests and Provisions-Wage Rate Requirements Criteria or Specific Requirement - 2 CFR 200.303(a) requires non-Federal entities expending Federal awards to establish and maintain effective internal controls over compliance with Federal statues, regulations, and the terms and conditions of Federal awards. All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141-3144, 3146, and 3147. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); 0MB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). Condition - Required prevailing wage rate clauses were not included in the contract or subcontract. Cause of Condition -The County was not aware the prevailing wage rate clauses were required to be include in the construction contract. Effect of Condition - The contract was not in compliance and did not contain the language that notified the contractor that prevailing wages were required under the contract. Questioned Costs - Undetermined Response of Management - Management concurs with this finding and will develop and implement policies to ensure that contracts and subcontracts with contractors or subcontractors working on projects financed by federal assistance funds contain prevailing wage rate clauses.

2024-005 Wage Rate Requirements - Review of Certified Payroll Reports ALN and Title: 20.106 - Airport Improvement Program Federal Agency: U.S. Department of Transportation Pass Through Entity: Georgia Department of Transportation Identifying Number: 313SBGP0582023 Award Year: 2023 Special Tests and Provisions-Wage Rate Requirements Criteria or Specific Requirement - 2 CFR 200.303(a) requires non-Federal entities expending Federal awards to establish and maintain effective internal controls over compliance with Federal statues, regulations, and the terms and conditions of Federal awards. All laborers and mechanics employed by contractors or subcontractors to work on construction contracts in excess of $2,000 financed by federal assistance funds must be paid wages not less than those established for the locality of the project (prevailing wage rates) by the Department of Labor (DOL) (40 USC 3141-3144, 3146, and 3147. This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls) (29 CFR sections 5.5 and 5.6; the A-102 Common Rule (section 36(i)(5)); 0MB Circular A-110 (2 CFR Part 215, Appendix A, Contract Provisions); 2 CFR Part 176, Subpart C; and 2 CFR section 200.326). Condition - For each week in which work was performed under the contract or subcontract, the required certified payroll reports were not formally reviewed. Cause of Condition - The County did not have in place formal procedures to ensure that a suitable County official independently reviewed the certified payrolls that were submitted by the construction contractor and reviewed by the County's contracted engineering firm. Effect of Condition - The County did not ensure that construction workers were paid in accordance with the appropriate prevailing wage rates. Questioned Costs - Undetermined Response of Management - Management concurs with this finding and will develop and implement policies to ensure the required certified payroll reports are formally reviewed.

Federal Assistance Listing Number: 84.425U Federal Award Year(s): June 30, 2024 Program Title(s): Education Stabilization Fund Name of Federal Agency(ies): U.S. Department of Education Services Name of Pass-Through Entity(ies): Colorado Department of Education COVID-19 Program(s): Yes Criteria: As stated in 2 CFR 200.303, the District 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The District had a material weakness in internal controls over multiple processes. The District’s lacked segregation of duties and/or a review process over payroll. The District’s process for managing personnel information and payroll was performed by one employee during the fiscal year ended June 30, 2024. In addition, the District did not properly maintain reimbursement request information that would reconcile the ESSER request for reimbursement with the allowable expenditures. However, the District was in compliance with the allowable activities, allowable costs, and cash management requirements, because the allowable activities and allowable costs exceeded the amount requested for reimbursement. Cause: The District’s payroll and human resources processes were performed by one employee without a secondary review. In addition, the reimbursement request process was performed by one employee without segregation of duties or secondary review and did not reconcile the ESSER grants on a regular basis to verify that revenues matched expenditures. Effect: The District hired a third-party accounting firm in order to reconcile the grants for fiscal year ended June 30, 2024. The District required material audit adjustments and incurred significant delays in the audit process for the fiscal year ended June 30, 2024. In addition, the District’s reimbursement documentation was unavailable for review. However, the allowable costs exceeded the reimbursement received from the Colorado Department of Education. Repeat Finding: No. Questioned Costs: None noted. Recommendation: We recommend that the District implement a month-end and year-end closing processes for the ESSER and potentially other federal grants that includes reconciling grant on a monthly basis, submitting requests for funds on a monthly basis, maintaining proper accounting records, and properly recording all the transactions in the District’s accounting system. In addition, we recommend that the District implement a process to perform a secondary review of completed grant reconciliations and requests for funds monthly. The District has already taken some steps to address this issue by hiring new staff and a third-party accounting firm to assist with this situation. Corrective Action Plan for Financial Reporting Findings: Reported on page 59.

Criteria: Grantees should have controls in place to ensure that grant reports are timely submitted to the grantor and are being properly reviewed and approved prior to submission. The Organization should file the SF-425 within the required time period, and these reports should reconcile to the underlying accounting records. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) 200.303 requires the non-Federal entity to “(a) establish, document and maintain effective internal controls over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Condition: Adequate controls were not in place to ensure reports being submitted to the grantor agreed to the underlying accounting activity and cumulative monetary funds requested did not exceed the amount available for the grant period.

Finding 2024-011 – Lack of Internal Controls Over Major Federal Program – Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2023-011) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring QUESTIONED COSTS: $-0- Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that the County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment; Reporting; Subrecipient Monitoring. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements and could result in a loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of requirements for this program and implement internal control procedures to ensure compliance with requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will work with all County Officials to inform them of all grants and federal monies that Pottawatomie County receives to ensure that proper internal controls are implemented. Criteria: 2 CFR § 200.303 Internal Controls (a) reads as follows: 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). Further, accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.

Finding 2024-013 – Noncompliance with Reporting Over Major Federal Program - Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2023-013) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: During the test of 100% of expenditures for the Coronavirus State and Local Fiscal Recovery Funds, totaling $1,152,068, twenty-three (23) expenditures totaling $905,330 were not accurately reported in the proper period on the quarterly reports as required by the Reporting compliance requirement. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County design and implement a system of internal controls to ensure the accuracy and completeness of reports and to ensure compliance with federal requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: 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 Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.

Finding 2024-2 Assistance listing number: 21.027 Program name: Coronavirus State and Local Fiscal Recovery Funds Pass-through entity: State of Michigan EGLE Project numbers: A5817-01 Finding type: Material weakness and material noncompliance with laws and regulations Repeat finding: No Criteria: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires non-federal entities to maintain specific written policies to ensure accountability for federal awards. Minimum mandatory policies include procurement procedures, allowability of costs, conflict of interest, cash management, and internal controls. Conditions: The City did not have written policies, as are required by Uniform Guidance, that adhered fully to the requirements of Uniform Guidance. Questioned Costs: None Why Questioned Costs Not Determinable: N/A How Questioned Computed: N/A Context: The City has some written policies or resolutions that address procurement and conflict of interest. The procurement policy, however, did not fully address the requirements of UG Section 200.318. In addition, the City had developed some procedures for cash management, allowability costs and internal control but did not adopt the written policies for cash management, allowability of costs and internal control that would fully address the requirements of UG Sections 200.305, 200.302, 200.400 and 200.303. Cause: The City was not in compliance with the UG requirements to have the correct written policies related to procurement, cash management, allowability costs and internal control. Effect: The absence of those properly prepared written policies increases the potential for further noncompliance because the City’s procedures may not adequately address the relevant compliance requirements. Recommendation: We recommend that the City create and put in place the written policies that address the requirements of 2 CFR 200.318-Procurement, 200.305-Cash Management, 200.302 & 200.400-Allowability of Costs, 200.303-Internal Control. View and Response of Responsible Officials: The City is reviewing existing documents and the requirements of UG for written policies to determine the best course of action to create and put in place the written policies required by UG.

Federal Agency: U.S. Department of Justice Federal Program Title: Crime Victim Assistance Federal Assistance Listing Number: 16.575 Federal Award and Identification Number and Year: 15POVC23GG00443ASSI-2024 Pass-Through Agency: Minnesota Office of Justice Programs Pass-Through Number(s): A-CVS-2024-AMS-077 Award Period: 10/01/2023 to 09/30/2025 Type of Finding: • Significant Deficiency in Internal Control over Major Federal Programs Criteria or Specific Requirement: Under 2 CFR section 200.303, a nonfederal entity must establish and maintain effective internal controls over the federal awards that provides reasonable assurance that the nonfederal 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). Timely review and approval should be maintained to ensure accurate amounts are being drawn down and accurate reports are submitted. Condition: The Organization did not have adequate internal controls in place for the full fiscal year to ensure cash drawdowns and required reports are approved by the appropriate personnel before being submitted. Questioned Costs: N/A Context: Two of the three reimbursement requests and five of the five reports selected for testing did not have support retained to show the drawdowns, financial status reports, and other performance reports were reviewed and approved prior to submission. Cause: Management did not have a separate individual assigned to review the cash drawdowns and required reports for the Crime Victim Assistance program after being prepared by the Director of Finance for the full fiscal year. Effect: Potential for inaccurate amounts of funds to be requested or inaccurate information reported. Repeat Finding: This is a repeat finding. Recommendation: A separate individual with supervisory authority over the preparer should be assigned to review and approve the cash drawdowns and reports prior to submission. Views of Responsible Officials and Planned Corrective Actions: The Organization has designated an individual to review and approve the cash drawdowns and reports prior to submission.

Department of Agriculture Federal Financial Assistance Listing #10.766 Community Facilities Loans and Grants Special Tests and Provisions Material Weakness in Internal Control Over Compliance Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal controls over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes and conditions of the award. Condition: During our testing, it was noted that funds were disbursed from the loan reserve accounts without proper prior approval from the USDA, causing the accounts to be underfunded. Cause: The Hospital did not have an adequate internal control policy in place to ensure the proper disbursement and funding of the reserve account. Effect: Although management obtained a waiver for the noncompliance, the lack of adequate policies governing proper funding of reserve increases the risk that employees participating in the federal award administration may not be able to detect and correct noncompliance in a timely manner. Questioned Costs: None reported Context: Sampling was not used. The Hospital has two reserve accounts that were tested. Repeat Finding from Prior Year: No Recommendation: We recommend that the Hospital enhance internal control policies to ensure that there is proper funding of the reserve accounts. Views of Responsible Officials: Management agrees with the finding.

2024-015 Inability to Test Compliance and Adequacy of Federal Grant Expenditures (Material Weakness) Federal Agency: All Pass-through Agency: New Hampshire Department of Education Cluster/Program: All Assistance Listing Numbers: All Compliance Requirement: All Type of Finding: Internal Control over Compliance – Material Weakness Noncompliance could not be determined due to the scope limitation Criteria or Specific Requirement: In accordance with 2 CFR 200.302(b)(3), Financial Management, recipients of federal funds must maintain records that adequately identify the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest, and must be supported by source documentation. In addition, per 2 CFR 200.303, Internal Controls, recipients must establish and maintain effective internal control over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the award. Lastly, per 2 CFR 200.334, Record Retention Requirements, recipients of federal funds must retain financial and programmatic records, supporting documents, statistical records, and all other records pertinent to a federal award for a period of three years from the date of submission of the final expenditure report. Condition: The School District informed the audit engagement team that it was unable to locate all required documentation necessary to support expenditures and demonstrate compliance with federal program requirements. As a result, we were unable to test compliance with Federal program requirements, and expenditures reported on the Schedule of Expenditures of Federal Awards (SEFA) could not be fully supported or reconciled to the School District’s financial records. This limitation prevented us from completing the required testing over major programs. In addition, while the audit engagement team was able to trace reported federal revenue amounts to records maintained by the New Hampshire Department of Education, the School District was unable to provide sufficient supporting documentation to verify expenditures at the individual grant level. Furthermore, the School District’s grants fund was adjusted, or “plugged,” in total so that aggregate revenues agreed to aggregate expenditures; however, detailed balances were not maintained or reconciled by individual federal award. As a result, the School District could not demonstrate that revenues and expenditures were accurately recorded and matched to the specific grants from which they originated. Cause: The School District lacks a consistent, centralized process for retaining and organizing documentation related to federal program expenditures and compliance requirements. In addition, accounting records were not maintained at a sufficient level of detail to track activity by individual grant award. High staff turnover and the absence of clear written procedures contributed to the unavailability of records and the use of unsupported year-end adjustments to reconcile grant activity. Effect: Because required supporting documentation was unavailable, we were unable to obtain sufficient appropriate audit evidence to support compliance with federal requirements for the affected programs. Consequently, we were unable to determine whether certain transactions were allowable, properly allocated, and in compliance with the applicable grant requirements. Additionally, the inability to reconcile grant revenues and expenditures at the individual award level increases the risk of inaccurate reporting, improper use of restricted funds, missed reimbursement opportunities, and noncompliance with grant terms and conditions. This represents material noncompliance and may result in questioned costs, repayment obligations, or other remedial actions by the granting agencies. Questioned Costs: Unable to determine. We cannot quantify questioned costs because no testing could be performed, and the scope limitation affects all reported federal expenditures. Identification as Repeat Finding: As identified in Schedule III, Summary Schedule of Prior Audit Findings, this is a repeat of finding 2023-001. Recommendation: We recommend that the School District establish and enforce stronger internal controls over Federal grants management and document retention. This should include implementing a centralized digital storage system, maintaining separate accounting records for each individual grant award, performing periodic reconciliations of revenues and expenditures by grant, and eliminating unsupported balancing entries used to force aggregate funds into agreement. In addition, the School District should provide regular staff training on federal documentation requirements and adopt written policies and procedures that clearly assign responsibility for grant accounting, reconciliation, and record retention. These steps will help ensure that all required documentation is consistently maintained, grant activity is accurately reported, and records are readily accessible for audit and monitoring purposes. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.

FINDING REFERENCE NUMBER 2024-023 (See Finding Reference Number 2024-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 231PR426S7003/4; 241PR426S7003/4 (Federal Award Years: 10/1/2022 through 9/30/2024) 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) 2301PRTABD; 2401PRTABD (Federal Award Years: 10/1/2022 through 9/30/2026) 2201PRLIEA; 2301PRLIEA; 2401PRLIEA (Federal Award Years: 10/1/2021 through 9/30/2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2023-2024 fiscal year were observed, in which these three options represented between 25% and 18% for local offices and 38% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-004/2023-032. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.

FINDING REFERENCE NUMBER 2024-026 (See Finding Reference Number 2024-006) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2201PRLIEA (Federal Award Year: 10/1/2021 – 9/30/2023) 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT CASH MANAGEMENT TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200.302, requires recipient's and subrecipient's financial management system must provide for the following: (3) maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation; (4) effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303; and (6) written procedures to implement the requirements of § 200.305. 2 CFR 200.305, Federal Payments, establishes that: (a) payments for States are governed by Treasury-State Cash Management Improvement Act (CMIA) agreements and default procedures codified at 31 CFR part 205 and Treasury Financial Manual (TFM) 4A-2000, “Overall Disbursing Rules for All Federal Agencies”; (b) for recipients and subrecipients other than States, payment methods must minimize the time elapsing between the transfer of funds from the Federal agency or the pass-through entity and the disbursement of funds by the recipient or subrecipient regardless of whether the payment is made by electronic funds transfer or by other means. See § 200.302(b)(6). Except as noted in this part, the Federal agency must require recipients to use only OMB-approved, government-wide information collections to request payment. STATEMENT OF CONDITION As part of our understanding of internal controls and compliance regarding cash management, we obtained a procedures manual. We found the following deficiencies: 1. The effective date is April 2024. 2. In the section describing the LIHEAP process, the US Department of Agriculture is mentioned instead of the US Department of Health and Human Services. 3. It does not identify the personnel responsible for the processes to establish segregation of duties. 4. In our interviews it was noted that only one person is in charge of all drawdowns, and no proper supervision or review of the documentation is performed. In addition, a detail of the requests related to the program was obtained; however, this request information does not reconcile with the revenue recognized in PRIFAS. The following deficiencies were identified: 1. The document includes amounts identified as LIHEAP, which belongs to another Federal program, the Low-Income Household Water Assistance Program (ALN 93.499), in the amount of $295,354.51. 2. Three (3) deposits were included in the detail that were not recorded in PRIFA in the amount of $491,243.33. 3. Three (3) deposits were included in PRIFA that were not included in the detail in the amount of $502,901.10. From a population of fifty (50) revenue transactions, six (6) transactions were selected to ensure that the correct amounts were requested from the Federal program and that the documents indicated in the manual were included with each petition. The following deficiencies were observed: 1. The documents included do not contain signatures from the personnel who perform each process. 2. The documentation included in the manual does not match the documentation included in the documents submitted with each petition. 3. In two (2) requests, the form DF-155, “Request for Federal Funds” was not included as part of the documentation. 4. A form used, IF-8, does not have a sequence number. The document does not provide for signatures, in addition, it makes reference to the Governmental Development Bank, which closed in 2017. 5. In two (2) requests, no detail of the liquidation of benefits was included, only an Excel document. 6. We were unable to determine whether the drawdown was a reimbursement or an advance. 7. We noted that in one drawdown in the amount of $8,014,770, had a note in the documentation indicating that this request is made and pending of the final certification or closeout of the grant from the federal reporting area. 8. In another drawdown in the amount of $832,397.50, the document identified as DF-155 was completed requesting the amount of $1,515,694.80. Although, in handwriting is a comment indicating that this drawdown is partial in order to comply with Puerto Rico Treasury Department, therefore, only the amount of $1,036,663.43 is requested. This amount is also adjusted by $204,265.93, ending with a balance of $832,397.50. No evidence of the adjustment was included. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systemic deficiency. The lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up affects this requirement. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF does not have a procedures manual that clearly establishes a segregation of duties, demonstrating compliance with the required internal control components. No standardized process is in place requiring documentation to be included, reviews and approvals of all requests for federal funds. POSSIBLE ASSERTED EFFECT The program may be requesting funds in excess of cash needs, or a reimbursement for funds not previously expended. The lack of internal controls may result in the program to be on a reimbursement basis. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-007/2023-035. RECOMMENDATIONS We recommend that management establish a written internal controls process that demonstrates compliance with cash management requirements and appropriate segregation of duties, and training to all areas regarding this compliance.

FINDING REFERENCE NUMBER 2024-027 (See Finding Reference Number 2024-007) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Years: 10/1/2022 – 9/30/ 2023) 241PR426S7003/4 (Federal Award Years: 10/1/2023 – 9/30/ 2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Benefits authorized = benefits posted. In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, authorization release form, citizenship alien status, social security, income and resources, self-employment expenses, post-secondary student status, 5-7 years old evidence studying or home schooling, care minors/dependents with disabilities, disability status, medical expenses, age and homelessness. In Regulation to Establish Eligibility Standards for the Nutrition Assistance for Puerto Rico (8684) from ADSEF, Article 21, Verification of Information, Part A: Methods of Verification, Line 1, it is established that, prior to the initial certification of the service household, the technical staff will verify the information provided by the applicant using documents that establish its authenticity. Methods of Verification: 1. Interview - The head of the service household, spouse, or authorized representative will be interviewed as part of the benefits application process. In the Manual of Procedures, it is established that the technician is responsible for documenting the required information in the “Daily Contact Sheet” (ADSEF-106G). In the Manual of Procedures, Chapter 1, Part II, Section D states that the responsibilities of the administrative staff include providing information about rights, responsibilities, warnings, and penalties. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Two (2) participants’ contact log history was incomplete. • One (1) authorization release form, and the declaration of citizenship were not completed during the application process. • Twenty-two (22) authorization release forms were not updated during the recertification or change process. • One (1) the declaration of citizenship was not observed in the participant file. • Seven (7) NAP rights, responsibilities, warnings, and penalties were not updated during the recertification or change process. • Four (4) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • In one case, the amount of income reported in the budget detail was not documented and was based on estimates derived from Social Security income, Medicare deductions, and Cost of Living (COL) adjustments, rather than verified income records. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico (NAP), Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks adequate controls to prevent delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-008/2023-036. RECOMMENDATIONS We recommend ADSEF strengthen internal controls to ensure complete and accurate eligibility documentation. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-028 (See Finding Reference Number 2024-008) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023996117 (Federal Award Years: 10/1/2022 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 – 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses, children school attendance, cooperation with the Individual Responsibility Plan and cooperation in the establishment of paternity or in obtaining child support. In Regulation 8684 to Establish Eligibility Standards for the Temporary Assistance for Needy Families from ADFAN, Chapter IV, Article 1 and 2, establishes that the certification period will be up to a maximum of six (6) months. In Chapter III, Article 4 Section 4.24 establish the participant will receive the benefit for a maximum period of sixty (60) months in total. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Nineteen (19) cases lacked the documents requested for their initial appointment (photo ID, evidence of residency, social security and evidence of citizenship). • Eight (8) new participant files did not include supervisor approval of the eligibility determination. • Twenty (20) files submitted were outside the scope of the audit period, and no information related to our audit period was provided. • Several documents were missing from the files: • Fourteen (14) files did not include child support evidence. • Eleven (11) files without evidence of schooling for dependent minors. • Fourteen (14) files did not include signed Individual Responsibility Plan. • Twenty-one (21) files did not have the assignment of rights to Child Support. • Fifteen (15) files did not have the document stating that they had not been convicted of controlled substances. • One Category C case (disability) in which the benefit was granted to the family and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. In addition. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-010/2023-038. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-029 (See Finding Reference Number 2024-009) FEDERAL PROGRAM (ALN – 93.560) PAYMENT TO TERRITORIES – ADULTS U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G9922PT (Federal Award Years: 10/1/2022 through 9/30/2025) 2301PRTABD (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In accordance with the State Plan the following is the list of documents required for the regular verification process: photo Id, residency, citizen status, social security, income and resources, self-employment expenses. In Regulation 8684 to Establish Eligibility Standards for the Payments to Territories – Adults from ADFAN, Chapter III, Article 3, Section 3.5, establishes that the eligibility period is determined by the Central Level Medical Social Board. In Chapter VIII, Article 2, Section 2.3, part B, it establishes that any eligible core member who intentionally violates the rules and receives benefits to which they are not entitled will be subject to a claim. In these cases, a collection invoice will be sent. In Chapter III, Article 3, Section 3.3, part 3, it establishes that the evaluation for determining the incapacity of applications or cases will be the responsibility of the ADSEF Central Level with the information available and will recommend the appropriate action. In addition, 2 CFR 200.303 (e) requires to take reasonable cybersecurity and other measures to safeguard information including protected personally identifiable information (PII) and other types of information. This also includes information the Federal agency or pass-through entity designates as sensitive or other information the recipient or subrecipient considers sensitive and is consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for eligibility requirements, we selected a sample of one hundred (100) participants who were active during the fiscal year under audit. During our audit we noted the following deficiencies: • Fifteen (15) cases lacked the documents requested for their initial appointment (photo ID, evidence of residency and evidence of citizenship). • Two (2) new participant files did not include supervisor approval of the eligibility determination. • Five (5) files submitted and no information related to our audit period was provided. • Fifty-nine (59) files showed an untimely eligibility determination based on the recertification date. • Six (6) files of Category D case in which the benefit was granted and they did not send the authorization to the Medical Social Board, who are responsible for determining eligibility in these cases. Further, the participants' social security number is used to assign the file number, and all physical files are identified with the social security number. In addition, the files are not uniform, and the documentation from the Nutrition Assistance for Puerto Rico, Payment to Territories and TANF are archived without maintaining an order, legend or uniformity between the regions. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem, lack of proper training and updated information to all personnel with the responsibility of determining, supervising, and monitoring the eligibility determinations and follow-up. The sampling was a statistical valid sample. STATEMENT OF CAUSE ADSEF lacks supervisory review, delays in updating participant information, and insufficient controls over eligibility verification, income documentation, and file maintenance. There are no formal trainings for all regions and locals for the personnel involved in eligibility determination and subsequent follow-up. In addition, ADSEF does not have proper instructions and control over how the information should be archived in the participants’ files. POSSIBLE ASSERTED EFFECT Improper documentation and ineligible determinations increase the risk of noncompliance and may result in improper benefit payments. ADSEF is not properly safeguarding PPI of participants. In addition, the way information is being filed in the records does not allow for adequate monitoring of the documents and information necessary to comply with Federal regulations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-011/2023-039. RECOMMENDATIONS We recommend ADSEF to strengthen internal controls to ensure complete and accurate eligibility documentation and improve timeliness of recertifications. ADSEF should establish a schedule for continuous training for personnel in charge of eligibility determinations. In addition, other identification numbers should be used for participants instead of the social security number.

FINDING REFERENCE NUMBER 2024-032 (See Finding Reference Number 2024-011) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT MATCHING, LEVEL OF EFFORT, EARMARKING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with the Compliance Supplement every fiscal year, a state must maintain an amount of “qualified state expenditures” (as defined in 42 USC 609(a)(7)(B) and 45 CFR section 263.2) for eligible families (as defined in 42 USC 609(a)(7)(B)(i)(IV) and 45 CFR section 263.2(b)) at least at the applicable percentage of the state’s historic state expenditures. In addition, it states that the applicable percentage for each fiscal year is 80 percent of the amount of non-Federal funds the state spent in FY 1994 on AFDC or 75 percent if the state meets the TANF work participation rate requirements (42 USC 607(a)) for the fiscal year. This is termed “basic MOE”, and the requirement is based on the Federal fiscal year. Any MOE expenditures above this required amount are referred to as “excess MOE”. In accordance with the regulation, the amount of MOE required for Puerto Rico is $21,185,453. 2 CFR section 200.303 (a) establishes 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our internal controls and compliance procedures for compliance with the MOE requirement, we requested the Grant Award report for 2023, covering the period from July 1, 2022, to September 30, 2023, to verify compliance with the MOE. The report covering this period reflects an MOE of $11,779,885, a deficiency of $9,405,568. Additionally, the reported expense amounts could not be validated against the PRIFAS database. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systematic. Puerto Rico government agencies fail to demonstrate that they maintain constant communication and follow up on information requests to ensure that all required documentation is available to complete reports. In ADSEF no one has been assigned with the responsibility of monitoring compliance with the Level of Effort requirement. Additionally, procedures and internal controls manuals should provide for and ensure the segregation of duties and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare the financial statement and SEFA. STATEMENT OF CAUSE According to discussions with ADSEF personnel, since 2018, another agency of the Government of Puerto Rico, the Health Insurance Administration (ASES, by its Spanish Acronym), has not provided information to comply with the spending levels of other state programs. In addition, during our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, and no one is assigned the responsibility of monitoring compliance with the Level of Effort requirement. POSSIBLE ASSERTED EFFECT ADSEF is not in compliance with reporting state program expenditure levels, as required by program regulations. Additionally, ADSEF is not ensuring that the reports are accurate and traceable to the accounting database used to prepare their financial reports. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-014/2023-042. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported. Puerto Rico government agencies must maintain constant communication and follow-up on information requests to ensure that all required documentation is available to complete reports. In addition, ADSEF should implement internal controls procedures that ensure continuous monitoring of the required level of effort.

FINDING REFERENCE NUMBER 2024-037 (See Finding Reference Number 2024-015) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 231PR426S7003/4 and 241PR426S7003/4 we noted the following deficiencies: 1) The PRDF was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. 2) In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-020/2023-049. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.

FINDING REFERENCE NUMBER 2024-041 FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2301PRLIEA (Federal Award Year: 10/1/2022 – 9/30/2024) 2401PRLIEA (Federal Award Year: 10/1/2023 – 9/30/2025) 2301PRLIEE (Federal Award Year: 10/1/2022 – 9/30/2024) 2301PRLIEI (Federal Award Year: 10/1/2022 – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. LlHEAP Performance Data Form (OMB No 0970-0449) – State grant recipients must submit this report by January 3lst regarding the prior Federal fiscal year. The first section of the report is the Grant recipient Survey that collects and reports data on sources and uses of LIHEAP funds. The Grant recipient Survey includes Section III: Estimated Sources of Funds and Section IV: Estimated Use of LIHEAP Funds. Note: that these are referencing obligated not expended funding. The rest of the report is regarding performance metrics, mostly related to home energy burden targeting and reduction, as well as the continuity of home energy service. The Grantee Survey obligation amounts should be compared with the Carryover and Reallotment and FFR-425 reports. This reconciliation is needed to make sure the obligated balances for the program year being tested are accurate. Annual Report on Households Assisted by LIHEAP (OMB No. 0970-0060) https://omb.report/icr/202211-0970-005 – As part of the application for block grant funds each year, a report is required for the preceding fiscal year of (1) the number and income levels of the households assisted for each component and any type of LHEAP assistance (heating, cooling, crisis, and weatherization); and (2) the number of households served that contained young children, elderly, or persons with disabilities, or any vulnerable household for each component. Quarterly Performance and Management Report (OMB No. 0970-0589) https://omb.report/icr/202205-0970-017/doc/121847100 – Grant recipients must submit data and information about LIHEAP during the current FY, including success, challenges, needs and innovations. The quarterly reports focus on assisted households, performance management, obligation of funding, changes made due to anticipated increase in energy bills, collaboration with other utility programs, training and technical assistance needs. STATEMENT OF CONDITION As part of our audit procedures over the financial reporting requirements for LIHEAP program, we selected three reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, there are no written procedures describing internal controls over this requirement. We requested the LIHEAP Performance Data (OMB No 0970-0449), but no evidence of the report was provided. We obtained a copy of the Annual Report on Households Assisted by LlHEAP (OMB No. 0970-0060), but no supporting documentation regarding the information reported was provided. We requested two quarterly reports for the Quarterly Performance and Management Report (OMB No. 0970-0589) for the 2301LIEA grant, but no documentation was provided. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. In relation to Special and Performance Reports, there are no proper controls over the data reported and the supporting information. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. In relation to the Special and Performance Reports, the lack of written procedures and proper safeguarding of documentation does not allow for demonstrating compliance with the requirements of these reports. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. We were unable to evaluate internal controls and compliance over the Special and Performance Reports. ADSEF might not comply with the requirements of the program and not report it on time to the regulatory agencies. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers 2023-021/2023-051. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. In addition, in relation to the Special and Performance Reports create internal controls that provide for obtaining information, preparing reports, and filing evidence of reports.

FINDING REFERENCE NUMBER 2024-043 FEDERAL PROGRAM (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2211PRSOSR (Federal Award Years: 101/2021 through 9/30/2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 42 U.S. Code §1397e and the requirements of the Post-Expenditure Report (OMB #0970-0234), states and territories must submit an annual Post-Expenditure Report to the Office of Community Services no later than six months following the end of the fiscal year. The report must include, among other elements, clearly defined eligibility criteria for program beneficiaries and an accurate accounting of expenditures, including the amount of Temporary Assistance for Needy Families (TANF) funds transferred to the Social Services Block Grant (SSBG). The 2 CFR §200.303 (a) establishes 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION During our review of the submitted Post-Expenditure Report and supporting documentation, we identified the following deficiencies: 1) The eligibility criteria for beneficiaries were not established or documented within the report and, 2) The reported amounts of TANF funds transferred to SSBG do not reconcile with the data provided in the PRDF’s internal database. Although the report specifies that expenditure should be based on current balances rather than budgeted amounts, the transfer in question was based on the approved budget. 3) In addition, internal control interviews revealed that there is no designated individual responsible for reviewing the information entered to the report by the preparer, increasing the risk of reporting errors. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training and segregation of duties when reporting (preparer and reviewer not being the same person). STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered in the Post-Expenditure Report. POSSIBLE ASSERTED EFFECT Failure to meet the reporting requirements may lead to noncompliance with Federal regulations, reduced transparency and accountability in the use of Federal funds, and potential implications for future funding or audit findings. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-022/2023-053. RECOMMENDATIONS We recommend ADFAN to establish and document eligibility criteria in accordance with Federal reporting requirements. Reconcile TANF transfers with internal records to ensure accurate reporting and ensure that all expenditures reported are based on actual balances rather than budgeted projections. ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.

FINDING REFERENCE NUMBER 2024-044 (See Finding Reference Number 2024-016) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBER 2203PRFPSS (Federal Award Years: 10/1/2021 through 9/30/2023); 2202PRFPCV (Federal Award Years: 10/1/2021 through 9/30/2023) 2211PRSOSR (Federal Award Years: 10/1/2021 through 9/30/2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes 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. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Awards 2203PRFPSS and 2202PRFPCV, which closes in the audit period from July 2023 to June 2024, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2203PRFPSS, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The matching expenditure on line (j) does not match the database provided by the PRDF. 4) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on July 8, 2024. 5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grant Award 2211PRSOSR, which closes in the audit period from July 1, 2023 to June 30, 2024, to validate the recorded amounts. Upon evaluating the report, we found the following deficiencies: 1) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis and no conversion to accrual basis was made. 2) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. 3) The report was not submitted within the established deadline, December 31, 2023 and they submitted the report on June 10, 2024. 4) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-023/2023-054. RECOMMENDATIONS We recommend that ADFAN ensures the SF-425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.

FINDING REFERENCE NUMBER 2024-046 (See Finding Reference Number 2024-018) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/2022 – 9/30/2023) 2022G9922PT (Federal Award Years: 10/1/2022 through 9/30/2025) 2301PRTABD (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL REPORTING TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirements for the Temporary Assistance for Needy Families (TANF) and Payment to Territories – Adult (PTTA) programs, we reviewed two ACF-196TR reports submitted during the fiscal year under audit. Our review disclosed deficiencies related to the accuracy, support, reconciliation, and timeliness of reported expenditures. Specifically, we noted the following: • Administrative expenditures for both TANF and PTTA are recorded under the same accounting account number and Assistance Listing Number associated with TANF. As a result, the PRIFA accounting system does not segregate administrative expenditures by federal award or Assistance Listing Number, limiting the ability to identify and track expenditures attributable to each program. • Amounts reported in the ACF-196TR reports could not be reconciled to the PRIFA accounting records, particularly for administrative expenditures. Upon request, management was unable to provide supporting schedules, reconciliations, or documentation demonstrating how the reported amounts were derived. Supporting information was prepared only after it was requested during the audit. • For grant award 2023G996117, reported expenditures in the quarterly report of September 30, 2023, that did not agree with the underlying accounting records. We identified differences of $7,266.40 in Line 6A (Work-Related Activities and Expenses), $1,745,668.00 in Line 5A (Basic Assistance), $1,645,366.55 in Line 6J (Administration), $2,007,611.62 in Line 3 (Transfer to SSBG), and $103,052.41 in Line 10 (Total Expenditures). In addition, the report was submitted after the applicable due date. • For grant award 2401PRTANF, reported expenditures in the June 30, 2024 quarterly report that also differed from the accounting records. We identified differences of $12,312.07 in Line 6A (Work-Related Activities and Expenses), $1,898,639.95 in Line 6J (Administration), $3,786,696.14 in Line 3 (Transfer to SSBG), and $1,902,297.08 in Line 10 (Total Expenditures). Furthermore, the report maintained by ADSEF did not contain evidence of the submission date; therefore, we were unable to determine whether the report was submitted within the required timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult programs to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-025/2023-056. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.

FINDING REFERENCE NUMBER 2024-047 (See Finding Reference Number 2024-019) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 231PR426S7003/4 (Federal Award Year: 10/1/2022 through – 9/30/2023); 241PR426S7003/4 (Federal Award Year: 10/1/2023 through – 9/30/2024) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – EBT RECONCILIATION TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with Compliance Supplement and the State Plan, the EBT services provider makes payments to authorized retailers, network, third party providers, and financial institutions on behalf of the Government of Puerto Rico for benefits accessed and distributed to recipients daily. The EBT services provider is reimbursed as authorized by the Popular Bank of Puerto Rico (PBPR). Payments are recorded and compared to the Daily Activity File and Daily Payments Summary File prepared by the EBT services provider for the Department of the Family. EBT system reports provide these and other standardized computer reports as well as ad hoc access to EBT system data to perform the following key reconciliation: 1) Benefits authorized = benefits posted. 2) Benefits accessed by recipients (net EBT account debits/credits) = benefit amount transactions approved by the EBT services provider. 3) Net EBT account debits/credits = amount paid to merchants and financial institutions, “+/-” authorized adjustments. 4) Amount paid to merchants and financial institutions = funds requested by the EBT services provider, “+/-” authorized adjustments. The 2 CFR §200.303 (a) establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit of compliance with the EBT reconciliation requirements for the fiscal year ended June 30, 2024, we identified the following deficiencies: • ADSEF was unable to provide updated written reconciliation procedures or manuals. They provided a manual from 2012, which was not updated with the data currently used. • No evidence was provided to show that EBT benefits were reconciled or matched to Federal drawdowns (SF-425 or PMS). QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records. STATEMENT OF CAUSE ADSEF deficiencies stem from the absence of formal updated written reconciliation procedures, inadequate internal controls over EBT operations, lack of staff training, and unclear assignment of responsibilities related to reconciliation and oversight. POSSIBLE ASSERTED EFFECT ADSEF lack of updated written reconciliation process increases the risk of undetected errors or irregularities in EBT transactions, potential misstatements in Federal financial reports, and unaccounted variances between Federal funding and benefit disbursements. It also limits the agency’s ability to monitor program performance and meet audit and compliance obligations. IDENTIFICATION OF REPEAT FINDING This is a repeat of a finding reported in the prior audit as Finding Numbers is 2023-026/2023-057. RECOMMENDATIONS We recommend ADSEF develop and implement updated formal, written reconciliation procedures, clearly outlining roles, responsibilities, and the frequency of reconciliations. Additionally, we advise providing staff with comprehensive training on reconciliation protocols and internal control requirements to ensure consistency and compliance.

Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Lincoln County has not established procedures to ensure compliance with the following compliance requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment; and Reporting. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements and could result in a loss of federal funds to the County. Management Response: Chairman of the Board of County Commissioners: The Board acknowledges the recommendation to formalize internal control documentation consistent with GAO Green Book standards. While internal controls have been operationally in practice, documentation has not been consolidated into a single formally adopted policy reflecting the federal framework language referenced in the audit. • A comprehensive written internal control policy will be drafted aligning with GAO Green Book principles. • The policy will incorporate revenue, disbursement, purchasing, monitoring, and documentation controls. • The policy will be reviewed by legal counsel prior to formal adoption. • An annual review process will be implemented to ensure continued compliance with federal standards. • Prior to initiation of any federally funded project, relevant county personnel will be formally briefed on applicable federal requirements. • Upon completion of federally funded projects, an internal review will be conducted to verify that required documentation is complete and that applicable regulations were followed. No questioned costs were identified in connection with these findings. County Clerk: Policies and procedures for federal programs will be included in the employee handbook. Each office will communicate with the County Clerk and Treasurer when federal funds have been awarded to ensure proper procedures are followed. Recommendation: OSAI recommends the County gain an understanding of grant requirements for this program and implement internal control procedures to ensure compliance with grant requirements. Criteria: 2 CFR § 200.303 Internal Controls (a) reads as follows 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). Accountability and stewardship should be overall goals in management's accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts.

Condition: During the process of documenting the County’s internal controls regarding federal disbursements, we noted that Lincoln County has not established procedures to ensure compliance with the following compliance requirements: Procurement and Suspension and Debarment, Special Tests and Provisions. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements and loss of federal funds to the County. Recommendation: OSAI recommends the County implement a system of internal controls to ensure compliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: As Chairman of the Board of County Commissioners, I am submitting the Board’s response to the federal compliance findings identified in the audit report. The Board acknowledges the recommendation to formalize internal control documentation consistent with GAO Green Book standards. While internal controls have been operationally in practice, documentation has not been consolidated into a single formally adopted policy reflecting the federal framework language referenced in the audit. • A comprehensive written internal control policy will be drafted aligning with GAO Green Book principles. • The policy will incorporate revenue, disbursement, purchasing, monitoring, and documentation controls. • The policy will be reviewed by legal counsel prior to formal adoption. • An annual review process will be implemented to ensure continued compliance with federal standards. • Prior to initiation of any federally funded project, relevant county personnel will be formally briefed on applicable federal requirements. • Upon completion of federally funded projects, an internal review will be conducted to verify that required documentation is complete and that applicable regulations were followed. No questioned costs were identified in connection with these findings. County Clerk: Policies and procedures for federal programs will be included in the employee handbook. Each office will communicate with the County Clerk and Treasurer when federal funds have been awarded to ensure proper procedures are followed. County Treasurer: The Treasurer will work with the other County Officials on gaining a better understanding of requirements for this program and will work on implementing policies and procedures to ensure compliance with grant requirements. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: 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).

2024-001 Excess Food Service Fund Balance (Material Weakness) Federal Agency: U.S. Department of Agriculture Pass-through Agency: New Hampshire Department of Education Cluster/Program: Child Nutrition Cluster Assistance Listing Numbers: 10.553 & 10.555 Passed-through Identification: N/A Compliance Requirement: Special Tests and Provisions Type of Finding: Internal Control over Compliance – Material Weakness Material Noncompliance Criteria or Specific Requirement: Federal regulations 2 CFR 200.303 states, the School District, as a recipient of Federal funds, must 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 addition, under 7 CFR, 210.14(b), Net Cash Resources, “the school food authority shall limit its net cash resources to an amount that does not exceed 3 months average expenditures for its nonprofit school food service.” Condition: During review of the food service unassigned fund balance, it was noted that the balance exceeded three months’ average expenditures. The fund balance in the food service fund amounted to $392,995 whereas three months’ average expenditure was $202,689. This generates excess fund balance of $190,306. Effect: The School District is not in compliance with CFR Title 7, 210.14(b) by maintaining fund balance more than three months average expenditures. Cause: Management identified the excess net cash resources condition and developed a corrective action plan; however, implementation of the plan was still in progress at fiscal year-end, and net cash resources remained above the allowable limit. Questioned Costs: No questioned costs were identified, as the condition relates to excess net cash resources rather than unallowable or unsupported expenditures. Identification as Repeat Finding: As identified in Schedule III, Summary Schedule of Prior Audit Findings, this is a repeat finding of 2023-004. Recommendation: We recommend that the School District take immediate steps to reduce its net cash resources by having an acceptable, approved plan for using surplus fund balance. Since program funds must be used only for program purposes, excess fund balance must be reduced by improving the quality of food served or purchasing needed supplies, services, or equipment unless otherwise directed by the State of New Hampshire Department of Education. Views of Responsible Officials: Management’s views and corrective action plan are included at the end of this report.

2024-008 – CORONAVIRUS CAPITAL PROJECT FUND – LACK OF SUPPORT FOR PROCUREMENT – ALN 21.029 - MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-008 Federal Program: Coronavirus Capital Project Fund ALN: 21.029 Federal Award Number(s) and Year(s): CPFFN0155, 2024 Federal Agency: U.S. Department of the Treasury Pass Through Agency: North Dakota Department of Career and Technical Education Questioned Cost: Unknown Condition Williston Basin Public School District No. 7 did not maintain support surrounding the selection process for the construction management at-risk (CMAR) for the CTE Center. Therefore, we were unable to determine if the CMAR selection was properly completed. In addition, Willison Basin Public School did not have a procurement policy. Effect Without support for the selection of the CMAR of the CTE Center, Williston Basin Public School District is unable to demonstrate that contracts were properly awarded. Cause Williston Basin Public School District No. 7 does not have sufficient procedures in place to ensure documentation is maintained to ensure the selection process was completed in accordance with NDCC. Criteria • N.D.C.C. §48-01.2-20 (selection process for construction management at-risk planning and design phase services) includes, but is not limited to, the following requirements: o The selection committee shall establish the content of the request for qualifications, which must include (but is not limited to); the identity of the governing body and a list of the members of the selection committee, description of the proposed public improvement, proposed budget limits of the public improvement, commencement and completion date of the proposed public improvement, and the description of the scope of services to be provided. • 2 CFR 200.318 states: "The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327." • Under 2 CFR 200.303(a), recipients and subrecipients 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." Context Williston Basin Public School District entered into one contract for the CTE Center with a value of $20,390,114. Repeat Finding No. Recommendation We recommend the Willison Basin Public School District maintain support surrounding the selection process for the construction manager at-risk. We also recommend that a procurement policy is established. Williston Basin Public School District No. 7’s Response See Corrective Action Plan.

2024-009 – TITLE I –INADEQUATE SUPPORTING DOCUMENTATION – ALN 84.010 - MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-009 Federal Program: Title I – Grants to LEA’s ALN: 84.010 Federal Award Number(s) and Year(s): S010A240034, 2024 Federal Agency: U.S. Department of Education Pass Through Agency: North Dakota Department of Public Instruction Questioned Cost: $136,372 Condition Williston Basin Public School District No. 7 was unable to provide supporting documentation for expenses charged to the Title I program. 54 of the 60 expenditures we sampled did not have any support, leaving them with known questioned costs of $136,372. Effect Williston Basin Public School District No. 7 may have charged unallowable expenditures to the grant program. Cause Williston Basin Public School District No. 7 did not maintain support documentation for all expenditures charged to the Title I grant. In addition, there was no evidence of approval for these transactions. Criteria Uniform Guidance 2 CFR 200.303(a) states “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).” Uniform Guidance 2 CFR 200.403(g) requires costs to be adequately documented. "Standards for Internal Control in the Federal Government" (Green Book) requires management to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. Management is to design appropriate types of control activities for the entity's internal control system. Control activities help management fulfill responsibilities and address identified risk responses in the internal control system. Context Williston Basin Public School District No. 7 had total Title I expenditures of $1,527,887 in fiscal year 2024. Projected questioned costs identified during testing totaled $1,463,906. Repeat Finding Yes. See finding 2023-014. Finding 2022-007 was reported in previous years. Recommendation We recommend that Williston Basin Public School District No. 7 establishes proper internal controls and policies to ensure they are maintaining proper support documentation for all federal grants. Williston Basin Public School District No. 7’s Response

2024-010 – EDUCATION STABILIZATION FUND - LACK OF SUPPORT OVER ESSER FUNDS – ALN 84.425 - MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-010 Federal Program: Education Stabilization Fund ALN: 84.425 Federal Award Number(s) and Year(s): S425U210007, 2024 Federal Agency: U.S. Department of Education Pass Through Agency: North Dakota Department of Public Instruction Questioned Cost: $171,408 Condition Williston Basin Public School District No. 7 was unable to provide supporting documentation for expenses charged to the Education Stabilization Fund. 13 of the 60 we sampled did not have any support, leaving them with known questioned costs of $171,408. Effect By not having the correct supporting documentation, the School District may be subject to an increased risk of error, fraudulent financial reporting, asset misappropriation, and corruption. Cause Williston Basin Public School District No. 7 does not have sufficient procedures in place to ensure that support documentation for federal grants is maintained. Criteria Uniform Guidance 2 CFR 200.403(g) requires costs to be adequately documented. "Standards for Internal Control in the Federal Government" (Green Book) requires management to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. Management is to design appropriate types of control activities for the entity's internal control system. Control activities help management fulfill responsibilities and address identified risk responses in the internal control system. Uniform Guidance 2 CFR 200.303(a) states “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).” Context Williston Basin Public School District No. 7 had total Education Stabilization Fund expenditures of $1,613,557 in fiscal year 2024. Projected questioned costs identified during testing totaled $257,784. Repeat Finding Yes. See finding 2023-013. Recommendation We recommend that Williston Basin Public School District No. 7 establishes proper internal controls and policies to ensure they are maintaining proper support documentation for all federal grants. Williston Basin Public School District No. 7’s Response See Corrective Action Plan.

Finding 2024-003 Internal Control and Compliance over Subrecipient Monitoring (Material Weakness) Information on the Federal Program: Assistance Listing Number(s): 17.258, 17.259, 17.278 Federal Program Name: Workforce Innovation and Opportunity Act (WIOA) Federal Agency: U.S. Department of Labor Pass-Through Entity: California Employment Development Department Federal Award Number and Award Year: AA211008/AA311008/AA411008/AA411009/AA411010 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (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. 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). Title 2: Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D - Post Federal Award Requirements, Subrecipient Monitoring and Management, §200.331 Requirements for pass-through entities (2 CFR 200.331): All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient's unique entity identifier; iii. Federal Award Identification Number (FAIN); iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; v. Subaward Period of Performance Start and End Date; vi. Subaward Budget Period Start and End Date; vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xiii. Identification of whether the award is R&D; and xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.; (1) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (2) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; Title 2: Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D - Post Federal Award Requirements, Subrecipient Monitoring and Management, §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). Condition: During our testing of the Imperial County Workforce Development Office’s (ICWDO) provisions for subrecipient monitoring under the WIOA Cluster, we noted two (2) of the two (2) subrecipient selected for testing, there was no review or approval over the monitoring procedures performed by ICWDO monitoring staff. The entire population consisted of two (2) subrecipients. Also, the County did not document their evaluation of the subrecipient’s risk of noncompliance. The following information was not provided at the time of the subaward for two (2) of the two (2) subawards selected for testing: o Federal award identification number o Federal award date of award to recipient by the Federal agency o Name of federal awarding agency o Federal Financial Assistance Listing/CFDA Number o Identification of whether the award is research and development Cause: The County’s ICWDO department does not have a formal procedure in place for the department’s review and approval over the monitoring procedures performed by the department over its subrecipients. The ICWDO department did not ensure that the required award information and applicable requirements were communicated to the subrecipients and did not maintain documentation of their evaluation of each subrecipient’s risk of noncompliance. Effect: The County’s ICWDO department did not review and approve monitoring procedures performed over its subrecipients. Additionally, the ICWDO department did not maintain policies and procedures to align with the Subrecipient Monitoring requirements in 2 CFR 200.332 (a) and 200.332(b). Identification as a Repeat Finding, If Applicable: Yes. See Finding 2023-004. Questioned Costs: No questioned costs were identified. Recommendation: We recommend ICWDO implement policies and procedures in accordance with 2 CFR 200.331(a) 200.332(b) to ensure compliance with subrecipient monitoring requirements and that require the review and approval of the monitoring procedures performed over its subrecipients by a separate individual. View of Responsible Officials and Planned Corrective Action: See separate Corrective Action Plan.

Finding 2024-004 Internal Control and Compliance over Reporting (Significant Deficiency) Information on the Federal Program: Assistance Listing Number: 17.258, 17.259, 17.278 Federal Program Name: Workforce Innovation and Opportunity Act (WIOA) Federal Agency: U.S. Department of Labor Pass-Through Entity: California Employment Development Department Federal Award Number and Award Year: AA211008/AA311008/AA411008/AA411009/AA411010 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (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. 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). OMB No. 1205-0461 states that all Employment and Training Administration (ETA) grantees are required to submit quarterly financial reports for each grant award they receive. Financial data is required to be reported cumulatively from grant inception through the end of each reporting period. Condition: During our testing of Imperial County Workforce Development Office’s (ICWDO) provisions for reporting requirements, we noted the following instances: • For two (2) of the two (2) quarterly reports from a nonstatistical sample, the amounts reported did not agree to the amounts recorded in the County’s general ledger and SEFA; • For four (4) of the four (4) monthly reports from a nonstatistical sample, the amounts reported did not agree to the amounts recorded in the County’s general ledger and SEFA; • For four (4) of the four (4) monthly reports from a nonstatistical sample, the reports were prepared, reviewed, and approved by the same individual • For one (1) of the one (1) closeout report consisting of the entire population, the amounts reported did not agree to the amounts recorded in the County’s general ledger and SEFA; Cause: ICWDO did not ensure the amounts reported on the quarterly financial reports agreed to the amounts recorded in the County’s general ledger and SEFA and did not ensure there was segregation of duties over the preparation and review and approval of the monthly reports. Effect: The ICWDO department’s procedures were not consistently followed, which requires reports to agree to the amounts recorded in the general ledger and SEFA and requires reports to be reviewed and approved by a separate individual. Identification as a Repeat Finding, If Applicable: Yes. See Finding 2023-005. Questioned Costs: No questioned costs were identified. Recommendation: We recommend ICWDO adhere to their policies and procedures and ensure amounts reported on the quarterly financial reports agree to the County’s general ledger and SEFA and ensure segregation of duties over the preparation and approval of monthly reports. View of Responsible Officials and Planned Corrective Action: See separate Corrective Action Plan.

Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Community Development Block Grant Federal Award Identification Number: B-20-MC-6-0545, B-21-MC-6-0545, B-22-MC-6-0545, B-24- MC-6-0545 Assistance Listing Number: 14.218 Award Period: July 1, 2023 through June 30, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matter Criteria or Specific Requirement: Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, hereafter referred as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., 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). Additionally, 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award section 200.303 requires that entities 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: FFATA reports were not filed for subgrants. Questioned Costs: None. Context: FFATA reports were not filed for subgrants for fiscal year 2023-2024. Cause: The Department had turnover during the audit period and did not have adequate staffing to know which reports to submit per the grant agreement. Effect: FFATA reporting was not completed. Repeat Finding: This is not repeat finding. Recommendation: We recommend the City implement policies and procedures to ensure that FFATA reporting occurs for all subawards of $30,000 or more for all federal awards and that the reporting be performed timely. Views of Responsible Officials: The City concurs with the finding.

Significant deficiency in internal controls over compliance related to allowable costs. Federal Agencies: Department of Treasury and Department of Housing and Urban Development Program Titles: Coronavirus State and Local Fiscal Recovery Fund and CDBG Entitlement/Special Purpose Grants Cluster Assistance Listing Numbers: 21.027 and 14.218 Award Numbers: City of Monroe ARPA Awards, HCS-23-AR-2110-048, EL-23-AR-48-048, EL-23-AR-47-048, and SLFRP0194. HCS-22-26-2205-048, CDBG - MH & TS, and Unknown Project Period: November 1, 2021 - September 30, 2025 and July 1, 2023 - June 30, 2026 Criteria Under 2 CFR § 200.303, a nonfederal entity is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition/Context for Evaluation During the audit for the year ending June 30, 2024, it was noted that the Agency did not consistently have manager review and approval for employee timesheets during a period of six months. The employees were signing the timesheets, but the control for the manager review and approval was not followed. Questioned Costs Not applicable. Cause The Agency had switched payroll systems during that time and there was an expectation that there would be a change in the review process. The updated control was determined not to be effective and the Agency switched back to manual review and approval of timesheets. However, due to employee turnover in the finance department, this switch back to the original control did not occur timely, leading to a lapse in control activities. Effect or Potential Effect The Agency did not apply their stated controls over allowable costs during a six-month period. Repeat Finding Not Applicable. Recommendation We recommend that the Agency strengthen monitoring over its allowable costs to ensure manager review and approval of employee timesheets is performed consistently and timely throughout the year. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying management corrective action.

FINDING 2024-004 Subject: Child Nutrition Cluster - Internal Controls Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY 22-23, FY 23-24 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Finding: Material Weakness Repeat Finding This is a repeat finding from the immediately prior audit report for control activities - allowable costs/cost principles. The prior audit finding number was 2022-003. Condition and Context Internal control is generally defined as a process affected by an entity's oversight body, management, and other personnel that provides reasonable assurance that the objectives of the entity will be achieved. For federal awards, nonfederal entities, such as the School Corporation, are required to establish and maintain internal control over federal awards to provide reasonable assurance that the entity will comply with applicable federal statutes, regulations, and the terms and conditions of its awards. Internal control is not one event or circumstance, but a dynamic and continual process. The process is based on fundamental principles that operate as whole. The fundamental principles are related to five components of internal controls that are as follows: Control Environment, Risk Assessment, Control Activities, Information and Communication, and Monitoring. If a component is not effective, or the components are not operating together in an integrated manner, then an internal control system cannot be effective. Deficiencies as noted below were identified in all five of the components. Control Environment - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Special Tests and Provisions - Non-Profit School Food Service Accounts The School Corporation had not established a strong foundation for an effective internal control system. There was no demonstrated emphasis on the importance of internal controls or on compliance with federal program requirements. INDIANA STATE BOARD OF ACCOUNTS 32 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Risk Assessment - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Special Tests and Provisions - Non-Profit School Food Service Accounts The School Corporation had not defined objectives necessary to identify risks or determine risk tolerances. Management did not identify, analyze, or respond to risks that could affect the achievement of objectives, including risks arising from significant changes to operations or the potential for fraud. Control Activities - Allowable Costs/Cost Principles The School Corporation was a member of the Food2School Cooperative that procured food and supply items on behalf of the member schools. The School Corporation did not have internal controls in place to ensure that the amount charged per item agreed to the approved price lists. Control Activities - Eligibility Any child enrolled in a participating school who meets the applicable program's definition of "child" may receive meals under the applicable programs. A child belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children that have been determined ineligible for free or reduced-price meals pay the full price for their meals. A child's eligibility for free and reduced-priced meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. The School Corporation determines eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Annual eligibility determinations may also be based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program, or, under most circumstances, the TANF program. A household may furnish documentation if its participation in one of those programs, or the School Corporation may obtain the information directly from the state or local agency that administers those programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. Paper applications and online applications are processed in the School Corporation's software system to determine if students are eligible for free or reduced meals. Paper applications are input by the Food Service Director and online applications are directly submitted by parents. The software's determination of eligibility was recalculated by the Food Service Director without an oversight or review process in place to ensure accuracy. Additionally, the Food Service Director downloaded the Direct Certifications file monthly from the CNC Web Portal and uploaded the file into the School Corporation's software without a documented oversight or review process in place to ensure directly certified students were properly processed. Information and Communication - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Special Tests and Provisions - Non-Profit School Food Service Accounts The School Corporation had not established adequate communication methods or practices to ensure that reliable information was identified, captured, and communicated to the appropriate internal and external parties. INDIANA STATE BOARD OF ACCOUNTS 33 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Monitoring - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Eligibility, Reporting, Special Tests and Provisions - Non-Profit School Food Service Accounts The School Corporation did not perform ongoing or periodic evaluations to determine whether internal controls were operating effectively or to identify needed improvement. In addition, the School Corporation did not have a process in place to track or to follow-up on corrective actions written in response to audit findings. The lack of internal controls was systemic throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause The School Corporation had not implemented an effective system of internal controls. Changes in key financial personnel, along with insufficient employee training, contributed to processes and procedures not being properly developed or consistently followed. Furthermore, documentation was not maintained to show that invoiced amounts were verified against approved price lists. Finally, only one individual performed the direct certification process, and no secondary review was conducted to ensure the accuracy of data entered into the School Corporation's school lunch software system or the correctness of determinations made. Effect Because the five components of internal control were not properly designed or implemented, the School Corporation's internal control system could not be effective. As a result, general and fraud-related risks, as well as risks arising from significant operational changes, could negatively impact the School Corporation. Existing internal control deficiencies may continue undetected, and additional weaknesses may exist without being identified. Without verifying that invoiced amounts agreed to approved price lists, the School Corporation is at risk of paying more than the bid-approved prices. Errors or incorrect entries in the school lunch software and inaccurate eligibility determinations could result in students receiving free or reduced-price meals in error. Without a properly implemented internal control system, the School Corporation cannot effectively prevent, or detect and correct, material noncompliance. INDIANA STATE BOARD OF ACCOUNTS 34 SCOTT COUNTY SCHOOL DISTRICT 2 SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended the School Corporation design and implement a system of internal controls, which would include policies and procedures related to the five components of internal control. Management should define clear objectives, identify and assess risks, and develop policies and procedures to address those risks. We further recommended that review processes be established to verify that invoiced amounts agree with approved price lists. Finally, we recommended a secondary review be implemented for the direct certification process to ensure the accuracy of information entered into the school lunch software and the correctness of eligibility determinations. Regular monitoring should be conducted to ensure internal controls are operating effectively and deficiencies are addressed promptly. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.