Findings Citing § 200.400

Finding 2025-002 Federal Assistance #66.034 Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to the Clean Air Act Criteria are the governing requirements with which the Organization is to comply. Criteria: Electronic Code of Federal Regulations (ECFR), Title 2, Section 200.400(a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. ECFR, Title 2, Section 200.68 MTDC means all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward or subcontract (regardless of the period of performance of the subawards and subcontracts under the award). Please note: the Organization’s federal award is for the period 9/1/24-8/31/27. Accordingly, the requirements for the award are those that are prior to the change to cost principles effective 10/1/24. Context: The Organization has allowed participating states to choose how to pay their annual assessment for Air Data Management System (ADMS) costs. States could either A) pay their ADMS assessment directly to the Organization, or B) have the State’s EPA grant award reduced by a portion or all of the ADMS assessment with the caveat that those funds be assigned to the Organization’s EPA grant award, or C) redirect amounts budgeted within the Organization’s EPA grant award originally to be used for ad-hoc travel to instead be used to pay ADMS costs. In the details of tracking all of these internal designations within the grant, the Organization made an error in the application of indirect costs. Condition is what happened that did not meet the criteria. Condition: The Organization did not properly charge indirect costs related to ADMS direct costs in excess of $25,000. Cause is the reason the condition did not meet the criteria. Cause: The Organization has allowed participating states choices as to how the Organization received its funds to provide flexibility in managing their budgets, including matching requirements. Effect is the result of the condition. Effect: The Organization did not timely identify the incorrect application of indirect costs charged to the federal award as required by 200.68 Auditor’s Recommendation: The Organization should withhold the amount overcharged to the federal award from the next funding request. The Organization should highlight or otherwise bring attention to the place in their ASAP funding workbook where contracts exceeding the federal threshold for application of the indirect cost rate are deducted from the calculation. Perspective: There was some uncertainty as to the treatment of the contract for personal services: whether it should be treated as personal services or a contract. Upon identification of the condition and its effects, the Organization recognized a reduction in amounts receivable from EPA as of 12/31/25 for overcharged indirect costs of $44,283. This was not a repeat finding. Questioned costs: Questioned costs of $44,283 are all related to Federal Assistance #66.034 Surveys, Studies, Research, Investigations, Demonstrations, and Special Purpose Activities Relating to the Clean Air Act and were determined to be the indirect rate applied to contract costs exceeding the $25,000 threshold for one contract. Views of responsible officials: As a result of preliminary discussions regarding this condition, we have already corrected the application of indirect costs and deducted the overcharged indirect costs from 2026 requests for reimbursement.

ALN 93.558 – Temporary Assistance for Needy Families (TANF) U.S. Department of Health and Human Services Passed through Ohio Department of Job and Family Services (ODJFS) Criteria: Allowability of Activities and Costs - The U.S. Department of Health and Human Services established requirements for allowable activities and costs for local governments as outlined in 42 USC 601 and 45 CFR section 263.11. These requirements established allowable activities and costs for TANF expenditures to comply with 2 CFR 200.400 -200.476. Additionally, ODJFS provides requirements for random moment sample (RMS) time studies in Ohio Administrative Code Section 5101:9-7-20. Eligibility – ODJFS requires each county in Ohio to develop and adopt a Prevention, Retention, and Contingency (PRC) Program Plan. The PRC Plan adopted by each county identifies eligibility requirements for the PRC portion of TANF. ACDJFS has adopted such a plan which governs eligibility for the program. Conditions: ODJFS conducted a monitoring visit at Athens County Department of Job and Family Services for the State Fiscal Year 2025. We incorporated the results of this monitoring with the results of our audit procedures. ACDJFS incurred multiple direct expenses that are not in compliance with TANF allowability rules, including: • Annual debt payment for the County’s Ohio Means Jobs facility • Renovation costs for facilities not fully utilized for TANF purposes • Direct expenses to support programs which served eligible and non-eligible participants • ACDJFS promotional items and advertising ACDJFS employees are responsible for identifying the activity and program they are working on when an e-mail is sent to them by the ODJFS RMS system. These RMS observations are then review and approved by the employees’ supervisors. Once the RMS observations are recorded the ODJFS system uses RMS information to allocate employee payroll costs to federal grants. Employees inaccurately responded to RMS observations and their costs were improperly allocated to TANF while working on programs which served eligible and non-eligible participants. Cause: ACDJFS did not have appropriate procedures and controls in place regarding the charging of direct expenses to TANF or regarding the submission and review of RMS observations. Furthermore, programs, such as Operation Fully Belly, Back to School Bash, and Winterfest, were being operated to serve both eligible and non-eligible participants, but RMS observations were submitted and approved to allocate 100% of payroll costs to TANF rather than allocating a portion to other funding sources for non-eligible participants. Effect: The results of the ODJFS monitoring required the County to enter into a repayment plan with ODJFS to reimburse $2,585,898 in unallowable costs and support to non-eligible participants being charged to TANF. A portion of these costs identified by ODJFS relate to costs charged to TANF prior to January 1, 2025. Questioned Costs: Known questioned costs for the year ended December 31, 2025 are $1,400,735. Recommendation: We recommend ACDJFS enhance its controls over allocation of direct expenses and RMS observations. ACDJFS should pay special attention to programs serving both eligible and non-eligible participants and properly advise and train staff on how to respond to RMS observations when working on these programs.

FINDING 2025-005 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Allowable Costs/Cost Principles Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2022 Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Significant Deficiency, Other Matters Condition and Context Prior to receipt of the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), all eligible entities were required to execute a Financial Assistance Agreement (Agreement), which included the award terms and conditions that recipients must comply within carrying out the objectives of its award. Per the Agreement, the County was responsible for the effective administration of the federal award, as well as the application of sound management practices and administration of the federal funds in a manner consistent with the program objectives and the terms and conditions of the award. INDIANA STATE BOARD OF ACCOUNTS 20 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recipients may use the SLFRF funds for any eligible expenses subject to the restrictions set forth in sections 602 and 603 of the Social Security Act, as added by section 9901 of the American Rescue Plan Act of 2021. The SLFRF program provides substantial flexibility for each recipient to meet local needs within four separate eligible use categories. Recipients may use the SLFRF funds to:  Respond to the COVID-19 public health emergency and its negative economic impacts;  Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers of eligible employers that have eligible workers who are performing essential work;  Provide government services, to the extent COVID-19 caused a reduction in revenues collected in the most recent full fiscal year of the recipient; and  Make necessary investments in water, sewer, or broadband infrastructure. During the audit, it was identified that the County charged various drug court expenditures to the SLFRF award throughout the audit period. While certain drug court expenditures were used to provide government services, detailed testing determined that the SLFRF funds were applied to costs that are not allowable under state guidance governing the drug court program. These expenditures do not meet the federal eligibility or cost-allowability requirements established for the SLFRF funds, and, therefore, constitute unallowable charges to the grant. The County had a system of internal controls over the compliance requirement; however, they were not properly implemented to prevent noncompliance. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. . . ." INDIANA STATE BOARD OF ACCOUNTS 21 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. . . ." 2 CFR 200.404 states in part: "A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the recipient's or subrecipient's operation or the proper and efficient performance of the Federal award; . . . (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost." Indiana Code 12-23-14-6 states in part: "(a) A program may provide for eligible individuals a range of necessary intervention services, including the following: (1) Screening for eligibility and other appropriate services. (2) Clinical assessment. (3) Education. (4) Referral. (5) Service coordination and case management. (b) A program that is eligible under section 7 of this chapter may also provide a range of necessary treatment and rehabilitation services, including the following: (1) Emergency services. (2) Detoxification. (3) Counseling. (4) Rehabilitative care. INDIANA STATE BOARD OF ACCOUNTS 22 BOONE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The County improperly charged the SLFRF funds to unallowable drug court costs. This occurred because the County did not have sufficient internal controls or review procedures in place to ensure that expenditures charged to the SLFRF award met federal and state allowability requirements. The approval process did not include adequate verification of eligibility, and staff responsible for coding and approving transactions did not consistently apply federal cost principles when determining whether drug court expenditures were appropriate for the SLFRF funding. As a result, unallowable costs were charged to the grant, leading to noncompliance with federal guidance and an internal control deficiency within the County's grant management processes. Effect Due to a misunderstanding of the SLFRF requirements, the County inadvertently allocated federal grant funds to an unallowable expenditure. Questioned Costs We identified $25,837 in known questioned costs. Recommendation We recommended that management of the County design and implement a proper system of internal controls including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are taking place prior to payment of funds from the SLFRF award. We could also recommend county officials review and become familiar with the grant requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Federal Program Information: Type of Finding: Compliance Areas: Funding Agency: Title: FAL Number: Passthrough: Award Period: Significant Deficiency, Other Non-compliance Cash Management, Allowable Costs and Cost Principles, and Reporting U.S. Department of Education Teacher Quality Partnership Grants 84.336S N/A 10/01/2024 – 09/30/2025 Criteria: Cash Management: Although 2 CFR 200.305(b)(1) permits the Foundation to draw down funds in advance, the entity utilizes a cost reimbursement approach for Federal funding. This practice ensures that funds are drawn only for immediate cash needs. 2 CFR 200.305(B)(1) Federal payment. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or projects costs and the proportionate share of any allowable indirect costs. Cost Principals and Reporting: The application of cost principles is governed by 2 CFR 200.400; specifically (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. Condition: During our review of cash management procedures, we identified the following issue:  The Foundation drew down funds for the Teacher Quality Partnership Grants (TQP) prior to expenditures or when expenditures were not yet anticipated to be actually disbursed. o TQP Effective Educators grant - $771,222 o TQP Southwest grant - $572,672 Questioned Costs: None. The Foundation used all the funds drawn down according to the grant directives as it closed out the grant funds. All expenditures were in compliance with the stated objectives. Cause: During the beginning of the second Donald Trump administration, President Trump issued an executive order on January 20, 2025 that established the Department of Government Efficiency (DOGE). Individuals within the Department of Education who oversaw this program encouraged the Foundation to draw down the remaining funds on both grants as they believed the grants were going to be shut down soon by DOGE, but they wanted those entities that were already committed to staffing and programs with schools to be able to complete the school year. The Foundation did draw down those funds in order to complete the commitments to the schools. Effect: The Foundation was not in compliance with 2 CFR 200.305(b)(1) and 2 CFR 200.400(b) by drawing down funds prior to actual expenditures. Auditor’s Recommendation: We recommend that the Foundation not draw down funds prior to incurring actual expenditures or until expenditures are expected in the very near future. Grant program personnel do not have the authority to waive 2 CFR requirements or grant requirements, even in unusual situations like the DOGE occurrence. Responsible official’s view:  Specific corrective action plan for the finding: Three Rivers Education Foundation’s staff will ensure that all drawdowns follow appropriate timeframes as required. TREF has already implemented this long-standing practice. The action described in this “Significant Deficiency” came about because of extenuating circumstances and advice provided from the federal government. We were assisted with disbursements by the Federal Program Officer for the TQP programs.  Timeline for completion of corrective action plan: Immediately and ongoing  Employee positions(s) responsible for meeting the timeline: Executive Director and Chief Financial Officer

Significant Deficiency: Condition: Wendell Foster does not have written policies and procedures to implement the requirements of 2 CFR section 200 for the administration of federal awards in their existing comprehensive accounting manual. Context and Criteria: Entities that receive federal funds must have written policies, procedures, and standards of conduct (“policies”) as required by 2 CFR 200, Subparts D and E (2 CFR sections 200.300 and 200.400, respectively) for compliance with Uniform Guidance. Cause: Program employees did not implement formal polices specifically for the administration of federal awards until after the reporting period. Effect: Wendell Foster was not in compliance with 2 CFR section 200 for the administration of federal awards during the reporting period. Recommendation: Policies and procedures for the administration of federal awards should be written to provide guidance to all program employees concerning the administrative requirements for conformance with Uniform Guidance. View of Responsible Officials and Planned Corrective Actions: The formal policy was written, incorporated in to our comprehensive accounting policies manual, and approved by the board of directors on February 25, 2026.

Assistance Listing, Federal Agency, and Program Name 93.247 Advanced Nursing Education Grant Program Federal Award Identification Number and Year 22T96HP45839 Pass through Entity N/A Finding Type Material weakness Repeat Finding Yes Criteria Per 2 CFR Section 200.510(b), "the auditee" must create a Schedule of Expenditures of Federal Awards (SEFA) if they expend more than $1 million in federal awards during their fiscal year. The schedule of expenditures of federal awards should include all expenditures associated with federal grants during the fiscal year. Per 2 CFR 200.400(d), the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition The Organization lacked effective controls over the review of the SEFA to ensure that only federal expenditures were included for fiscal year 2025 and to ensure that expenditures were appropriately tracked and recorded to the correct grant period. Questioned Costs N/A If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported N/A Identification of How Questioned Costs Were Computed N/A Context The Organization lacked effective controls to ensure that expenditures were appropriately tracked to individual grants and recognized in the proper reporting period. Consequently, the original SEFA included nonfederal expenditures. Completeness testing identified approximately $120,000 of expenditures that did not pertain to current year federal awards, as well as approximately $65,000 of expenditures related to prior year activity that were inappropriately included on the SEFA. Cause and Effect The Organization does not have an award management system connected to its accounting software to appropriately track federal grants and their associated expenditures. This prevented the Organization from being able to implement effective controls to validate expenditures were applied to the proper grant in the proper period and to ensure that transactions were accounted for consistently between the financial statements and the SEFA. Recommendation We recommend that management implement procedures to perform a review at period end to ensure all payroll and accounts payable accruals are properly included on the SEFA and any amounts related to a future period (prepaid expenses) are excluded. We additionally recommend that management implement procedures to ensure only federal activity is reflected within the SEFA. Views of Responsible Officials and Planned Corrective Actions The Organization acknowledges certain errors in grant tracking and SEFA preparation resulting from the lack of an integrated award management system. The Organization will enhance its reviews around SEFA preparation and federal expenditure tracking to accommodate the lack of an integrated system as well as to ensure cut-off, completeness, and classification of federal expenditures.

BETH ISRAEL LAHEY HEALTH, INC. AND AFFILIATES Schedule of Findings and Questioned Costs Year ended September 30, 2025 Criteria: Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Section 200.430(a) states that compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award, including but not necessarily limited to wages and salaries. Costs of compensation are allowable to the extent the compensation is reasonable for the services rendered and conforms to the established written policy of the recipient or subrecipient consistently applied to both Federal and non-Federal activities; follows an appointment made in accordance with the recipient's or subrecipient's laws, rules, or written policies and meets the requirements of Federal statute, where applicable; and is determined and supported by records that accurately reflect the work performed. 2 CFR 200.403(b) further states costs must meet the criteria of conforming to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items to be allowable under Federal awards. This includes the auditor to determine if the awards contain any negotiated wage or salary rates, or contain any restrictions on salaries and wages, such as the NIH restriction on the amount that may be charged for individual salaries (https://grants.nih.gov/grants/policy/salcap_summary.htm). Additionally, 2 CFR 200.400(d) requires the accounting practices of the recipient and subrecipient to be consistent with the cost principles and support the accumulation of costs as required by the cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Furthermore, 2 CFR 200.403 states the factors affecting allowability of costs. These factors include the cost to (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principes and (g) be adequately documented to meet the criteria to be allowable under Federal awards. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: During our testing of payroll for Beth Israel Deaconess Medical Center (BIDMC), an affiliate of Beth Israel Lahey Health, Inc., management did not consistently adhere to the specific award conditions set forth in the Notice of Award (NOA) related to salary limitations for 1 out of 12 of our samples related to our testing. The control operator applied an erroneous National Institutes of Health (NIH) Salary Cap limit when calculating the payroll allocation for an individual’s time allocated to a specific NIH grant selected for testing. As a result, the portion of the individual’s salary charged to the federal grant exceeded the maximum allowable NIH Salary Cap, resulting in an unallowable cost of $41 charged to the award. Furthermore, Joslin Diabetes Center (the Center), an affiliate of Beth Israel Lahey Health, Inc., manually matches purchase orders to the corresponding invoice once received. During our testing for 1 out of 25, we identified an invoice that was incorrectly matched to the purchase order for the Federal award selected for testing. This invoice was processed for payment and subsequently included in the monthly reimbursement draw. At the time of testing, the correct invoice corresponding to the valid purchase order for the selected grant had not yet been received by the Center. This resulted in the expenditure in the amount of $14 being BETH ISRAEL LAHEY HEALTH, INC. AND AFFILIATES Schedule of Findings and Questioned Costs Year ended September 30, 2025 allocated to the incorrect Federal award as well as the Federal award charged not being supported by adequate documentation. Cause: The conditions results from a lack of effective operation of internal controls over the allowability of costs related to Federal awards; specifically, ensuring the cost conforms to any limitations set forth in the Federal award as to the amount of cost items at BIDMC as well as ensuring the cost is allocable to the Federal grant and is adequately documented at the Center. Possible Asserted Effect: Failure to maintain sufficient internal controls to ensure a cost is allowable to a Federal award may result in unallowable costs being charged to Federal awards. Questioned Costs: None. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding was a Repeat Finding: This is not a repeat finding. Recommendation: We recommend that BILH enhance its internal controls over Federal award expenditures to ensure, where applicable, all costs charged to Federal awards conform to any limitations or salary caps set forth in the Federal award agreement, are accurately allocated to the correct grant and are adequately documented.

Finding: 2025-002: Written Financial Management Policies and Procedures Condition: The Organization did not have written policies, procedures and standards of conduct in accordance with 2 CFR 200, Subparts D and E for the year ended August 31, 2025. Criteria: The Organization is required to have written policies, procedures and standards of conduct in accordance with 2 CFR 200, Subparts D and E (2 CFR sections 200.300 and 200.400, respectively).Cause: Management was not aware of the requirement under 2 CFR 200, Subparts D and E requiring the Organization to have written policies, procedures and standards of conduct. Effect: While the Organization did not have written policies, procedures, or standards of conduct in accordance with 2 CFR 200, Subparts D and E during the year ended August 31, 2025, we are not aware of any instances of noncompliance with respect to activities allowed or unallowed, allowable costs/cost principles, cash management, period of performance or reporting. Recommendation: We recommend that management of the Organization adopt written policies, procedures and standards of conduct as required by 2 CFR 200, Subparts D and E. Response: Management accepts the recommendation and is working to develop an updated financial policies and procedures manual to meet Federal compliance requirements.

Finding 2025-006 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Costs/Activities Federal Agency: U.S. Department of Education, passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): Title I-A Basis/School Improvement 1003(a) Assistance Listing Number(s):84.010A Award Number(s): Federal Award Numbers: S010A230002 and S010A24000, Pass through entity award numbers: IP 25.IASD.01 and SI 25.IASD.01 Award Year(s): 2025 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E § 200.400 (d)). Condition and Context: We tested seventeen (17) payroll transactions charged to the program and noted three (3) instances where the transaction lacked supporting documentation for approved employee pay rate. The transactions were not considered unallowable under the program. Cause: Lack of internal controls over maintaining adequate supporting documentation for transactions charged to the program. Effect: Lack of adequate supporting documentation for transactions allows for an environment where unallowable costs could be charged to the program. Repeat Finding: No. Questioned Costs: None reported. Recommendation: We recommend that management strengthen internal controls over payroll transactions and improve the maintenance of supporting documentation processes to ensure compliance and accuracy of payroll transactions. Management Response: Management concurs with this finding. See Corrective Action Plan

Finding 2025-002 Lack of Internal Controls over Activities Allowed and or Unallowed and Allowable Costs/Activities – Cash Disbursements Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): ARP Act: ESSER III Assistance Listing Number(s):84.425U Award Number(s): Federal award number(s): S425U210020, Pass through entity award number(s): ER 25.YFSD.01, AR.25.YFSD.01 Award Years: 2025 Type of Finding: Significant deficiency in internal control over compliance. Criteria: 2 CFR Part 200 Subpart E §200.400(d) dictate that the accounting practices of a recipient (or subrecipient) must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of twenty-five (25) cash disbursements for the program. We noted seven (7) credit card transactions that lacked adequate supporting documentation. We did not identify any transactions in the program that appeared to be unallowed based on the context of the transaction. Cause: Lack of internal controls related to supporting documentation for transactions charged to the programs. Effect: Lack of internal controls allows for the potential for unallowable costs to be charged to the programs. Repeat Finding: This is a repeat of Finding of 2024-005, and since it is a repeat finding, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management implement stronger internal controls over cash disbursements, specifically to retaining supporting documentation. Management Response: Management concurs with this finding. See Corrective Action Plan.

2025-010 – Indirect Cost Rate Review Finding Type. Significant Deficiency in Internal Control over Compliance (Allowable Costs/Cost Principles). Program. Epidemiology and Laboratory Capacity for Infectious Diseases (ELC); U.S. Department of Health and Human Services; Assistance Listing Number 93.323; Award Number E20242798-00. Criteria. Under 2 CFR §200.400(e), when reviewing, negotiating, and approving cost allocation plans or indirect cost proposals, the cognizant agency for indirect costs should ensure that the recipient consistently applies these cost principles. Condition. The University does not have a formal review process related to indirect cost rate automated entries. Cause. The University has not developed or implemented formal review procedures related to indirect costs. Effect. As a result of this condition, there is an increased risk of unallowable charges to the grants, inaccurate financial reporting, and other potential noncompliance with federal regulations. Questioned Costs. No costs are required to be questioned as a result of this finding, inasmuch as no unallowable expenditures were noted. Recommendation. We recommend the University implement procedures to review the indirect cost rate input and automated entries by responsible individual on a monthly or quarterly basis. View of Responsible Officials. Management agrees with this finding and has prepared a Corrective Action Plan.

Finding 2025-001: Questioned Costs – Allowable Costs/Costs Principles (material weakness) Statement of Condition: During our testing of expenditures applied to the Economic Adjustment Assistance Program, we identified that the College charged federal funds to a capital project that had previously been paid for with bond proceeds. The bond proceeds were restricted for use on the same project for which federal funds were awarded. Criteria: In accordance with 2 CFR 200.403(a), costs charged to a federal award must be necessary, reasonable, and allocable to the federal program. Additionally, 2 CFR 200.404(a) states that a cost is reasonable if the cost is generally recognized as ordinary and necessary for the recipient’s operation or the proper and efficient performance of the Federal award. Further, 2 CFR 200.405(a) notes that a cost is allocable to a Federal award or other cost objective if the cost is assignable to that Federal award or other cost objective in accordance with the relative benefits received. In addition, the cost must be incurred specifically for the Federal award. 2 CFR 200.406(a) states that applicable credits refer to transactions that offset or reduce direct costs allocable to a federal award. To the extent that such credits are received by the recipient relate to allowable costs, they must be credited to the federal award either as a cost reduction or cash refund, as appropriate. Effect of Condition: Federal funds were used to reimburse costs that had already been paid with bond proceeds, resulting in unallowable costs being charged to the federal program. Cause of Condition: The College did not have adequate controls in place to ensure that costs charged to the federal program had not already been funded by another source. Questioned Costs: The questioned costs total approximately $1,100,000, representing the federal funds used to pay for the capital project already funded by bond proceeds. Recommendation: We recommend that the College implement and enforce procedures to ensure that all costs charged to federal programs comply with the Cost Principles stated in Subpart E of 2 CFR 200.400.

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

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

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

Condition: Expenditures for the Child and Adult Care Food Program were incorrectly reported as expenditures to other nutrition programs. Criteria: According to 2 CFR §200.303, Internal Controls, non-Federal entities must establish and maintain effective internal control over federal awards that provides reasonable assurance the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Further, under 2 CFR §§200.400, Policy Guide, and 200.405, Allocable Costs, costs are to be adequately supported as charged to the Federal award and must be necessary, reasonable, allocable, and conform to any limitations or exclusions set forth in federal regulations or award terms. Cause: The School did not understand the need to properly identify expenditures to the appropriate formula grant nutrition program. Effect: Although expenditures were properly reported collectively over all the nutrition programs, expenditures for specific nutrition programs were incorrectly reported for various separately funded nutrition programs. Recommendation: We recommend that the School properly identify and report nutrition program expenditures by program. Management’s Response: The School’s responsible officials’ views and planned corrective action are in its corrective action plan at the end of the report.

2025-001 16.575 Crime Victims Assistance Criteria: According to 2 CFR 200.510, the auditee is responsible for preparing a Schedule of Expenditures of Federal Awards (SEFA) that includes all federal awards received and expended, including the Assistance Listings Number (CFDA), grant numbers, and agency names. Condition: During the audit, management did not identify the total amount of federal funds received during the fiscal year. Context and Criteria: Entities that receive federal funds must have written policies, procedures, and standards of conduct (“policies”) as required by 2 CFR 200, Subparts D and E (2 CFR sections 200.300 and 200.400, respectively) for compliance with Uniform Guidance. Cause: Management did not include all grants with federal funding in their SEFA. Effect: The SEFA was inaccurate, leading to an incorrect determination that the Organization fell under the Single Audit requirement of $750,000. Recommendation: Management should review all grant agreements for Assistance Listing Numbers and pass-through identification information. Management should reconcile the SEFA to the general ledger periodically throughout the year. View of Responsible Officials and Planned Corrective Actions: Management will review the SEFA process and make changes as necessary.

FINDING 2025-204 Multiple errors were identified in the amounts reported on the Rehabilitation Services Administration (RSA) reports required for the Rehabilitation Services-Vocational Rehabilitation Grants to States. Related to Prior Finding: 2024-201 Type of Finding: Material Weakness, Material Noncompliance Assistance Listing Title: Rehabilitation Services – Vocational Rehabilitation Grants to States Assistance Listing Number: 84.126 Federal Award Number: H126A230016; H126A240016; H126A250016 Program Year: October 1, 2022 - September 30, 2024; October 1, 2023 - September 30, 2025; October 1, 2024 - September 30, 2025 Federal Agency: Department of Education, Rehabilitation Services Administration Compliance Requirement: Reporting Questioned Costs: $479,178 Known Criteria: The U.S. Code of Federal Regulations (CFR) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200.303) requires that a nonfederal entity receiving federal awards establish and maintain internal controls that provide reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions in the federal award. Section 2 CFR 200.400 contains the policy guide for cost principles related to federal grant administration. Paragraph (a) states that the nonfederal entity is responsible for the efficient and effective administration of the federal award through the application of sound management practices. Paragraph (d) states that the accounting practices of the nonfederal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the federal award. Section CFR 200.302 – Financial Management states that federal award recipient’s financial management system must identify all federal awards received and expended and the federal programs under which they were received. Additionally, they must maintain records that sufficiently identify the amount, source, and expenditure of federal funds for federal awards. These records must contain information necessary to identify federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. Condition: The RSA requires the Commission to submit financial reports semi-annually. The reports are cumulative and cover the entire grant period through to the end of the reporting period. The RSA also requires a final report at the end of the grant period. The Vocational Rehabilitation Basic Services Grants are issued for an initial 12-month period. If State match requirements are met within the initial period, recipients qualify for an additional 12-month carryover period to spend any unobligated federal funds. Including the carryover period, the federal fiscal year 2025 grant period is October 1, 2024, through September 30, 2026. The Commission identifies the grant periods using the initials VRBAS and the last 2 digits of the grant year. During State fiscal year 2025, there were three grants open: VRBAS23, VRBAS24, and VRBAS25. We tested four semi-annual reports that were due within State fiscal year 2025. We identified errors in all four reports. The financial reports were not prepared on an award-by-award basis, which resulted in reported amounts that did not agree to the accounting records. We also identified other errors between the reported amounts and the accounting records. The following errors were identified: VRBAS23 – Reporting Period October 1, 2022, through March 31, 2024 The report was due on July 29, 2024, and was not submitted until February 28, 2025; seven months past the due date. Line 15 Federal Expenditures Incurred for Pre-employment Transition Service Activities: The amount reported was $486,965; however, accounting records showed a total of $418,472 resulting in a $68,493 overstatement. Line 28 Total Non-Federal Share of Expenditures: The amount reported was $968,661; however, accounting records showed a total of $364,414 resulting in a $604,247 overstatement. Lines 29 and 32: The purpose of Line 29 is to report unliquidated obligations to be paid with nonfederal funds meeting the nonfederal share requirements. Nonfederal share can only be credited as match when obligated in the federal fiscal year of appropriation for an award. The purpose of Line 32 is to report the liquidations from the amount of nonfederal unliquidated obligations report on Line 29 that were liquidated during a subsequent reporting period. Line 32 reflects the amount of the reported unliquidated obligations that have been liquidated in the carryover year. Line 29 Non-Federal Share of Unliquidated Obligations: The amount reported was $26,324. We recalculated the nonfederal share using outstanding authorizations reported in Orion, the Commission’s client management system. We used the amount reported of $125,946 and calculated the nonfederal share of 21.3 percent for a total of $26,826 resulting in a $502 understatement. Line 32 Non-Federal Expenditures for Unliquidated Obligations Reported on Line 29, Liquidated After September 30, 2023: The amount reported was $26,324; however, this amount was not supported in the reporting documentation, resulting in a $26,324 overstatement. Line 37 Administrative Expenditures: The amount reported was $848,533; however, accounting records and the Cost Allocation Plan support showed a total of $1,120,301 resulting in a $271,768 understatement. Line 38 Expenditures Incurred for Pre-ETS Services by Agency Staff: The amount reported was $121,463; however, accounting records showed a total of $132,767 resulting in a $11,213 understatement. Line 39 Services to Groups: The amount reported was $668,179; however, accounting records showed a total of $320,501 resulting in a $347,678 overstatement. Line 41 Innovations & Expansion Expenditures: The amount reported was $103,353; however, accounting records showed a total of $84,850 resulting in a $18,503 overstatement. VRBAS24 – Reporting Period October 1, 2023, through September 30, 2024 The report did not have a documented review prior to submission. Line 15 Federal Expenditures Incurred for Pre-employment Transition Service Activities: The amount reported was $543,497; however, accounting records showed a total of $383,020 resulting in a $160,477 overstatement. Line 18 Federal Share of Unliquidated Obligations: The amount reported was $102,977; however, we recalculated the federal share using the unliquidated obligations from Orion of $102,977 and the State match rate of 21.3 percent and determined the federal share to be $81,043, resulting in a $21,934 overstatement. Line 19 Total Federal Share: Line 19 is the total of Line 14 and Line 18. Since Line 18 was overstated by $21,934, Line 19 was also overstated by $21,934. Line 20 Unobligated Balance of Federal Funds: Line 20 is the total of the Federal Award less Line 19. If Line 19 was overstated, that resulted in Line 20 being understated by $21,934. Line 28 Total Non-Federal Share of Expenditures: The amount reported was $1,208,310; however, accounting records showed a total of $781,653 resulting in a $426,657 overstatement. Lines 29 and 32: The purpose of Line 29 is to report unliquidated obligations to be paid with nonfederal funds meeting the nonfederal share requirements. Nonfederal share can only be credited as match when obligated in the federal fiscal year of appropriation for an award. The purpose of Line 32 is to report the liquidations from the amount of nonfederal unliquidated obligations report on Line 29 that were liquidated during a subsequent reporting period. Line 32 reflects the amount of the reported unliquidated obligations that have been liquidated in the carryover year. Line 29 Non-Federal Share of Unliquidated Obligations: The amount reported was zero. We recalculated the nonfederal share using the outstanding authorizations in Orion, the Commission’s client management system. We used the amount reported in Orion of $102,977 and calculated the nonfederal share of 21.3 percent for a total of $21,934, resulting in a $21,934 understatement. Line 37 Administrative Expenditures: The amount reported was $1,240,104; however, accounting records and Cost Allocation Plan support showed a total of $1,779,969 resulting in a $539,865 understatement. Line 39 Services to Groups: The amount reported was $622,021; however, accounting records showed a total of $460,958 resulting in a $161,063 overstatement. Line 41 Innovations & Expansion Expenditures: The amount reported was $81,692; however, accounting records showed a total of $18,568 resulting in a $63,124 overstatement. VRBAS24 – Reporting Period October 1, 2023, through March 31, 2025 The report did not have a documented review prior to submission. The report was due on April 30, 2025, but was submitted May 21, 2025, three weeks past the due date. Line 15 Federal Expenditures Incurred for Pre-employment Transition Service Activities: The amount reported was $600,423; however, accounting records showed a total of $417,880 resulting in a $182,543 overstatement. Line 18 Federal Share of Unliquidated Obligations: The amount reported was $39,690; however, we recalculated the federal share using the unliquidated obligations from Orion, the Commission’s client management system, of $39,690 and the State match rate of 21.3 percent and determined the federal share to be $31,236 resulting in a $8,454 overstatement. Line 19 Total Federal Share: Line 19 is the total of Line 14 and Line 18. Since Line 18 was overstated by $8,454, Line 19 was also overstated by $8,454. Line 20 Unobligated Balance of Federal Funds: Line 20 is the total of the Federal Award, less Line 19. If Line 19 was overstated, that resulted in Line 20 being understated by $8,454. Line 28 Total Non-Federal Share of Expenditures: The amount reported was $1,208,310; however, accounting records showed a total of $1,196,358 resulting in a $11,952 overstatement. Lines 29 and 32: The purpose of Line 29 is to report unliquidated obligations to be paid with nonfederal funds meeting the nonfederal share requirements. Nonfederal share can only be credited as match when obligated in the federal fiscal year of appropriation for an award. The purpose of Line 32 is to report the liquidations from the amount of nonfederal unliquidated obligations report on Line 29 that were liquidated during a subsequent reporting period. Line 32 reflects the amount of the reported unliquidated obligations that have been liquidated in the carryover year. Line 29 Non-Federal Share of Unliquidated Obligations: The amount reported was zero. We recalculated the nonfederal share using the outstanding authorizations in Orion, the Commission’s client management system. We used the amount reported in Orion of $39,690 and calculated the nonfederal share of 21.3 percent for a total of $8,454 resulting in a $8,454 understatement. Line 37 Administrative Expenditures: The amount reported was $2,267,253; however, accounting records and Cost Allocation Plan support showed a total of $1,972,591 resulting in a $294,662 overstatement. Line 39 Services to Groups: The amount reported was $539,549; however, accounting records showed a total of $196,320 resulting in a $343,229 overstatement. Line 41 Innovations & Expansion Expenditures: The amount reported was $61,223; however, accounting records showed a total of $33,328 resulting in a $27,895 overstatement. VRBAS25 – Reporting Period October 1, 2024, through March 31, 2025 The report was due on April 30, 2025, but was submitted May 21, 2025, three weeks past the due date. Line 14 Federal Share of Expenditures: The amount reported was $66,749; however, the accounting records show a total of $0, resulting in a $66,749 overstatement. Line 15 Federal Expenditures Incurred for Pre-employment Transition Service Activities: The amount reported was $20,904; however, accounting records showed a total of $19,988 resulting in a $916 overstatement. Line 19 Total Federal Share: Line 19 is the total of Line 14 and Line 18. Since Line 14 was overstated by $66,749, Line 19 is also overstated by $66,749. Line 20 Unobligated Balance of Federal Funds: Line 20 is the total of the Federal Award, less Line 19. If Line 19 is overstated, that results in Line 20 being understated by $66,749. Line 28 Total Non-Federal Share of Expenditures: The amount reported was $524,910; however, accounting records showed a total of $143,079 resulting in a $381,831 overstatement. Line 37 Administrative Expenditures: The amount reported was $1,027,148; however, accounting records and Cost Allocation Plan support showed a total of $814,086 resulting in a $213,062 overstatement. Line 39 Services to Groups: The amount reported was $202,321; however, accounting records showed a total of $50,331 resulting in a $151,990 overstatement. Line 41 Innovations & Expansion Expenditures: The amount reported was $42,655; however, accounting records showed a total of $27,768 resulting in a $14,887 overstatement. The total errors in all reports resulted in $2,742,933 in overstatements. Two of the four submissions did not have a documented review prior to submission. Three of the four submissions were not submitted within the due date provided. Cause: The Commission has designed a procedure to detect errors in reporting prior to issuance. The reports are compiled by one individual and reviewed by a second individual prior to issuing them to the federal agency. However, the review did not detect the errors, indicating that the staff completing these reviews did not have adequate knowledge to ensure this internal control was effective. Our testing found that two of the three quarterly reports with errors were not reviewed prior to submission. The Commission could not provide an explanation for the errors. Effect: The RSA uses the RSA-17 reports to determine compliance with federal statutes, regulations, and the terms and conditions of the federal award. Incorrect reporting can affect both the ability to cover current obligations and the amount of future federal grant awards received by the State of Idaho. The total errors in the reports were overstatements of $3,693,806 and understatements of $950,874, which resulted in overall overstatements of $2,742,933. However, not all reporting errors occurred in federal expenditures and as a result we are including only the Line 14 and Line 15 - federal share of expenditures errors as questioned costs totaling $479,178 known ($68,493 VRBAS23 March 2024 Line 15 +$160,477 VRBAS24 September 2024 Line 15 +$182,543 VRBAS24 March 2025 Line 15 + $66,749 VRBAS25 March 2025 Line 14 = $916 VRBAS25 March 2025 Line 15). Recommendation: We recommend that the Commission design and implement procedures to ensure accurate federal grant reporting and retain appropriate documentation to support the amounts reported. We also recommend that the Commission review prior submissions, identify correct reporting, and communicate with the federal grantor about resubmitting corrected reports. Providing appropriate training and staff recruitment is critical to ensure the internal controls are effective in preventing or detecting errors. Management’s View: The agency agrees with the finding as we were using the cost allocation plan which changes the numbers from the ones used by the audit team and found from Luma (the state accounting system). Corrective Action: Corrective Action Objectives: • Ensure that future RSA reports are complete, accurate, consistent, and fully supported by documentation. • Establish and implement clear, standardized reporting procedures. • Retain documentation necessary to justify all reported amounts. • Identify and correct errors in previously submitted reports and communicate corrections to RSA. • Strengthen staff competencies and ensure adequate staffing levels to support proper grant reporting. Actions To Be Taken: • Form a Reporting Review Team comprising program, fiscal, and data analysts to review reports prior to submission. • Develop standardized RSA Reporting Procedures, including: o Step-by-step instructions for preparing RSA-17 o Required supporting documentation for each line item. o Definitions of allowable expenditures and required classifications. o Review and approval workflows. • Established a double-verification process, requiring two qualified staff members to independently verify all numeric entries prior to submission. • Implement a centralized documentation repository for financial records, worksheets, cost allocation documents, and reconciliation statements. • Establish a mandatory documentation checklist that must be completed before a report can be sent for approval. • Create standardized reconciliation templates tying reported amounts directly to the general ledger or supporting program records. • Complete a retrospective review of all RSA submissions for the necessary reports. • Identify inaccuracies, variances, and documentation gaps. • Develop corrected versions of each affected report. • Prepared a formal communication package for RSA including: o Corrected reports o Explanation of errors o Documentation supporting corrected amounts Conclusion This Corrective Action Plan establishes a comprehensive strategy to resolve reporting errors, strengthen documentation practices, and prevent future inaccuracies in RSA federal grant reporting. Through strengthened controls, trained staff, and rigorous review processes, the Commission will ensure ongoing compliance and improved accountability. Auditor’s Concluding Remarks: We thank the Commission for its cooperation and assistance throughout the audit.

FINDING 2025-205 The Cost Allocation Plan (CAP) used in fiscal year 2025 was not approved by the RSA as required and contained multiple errors. Related to Prior Finding: 2024-202 Type of Finding: Material Weakness, Material Noncompliance Assistance Listing Title: Rehabilitation Services – Vocational Rehabilitation Grants to States Assistance Listing Number: 84.126 Federal Award Number: H126A230016; H126A240016; H126A250016 Program Year: October 1, 2022 - September 30, 2024; October 1, 2023 - September 30, 2025; October 1, 2024 - September 30, 2025 Federal Agency: Department of Education, Rehabilitation Services Administration Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: $767,081 Known Criteria: The U.S. Code of Federal Regulations (CFR) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200.303) requires that a nonfederal entity receiving federal awards establish and maintain internal controls that provide reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions in the federal award. Section 2 CFR 200.400 contains the policy guide for cost principles related to federal grant administration. Paragraph (a) states that the nonfederal entity is responsible for the efficient and effective administration of the federal award through the application of sound management practices. Paragraph (d) states that the accounting practices of the nonfederal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the federal award. The U.S. Code of Federal Regulations (CFR) Title 34 contains the regulations of the offices of the U.S. Department of Education, including the Rehabilitation Services Administration (RSA). Title 34 CFR § 76.560 (b) states: A grantee must have a current indirect cost rate agreement to charge indirect costs to a grant. Title 2, Subtitle A contains the Office of Management and Budget Guidance for Grants and Agreements. Title 2 CFR § 200 Appendix VII part 3 states: Indirect Cost Allocations Not Using Rates: In certain situations, governmental departments or agencies (components of the governmental unit), because of the nature of their Federal awards, may be required to develop a cost allocation plan that distributes indirect (and, in some cases, direct) costs to the specific funding sources. In these cases, a narrative cost allocation methodology should be developed, documented, maintained for audit, or submitted, as appropriate, to the cognizant agency for indirect costs for review, negotiation, and approval. Condition: The Commission uses a CAP to allocate indirect costs among its various programs that should be certified annually by the RSA. The CAP used by the Commission in fiscal year 2025 was not approved by the RSA. The Commission inquired about the recertification process in April 2025 after we inquired about the certification process and documentation for the CAP as part of our fiscal year 2024 Single Audit procedures. The RSA has instructed the Commission to cease using the CAP to claim indirect costs for grant reimbursement, and to use the de minimis rate until an indirect cost rate plan is approved. Cause: The Commission did not have a procedure in place to review the CAP and submit it for recertification annually as required. Effect: The CAP used by the Commission was not submitted timely for recertification and was not approved for use by the RSA. Using an unapproved CAP to claim reimbursement for indirect costs could result in those costs being questioned, and the RSA could require them to be repaid. Recommendation: We recommend that the Commission work with the federal grantor, the Rehabilitation Services Administration (RSA), to establish an approved indirect cost rate plan. We further recommend that the Commission design and implement procedures to ensure the indirect cost rate plan is implemented as designed and to ensure that future plans are submitted and approved timely and appropriate supporting documentation is retained. Management’s View: The agency agrees with the finding as we were using the cost allocation plan which was originally approved by RSA but needed to be updated when the state changed to a new accounting system (Luma). The updated plan was submitted to the Indirect Cost Division with the Department of Education in January of 2026. After conversations with both RSA and the VRTAC we withdrew our submission in September of 2026 when the Department of Education began their evaluation of the new plan. It was determined that we will negotiate an indirect cost rate rather than use the updated Cost Allocation Plan. Corrective Action: Based on conversations with the Indirect Cost Division, RSA, the state audit team, and the VR TAC team we determined it would be best for the agency to work with the Indirect Cost Division to establish an indirect cost rate. Switching from using the Cost Allocation Plan that we had been using for 16 years, abruptly, to a 15% indirect cost rate April 1, 2026 created multiple hurdles and changes that we have been trying to overcome with the help of the VR TAC team’s intensive assistance. We are in the process of creating a system that will address the errors that were found by the state auditors. The Indirect Cost Division states that we need to begin the new plan July 1, 2027. They have provided us with a template, and we will complete that and work with them to ensure this rate is ready to begin using July 1, 2027. Previously, annually, we submitted a document by email to the Indirect Cost Division indicating that we were re-certifying the same Cost Allocation Plan. We did not receive responses, and we took that to mean it was okay to continue using the same plan each year. From 2021-2025 this was done and there was one year it was submitted later than when we typically (October 1) sent it. In the meeting with the Indirect Cost Division, Andre Hylton, told us that once our indirect rate was established, it would be approved for two years and then after review, it would be on a 5 year review schedule. Auditor’s Concluding Remarks: We thank the Commission for its cooperation and assistance throughout the audit.

FINDING 2025-208 The Department’s Indirect Cost Rate Proposal contained multiple errors. Related to Prior Finding: 2024-212 Type of Finding: Material Weakness, Material Noncompliance Assistance Listing Title: Drinking Water State Revolving Fund Assistance Listing Number: 66.468 Federal Award Number: 98003020; 98003021; 98003022; 02J61801; 02J62801; 02J44701; 02J82001; 02J82401; 02J22801; 02J61701; 02J62701; 02J52301; 02J82201 Program Year: July 1, 2020 – June 30, 2025; July 1, 2021 – June 30, 2026; July 1, 2022 – June 30, 2027; March 1, 2024 – February 28, 2029; October 1, 2024 – September 30, 2029; July 1, 2023 – June 30, 2028; July 1, 2024 – June 30, 2029; July 1, 2024 – June 30, 2029; November 1, 2022 – June 30, 2027; March 1, 2024 – February 28, 2029; October 1, 2024 – September 30, 2029; July 1, 2023 – June 30, 2028; July 1, 2024 – June 30, 2029 Federal Agency: Environmental Protection Agency Compliance Requirement: Allowable Costs/Cost Principles Questioned Costs: Undetermined Criteria: The U.S. Code of Federal Regulations (CFR) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200.303) requires that a nonfederal entity receiving federal awards establish and maintain internal controls that provide reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions in the federal award. Section 2 CFR 200.400 contains the policy guide for cost principles related to federal grant administration. Paragraph (a) states that the nonfederal entity is responsible for the efficient and effective administration of the federal award through the application of sound management practices. Paragraph (d) states that the accounting practices of the nonfederal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the federal award. Condition: The Department uses an Indirect Cost Rate Proposal (ICRP) with a predetermined fixed cost rate to charge indirect costs to its programs. We reviewed the initial ICRP support documentation and calculations for the indirect cost rate in place for fiscal year 2025 and found multiple errors: • The direct cost base was reported as $28,142,926; however, the Department could not provide documentation to support that it was correct. Audit review procedures estimated the total should have been $29,294,524, a difference of ($1,151,598). • The indirect departmental cost was reported as $10,312,698; however, the Department could not provide documentation to support that it was correct. Audit review procedures estimated the total should have been $10,862,805, a difference of ($550,107). • The rate calculation included a carryforward amount of $2,153,740; however, the Department could not provide documentation to support that it was correct. Audit review procedures estimated the amount should have been $1,172,072, a difference of $981,668. • The rate calculation included an amount from the statewide cost allocation plan (SWCAP) of $13,530. The Department provided support for this amount; however, the support was from the incorrect fiscal year. Audit review procedures estimated the amount should have been $2,825, a difference of $10,705. Cause: The Department has procedures in place for the ICRP to be compiled by the fiscal staff and reviewed by separate staff to identify errors. The Department provided documentation to verify that the review occurred; however, it was not performed at a level of detail necessary to identify the errors. The Department provided historical spreadsheets of the initially proposed indirect cost rate submitted to the Environmental Protection Agency (EPA); however, using the initially proposed amounts and supporting documentation failed to recreate the calculated amounts in the ICRP agreement. The EPA reviewed and modified the Department’s initial proposed ICRP to arrive at the final negotiated ICRP. However, documentation to support the modified ICRP was not available at the time of our review. Effect: We were unable to determine if the indirect cost rate used in fiscal year 2025 was correctly calculated because documentation to support the amounts used in the calculation were unavailable. Further, Department staff could not fully explain or recreate the amounts calculated. Audit procedures calculated estimates based on methodology explained at the time of review and found the direct costs were misstated by ($1,151,98), the total cost pool was misstated by ($495,937), and the carryforward was misstated by $981,668. This results in an ICRP of 37.09 percent, compared to the Department’s calculated rate of 36.85 percent, and the EPA approved rate of 33.09 percent. Recommendation: We recommend that the Department provide training for Department staff preparing and reviewing the ICRP to ensure compliance with applicable regulations. We further recommend that the Department design and implement procedures to retain documentation of the methods used to compile the ICRP and the basis for the amounts reported in the ICRP. Management’s View: Due to staff turnover, DEQ agrees that sufficient supporting documentation could not be located to recreate the data and calculations from the initial indirect cost rate proposal (ICRP) packet. DEQ does not agree with the ‘Cause’ statement of the Management Letter that says, “documentation to support the modified ICRP was not available at the time of our review.” DEQ had the documentation supporting the negotiated rate with the Environmental Protection Agency (EPA). The Legislative Services Office (LSO) Audit Division audited the initial indirect cost rate proposal (ICRP) only, which had errors, but not the final packet that was modified and approved by EPA. The rate used by DEQ for FY25 was reviewed, modified (negotiated) and approved by EPA. Corrective Action: DEQ has had significant turnover in the fiscal office, which has resulted in gaps of knowledge of policies and practices. In summer 2025, DEQ leadership reorganized the fiscal department to improve efficiency, enhance oversight of grants and contracts, and strengthen financial controls. The fiscal office is currently in a rebuilding phase and is dedicated to training and developing staff, implementing best practices, and documenting processes and procedures, including those for federal grant compliance. The agency reached out to our federal oversight agency for assistance and direction with preparing and submitting the indirect cost rate proposal for FY27. We have and are committed to maintaining a file with all supporting documentation used to compile and prepare current and future proposals, as required by 2 CFR 200. Training and developing staff is an ongoing process, along with following updated federal rules and regulations. DEQ staff worked with the Environmental Protection Agency’s Indirect Cost Rate Negotiator to submit the indirect cost rate proposal packet for FY27 and we anticipate significantly reduced errors with the calculations and support for that submittal. Auditor’s Concluding Remarks: We thank the Department for its cooperation and assistance throughout the audit. We continue to assert that the audit team was not provided with information to verify amounts used in the indirect cost rate proposal applicable to fiscal year 2025 grant awards. Further, the team was not provided with information related to schedules or calculations for the final negotiated indirect cost rate during the completion of audit fieldwork. A cursory review of the final negotiated indirect cost rate documentation that was provided after the audit fieldwork was completed included amounts that the audit team was unable to verify or agree to supporting documentation. We continue to recommend that the Department maintain appropriate documentation to support the approved indirect cost rate.

2024-002 Allowable Costs Assistance Listing Number: 81.042 Name of Program and Cluster: Weatherization Assistance Program Agency: U.S. Department of Energy Compliance Supplement Requirement: Allowable Cost Principles Condition: The Organization did not allocate shared costs between program and non-program related costs. Criteria: In accordance with Regulation 2 CFR 200.400, only costs related to the Weatherization Assistance Program should be allocated to the contract and submitted for reimbursement. Perspective: The Organization did not allocate costs between program and non-program related costs. RBT estimated approximately $15,078.56 in costs that should have been allocated to non- program related costs. Cause: The Organization believed all costs should be allocated to the program. Effect: The Organization may overstate expenditures of Federal Awards. Recommendation: RBT recommends that the Organization uses a percentage allocation based on the amount of time spent on other programs to allocate shared costs to non-program accounts. Management's Response: See corrective action plan

Finding 2024-001: Lack of documentation of review and approval - Material Weakness Program name:Office for Coastal Management Assistance Listing: 11.473 Federal award Identification number: 20 NFWF 339630 Federal award year: 9/1/2020 - 9/30/2024 Federal awarding agency: U.S. Department of Commerce Criteria - In accordance with 2 CFR 200.303, recipients and subrecipients must establish, document and maintain effective internal control over Federal awards. These controls should be in compliance with Federal statutes, regulations, and the terms and conditions of the award, and should align with standards such as the “Standards for Internal Control in the Federal Government” (Green Book) or the COSO framework. This includes controls over: Expenses: Ensuring proper documentation and approval. (2 CFR 200.400(d) ) Reporting: Ensuring financial reports are accurate, complete, and reviewed prior to submission (2 CFR 200.328). Condition - The Organization has limited written processes of certain transaction classes. There was a pervasive lack of documentation of approval over transactions, including expenses, and reporting. Cause - The Organization did not maintain or consistently apply documentation protocols for internal control reviews. Formal documentation practices were not in place during the audit period. Effect - Lack of documentation as evidence that controls over compliance were being performed. Documentation should be maintained as evidence that sufficient control activities are in place and would effectively prevent or detect and correct noncompliance. Controls must be followed for every transaction and documentation of the control being performed must be maintained. Questioned costs - None identified. Perspective - The deficiency was pervasive across multiple compliance areas and was not isolated to a specific transaction or department. The scope indicates a systemic control weakness during the audit period. Identification of Repeat Findings - This is a repeat finding from the prior year (Finding 2023-002). As a result of the 2023 audit report, issued in February 2026, the Organization began the process of developing updated policies for compliance. In 2025, the Organization formally adopted new policies and procedures that align with the internal control standards per 2 CFR Part 200. Recommendation - We recommend that the Organization ensure updated policies and procedures are implemented and consistently applied. This includes: Documented review and approval of all transactions related to expenses, and reporting. Maintenance of written evidence supporting such reviews. Regular training and internal monitoring to ensure control procedures are consistently followed. Management response - Management agrees with this assessment and has committed to a corrective action plan. Management has also engaged with a new accounting firm to oversee the financial reporting functions at the Organization.

Finding 2024 – 002 Noncompliance with Allowable Cost/Cost Principle Compliance Requirement Requirement Allowable Cost/Cost Principle Compliance Requirement Type of Finding Material Weakness Criteria: 2 CFR Section 200.400 requires allowable cost principles to be followed in accordance with the Assistance Agreement. Condition: Prior to the April 2024 Modification 0015, the Assistance Agreement limited reimbursement of certain employees’ compensation, excluding the Executive Director, to 92.31% of their total compensation. The Organization requested reimbursement for 100% of certain employees’ compensation. The limitation was removed as part of Modification 0015. Cause: Subsequent to the March 2021 Assistance Agreement being awarded and finalized, the Organization negotiated with the grantor to remove the compensation limitation; however, the Assistance Agreement was not updated for this change until the April 2024 Assistance Agreement. Effect: Failure to comply with March 2021 Assistance Agreement. Questioned Costs: Based on the total labor charged, excluding the Executive Director, there are likely questioned costs, which include direct labor, fringe on direct labor, and general and administrative fringe, totaling approximately $23,000. Identification as a Repeat Finding: See finding 2023-002 included in the Summary of Prior Audit Findings. Recommendation: Management should ensure all negotiated agreements are included in the Assistance Agreement. Management Response: See Corrective Action Plan section.

Lack of Internal Controls over Substantially All Compliance Requirements Federal Agency: U.S. Department of Agriculture / U.S. Department of Education Federal Program: Child and Adult Care Food Program / Alaska Native Educational Programs ALN: 10.558 / 84.356A Award Numbers: 53301 / S356A210037 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E §200.400 (d)). This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Additionally, requirements relevant to maintaining effective internal control over Federal awards found in 2 CFR Part 200 Subpart E §200.303-Internal Controls are required to be implemented by grant recipients to provide reasonable assurance they are managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the award. Condition and context: We were unable to obtain sufficient audit evidence to support compliance with applicable compliance requirements for all major federal programs of the Organization including Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Cash Management, Eligibility, Period of Performance, Procurement and Suspension and Debarment, Reporting and Special Tests and Provisions. The Organization was unable to provide supporting documentation for auditor’s to verify compliance with the compliance requirements listed above. Cause: Insufficient monitoring by management and the board over the financial and other activities of the Club as well as employee turnover in several positions contributed to an ineffective control environment throughout the Organization. Effect: Because adequate supporting documentation was not available for expenditures charged to the program, we could not determine whether the costs charged to the programs were allowable and in compliance with the applicable requirements. Accordingly, we consider the entire amount of expenditures for these programs during the audit period to be likely questioned costs. Questioned Costs: Likely questioned costs: Alaska Native Educational Program (ALN 84.356A) $757,173 and Child and Adult Care Food Program (ALN 10.558) $274,693 are equal to total estimated program expenditures during the period, representing the auditor’s best estimate of total questioned costs (likely questioned costs) for these major programs due to lack of adequate supporting documentation. Repeat finding: No, however due to the number of issues identified we believe this to be a systemic issue. Recommendation: We recommend that management implement a stronger internal controls environment that includes adequate staffing to maintain a segregation of duties for an effective control environment as well as improving monitoring processes to ensure the Organization is in compliance with requirements applicable to Federal statutes, regulations, and the terms and conditions of the award Management’s Response: Management concurs with the finding. See Corrective Action Plan.

Criteria: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to the Uniform Guidance (2 CFR Part 200), specifically §200.400 - 200.475, costs charged to federal awards must be reasonable, allocable, and allowable under the terms of the award. Condition and Context: Management was unable to provide sufficient documentation for specific COVID-19 expenditures that were initially reported on the Schedule of Expenditures of Federal Awards. As a result, audit adjustments were necessary to revise the total COVID-19 expenditures to include only those amounts that could be adequately substantiated. Cause: The lack of sufficient documentation was primarily due to a lack of adequate internal controls and oversight regarding the classification and allocation of COVID-19 expenditures charged to federal awards. Effect: Management did not have sufficient documentation to support activities met the terms and conditions related to the COVID-19 Indian Self-Determination federal awards. Audit adjustments were necessary to revise the total COVID-19 expenditures to include only those amounts that could be adequately substantiated. Questioned Cost: None. Repeat Finding: No Recommendation: We recommend the Hospital establish and document clear policies and procedures for identifying, classifying, and allocating costs charged to federal awards, ensuring compliance with the Uniform Guidance. Additionally, we recommend the Hospital conduct regular reviews of expenditures charged to federal awards to ensure compliance with federal regulations and the terms of the awards. Views of Responsible Officials: The Finance team of Financial Controller and Senior Accountant are responsible for gathering sufficient documentation specific to COVID-19 expenditures. Proper and accurate classification and allocation of COVID-19 related activities and expenditures will be tracked and monitored before charging to funds. This will be completed by September 30, 2025.

Criteria: According to §200.303 Internal controls of 2 CFR Part 200, 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. According to the Uniform Guidance (2 CFR Part 200), specifically §200.400 - 200.475, costs charged to federal awards must be reasonable, allocable, and allowable under the terms of the award. Condition and Context: Management was unable to provide sufficient documentation for specific COVID-19 expenditures that were initially reported on the Schedule of Expenditures of Federal Awards. As a result, audit adjustments were necessary to revise the total COVID-19 expenditures to include only those amounts that could be adequately substantiated. Cause: The lack of sufficient documentation was primarily due to a lack of adequate internal controls and oversight regarding the classification and allocation of COVID-19 expenditures charged to federal awards. Effect: Management did not have sufficient documentation to support activities met the terms and conditions related to the COVID-19 Indian Self-Determination federal awards. Audit adjustments were necessary to revise the total COVID-19 expenditures to include only those amounts that could be adequately substantiated. Questioned Cost: None. Repeat Finding: No Recommendation: We recommend the Hospital establish and document clear policies and procedures for identifying, classifying, and allocating costs charged to federal awards, ensuring compliance with the Uniform Guidance. Additionally, we recommend the Hospital conduct regular reviews of expenditures charged to federal awards to ensure compliance with federal regulations and the terms of the awards. Views of Responsible Officials: The Finance team of Financial Controller and Senior Accountant are responsible for gathering sufficient documentation specific to COVID-19 expenditures. Proper and accurate classification and allocation of COVID-19 related activities and expenditures will be tracked and monitored before charging to funds. This will be completed by September 30, 2025.

Finding 2024-001 (A/B – Activities Allowed or Unallowed and Allowable Costs / Cost Principles) Identification of the federal program: Federal Grantor: US Department of Homeland Security Federal Emergency Management Agency (FEMA) Assistance Listing No.: 97.036 - COVID-19 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) Criteria or specific requirement (including statutory, regulatory or other citation): The Uniform Guidance 2 CFR section 200.303 states, “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” The Uniform Guidance 2 CFR sections 200.400 through 200.405 set forth the guidance for allowable costs for projects funded with Federal funds. Condition: Baptist Health Care, Inc. (the Company) received funding under program 97.036 – COVID-19 - Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Program) during the fiscal year ended September 30, 2024. The Company submitted duplicate invoices for different projects that resulted in expenditures being reimbursed for costs incurred multiple times. The Company also submitted for reimbursement an amount greater than what was supported by the underlying invoice due to incorrect data submission. Based on discussions with management, we understand that the Company utilized a contracted third party to assist with collecting the information to be submitted to FEMA. However, the internal controls over compliance did not detect or prevent these situations from occurring at the required level of precision. As such, we consider the lack of effectiveness of controls to validate completeness and accuracy of the amounts submitted for reimbursement for this program to represent a material weakness in internal control over compliance. Cause: The Company’s internal controls in place over the review of the completeness and accuracy of amounts submitted for reimbursement under the Program were not sufficient to detect or prevent errors in the underlying files submitted for reimbursement. Effect or potential effect: The lack of management review at a sufficient level of precision regarding expenditures submitted for reimbursement under this Program resulted in the reimbursement of duplicate invoices and reimbursement of an amount greater than the amount supported by the underlying supporting documentation from the granting agency. As a result, the Company will be required to reimburse the Federal Agency. Questioned costs: $79,118.82 Context: There were 8 individual projects for the COVID-19 disaster that the Company received funding for in fiscal year 2024. These projects were submitted to FEMA during the fiscal years 2020 through 2022. We selected 40 expenditures totaling $161,579 from the total population of expenditures totaling $1,843,741. We identified a duplicate invoice in our testing sample. We then reviewed the total population of invoices subject to testing and identified 24 invoices totaling $77,521.50 that were submitted for reimbursement more than once and therefore reimbursed by the Program more than once. We also identified one invoice totaling $177.48 for which reimbursement was requested for an amount $1,597.32 greater than the invoice amount. We extrapolated this error to estimate the likely questioned costs of $16,629.33. We reviewed the entire population of expenditures for which reimbursement was requested and received to determine the total amount of duplicate reimbursements and reimbursements in excess of supporting documentation to quantify the total known questioned costs of $79,118.82. Identification as a repeat finding, if applicable: Not applicable. Recommendation: The Company should ensure that a diligent review of amounts submitted for reimbursement is conducted at a sufficient level of precision by an appropriate individual with knowledge of the Program to ensure expenditures are only submitted once for reimbursement and to ensure that amounts submitted for reimbursement are not in excess of the amounts supported by appropriate documentation. We also recommend that management reimburse the Agency for the amounts reimbursed more than once and reimbursed at amounts in excess of the appropriate supporting documentation. Views of responsible officials: The Company agrees with the above recommendation. See separate Corrective Action Plan.

Condition: The Authority did not always maintain the sufficient documents required to support tested transactions. During our testing of transactions, we noted the lack of supporting documentation for four out of forty items tested. The four transactions totaled $91,273, and all occurred before a change in management in April 2024. All transactions after April 2024 were properly recorded and supported. Criteria: CFR 2 Part 200, Subpart E § 200.400(d): The application of federal cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with federal cost principles and support the accumulation of costs as required by the principles, and must provide for adequate documentation to support costs charged to the Federal award. Cause: The Authority did not maintain supporting documentation for expenditures. Effect: Possible theft or misuse of federal funds can occur without proper support and approval of expenditures. Recommendation: We recommend that the Authority record all expenditures are properly supported, documented and approved, to ensure compliance with the uniform guidance and generally accepted accounting principles.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA Act: ESSER II / ARP Act: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award number(s): S425U210020 and S425D210020 (ESSER), S010A230002, and S010A220002 (Title I-A), Pass through entity award number(s): ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A) Award Years: 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: 2 CFR Part 200 Subpart E §200.400(d) dictate that the accounting practices of a recipient (or subrecipient) must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of seventeen (17) cash disbursements for ESSER and fourteen (14) cash disbursements for Title I-A. We noted seven (7) transactions from each program that lacked either adequate supporting documentation or documentation of proper review and approval. We did not identify any transactions in either program that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of internal controls allows for the potential for unallowable costs to be charged to the programs. Repeat Finding: This is a repeat of Finding of 2023-006, and since it is a repeat finding, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management implement stronger internal controls over cash disbursements, specifically to retaining supporting documentation and ensuring proper approval. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA Act: ESSER II / ARP Act: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award number(s): S425U210020 and S425D210020 (ESSER), S010A230002, and S010A220002 (Title I-A), Pass through entity award number(s): ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A) Award Years: 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: 2 CFR Part 200 Subpart E §200.400(d) dictate that the accounting practices of a recipient (or subrecipient) must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of seventeen (17) cash disbursements for ESSER and fourteen (14) cash disbursements for Title I-A. We noted seven (7) transactions from each program that lacked either adequate supporting documentation or documentation of proper review and approval. We did not identify any transactions in either program that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of internal controls allows for the potential for unallowable costs to be charged to the programs. Repeat Finding: This is a repeat of Finding of 2023-006, and since it is a repeat finding, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management implement stronger internal controls over cash disbursements, specifically to retaining supporting documentation and ensuring proper approval. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA Act: ESSER II / ARP Act: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award number(s): S425U210020 and S425D210020 (ESSER), S010A230002, and S010A220002 (Title I-A), Pass through entity award number(s): ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A) Award Years: 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: 2 CFR Part 200 Subpart E §200.400(d) dictate that the accounting practices of a recipient (or subrecipient) must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of seventeen (17) cash disbursements for ESSER and fourteen (14) cash disbursements for Title I-A. We noted seven (7) transactions from each program that lacked either adequate supporting documentation or documentation of proper review and approval. We did not identify any transactions in either program that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of internal controls allows for the potential for unallowable costs to be charged to the programs. Repeat Finding: This is a repeat of Finding of 2023-006, and since it is a repeat finding, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management implement stronger internal controls over cash disbursements, specifically to retaining supporting documentation and ensuring proper approval. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E §200.400 (d). This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We noted four (4) instances where the transaction either lacked supporting documentation for payrate or hours worked for ESSER. We noted three (3) instances where the transaction lacked supporting documentation for payrate or hours worked for Title I-A. We also identified one (1) transaction charged to ESSER that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of approval and adequate supporting documentation for transactions allows for an environment where unallowable costs could be charged to the programs.   Federal Schedule of Findings and Questioned Costs, Continued Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None over the reporting threshold of $25,000. Recommendation: We recommend that management implement stronger internal controls over payroll transactions and improve the review, approval and maintenance of supporting documentation processes. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E §200.400 (d). This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We noted four (4) instances where the transaction either lacked supporting documentation for payrate or hours worked for ESSER. We noted three (3) instances where the transaction lacked supporting documentation for payrate or hours worked for Title I-A. We also identified one (1) transaction charged to ESSER that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of approval and adequate supporting documentation for transactions allows for an environment where unallowable costs could be charged to the programs.   Federal Schedule of Findings and Questioned Costs, Continued Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None over the reporting threshold of $25,000. Recommendation: We recommend that management implement stronger internal controls over payroll transactions and improve the review, approval and maintenance of supporting documentation processes. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E §200.400 (d). This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We noted four (4) instances where the transaction either lacked supporting documentation for payrate or hours worked for ESSER. We noted three (3) instances where the transaction lacked supporting documentation for payrate or hours worked for Title I-A. We also identified one (1) transaction charged to ESSER that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of approval and adequate supporting documentation for transactions allows for an environment where unallowable costs could be charged to the programs.   Federal Schedule of Findings and Questioned Costs, Continued Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None over the reporting threshold of $25,000. Recommendation: We recommend that management implement stronger internal controls over payroll transactions and improve the review, approval and maintenance of supporting documentation processes. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E § 200.400 (d)). Further, Uniform Guidance Requirements, which also apply to expenditures of ESSER funds, dictate the funding recipient is required to follow document personnel costs in accordance with 2 CFR Section 200.430 (i). The District is required to maintain time distribution records for employees funded under Federal Programs. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We were unable to verify the funding allocation for eleven (11) transactions for the ESSER funding and four (4) transactions for the Title I-A funding. The payroll expenditures charged to these programs were recorded using journal entries and lacked documentation of time and effort. The employee positions were not considered unallowable under the programs. Cause: Lack of internal controls over payroll expenditure allocation.   Effect: The lack of supporting documentation indicating the payroll expenditure allocation allows for the potential of payroll expenditures to be incorrectly charge to unallowable funding sources. Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management ensures employee personnel action forms are updated to reflect the correct fund allocations for payroll costs to ensure employees time is appropriately coded. Additionally, if charged to federal grant sources that time and effort be adequately tracked and documented. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E § 200.400 (d)). Further, Uniform Guidance Requirements, which also apply to expenditures of ESSER funds, dictate the funding recipient is required to follow document personnel costs in accordance with 2 CFR Section 200.430 (i). The District is required to maintain time distribution records for employees funded under Federal Programs. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We were unable to verify the funding allocation for eleven (11) transactions for the ESSER funding and four (4) transactions for the Title I-A funding. The payroll expenditures charged to these programs were recorded using journal entries and lacked documentation of time and effort. The employee positions were not considered unallowable under the programs. Cause: Lack of internal controls over payroll expenditure allocation.   Effect: The lack of supporting documentation indicating the payroll expenditure allocation allows for the potential of payroll expenditures to be incorrectly charge to unallowable funding sources. Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management ensures employee personnel action forms are updated to reflect the correct fund allocations for payroll costs to ensure employees time is appropriately coded. Additionally, if charged to federal grant sources that time and effort be adequately tracked and documented. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E § 200.400 (d)). Further, Uniform Guidance Requirements, which also apply to expenditures of ESSER funds, dictate the funding recipient is required to follow document personnel costs in accordance with 2 CFR Section 200.430 (i). The District is required to maintain time distribution records for employees funded under Federal Programs. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We were unable to verify the funding allocation for eleven (11) transactions for the ESSER funding and four (4) transactions for the Title I-A funding. The payroll expenditures charged to these programs were recorded using journal entries and lacked documentation of time and effort. The employee positions were not considered unallowable under the programs. Cause: Lack of internal controls over payroll expenditure allocation.   Effect: The lack of supporting documentation indicating the payroll expenditure allocation allows for the potential of payroll expenditures to be incorrectly charge to unallowable funding sources. Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management ensures employee personnel action forms are updated to reflect the correct fund allocations for payroll costs to ensure employees time is appropriately coded. Additionally, if charged to federal grant sources that time and effort be adequately tracked and documented. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA Act: ESSER II / ARP Act: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award number(s): S425U210020 and S425D210020 (ESSER), S010A230002, and S010A220002 (Title I-A), Pass through entity award number(s): ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A) Award Years: 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: 2 CFR Part 200 Subpart E §200.400(d) dictate that the accounting practices of a recipient (or subrecipient) must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of seventeen (17) cash disbursements for ESSER and fourteen (14) cash disbursements for Title I-A. We noted seven (7) transactions from each program that lacked either adequate supporting documentation or documentation of proper review and approval. We did not identify any transactions in either program that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of internal controls allows for the potential for unallowable costs to be charged to the programs. Repeat Finding: This is a repeat of Finding of 2023-006, and since it is a repeat finding, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management implement stronger internal controls over cash disbursements, specifically to retaining supporting documentation and ensuring proper approval. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance and noncompliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E §200.400 (d). This includes ensuring there is proper supporting documentation for transactions as well as methods to document approval of the cost/activity to determine whether it is allowable under the funding requirements. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We noted four (4) instances where the transaction either lacked supporting documentation for payrate or hours worked for ESSER. We noted three (3) instances where the transaction lacked supporting documentation for payrate or hours worked for Title I-A. We also identified one (1) transaction charged to ESSER that appeared to be unallowable based on the context of the transaction. Cause: Lack of internal controls related to approval and supporting documentation for transactions charged to the programs. Effect: Lack of approval and adequate supporting documentation for transactions allows for an environment where unallowable costs could be charged to the programs.   Federal Schedule of Findings and Questioned Costs, Continued Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None over the reporting threshold of $25,000. Recommendation: We recommend that management implement stronger internal controls over payroll transactions and improve the review, approval and maintenance of supporting documentation processes. Management Response: Management agrees with this finding, see Corrective Action Plan.

Federal Agency: U.S. Department of Education passed through the State of Alaska, Department of Education and Early Development (DEED) Federal Program(s): COVID-19 CRRSA ACT: ESSER II / ARP ACT: ESSER III (ESSER) and Title I-A Assistance Listing Number(s):84.425 U and D and 84.010A Award Number(s): Federal award numbers: S425U210020, S425D210020 (ESSER), S010A230002, and S010A230002 (Title I-A), Pass through entity award numbers: ER 24.YFSD.01 (ESSER), IP 24.YFSD.01, and SI 24.YFSD.01 (Title I-A). Award Year(s): 2024 Type of Finding: Significant deficiency in internal control over compliance. Criteria: Management is responsible for designing, implementing and maintaining internal controls relevant to ensuring that transactions charged to programs follow proper internal control processes (2 CFR Part 200 Subpart E § 200.400 (d)). Further, Uniform Guidance Requirements, which also apply to expenditures of ESSER funds, dictate the funding recipient is required to follow document personnel costs in accordance with 2 CFR Section 200.430 (i). The District is required to maintain time distribution records for employees funded under Federal Programs. Condition and Context: We tested a sample of fifteen (15) payroll transactions for ESSER and seven (7) payroll transactions for Title I-A. We were unable to verify the funding allocation for eleven (11) transactions for the ESSER funding and four (4) transactions for the Title I-A funding. The payroll expenditures charged to these programs were recorded using journal entries and lacked documentation of time and effort. The employee positions were not considered unallowable under the programs. Cause: Lack of internal controls over payroll expenditure allocation.   Effect: The lack of supporting documentation indicating the payroll expenditure allocation allows for the potential of payroll expenditures to be incorrectly charge to unallowable funding sources. Repeat Finding: This is not a repeat finding, however, due to the number of exceptions identified, we believe this to be a systemic issue. Questioned Costs: None reported. Recommendation: We recommend that management ensures employee personnel action forms are updated to reflect the correct fund allocations for payroll costs to ensure employees time is appropriately coded. Additionally, if charged to federal grant sources that time and effort be adequately tracked and documented. Management Response: Management agrees with this finding, see Corrective Action Plan.

2024-001 EXCESS DRAWDOWN OF FEDERAL FUNDS Federal agency: U.S. Department of Education Federal Program Title & Assistance Listing Number: Extending Equity into the Digital Workforce Projects of Regional and National Significance -84.411B Award Period: 12/15/2021 - 12/15/2025 Type of Finding: Significant Deficiency, Other Non-compliance Compliance Areas: Cash Management, Allowable Costs, and Cost Principles and Reporting Questioned Costs: None Condition During testing of expenditures and manual journal entries for the Extending Equity into the Digital Workforce (EEDW) grant, we identified a duplicate manual journal entry of $129,781. This entry reclassified August and September 2023 General Fund (Fund 27101) expenditures to the EEDW Fund (Fund 25271). While the costs themselves are necessary and reasonable under the grant's objectives, the duplicate entry resulted in the federal fund expenditures being overstated and reimbursed twice, leading to an overdraw of federal funds. The duplicate entry was reversed by the client upon discovery by the auditors. An audit adjustment was made to record the excess cash balance as unearned grant revenue. Additionally, the annual Federal Financial Report for the period ending December 31, 2023, included these expenditures, causing the reported federal disbursements to be overstated by $129,781. Criteria Cash Management: Although 2 CFR 200.305(b)(1) permits the Cooperative to draw funds in advance, the entity utilizes a cost reimbursement approach for Federal funding. This practice ensures that funds are drawn only for immediate cash needs. 2 CFR 200.305(b)(1) Federal payment. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Cost Principles and Reporting: The application of cost principles is governed by 2 CFR 200.400; specifically (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. Effect The error resulted in an overstatement of federal revenues and expenditures, leading to excess unearned cash in the fund at year-end and inaccuracies in the financial reports (SF-425) submitted to the federal funding agency. The Cooperative is not in compliance with federal regulations for Cash Management and Cost Principles and Reporting. Cause The allowable expenditures intended to be reclassified from the general fund to the federal fund were processed twice, resulting in a duplicate recording. This error was not detected during regular reconciliations or the financial close and reporting process.

Finding 2024-002 Lack of Internal Control / Noncompliance over Activities Allowed or Material Weakness Unallowed and Allowable Costs/Cost Principles Material Noncompliance Federal Agency: U.S. Department of Education Federal Program: School Safety National Activities and Elementary-Secondary School Emergency Relief Programs ALN: 84.425 Pass-through Award Number: ER 24.HGSD.01 Award Years: 2024 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Allowable cost principles are defined in 2 CFR 200.400. Condition and Context: The District was unable to provide supporting documentation for all credit card transactions charged to the grant. Cause: Lack of internal control over transactions charged to the major programs. Effect: The lack of supporting documentation allows for the potential for misstatement of expenditures being charged to the major program for which the cost is unallowable. Questioned Costs: Known questioned costs are $10,611. This is the total balance of purchases made on the district’s credit card charged to the grant. Repeat Finding: Yes, this is a repeat of Finding 2023-004. Since this is a repeat finding, we believe this to be a systemic issue. Recommendation: We recommend the District adhere to their internal control policies to ensure that the regulations contained in 2 CFR 200 are followed and adequate support for transaction is maintained. Management’s Response: Management agrees with this finding. See Corrective Action Plan.

Finding 2024-002 Lack of Internal Control / Noncompliance over Activities Allowed or Material Weakness Unallowed and Allowable Costs/Cost Principles Material Noncompliance Federal Agency: U.S. Department of Education Federal Program: School Safety National Activities and Elementary-Secondary School Emergency Relief Programs ALN: 84.425 Pass-through Award Number: ER 24.HGSD.01 Award Years: 2024 Type of Finding: Material weakness in internal control over compliance and material noncompliance. Criteria: Allowable cost principles are defined in 2 CFR 200.400. Condition and Context: The District was unable to provide supporting documentation for all credit card transactions charged to the grant. Cause: Lack of internal control over transactions charged to the major programs. Effect: The lack of supporting documentation allows for the potential for misstatement of expenditures being charged to the major program for which the cost is unallowable. Questioned Costs: Known questioned costs are $10,611. This is the total balance of purchases made on the district’s credit card charged to the grant. Repeat Finding: Yes, this is a repeat of Finding 2023-004. Since this is a repeat finding, we believe this to be a systemic issue. Recommendation: We recommend the District adhere to their internal control policies to ensure that the regulations contained in 2 CFR 200 are followed and adequate support for transaction is maintained. Management’s Response: Management agrees with this finding. See Corrective Action Plan.

Finding: Allowable Activities and Allowable Costs Federal Assistance Listing No. 93.527 Affordable Care Act (ACA) Grants for New and Expanded Services Under the Health Center Program Cluster Award #: 1 Q8VCS45450-01-00, Award year: March 1, 2022 – February 29, 2024 U.S. Department of Health and Human Services, Health Resources and Services Administration Criteria: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; Subpart E – Cost Principles; General Provision – Policy Guide (2 CFR 200.400): The application of cost principles is based on the fundamental premises that: The accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the federal award. Condition: During our review of expenditures of federal funds under the Health Center Program Cluster, certain cost principles were not consistently applied to all expenses. The Organization received a grant for the purpose of expanding electronic health record systems, which ended in February of 2024; however the contracted vendor had not completed work for which the grant funds had been appropriated within the 120 day grant close out period. Questioned Costs: $880,535. Questioned costs were related to a single grant within the Health Center Program cluster. The value was determined based on the two vendor invoices paid to the vendor at the end of the grant period but prior to work performed. Context: We tested a sample of 24 expenditures out of a population of 230 expenditures recorded to the grant for $1,906,159 of the total expenditures $5,711,364 and noted the above issue. A non-statistical sampling methodology was used to select the sample. Effect: The Organization did not consistently cost principles under Uniform Guidance. Costs were incurred using federal funds prior to services rendered. Cause: The Organization did not have adequate internal controls in place to ensure cost principles under Uniform Guidance were consistently applied. Identification as a repeat finding: Not applicable. Recommendation: The Organization should coordinate with HRSA to determine allowability of expenditures incurred. The Organization should add internal controls to monitor that cost principles under Uniform Guidance are consistently applied. Views of responsible officials: The Organization agrees with the finding. See separate report for planned corrective actions.

FINDING 2024-003 Subject: Title I Grants to Local Educational Agencies - Earmarking Federal Agency: Department of Education Federal Program: Title I Grants to Local Educational Agencies Assistance Listings Number: 84.010 Federal Award Number and Year (or Other Identifying Number): S010A210014 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context Homeless children and youth are automatically eligible for services under Title I, Part A, whether or not they live in a Title I school attendance area or meet the academic standards required of other children for eligibility. The School Corporation is required to reserve (set-aside) the funds necessary to provide homeless children services comparable to services provided in Title I, Part A schools. The set-aside is to be a reasonable amount of funds to meet the needs of the homeless population in the school community. At the end of each grant period, if the School Corporation's obligation to provide services to students experiencing homelessness has been met, but the amount needed to meet that obligation was less than the amount the school had reserved, the school may carry over those unused funds to support any allowable Title I, Part A activities in the next school year. However, if at the end of each grant period the School Corporation's obligation to provide services has not been met, the funds must be carried over to the next school year to provide services to those students experiencing homelessness, in addition to reserving funds from that next school year's grant award for that purpose. The 2021-2022 grant award homeless reservation was $8,600. The School Corporation did not spend any of the funds, but was determined to have met its obligation based on documentation provided. However, through inspection of the final grant report, it was determined that $276 of the $8,600 was used inappropriately in the current school year for other Title I, Part A activities and not for the needs of the homeless student population. The lack of internal controls and noncompliance were isolated to the 2022-2023 school year. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The recipient and subrecipient are responsible for the efficient and effective administration of the Federal award through sound management practices. (b) The recipient and subrecipient are responsible for administering Federal funds in a manner consistent with Federal statutes, regulations, and the terms and conditions of the Federal award. . . ." 20 USC 6313(c)(3)(A) states: "A local educational agency shall reserve such funds as are necessary under this part, determined in accordance with subparagraphs (B) and (C), to provide services comparable to those provided to children in schools funded under this part to serve - (i) homeless children and youths, including providing educationally related support services to children in shelters and other locations where children may live; (ii) children in local institutions for neglected children; and (iii) if appropriate, children in local institutions for delinquent children, and neglected or delinquent children in community day programs." Cause Total expenditures for the grant were not adequately monitored to ensure funds from the homeless reservation were not spent on other activities. Effect A portion of the homeless reservation was spent on activities not related to the homeless population. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls, including segregation of duties, related to the grant agreement and the earmarking compliance requirements. An internal control system, including segregation of duties, should be designed and operate effectively to provide reasonable assurance that material noncompliance with the grant agreement or a compliance requirement of a federal program will be prevented, or detected and corrected, on a timely basis. In order to have an effective internal control system, it is important to have proper segregation of duties. This is accomplished by making sure proper oversight, reviews, and approvals take place and to have a separation of functions over certain activities related to the program. The fundamental premise of segregation of duties is that an individual or small group of individuals should not be in a position to initiate, approve, undertake, and review the same activity. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Material Weakness in Internal Control over Compliance 2024-004 Activities Allowed or Unallowed and Allowable Costs/Costs Principles Program: Community Services Block Grant (CSBG) & Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care)(HCH). Federal Assistance Listing No: 93.569 and 93.224 County Recipient: Community Action Partnership of Natrona County Federal Agency: Department of Health and Human Services Grant year: 2023 and 2024 Federal Award Identification: Unknown Applicable Pass-through Entity: Wyoming Department of Health (CSBG), Direct (HCH) Criteria Accounting practices of the non-Federal entity must provide for adequate documentation to support costs charged to the Federal award. Standards for accounting practices in Uniform Guidance 2 CFR part 200.400 state that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition CAP was missing a consistent system of internal control for accumulation of costs charged to the federal program. The detail of costs maintained in the accounting system charged to the grants differed from the amounts included in the reimbursement requests. Cause Due to an accounting system conversion, adjustments were made in the general ledger to the beginning account balances. This resulted in unreconcilable differences from the detail in the accounting system after adjustment to what was originally submitted for reimbursement. Additionally, CAP began utilizing a separate payroll provider that required an integration of the payroll register monthly to the general ledger. Mapping and coding errors existed during the initial integrations of the payroll register to the general ledger resulting in additional differences from the general ledger to the amounts submitted for reimbursement for wage and benefit expense allocated to the grants. Effect or Potential Effect CAP was unable to provide an accurate accumulation of costs for amounts charged to the grant. Questioned Cost 93.224 - $9,274 93.569 - $28,355 Context The comparison of the general ledger for grant costs to the total of the amounts submitted for reimbursement resulted in differences of $9,274 for the Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) grant, and $28,355 Community Services Block Grant. Identification as a repeat finding This is not a repeat finding Recommendation We recommend CAP review its policies and procedures related to the internal controls over accumulation of expenditures related to grants to ensure the detail agrees to amounts submitted for reimbursement. Views of Responsible Officials Over the past year, CAPNC has continued to make significant improvements to its fiscal practices, particularly in navigating the software conversion from an archaic, unsupported system to Sage Intacct. This new software has modernized and deployed the levels of internal controls that were previously missing due to inadequate fiscal personnel oversight and technical capability. Current staff have been trained under Sage Intacct and Wipfli consultants to properly track accounts payable (A/P), accounts receivable (A/R), payroll, and grant management, ensuring data integrity and compliance. Resulting journal entries are in place to bring system in alignment and current as of July 2024, alleviating any further discrepancies related to past staff and old software. The old system will be archived as required under retention. See Corrective Action Plan

Material Weakness in Internal Control over Compliance 2024-004 Activities Allowed or Unallowed and Allowable Costs/Costs Principles Program: Community Services Block Grant (CSBG) & Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care)(HCH). Federal Assistance Listing No: 93.569 and 93.224 County Recipient: Community Action Partnership of Natrona County Federal Agency: Department of Health and Human Services Grant year: 2023 and 2024 Federal Award Identification: Unknown Applicable Pass-through Entity: Wyoming Department of Health (CSBG), Direct (HCH) Criteria Accounting practices of the non-Federal entity must provide for adequate documentation to support costs charged to the Federal award. Standards for accounting practices in Uniform Guidance 2 CFR part 200.400 state that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition CAP was missing a consistent system of internal control for accumulation of costs charged to the federal program. The detail of costs maintained in the accounting system charged to the grants differed from the amounts included in the reimbursement requests. Cause Due to an accounting system conversion, adjustments were made in the general ledger to the beginning account balances. This resulted in unreconcilable differences from the detail in the accounting system after adjustment to what was originally submitted for reimbursement. Additionally, CAP began utilizing a separate payroll provider that required an integration of the payroll register monthly to the general ledger. Mapping and coding errors existed during the initial integrations of the payroll register to the general ledger resulting in additional differences from the general ledger to the amounts submitted for reimbursement for wage and benefit expense allocated to the grants. Effect or Potential Effect CAP was unable to provide an accurate accumulation of costs for amounts charged to the grant. Questioned Cost 93.224 - $9,274 93.569 - $28,355 Context The comparison of the general ledger for grant costs to the total of the amounts submitted for reimbursement resulted in differences of $9,274 for the Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) grant, and $28,355 Community Services Block Grant. Identification as a repeat finding This is not a repeat finding Recommendation We recommend CAP review its policies and procedures related to the internal controls over accumulation of expenditures related to grants to ensure the detail agrees to amounts submitted for reimbursement. Views of Responsible Officials Over the past year, CAPNC has continued to make significant improvements to its fiscal practices, particularly in navigating the software conversion from an archaic, unsupported system to Sage Intacct. This new software has modernized and deployed the levels of internal controls that were previously missing due to inadequate fiscal personnel oversight and technical capability. Current staff have been trained under Sage Intacct and Wipfli consultants to properly track accounts payable (A/P), accounts receivable (A/R), payroll, and grant management, ensuring data integrity and compliance. Resulting journal entries are in place to bring system in alignment and current as of July 2024, alleviating any further discrepancies related to past staff and old software. The old system will be archived as required under retention. See Corrective Action Plan

Material Weakness in Internal Control over Compliance 2024-004 Activities Allowed or Unallowed and Allowable Costs/Costs Principles Program: Community Services Block Grant (CSBG) & Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care)(HCH). Federal Assistance Listing No: 93.569 and 93.224 County Recipient: Community Action Partnership of Natrona County Federal Agency: Department of Health and Human Services Grant year: 2023 and 2024 Federal Award Identification: Unknown Applicable Pass-through Entity: Wyoming Department of Health (CSBG), Direct (HCH) Criteria Accounting practices of the non-Federal entity must provide for adequate documentation to support costs charged to the Federal award. Standards for accounting practices in Uniform Guidance 2 CFR part 200.400 state that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition CAP was missing a consistent system of internal control for accumulation of costs charged to the federal program. The detail of costs maintained in the accounting system charged to the grants differed from the amounts included in the reimbursement requests. Cause Due to an accounting system conversion, adjustments were made in the general ledger to the beginning account balances. This resulted in unreconcilable differences from the detail in the accounting system after adjustment to what was originally submitted for reimbursement. Additionally, CAP began utilizing a separate payroll provider that required an integration of the payroll register monthly to the general ledger. Mapping and coding errors existed during the initial integrations of the payroll register to the general ledger resulting in additional differences from the general ledger to the amounts submitted for reimbursement for wage and benefit expense allocated to the grants. Effect or Potential Effect CAP was unable to provide an accurate accumulation of costs for amounts charged to the grant. Questioned Cost 93.224 - $9,274 93.569 - $28,355 Context The comparison of the general ledger for grant costs to the total of the amounts submitted for reimbursement resulted in differences of $9,274 for the Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) grant, and $28,355 Community Services Block Grant. Identification as a repeat finding This is not a repeat finding Recommendation We recommend CAP review its policies and procedures related to the internal controls over accumulation of expenditures related to grants to ensure the detail agrees to amounts submitted for reimbursement. Views of Responsible Officials Over the past year, CAPNC has continued to make significant improvements to its fiscal practices, particularly in navigating the software conversion from an archaic, unsupported system to Sage Intacct. This new software has modernized and deployed the levels of internal controls that were previously missing due to inadequate fiscal personnel oversight and technical capability. Current staff have been trained under Sage Intacct and Wipfli consultants to properly track accounts payable (A/P), accounts receivable (A/R), payroll, and grant management, ensuring data integrity and compliance. Resulting journal entries are in place to bring system in alignment and current as of July 2024, alleviating any further discrepancies related to past staff and old software. The old system will be archived as required under retention. See Corrective Action Plan

Material Weakness in Internal Control over Compliance 2024-004 Activities Allowed or Unallowed and Allowable Costs/Costs Principles Program: Community Services Block Grant (CSBG) & Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care)(HCH). Federal Assistance Listing No: 93.569 and 93.224 County Recipient: Community Action Partnership of Natrona County Federal Agency: Department of Health and Human Services Grant year: 2023 and 2024 Federal Award Identification: Unknown Applicable Pass-through Entity: Wyoming Department of Health (CSBG), Direct (HCH) Criteria Accounting practices of the non-Federal entity must provide for adequate documentation to support costs charged to the Federal award. Standards for accounting practices in Uniform Guidance 2 CFR part 200.400 state that the accounting practices of the recipient and subrecipient must be consistent with these cost principles and support the accumulation of costs as required by these cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Condition CAP was missing a consistent system of internal control for accumulation of costs charged to the federal program. The detail of costs maintained in the accounting system charged to the grants differed from the amounts included in the reimbursement requests. Cause Due to an accounting system conversion, adjustments were made in the general ledger to the beginning account balances. This resulted in unreconcilable differences from the detail in the accounting system after adjustment to what was originally submitted for reimbursement. Additionally, CAP began utilizing a separate payroll provider that required an integration of the payroll register monthly to the general ledger. Mapping and coding errors existed during the initial integrations of the payroll register to the general ledger resulting in additional differences from the general ledger to the amounts submitted for reimbursement for wage and benefit expense allocated to the grants. Effect or Potential Effect CAP was unable to provide an accurate accumulation of costs for amounts charged to the grant. Questioned Cost 93.224 - $9,274 93.569 - $28,355 Context The comparison of the general ledger for grant costs to the total of the amounts submitted for reimbursement resulted in differences of $9,274 for the Health Center Program Cluster Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) grant, and $28,355 Community Services Block Grant. Identification as a repeat finding This is not a repeat finding Recommendation We recommend CAP review its policies and procedures related to the internal controls over accumulation of expenditures related to grants to ensure the detail agrees to amounts submitted for reimbursement. Views of Responsible Officials Over the past year, CAPNC has continued to make significant improvements to its fiscal practices, particularly in navigating the software conversion from an archaic, unsupported system to Sage Intacct. This new software has modernized and deployed the levels of internal controls that were previously missing due to inadequate fiscal personnel oversight and technical capability. Current staff have been trained under Sage Intacct and Wipfli consultants to properly track accounts payable (A/P), accounts receivable (A/R), payroll, and grant management, ensuring data integrity and compliance. Resulting journal entries are in place to bring system in alignment and current as of July 2024, alleviating any further discrepancies related to past staff and old software. The old system will be archived as required under retention. See Corrective Action Plan

Finding Number: 2024-005 State/Educational Agency(s): Arkansas Department of Education Pass-Through Entity: Not Applicable AL Number(s) and Program Title(s): 10.558 – Child and Adult Care Food Program Federal Awarding Agency: U.S. Department of Agriculture Federal Award Number(s): 6AR300321 Federal Award Year(s): 2023 and 2024 Compliance Requirement(s) Affected: Cash Management Type of Finding: Noncompliance and Significant Deficiency Repeat Finding: A similar issue was report in prior year finding 2023-002. Criteria: In accordance with 2 CFR § 200.303(c), a non-federal entity must evaluate and monitor its compliance with statutes, regulations, and the terms and conditions of federal awards. In addition, 2 CFR § 200.400(a) and (b) state that the non-federal entity is responsible for efficient and effective administration of the federal award through the application of sound management practices and assumes responsibility for administering federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the federal award. Condition and Context: The Agency receives the following separate grant awards for reimbursement payments to meal providers and sponsoring organizations: 1) Child Nutrition Program (CNP) Block Consolidated (ALN 10.555). 2) CNP Child and Adult Care Food Program (CACFP) Cash in Lieu (ALN 10.558). 3) CNP CACFP Sponsor Administrative (ALN 10.558). Previous correspondence between ALA and the federal awarding agency indicated that each grant award has a designated purpose, and funds are not to be used interchangeably among the grant awards. All expenditures are assigned a cost center and WBS element to identify the applicable federal program and cost category within AASIS, the State’s accounting system. The Agency’s Health and Nutrition Unit (HNU) staff are responsible for ensuring expenditures are properly coded in AASIS, and the federal finance staff utilize expenditure transactions in AASIS to complete cash draws for direct costs to the program. Expense corrections are completed and processed in AASIS by federal finance staff as needed. According to the Agency, corrective action was taken to ensure the accuracy of data from August 1, 2023 through January 31, 2024. ALA review of 10 cash draws to determine if funds were drawn from the appropriate grant revealed the following: • Sponsor Administrative expenditures (ALN 10.558) totaling $65,173 were inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555). • As a result of expense corrections, Child Care and Development Block grant (ALN 93.575) expenditures were erroneously coded as CACFP expenditures and inappropriately drawn from the CNP Block Consolidated grant (ALN 10.555) and CNP CACFP Cash in Lieu (ALN 10.558), totaling $53,095 and $1,940, respectively. Note: Sponsor Administrative expenditures were appropriately drawn from the CNP CACFP Sponsor Administrative grant (ALN 10.558) beginning March 12, 2024. Additionally, on October 14, 2024, after auditor inquiry, federal finance staff completed fund transfers in AASIS to correct the coding of Child Care and Development Block grant expenditures. Statistically Valid Sample: Not a statistically valid sample Questioned Costs: $120,208 Cause: CACFP sponsor administrative and child care expenditures were not properly coded in AASIS, causing funds to be drawn from the incorrect grant award. Effect: Funds were drawn for unallowable expenditures (based on the purpose of each grant). Recommendation: ALA staff recommend the Agency establish and document procedures that specifically address the proper coding of expenditures in AASIS. Views of Responsible Officials and Planned Corrective Action: The Arkansas Department of Education (ADE), Division of Elementary and Secondary Education (DESE), Health and Nutrition Unit (HNU), concur with the finding. The HNU Finance staff implemented procedures for meal claim payment requests which include an initial and final review of all requests to be conducted by two (2) staff. The review process includes, but is not limited to, ensuring expenditures are assigned correct codes related to the appropriate funding source within the appropriate grant year, mitigating the Child Nutrition Program (CNP), Child and Adult Care Food Program (CACFP) Sponsor Administrative expenditure errors going forward. When the request is determined to be compliant, the Associate Director of Finance and Training approves payments before being forwarded to the ADE Finance team for payment. Anticipated Completion Date: March 15, 2025 Contact Person: Sheila Chastain Associate Director Arkansas Department of Education, DESE, Nutrition Services #4 Capitol Mall, Box #12 Little Rock, AR 72201 (501) 324-9502 Sheila.Chastain@ade.arkansas.gov Pamela Burton Director Arkansas Department of Education, DESE, Nutrition Services #4 Capitol Mall, Box #19 Little Rock, AR 72201 (501) 320-8978 Pamela.Burton@ade.arkansas.gov