Findings Citing § 200.403

FINDING 2025-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X; 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-056-PN01, 22611-056-ARP, 22619-056-PN01, 22619-056-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not designed nor implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Proportionate share is an amount of funds that must be expended on special education/related services for parentally placed private school and homeschooled students. The amount to be spent is automatically calculated within each grant application. The School Corporation had not designed, nor implemented, policies and procedures to ensure that the required level of expenditures for nonpublic students was met for each grant. The Non-Public Proportionate Share expenditures for the 22611-056-PN01, 22619-056-PN01, 22611-056-ARP, and 22619-056-ARP grants were not spent in full, and the School Corporation did not file a waiver, which, if approved, would have allowed the funds to be moved and spent under the regular Part B special education scope. INDIANA STATE BOARD OF ACCOUNTS 26 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause The School Corporation did not request a waiver so that unused preschool funds could be carried over to Part B of the program. Effect The failure to establish an effective system of internal controls enabled noncompliance to go undetected. Noncompliance with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement could result in the loss of future funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a system of internal controls to ensure compliance and comply with the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 27 METROPOLITAN SCHOOL DISTRICT OF WASHINGTON TOWNSHIP SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-002 Subject: Child Nutrition Cluster - Allowable Costs/Costs Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Numbers and Years (or Other Identifying Numbers): FY 2023-2024, FY2024-2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation's salary ordinance for classified staff reported the beginning wage rate and not the current wage rate. As a result, 11 of the 13 payroll disbursements sampled for classified employees did not agree with the School Corporation's salary ordinance, which totaled $714. This amount was considered questioned costs. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." INDIANA STATE BOARD OF ACCOUNTS 16 MACONAQUAH SCHOOL CORPORATION 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. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause The School Corporation was not aware of the need for reporting the current wage rate within its salary ordinance. Effect Payroll disbursements for classified employees paid from the grant did not agree with the School Corporation's salary ordinance. As a result, known questioned costs of $714 were identified in the Condition and Context. Questioned Costs Known questioned costs of $714 were identified as described above in the Condition and Context. Recommendation We recommended that the School Corporation's management report the current wage rate within its salary ordinance and establish effective internal controls to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-003 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 17 MACONAQUAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation's salary ordinance for classified staff reported the beginning wage rate and not the current wage rate. As a result, six of the seven payroll disbursements sampled for classified employees did not agree with the School Corporation's salary ordinance, which totaled $952. This amount was considered questioned costs. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause The School Corporation was not aware of the need for reporting the current wage rate within its salary ordinance. Effect Payroll disbursements for classified employees paid from the grant did not agree with the School Corporation's salary ordinance. As a result, known questioned costs of $952 were identified in the Condition and Context. Questioned Costs Known questioned costs in the amount of $952 were identified as described above in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 18 MACONAQUAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that School Corporation's management report the current wage rate within its salary ordinance and establish effective internal controls to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-001 Subject: Twenty-First Century Community Learning Centers - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: Twenty-First Century Community Learning Centers Assistance Listings Number: 84.287 Federal Award Numbers and Years (or Other Identifying Numbers): S287C220014, S287C230014, S287C240014 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The Twenty-First Century Community Learning Centers grant is awarded to schools to provide opportunities for academic enrichment for children, particularly students who attend a high-poverty and lowperforming school. The program is intended to help students meet state and local academic achievement standards in core academic subjects, such as reading and math; to offer students a broad array of enrichment activities that reinforce and complement their regular academic programs; and to offer literacy and other educational services to the families of participating children. Program funds are intended to be used for activities that provide students with activities that complement the regular school-day program of participating students and also fund local activities that are included as part of an expanded learning time (ELT) program that provides students at least 300 additional program hours before, during or after the traditional school day. A sample of 41 vouchers reimbursed by the Indiana Department of Education from the School Corporation's grant funds were selected for testing, consisting of 17 vendor claims and 24 payroll claims. Of the 17 vendor claims selected, 2 were for activities and costs that were determined to be unallowable. The first voucher was paid to NLB Sportswear to purchase 85 Sport-Tek Stripe Pom Pom Beanies in the amount of $1,190. The second voucher was paid to Shoup's Country Foods for a Staff Christmas Dinner in the amount of $1,504. We found 3 additional payments made to Shoup's Country Foods from grant funds during the audit period totaling an additional $3,209, 1 for a December 2024 Christmas dinner and 2 for a December 2023 Christmas dinner. The total amount of charges for these expenditures was $5,903, which we considered to be questioned costs. Internal controls over grant expenditures were not properly designed and implemented to detect and prevent the noncompliance noted above. Criteria 2 CFR 200.303 states in part: "The recipient and subrecipient must: INDIANA STATE BOARD OF ACCOUNTS 14 CLINTON CENTRAL SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control-Integrated Framework' issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federallyfinanced and other activities of the non-Federal entity. . . ." Cause The grant manager approved the expenses and directed that they be paid from this funding. The Treasurer, who reviewed all expenses, did not consider it appropriate to question the expenses because the grant manager had already approved them. Effect Without proper implementation of an effectively designed system of internal controls, the School Corporation made purchases for unallowable items. Examiners were unable to determine how these items benefited the program. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs Questioned costs in the amount of $5,903 were identified as described in the Condition and Context. Recommendation We recommended that management of the School Corporation design and implement a proper system of internal controls, including documented policies and procedures, that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight are obtained to support disbursements that are charged to the respective grants. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Significant Deficiencies Federal Program: U.S. Department of Health and Human Services Pass-Through from Maryland Department of Health and Cecil County Health Department Major Program: Opioid State Targeted Response (93.788) Finding 2025 - 004: Transactions Lacking Adequate Documentation – Allowable Costs Criteria: 2 CFR Part 200.403(g) requires that costs should be adequately documented to support the nature and amount of a transaction for such charges to be allowable under federal awards. In addition, 2 CFR Part 200.334 requires recipients to maintain financial records sufficient to show compliance with federal statues, regulations, and terms and conditions of the award. Condition: During our audit we identified certain transactions without adequate documentation. Context: A review of 40 disbursements totaling $41,262 noted two transactions without proper support. One employee reimbursement was overpaid due to an incorrect reimbursement form, and one disbursement did not have proper approval of the invoice. Cause: The employee improperly completed the reimbursement form, and the total amount did not match the original receipt. The supervisor failed to notice this difference when reviewing the form. For the other disbursement, the invoice was not properly reviewed and approved by a supervisor prior to payment. Effect: Costs could be deemed unallowable by the awarding agency if not properly substantiated and grant funding could be improperly spent. Questioned Costs: $1,434 of known costs charged to federal awards without adequate documentation. Recommendation: We recommend the Organization reiterate its policy to employees to properly calculate and document reimbursement forms. We also recommend that management adequately review and approve all invoices as they arrive. View of Responsible Officials and Planned Corrective Action: We are in agreement with the finding and will reinforce our policies on reimbursements and invoice approvals.

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

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

Program: AL 21.027 – COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – Allowability Grant Number & Year: SLFRP1965, March 3, 2021, through December 31, 2024 Federal Grantor Agency: U.S. Department of the Treasury Criteria: 31 CFR § 35.6(b) (July 1, 2024) states, in relevant part, the following: A recipient may use funds to respond to the public health emergency or its negative economic impacts if the use meets the criteria provided in paragraph (b)(1) of this section or is enumerated in paragraph (b)(3) of this section; provided that, in the case of a use of funds for a capital expenditure under paragraph (b)(1) or (b)(3) of this section, the use of funds must also meet the criteria provided in paragraph (b)(4) of this section. Treasury may also articulate additional eligible programs, services, or capital expenditures from time to time that satisfy the eligibility criteria of this paragraph (b), which shall be eligible under this paragraph (b). (1) Identifying eligible responses to the public health emergency or its negative economic impacts. (i) A program, service, or capital expenditure is eligible under this paragraph (b)(1) if a recipient identifies a harm or impact to a beneficiary or class of beneficiaries caused or exacerbated by the public health emergency or its negative economic impacts and the program, service, or capital expenditure responds to such harm. (ii) A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced. * * * * (3) Enumerated eligible uses: responses presumed reasonably proportional. A recipient may use funds to respond to the public health emergency or its negative economic impacts on a beneficiary or class of beneficiaries for one or more of the following purposes unless such use is grossly disproportionate to the harm caused or exacerbated by the public health emergency or its negative economic impacts: * * * * (ii) Responding to the negative economic impacts of the public health emergency for purposes including: * * * * (D) Assistance to tourism, travel, hospitality, and other impacted industries for programs, services, or capital expenditures, including support for payroll costs and covered benefits for employees, compensating returning employees, support for operations and maintenance of existing equipment and facilities, and technical assistance[.] 31 CFR § 35.6(c) (July 1, 2024) states the following: Providing premium pay to eligible workers. A recipient may use funds to provide premium pay to eligible workers of the recipient who perform essential work or to provide grants to eligible employers that have eligible workers who perform essential work, provided that any premium pay or grants provided under this paragraph (c) must respond to eligible workers performing essential work during the COVID-19 public health emergency. A recipient uses premium pay or grants provided under this paragraph (c) to respond to eligible workers performing essential work during the COVID-19 public health emergency if: (1) The eligible worker's total wages and remuneration, including the premium pay, is less than or equal to 150 percent of the greater of such eligible worker’s residing State’s or county’s average annual wage for all occupations as defined by the Bureau of Labor Statistics’ Occupational Employment and Wage Statistics; (2) The eligible worker is not exempt from the Fair Labor Standards Act overtime provisions (29 U.S.C. 207); or (3) The recipient has submitted to the Secretary a written justification that explains how providing premium pay to the eligible worker is responsive to the eligible worker performing essential work during the COVID-19 public health emergency (such as a description of the eligible workers’ duties, health, or financial risks faced due to COVID-19, and why the recipient determined that the premium pay was responsive despite the worker's higher income). 31 CFR § 35.3 (July 1, 2024) defines “premium pay,” in relevant part, as follows: Premium pay means an amount of up to $13 per hour that is paid to an eligible worker, in addition to wages or remuneration the eligible worker otherwise receives, for all work performed by the eligible worker during the COVID-19 public health emergency. Such amount may not exceed $25,000 in total over the period of performance with respect to any single eligible worker. H.J. Res 7 (2023) states the following: Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That, pursuant to section 202 of the National Emergencies Act (50 U.S.C. 1622), the national emergency declared by the finding of the President on March 13, 2020, in Proclamation 9994 (85 Fed. Reg. 15337) is hereby terminated. Approved April 10, 2023. Additionally, the “Final Rule” was released by the U.S. Department of the Treasury on January 6, 2022. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 1. General Provisions: Structure and Standards, a. Standards for Identifying a Public Health or Negative Economic Impact, Standards: Designating a Negative Economic Impact, states the following, in relevant part: (Page 4344) First, there must be a negative economic impact, or an economic harm, experienced by an individual or a class. The recipient should assess whether, and the extent to which, there has been an economic harm, such as loss of earnings or revenue, that resulted from the COVID-19 public health emergency. A recipient should first consider whether an economic harm exists and then whether this harm was caused or made worse by the COVID-19 public health emergency. * * * * Second, the response must be designated to address the identified economic harm or impact resulting from or exacerbated by the public health emergency. In selecting responses, the recipient must assess whether, and the extent to which, the use would respond to or address this harm or impact. * * * * Responses must be reasonably designed to benefit the individual or class that experienced the negative economic impact or harm. Uses of funds should be assessed based on their responsiveness to their intended beneficiary and the ability of the response to address the impact or harm experienced by that beneficiary. Responses must also be related and reasonably proportional to the extent and type of harm experienced. The Final Rule, Section II. Eligible Uses, A. Public Health and Negative Economic Impacts, 4. General Provisions: Other, a. Public Sector Capacity and Workforce, states the following, in relevant part: (Page 4386) The final rule allows for an expanded set of eligible uses to restore and support public sector employment. Eligible uses include hiring up to a pre-pandemic baseline that is adjusted for historic underinvestment in the public sector, providing additional funds for employees who experienced pay cuts or were furloughed, avoiding layoffs, providing worker retention incentives, and paying for ancillary administrative costs related to hiring. * * * * The final rule provides two options to restore pre-pandemic employment, depending on recipient’s needs. Under the first and simpler option, recipients may use SLFRF funds to rehire staff for pre-pandemic positions that were unfilled or were eliminated due the pandemic without undergoing further analysis. Under the second option, the final rule provides recipients an option to hire above the pre-pandemic baseline, by adjusting the pre-pandemic baseline for historical growth in public sector employment over time, as well as flexibility on roles for hire. * * * * To pursue the second option, recipients should undergo the analysis provided below. In short, this option allows recipients to pay for payroll and covered benefits associated with the recipient increasing its number of budgeted full-time equivalent employees (FTEs) up to 7.5 percent above its pre-pandemic employment baseline, which adjusts for the continued underinvestment in state and local governments since the Great Recession. * * * * Funds may be used to maintain current compensation levels, with adjustments for inflation, in order to prevent layoffs that would otherwise be necessary. Recipients must be able to substantiate that layoffs were likely in the absence of SLFRF funds and would be substantially due to the public health emergency or its negative economic impacts (e.g., fiscal pressures on state and local budgets) and should document their assessment. * * * * Funds may be used to provide worker retention incentives, which are designed to persuade employees to remain with the employer as compared to other employment options. Recipients must be able to substantiate that the employees were likely to leave employment in the absence of the retention incentive and should document their assessment. * * * * All worker retention incentives must be narrowly tailored to need and should not exceed incentives traditionally offered by the recipient or compensation that alternative employers may offer to compete for the employees. Further, because retention incentives are intended to provide additional incentive to remain with the employer, they must be entirely additive to an employee’s regular rate of wages and other remuneration and may not be used to reduce or substitute for an employee’s normal earnings. Treasury will presume that retention incentives that are less than 25 percent of the rate of base pay for an individual employee or 10 percent for a group or category of employees are reasonably proportional to the need to retain employees, as long as the other requirements are met. The Final Rule, Footnote 230, states the following, in relevant part: (Page 4379) Ultimately, recipients must comply with the eligible use requirements and any other applicable laws or requirements and are responsible for the actions of their subrecipients or beneficiaries. Per 2 CFR § 1000.10 (January 1, 2024), “[T]he Department of the Treasury adopts the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, set forth at 2 CFR part 200.” 2 CFR § 200.303 (January 1, 2024) states, in relevant part, the following: 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. Per 2 CFR § 200.403 (January 1, 2024), costs must be necessary and reasonable for the performance of the Federal award. Costs must also be adequately documented. Good internal control and sound business practices require procedures for ensuring that: 1) premium pay is paid to only eligible individuals; 2) expenditures are adequately supported; and 3) all expenditures are for allowable purposes. Condition: The State lacked procedures to ensure that: • Grants issued to beneficiaries for worker retention and incentives were used for such purposes. • Premium pay paid to eligible individuals was for work performed during the COVID-19 public health emergency. Repeat Finding: 2024-069 Questioned Costs: $2,619,690 known Statistical Sample: No Context: We randomly selected 40 payments to test. We also judgmentally selected 12 payments and 7 journal entries to test. We noted the following: Payments to Nursing Facilities & Assisted Living Centers for Employee Retention and Recruitment LB 1014 (2022), section 28, appropriated $12,500,000 from the CSLFRF grant to the Department of Health and Human Services (DHHS) for State fiscal year 2025 to be paid out to Medicaid-certified nursing facilities. The funds were to be used to provide supplemental incentive payments for direct care staff members employed at the nursing facilities. DHHS paid out $12,500,000 to Medicaid-certified nursing facilities during State fiscal year 2025. During testing of 40 randomly selected CSLFRF payments, we tested five payments, totaling $452,690, made to Medicaid-certified nursing facilities. We asked for documentation of how DHHS ensured that the payments were used for allowable employee retention and recruitment programs, and for any documented assessments that were required by the Final Rule for worker incentive programs. According to DHHS, the funds were paid out in accordance with the requirements of LB 1014 (2022). Additionally, during June and July 2024, DHHS obtained signed attestations from all entities that had previously received funds in fiscal years 2023 and 2024, attesting that the entity was aware that funds provided could be used only to enhance employee recruitment and retention and that funds were used for such purpose. These forms applied only to funds already received at the time and did not include language referencing that they would apply to those payments issued in the State fiscal year 2025. DHHS claimed to have performed additional monitoring procedures in response to our finding in fiscal year 2024, which consisted of reviewing four entities that received funds in fiscal year 2024. The APA noted that this review consisted of only 4 of the 181 entities that received payments in fiscal year 2025, and the review considered only the use of funds disbursed prior to fiscal year 2025. Lastly, the APA noted that the documentation on file for DHHS’ review did not contain any analysis to support that funds were allowed for allowable retention and recruitment. Because no documentation was provided to support that funds were used for allowable employee retention and recruitment programs, we questioned all costs for the five payments tested, totaling $452,690, and noted that all $12,500,000 disbursed are dollars at risk. Premium Pay LB 1412 (2024), section 112, allowed the Governor to reallocate previously appropriated CSLFRF dollars that could not otherwise be obligated by the December 31, 2024, obligation deadline. Under this authority, the Office of the Governor authorized $3,007,058 to be used for premium pay to State employees. In December 2024, May 2025, and June 2025, DHHS posted three journal entries to move payroll costs of $2,167,000 to the CSLFRF grant. During our review of these entries, totaling $2,167,000, we noted that DHHS had determined the allowability of the entry by calculating the total amount of allowable premium pay during the grant period. DHHS had identified premium pay, totaling $10,537,975, paid to employees providing mental health services as part of the Lincoln Regional Center and Norfolk Regional Center Sex Offender Treatment Program for work dates from December 23, 2019, through April 30, 2023, and stated that this was more than the $9,760,287 in premium pay coded to the grant as of June 30, 2025, including the $2,167,000 tested; therefore, the entry was allowable. However, during our review, we noted the following deficiencies in DHHS’ review: • DHHS included $5,054,478 of payroll costs associated with work performed prior to the implementation of any premium pay on November 1, 2021, and after the end of the public health emergency on April 10, 2023, which is not allowable. • DHHS projections did not include any review of employee exemption status or total wages to support that moving payroll costs to the grant was responsive to employees performing essential work. Further, DHHS had no written justification on file to support the responsiveness of premium pay for any employees. We noted 28 employees who were exempt with wages over 150% of the State average. • DHHS did not properly cap the amount of premium pay at $25,000 per person for the life of the grant. Rather, DHHS capped premium pay at $25,000 per employee per each fiscal year during the grant. • Despite attempting to cap premium pay at $13 per hour for all employees, DHHS did not properly calculate the amount of premium pay earned by each employee. Employees were afforded a 20-30% pay increase for premium pay; however, DHHS calculated the premium pay as 20-30% of the new rate (including premium pay) instead of the employees’ original pay rate, resulting in overstatements of 3-7%. • In determining the amount of premium pay, DHHS erroneously included duplicate payroll lines, totaling $709,206, of gross pay. Taking all of the deficiencies into consideration, the APA calculated total allowable premium pay for the grant period to be only $5,001,281, which was $4,759,005 less than the amount of premium pay coded to the grant. The APA observed that, prior to fiscal year 2025, the agency had moved $7,593,287 of payroll costs to the grant. Therefore, all $2,167,000 of these journal entries tested are questioned costs. Cause: Inadequate procedures to ensure: 1) grants to nursing and assisted-living facilities were used for allowable purposes; and 2) premium pay was paid only to individuals who performed work during the COVID-19 public health emergency and at allowable rates. Effect: Without adequate supporting documentation and review procedures, there is an increased risk that Federal awards could be used for unallowable costs. Recommendation: We recommend the State strengthen procedures for ensuring that all Federal funds are used for intended and allowable purposes. Management Response: Department of Health and Human Services Agency disagrees with this finding. The methods utilized to calculate claims over the $25k per person cap and the max $13/hour increase cap were erroneous. DHHS was able to consolidate the entire data set for the appropriation periods between State fiscal year 2022 and State fiscal year 2025 and showed that, based on allowable claims for each period, there was a total of $10,537,974.76 possible to be claimed, and $9,760,286.67 actually claimed. APA Response: As noted above, 31 CFR § 35.3 (July 1, 2024) defines “premium pay” as an additional amount up to $13 per hour that is paid to an eligible worker for all work performed by the eligible worker during the COVID-19 public health emergency and states that it “may not exceed $25,000 in total over the period of performance with respect to any single eligible worker.” Review of DHHS’s analysis of $10,537,974.76 noted that it includes premium pay in excess of the $25,000 per person total limit for the period of performance for 138 individuals, totaling $4,208,829.04.

2025-009 – Insufficient Supporting Documentation of Disbursements Finding Type. Immaterial Noncompliance/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 §200.403(g) and 2 CFR 200.334, federal award expenses must be adequately documented, and records must be retained and available for review for the required retention period. Condition. During our testing of disbursements, we noted 1 of 26 disbursements tested where the University did not have adequate documentation to support why the disbursement was charged to the grant. Cause. The lack of required supporting documentation resulted from employee turnover within the grant and accounts payable functions, which led to gaps in knowledge transfer and inconsistent adherence to established documentation procedures. Effect. As a result of this condition, there is an increased risk of unallowable expenses being charged to the grant, inaccurate financial reporting, and other potential noncompliance with federal regulations. Questioned Costs. There were questioned costs of $135. Recommendation. We recommend the University establish formal procedures to ensure all expenses charged to grants have adequate support and reviewed and approved by management. 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.

Information on the federal program: Subject: Special Education Cluster (IDEA) – Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01, 22611-047-ARP, 22619-047-ARP, 24611-047-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act – (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act – (a) To children with disabilities aged three through five years; and (b) At a State's discretion, to two-year-old children with disabilities who will turn three during the school year." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items . . . (g) Be adequately documented. . 511 IAC 7-34-9 states in part: “(a) The public agency must hold title to and exercise continuing administrative control of all: (1) property; (2) equipment; and (3) supplies; the public agency acquires with Part B funds for the benefit of nonpublic school students with disabilities. (b) The public agency may place equipment and supplies in a nonpublic school for the period of time needed to provide special education and related services. The public agency must ensure that the equipment and supplies: (1) are used only for the provision of special education and related services; and (2) can be removed from the nonpublic school without remodeling the nonpublic school facility.” Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster program and Activities Allowed or Unallowed and Allowable Costs compliance requirements. Cause: Management was not aware that non-public school officials have no authority to obligate or receive federal funds and that School Corporation must maintain control of all Special Education funds, property, equipment and supplies; therefore, reimbursements were made to a non-public school for proportionate share expenditures. Effect: The payment of proportionate share expenditures to a non-public school resulted in the potential misuse of funds that were meant to pay the excess costs of providing special education to students. The unallowable nature of these expenditures may also result in the School Corporation not meeting their requirements related to Non-Public Proportionate Share for the respective grants. Questioned Costs: There were questioned costs identified in the amount of $17,857. Context: During fiscal year 2023-2024, the School Corporation was a member of Cooperative School Services (Cooperative). The Cooperative operated the special education programs and spent the federal money on behalf of its member schools. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. For costs related to non-public schools, the practice of the Cooperative was to separate out the required amount for each member school from the Cooperative budget, and the member schools would work with the non-public schools to determine how to spend their proportionate share amount. Each member school would then request reimbursement from the Cooperative for non-public school expenditures incurred. This allowed both the Cooperative and member schools to maintain control of all Special Education funds, property, equipment and supplies. In the initial sample of 25 expenditures, there was no noncompliance identified. However, while performing a review of separate transactions for the Period of Performance compliance requirement, it was noted that non-public schools received direct reimbursements from the Cooperative for their proportionate share expenditures, which is not allowable under the grant award. The audit team reviewed the expenditure population in entirety and identified a total of 5 expenditures, totaling $17,857, that were made from Special Education funds directly to non-public schools by the cooperative during the audit period. The lack of controls and noncompliance was an isolated to the 22611-047-PN01, 22611-047-ARP, 22619-047-ARP and 24611-047-PN01 grant awards. This issue was isolated to fiscal year 2024. No direct payments to non-public schools were identified during fiscal year 2025. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the School Corporation's management establish a system of internal controls to ensure that no direct reimbursements are made to the non-public schools and to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

FINDING 2025-001 Information on the federal program: Subject: Special Education Cluster (IDEA) – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking Audit Findings: Significant Deficiency Criteria: 2 CFR section 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 awards 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and earmarking compliance requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the earmarking requirements. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Porter County Education Services (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01and 22611-046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The non-public proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per each applicable member schools’ grant award was expended and properly reported to IDOE, as required. The lack of internal controls was isolated to the 22611-046-PN01 and 22611-046-ARP grant awards which were fully expended during fiscal year 2024. These two grant awards had minimum earmarking requirements for the Non-Public Proportionate Share of $35,513 and $8,472, respectively. Identification as a repeat finding, if applicable: This is a repeat finding from the immediately prior audit. The prior finding number was 2023-003. Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to monitor the Cooperative and ensure non-public proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

Information on the federal program: Subject: Child Nutrition Cluster (CNC) Federal Agency: Department of Agriculture Federal Program: School Breakfast Program, National School Lunch Program Assistance Listing Number: 10.553, 10.555 Federal Award Numbers and Years (Or Other Identifying Numbers): FY23-FY24, FY24-FY25 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed and Unallowed, Allowable Costs Audit Findings: Material Weakness, Other Matters Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The School Corporation did not have adequate internal controls in place to ensure that the School Corporation complied with the allowable cost requirements. Cause: A proper system of internal control was not designed by management of the School Corporation that included a thorough review of expenditures charged to the food service program fund (Fund 0800). Effect: Without the proper implementation of an effectively designed system of internal controls, the control system could not be capable of effectively preventing, or detecting and correcting, material noncompliance. Questioned Costs: $6,388 (known questioned costs). Context: During our testing of the School Corporation’s compliance with the allowable cost requirements for the Child Nutrition Cluster (CNC), we tested 40 vendor disbursement transactions and 40 payroll disbursement transactions and identified the following exceptions: 1. For one vendor disbursement, the School Corporation incorrectly recorded the disbursement for $820 to Fund 800 (School Lunch Fund) that should have been recorded to Fund 300 (Operations Fund), resulting in an unallowable cost being charged to the food service fund. 2. For one payroll disbursement, the School Corporation mistakenly entered the number of hours worked by a cafeteria employee for one pay period due to a typo, resulting in an overpayment to the employee by $5,568. The employee notified the School Corporation of the overpayment and remitted the overpayment back to the School Corporation. These errors were attributable to deficiencies in the internal controls over the review and approval of vendor and payroll expenditures. Identification as a repeat finding, if applicable: No. Recommendation: We recommend that management of the School Corporation review internal controls in place to ensure the review controls detect and correct errors in processing transactions including verifying the transactions are recorded to the appropriate fund and hours worked supported by timecards are accurately entered and reviewed prior to processing payments. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.

FINDING 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States Assistance Listings Numbers: 84.027; 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-001-PN01, 22611-001-ARP, 23611-001-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters Condition and Context The School Corporation is a member of the Adams Wells Special Services Cooperative (Cooperative). During the audit period, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. INDIANA STATE BOARD OF ACCOUNTS 19 NORTH ADAMS COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation did not have internal controls in place during fiscal year 2023-2024 to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. During 2023-2024, the staff member providing the services to students did not differentiate between their hours worked with preschool and elementary students on their timesheet. Preschool and elementary services are funded by different grants. As the hours for the elementary services were unavailable, we were unable to determine what hours were worked that applied to the elementary grant. The lack of internal controls and noncompliance was isolated to the 2023-2024 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of management and review of documentation, we determined the Cooperative was tracking the hours spent at all nonpublic schools associated with the member schools. However, the staff members were not tracking their time within the nonpublic school between the preschool hours and elementary school hours. The discussion with the Cooperative revealed they were unaware of the requirement to track funds separately. INDIANA STATE BOARD OF ACCOUNTS 20 NORTH ADAMS COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effort Without proper implementation of effectively designed system of internal controls, the Cooperative did not track expenditures for nonpublic services between preschool grant funds and Part B grant funds. Consequently, the amounts requested for reimbursement were not supported by actual hours worked between the preschool and elementary School but rather the combination of nonpublic proportionate share amounts for both grants. Recommendation Management of the Cooperative should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures by grant. Documentation should be maintained to show how these expenditures are being tracked to ensure compliance with the Earmarking requirements. Questioned Costs There were no questioned costs identified. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Finding 2025-001: Period of Performance and Allowability Federal Agency: Department of Health and Human Services Federal Division: National Institutes of Health Federal Program: Research and Development (R&D) Cluster (ALN 93.866) Federal Award Year: September 15, 2017 – May 31, 2024 Federal Award Number: R01AG057725 Criteria Section 2 Code of Federal Regulations (CFR) 200.309, states that costs charged to a federal award must be incurred during the approved period of performance. Section 2 CFR 200.403, indicates that costs must be allowable under Federal awards. CFR 200.303, states the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition, including proper perspective We sampled 50 University R&D procurement transactions aggregating $5,834,093 and identified one instance where the vendor was paid despite the services not being performed and outside the federal award’s period of performance. Costs in the amount of $286,140 were determined to be unallowable and outside of the period of performance. Total procurement expenditures within the University’s R&D program aggregated $166,760,329. Cause and Effect The control in place over period of performance was not operating at a level of precision to prevent or detect non-compliance. There was insufficient review and monitoring of vendor invoices by the departmental management to ensure that costs were incurred within the approved period of performance which resulted in costs being incurred on the award after the period of performance ended. Questioned Costs There are known questioned costs of $468,555, inclusive of $286,140 direct costs and $182,415 indirect costs. Sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat Finding in the Prior Year No. Recommendation We recommend that the University reinforce its policies and internal controls over grant expenditure review. Specifically, expenditures should be verified for compliance with the grant period of performance and confirmation that services were performed. Periodic training for staff responsible for grant administration is also recommended. Views of Responsible Officials The University accepts this finding and has removed the questioned costs from the award. Management will reinforce and reiterate our internal controls around 2 CFR 200 to the staff. Management will provide targeted 2 CFR 200 training to the impacted department.

Information on the federal program: Subject: Special Education Cluster (IDEA) – Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, Special Education Preschool Grants Assistance Listing Numbers: 84.027 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-047-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act – (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities:  Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act – (a) To children with disabilities aged three through five years; and (b) At a State's discretion, to two-year-old children with disabilities who will turn three during the school year." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items . . . (g) Be adequately documented. . . ." 511 IAC 7-34-9 states in part: “(a) The public agency must hold title to and exercise continuing administrative control of all: (1) property; (2) equipment; and (3) supplies; the public agency acquires with Part B funds for the benefit of nonpublic school students with disabilities. (b) The public agency may place equipment and supplies in a nonpublic school for the period of time needed to provide special education and related services. The public agency must ensure that the equipment and supplies: (1) are used only for the provision of special education and related services; and (2) can be removed from the nonpublic school without remodeling the nonpublic school facility.” Condition: An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the Special Education Cluster program and Activities Allowed or Unallowed and Allowable Costs compliance requirements. Cause: Management was not aware that non-public school officials have no authority to obligate or receive federal funds and that School Corporation must maintain control of all Special Education funds, property, equipment and supplies; therefore, reimbursements were made to a non-public school for proportionate share expenditures. Effect: The payment of proportionate share expenditures to a non-public school resulted in the potential misuse of funds that were meant to pay the excess costs of providing special education to students. The unallowable nature of these expenditures may also result in the School Corporation not meeting their requirements related to Non-Public Proportionate Share for the respective grants. Questioned Costs: There were questioned costs identified in the amount of $3,399. Context: During fiscal year 2023-2024, the School Corporation was a member as well as the fiscal agent of Cooperative School Services (Cooperative). The Cooperative operated the special education programs and spent the federal money on behalf of its member schools. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. For costs related to non-public schools, the practice of the Cooperative was to separate out the required amount for each member school from the Cooperative budget, and the member schools would work with the non-public schools to determine how to spend their proportionate share amount. Each member school would then request reimbursement from the Cooperative for non-public school expenditures incurred. This allowed both the Cooperative and member schools to maintain control of all Special Education funds, property, equipment and supplies. In the initial sample of 25 expenditures, there was no noncompliance identified. However, while performing a review of transactions for the Period of Performance compliance requirement, it was noted that non-public schools received direct reimbursements from the Cooperative for their proportionate share expenditures. A total of 13 expenditures were made from Special Education funds to non-public schools on behalf of the member schools during the audit period. Of the 13 expenditures, 3, totaling $3,399, were made on behalf of the School Corporation to a non-public school. In addition, one of the expenditures was used to reimburse the non-public school for the purchase of gift cards and certificates, totaling $670, which was not for the benefit of non-public students. The lack of controls and noncompliance was an isolated to the 22611-047-PN01 grant award. This issue was isolated to fiscal year 2024. Identification as a repeat finding, if applicable: No Recommendation: We recommended that the School Corporation's management establish a system of internal controls to ensure that no direct reimbursements are made to the non-public schools and to ensure compliance with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials and Planned Corrective Actions: Management has agreed with the finding and prepared a corrective action plan.

Criteria: Per 2 CFR 200.403, costs charged to federal awards must be necessary, reasonable, and adequately documented. Additionally, 2 CFR 200.430 requires payroll costs charged to federal awards to be accurately supported and properly allocated to the benefiting program. Condition: During testing of expenditures charged to the federal award, we identified contractual payroll amounts that were charged to the grant for instruction and curriculum development activities. However, these activities were already charged to the grant through the separate training fee (HRSA-approved fee-for-service). This essentially resulted in these payroll expenditures being double charged to the grant. Cause: Management indicated that the duplication resulted from confusion regarding the proper treatment and recording of contractual payroll costs under the grant requirements, which led to the amounts being charged to the program more than once. Effect: As a result, contractual payroll costs charged to the federal award were overstated. Questioned Costs: Questioned costs totaling $ 6,405 were identified as duplicated contractual payroll amounts charged to the grant. Recommendation: We recommend that management implement additional review procedures over payroll allocations charged to federal awards and ensure staff responsible for grant accounting receive additional guidance regarding grant requirements to prevent similar errors in the future. Management Response: Management agrees with the finding. Management has already corrected by reducing the most recent drawdown from HRSA by the amount in question. Management will also implement additional review procedures to prevent similar errors in the future.

FINDING 2025-004 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-151-PN01, 22611-151-ARP, 23611-151-PN01, 23619-151-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation did not have internal controls in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met. Although the Proportionate Share Report was prepared by the Treasurer and reviewed and approved by the Special Education Director, the internal controls were not effective to ensure nonpublic school expenditures were appropriately identified and reported. The nonpublic expenditures spent did not meet the earmarking requirements for grant award numbers 22611-151-PN01, 22611-151-ARP, 23611-151-PN01, and 23619-151-PN01. The required expenditures for nonpublic proportionate shares were $11,074, $2,423, $9,363, and $504, respectively. The School Corporation could only provide documentation of expenditures of $10,465, $0, $2,561, and $0, respectively. In addition, the School Corporation did not track the expenditures in a separate line item within the ledger to specifically identify services provided for nonpublic school students. The lack of internal controls and noncompliance were isolated to the 22611-151-PN01, 22611-151-ARP, 23611-151-PN01, and 23619-151-PN01 grants. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 20 DELPHI COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Through inquiry of management, they were unaware of the requirements to track the nonpublic proportionate share expenditures separately. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation was unable to track expenditures for nonpublic services and ensure the proper amount was spent which could result in the repayment of federal awards. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure the required level of expenditures for nonpublic school students with disabilities is met and properly tracked to ensure compliance with the matching, level of effort, earmarking requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-003 Subject: Child Nutrition Cluster - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Number and Year (or Other Identifying Number): FY2023-24 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Special Tests and Provisions - Non-Profit School Food Service Accounts Audit Findings: Significant Deficiency, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context Food Service - Expenditures The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to transfers of the grant. A transfer totaling $148,955 was made from the School Lunch fund to the Payroll Clearing fund on July 1, 2023, as a part of the conversion to the new financial system. Documentation to support that this was to fund an allowable activity or cost of the grant was not provided for audit. Food Service - Revenues The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to food service revenues being accounted for in the School Food Account. A School Food Authority (SFA) is required to account for all revenues and expenditures of its nonprofit school food service in accordance with state and federal requirements. A SFA must operate its food services on a nonprofit basis; all revenue generated by the school food service must be used to operate and improve its food services. In the prior audit, the School Corporation's process was to receipt the School Lunch reimbursement received into a Food Service Federal Reimbursement fund and then transfer that reimbursement to the School Lunch fund the following month. The April 2022 and April 2023 reimbursements of $158,679 and $91,108, respectively, were receipted into the Food Service Federal Reimbursement fund on July 7, 2022, and June 2, 2023. The reimbursements, totaling $249,787, had not been transferred to the School Lunch fund, which is the designated school food service fund, as of June 30, 2023. INDIANA STATE BOARD OF ACCOUNTS 23 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) In July 2023, the School Corporation converted to a new financial system. The $250,995 balance in the Food Service Federal Reimbursement fund was not converted into the new financial system, and, therefore, was not transferred to the School Lunch fund. Audit adjustments were proposed, accepted by the School Corporation, and made to the financial statement and the Combining Schedule of Receipts, Disbursements, Other Financing Sources (Uses), and Cash and Investment Balances - Regulatory Basis presented as Other Information in the Financial Statement Audit Report of the School Corporation. The lack of internal controls and noncompliance was isolated to the 2023-2024 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). . . ." 7 CFR 220.7(e) states in part: ". . . the School Food Authority shall, with respect to participating schools under its jurisdiction: (1) (i) Maintain a nonprofit school food service; (ii) . . . use all revenues received by such food service only for the operation or improvement of that food service . . ." 7 CFR 210.14(a) states in part: "Nonprofit school food service. School food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved by FNS, or to construct buildings. . . ." 7 CFR 220.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." INDIANA STATE BOARD OF ACCOUNTS 24 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 7 CFR 210.2 states in part: ". . . Nonprofit school food service account means the restricted account in which all of the revenue from all food service operations conducted by the school food authority principally for the benefit of school children is retained and used only for the operation or improvement of the nonprofit school food service. . . ." 7 CFR 225.15(a)(1) states: "Sponsors shall operate the food service in accordance with: the provisions of this part; any instructions and handbooks issued by FNS under this part; and any instructions and handbooks issued by the State agency which are not inconsistent with the provisions of this part." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause The School Corporation's management did not have properly designed internal controls in place to ensure all funds in the prior financial system were properly converted into the new financial system. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, unsupported costs were transferred out of the School Lunch fund and prior period errors were not corrected. Noncompliance with the grant agreement and the compliance requirements could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $148,955 were identified as explained in the Condition and Context. Recommendation We recommended that management of the School Corporation 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 to ensure costs transferred out are adequately documented and that reimbursements errors are corrected. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-004 Subject: Special Education Cluster (IDEA) - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-148-PN01, 23611-148-PN01, 24611-148-PN01, 25611-148-PN01, 22611-148-ARP, 22619-148-PN01, 23619-148-PN01, 24619-148-PN01, 25619-148-PN01, 22619-148-ARP 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 properly designed or implemented a system of internal controls to ensure that proper documentation was retained for audit. A sample of 40 expenditures from the School Corporation's special education funds during the audit period was selected for testing. Of the sample, there were 5 transactions for which the School Corporation was unable to provide supporting documentation. As a result, 5 expenditures totaling $11,683 could not be verified as allowable activities or costs for the program. The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for the Federal awards that are renewed quarterly or annual, from the date of submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." INDIANA STATE BOARD OF ACCOUNTS 26 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 34 CFR 300.202(a) states: "General. Amounts provided to the LEA under Part B of the Act— (1) Must be expended in accordance with the applicable provisions of this part; (2) Must be used only to pay the excess costs of providing special education and related services to children with disabilities, consistent with paragraph (b) of this section; and (3) Must be used to supplement State, local, and other Federal funds and not to supplant those funds." 34 CFR 300.208 states: "(a) Uses. Notwithstanding §§ 300.202, 300.203(b), and 300.162(b), funds provided to an LEA under Part B of the Act may be used for the following activities: (1) Services and aids that also benefit nondisabled children. For the costs of special education and related services, and supplementary aids and services, provided in a regular class or other education-related setting to a child with a disability in accordance with the IEP of the child, even if one or more nondisabled children benefit from these services. (2) Early intervening services. To develop and implement coordinated, early intervening educational services in accordance with § 300.226. (3) High cost special education and related services. To establish and implement cost or risk sharing funds, consortia, or cooperatives for the LEA itself, or for LEAs working in a consortium of which the LEA is a part, to pay for high cost special education and related services. (b) Administrative case management. An LEA may use funds received under Part B of the Act to purchase appropriate technology for recordkeeping, data collection, and related case management activities of teachers and related services personnel providing services described in the IEP of children with disabilities, that is needed for the implementation of those case management activities." 34 CFR 300.800 states: "The Secretary provides grants under section 619 of the Act to assist States to provide special education and related services in accordance with Part B of the Act— (a) To children with disabilities aged three through five years; and (b) At a State's discretion, to two-year-old children with disabilities who will turn three during the school year." 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: INDIANA STATE BOARD OF ACCOUNTS 27 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." Cause Due to turnover of staffing in the School Corporation's administrative office, an effective system of internal controls was not established that would have ensured compliance, or that supporting documentation would have been maintained and made available for audit, with the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Effect Without a proper system of internal controls in place that operated effectively, the School Corporation did not retain and provide appropriate supporting documentation. This prevented the determination of the School Corporation's compliance with the compliance requirements listed above. Questioned Costs We identified $11,683 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls to ensure documentation to support all grant expenditures will be maintained and made available for audit as related to the grant agreement and the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-007 Subject: Special Education Cluster (IDEA) - Earmarking and Level of Effort Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Assistance Listings Numbers: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-148-ARP, 23611-148-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, and Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not designed or implemented at the School Corporation to ensure compliance with requirements related to the grant agreement and the Matching, Level of Effort, Earmarking compliance requirement. Earmarking The nonpublic proportionate share of expenditures for the 22611-148-ARP and 23611-148-PN01 grant awards could not be verified for proper classification and did not meet the proportionate share requirement. The 22611-148-ARP and 23611-148-PN01 grant awards did not meet the minimum nonpublic proportionate share of expenditures by $457 and $38,859, respectively. Level of Effort - Maintenance of Effort Maintenance of Effort is a district-level test that determines whether the School Corporation is providing a consistent level of financial support to public schools from year to year. This rule ensures that the School Corporation does not use Special Education funds to shore up reductions in state and local support for public education. The Indiana Department of Education (IDOE) performs the maintenance of effort calculation utilizing Form 9 information provided by the School Corporation from the prior year. As such, the amounts submitted to the IDOE in the prior year to be used in the computation are tested to ensure they were recorded properly in the School Corporation's records as to the account or object code. In fiscal year 2023-2024, 40 transactions were tested to ensure the disbursements were posted to the proper account and object code. For 21 of the 40 transactions selected in 2023-2024, appropriate supporting documentation was not provided for audit. As a result, 21 disbursements could not be verified as to whether they were posted to the proper account or object code. INDIANA STATE BOARD OF ACCOUNTS 34 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) In addition, 25 disbursement line items were sampled from the IDOE Form 9 for 2023-2024 to ensure the amounts agreed to the ledger. One disbursement line item for 2023-2024 could not be traced to the ledger. Therefore, we were unable to determine if the disbursement line item was posted to the proper account or object code. The lack of internal controls and noncompliance were isolated instances to 2023-2024. 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Cause Due to turnover of staffing in both the special education personnel and the School Corporation's administrative office along, with recordkeeping issues, the School Corporation's management had not developed a system of internal controls that would have ensured compliance. The School Corporation also did not ensure that supporting documentation would have been maintained and made available for audit, as related to the Matching, Level of Effort, Earmarking compliance requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure compliance with the level of effort - maintenance of effort and earmarking requirements. As a result, amounts reported to the oversight agency were not accurately reported. INDIANA STATE BOARD OF ACCOUNTS 35 GRIFFITH PUBLIC SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure the required nonpublic proportionate share funds are spent. In addition, proper recordkeeping should be maintained to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

FINDING 2025-002 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Number and Year (or Other Identifying Number): S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 17 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-004. Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to combat the effects of the coronavirus pandemic, help safely reopen and sustain the safe operation of schools, and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of its ESSER allocation to local educational agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for ESSER funding, which was submitted to the Indiana Department of Education, the passthrough entity, for approval. The application included a district level budget identifying how the LEA intended to spend program funds. Per the School Corporation's approved application, program funding was budgeted for salaries and respective benefits, counseling services, and supplies. An effective internal control system was not in place at the School Corporation over adjustments into the ESSER II (CRRSA) fund to ensure compliance with requirement related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation transferred a total of $273,534 of expenditures made up of vendor, payroll, and related benefit payments into grant funds; however, adequate supporting documentation was not provided to determine where the expenditures were originally paid, to whom the original payment was made, and at what amount the original payment was made. The $273,534 was determined to be questioned costs. As a result, the School Corporation was unable to verify the total expenditures requested for reimbursement for the COVID-19 - Education Stabilization Fund grant. The School Corporation requested $273,534, which resulted in an over reimbursement for the COVID-19 - Education Stabilization Fund grant. The lack of internal controls and supporting documentation was isolated to the adjustments noted above. 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: INDIANA STATE BOARD OF ACCOUNTS 18 PENN-HARRIS-MADISON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 34 CFR 76.700 states: "A State and a subgrantee shall comply with § 76.500, the State plan, applicable statutes, regulations, and approved applications, and shall use Federal funds in accordance with those statutes, regulations, plan, and applications." Indiana Department of Education ESSER III Application Walk Through states in part: ". . . Please budget the appropriate items in the district budget. Be sure to include all requested items or activities in the budgeted total and include sufficient detail in the narrative boxes below. Be sure to provide sufficient detail for IDOE to determine the reasonableness, allowability, and necessity of the proposed activity. You may include additional documentation in the Attachments section of the Summary Page. . . ." Cause A proper system of internal controls was not designed by management of the School Corporation for adjustments. Additionally, proper documentation was not maintained to support adjustments. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. Additionally, without maintaining proper supporting documentation it is not possible to determine if the underlying costs are an allowable cost to the federal program. As a result, costs were reimbursed that did not have adequate documentation to ensure compliance with the compliance requirement. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs We identified $273,534 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure costs and adjustments are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

Federal Agency: U.S. Department of Education Federal Program Name: Special Education Cluster Assistance Listing Number: 84.027, 84.173 Federal Award Identification Number: H027A240103 Pass-Through Agency: New Hampshire Department of Education Pass-Through Number(s): 20230519, 20241089, 20250423 Award Period: July 1, 2024 – June 30, 2025 Compliance Requirement: Period of Performance Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or specific requirement: A nonfederal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition and Context: Two (2) of eight (8) transactions tested were incurred outside of the period of performance. Questioned costs: Below the reportable threshold. Cause: Procedures were not in place to ensure that expenditures charged to the grant program were incurred within the period of performance in the grant award for all applicable transactions. Effect: Noncompliance with federal requirements occurred. Repeat Finding: No. Recommendation: We recommend procedures be strengthened to ensure that charges to the grant program are incurred within the period of performance included in the grant award. Views of responsible officials: Management agrees with the finding.

Federal Agency: U.S. Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds (SLFRF) Assistance Listing Number: 21.027 Federal Award Identification Number: SLFRP1134 Pass-Through Agency: New Hampshire Governor’s Office for Emergency Relief and Recovery Pass-Through Number(s): Unknown Award Period: July 1, 2024 – June 30, 2025 Compliance Requirement: Period of Performance Type of Finding: • Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or specific requirement: A nonfederal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Specifically regarding SLFRF, recipients must obligate program funds by December 31, 2024. Condition and Context: A portion of the City’s SLFRF expenditures related to revenue loss were spent on the provision of government services. As part of the audit of the SLFRF grant, the City provided us with an initial list of expenditures related to revenue loss. We identified that some of the expenditures were not obligated by December 31, 2024. Subsequently, in accordance with question 17.19 of the U.S. Department of Treasury’s Frequently Asked Questions dated April 29, 2025, the City re-allocated some of the expenditures related to revenue loss. The re-allocated expenditures met period of performance requirements (i.e., they were all obligated by December 31, 2024). Questioned costs: None Cause: Procedures were not in place to ensure that all expenditures initially charged to the grant program were obligated by December 31, 2024 (subsequently corrected as identified above). Effect: Noncompliance with federal requirements initially occurred (subsequently corrected as identified above). Repeat Finding: No. Recommendation: We recommend procedures be strengthened to ensure that charges to the grant program are obligated and/or incurred within the period of performance. Views of responsible officials: Management agrees with the finding.

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

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

Finding 2025-002: Noncompliance with OMB Compliance Supplement; Period of Performance (H) for Assistance Listing Number (ALN) 93.958 Block Grants for Community Mental Health Services Criteria: The Code of Federal Regulations (CFR) Sections 200.308, 200.309, and 200.403(h) states “a non-Federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entities.” Costs incurred before or after the period of performance are unallowable unless explicitly approved. Condition: During our testing of expenditures charged to ALN 93.958, we identified 2 transactions out of a total sample of 15 totaling $192 that were incurred outside of the award’s period of performance. Cause and Effect: The Center did not have the controls in place to perform a review of service dates to ensure they fell within the authorized period of performance. The effect of this condition increases the possibility that expenditures are unallowable per the grant being charged to the Federal program. Repeat Finding: No Questioned Costs: $192 Recommendation: Policies and procedures should be in place to ensure accurate reporting. A formal review process should be established to ensure compliance. Views of Responsible Officials: Management agrees with this finding and response is included in the Corrective Action Plan.

Federal Agency: U.S. Department of Education Federal Program Name: Special Education Cluster Assistance Listing Number: 84.173 Federal Award Identification Number and Year: H173A240089 and 2024 Pass-Through Agency: Maryland State Department of Education Pass-Through Numbers: 25033401 Award Period: July 1, 2024 – September 30, 2026 Compliance Requirement: Period of Performance Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: Uniform Guidance (2 CFR §200.403 and §200.309) requires that costs charged to a federal award be incurred during the approved period of performance and be allowable, allocable, and reasonable for the federal program. Costs incurred before the start date of the award period are not allowable unless specifically authorized by the federal awarding or pass-through agency. Condition/Context: During testing of expenditures charged to the Special Education Cluster, it was noted that one of three transactions tested were incurred and charged to the federal program prior to the beginning of the approved period of performance. Questioned Costs: $4,157.27 Cause: The Board did not have sufficient internal controls in place to ensure that expenditures charged to federal awards were reviewed for period-of-performance allowability prior to posting and payment. Effect: Charging expenditures incurred outside the approved period of performance increases the risk of unallowable costs, potential repayment to the pass-through or federal awarding agency, and noncompliance with Uniform Guidance requirements. Repeat Finding: No Recommendation: We recommend that the Board strengthen internal controls over federal grant expenditure by implementing procedures to ensure costs are incurred within the approved period of performance prior to being charged to federal awards. This should include enhanced supervisory review, system controls where feasible, and training for staff responsible for grant accounting and compliance. Views of Responsible Officials: The Board concurs with the finding.

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

2025-001 Improve Oversight Over Period of Performance of Federal Awards (Material Weakness) Federal Agency: Department of Education Cluster/Program: Special Education Cluster AL Number(s): 84.027/84.173 Award Year: 2025 Compliance Requirement: Period of Performance Type of Finding Material Noncompliance Internal Control over Compliance – Material Weakness Criteria or Specific Requirement A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Management of the Town is also responsible for establishing and maintaining effective internal control over compliance with federal requirements that have a direct and material effect on a federal program. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. Condition and Context During our review of 40 of the 281 invoices charged to the special education grant, we noted one instance where an invoice for special education transportation was charged to the 2025 grant year, however, a portion of these services occurred prior to the period of performance of the 2025 grant. This was not a statistically valid sample. Cause The Town has not established adequate procedures to ensure expenditures are expended within the authorized period of performance. Effect or Potential Effect Due to the weakness in internal control noted above, there are known and questioned costs reported related to contracted services incurred prior to the period of performance and charged to the grant, which could impact future grant funding. Questioned Costs The questioned costs associated with the portion of the invoice that occurred outside the authorized period of performance is $86,611. Recommendation The Town should implement controls to ensure that no costs are charged to a grant prior to the authorized period of performance. Views of Responsible Official Management agrees with the finding. Planned Corrective Action Management’s corrective action plan is included at the end of this report after the schedule of prior year findings.

Reference Number: 2025-007 Prior Year Finding: 2024-010 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: 25A55UI000119 (10/1/2024 – 12/31/2027) Compliance Requirement: Period of Performance Type of Finding: Material Weakness in Internal Control over Compliance, Material Noncompliance Criteria or specific requirement: Compliance: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Labor (Department) charged costs to the federal grant prior to the allowable start of the period of performance and expenditures were missing evidence of approval prior to issuance of payment. Context: Nine of sixty transactions selected for testing were charged to the award before the allowable period of performance. The grant award start date was October 1, 2024, but costs were incurred in August and September 2024. Two of sixty transactions selected for testing were missing evidence of review and approval prior to issuance of the payment. Cause: The Department’s procedures and internal controls were not operating sufficiently to ensure that expenditures charged to the program were incurred within the award’s period of performance nor that payments were reviewed and approved prior to issuance. Effect: Unallowable costs were charged to the program. Questioned costs: $2,267, which represents the total incurred before the allowable period of performance. Recommendation: We recommend the Department review and enhance its procedures and controls to ensure that, prior to charging costs to the program, they are incurred within an award’s allowable period of performance and that payments are reviewed and approved by a supervisor who has knowledge of costs that are allowable under the program. Views of responsible officials: Management agrees with the finding.

Reference Number: 2025-009 Prior Year Finding: 2024-009 Federal Agency: U.S. Department of Labor State Agency: Vermont Department of Labor Federal Program: Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: 25A55UI000119 (10/1/2024 – 12/31/2027) UI370952155A50 (9/1/2021 – 5/22/2025) 23A60UB000019 (8/3/2023 – 5/22/2025) 24A60UD000052 (8/20/2024 – 8/20/2027) Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control over Compliance Criteria or specific requirement: Compliance: 2 CFR section 200.403 states, in part, except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The Department of Labor (Department) charged costs to the program that were issued without documentation of supervisory review and approval. Context: For two of sixty transactions selected for testing, the Department was unable to provide documentation of supervisory review and approval prior to issuance of payment. Cause: The Department’s procedures were not sufficient to ensure that payments were reviewed and approved prior to issuance of payment. Internal controls did not prevent or detect the errors. Effect: Unallowable costs could be charged to the program if disbursements are not reviewed by a supervisor who is knowledgeable of program regulations regarding allowable costs. Questioned costs: Undetermined. Recommendation: We recommend the Department review and enhance its procedures and controls regarding payment processing to ensure that, prior to charging costs to the program, they are reviewed by a supervisor who is knowledgeable of the regulations regarding allowable program costs and that documentation of the review is maintained. Views of responsible officials: Management agrees with the finding.

2025 – 003. Period of Performance Federal Agency: Department of Homeland Security Federal Program Title: Disaster Grants – Public Assistance (Presidentially Declared Disasters) Assistance Listing: 97.036 Federal Grant ID Number: 4286-DR-SC Pass-Through Entity: Not applicable Award Period: October 11, 2016 through April 10, 2017 Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 2 CFR § 200.403(h) requires that all costs, excluding administrative costs, be incurred during the approved budget period. 2 CFR § 200.303 requires that the recipient and subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition: Expenditures were incurred and charged to the grant after the authorized period of performance. Cause: Office controls failed to prevent costs incurred outside the applicable period of performance from being charged to the grant. Effect: Costs charged outside the period of performance may be unallowable. Questioned Costs: Questioned costs totaled $2,231 for expenditures improperly charged to the federal award in noncompliance of period of performance requirements. Context: One of thirty-four transactions selected for testing costs for which the obligation had not been paid as of the end of period of performance was incurred after the period of performance ended, totaling $2,231. Prior Year Single Audit Report Finding Number: Not applicable Recommendation: We recommend that the Office strengthen its internal controls to ensure that expenditures charged to federal grants are incurred within the applicable period of performance. Views of responsible officials and planned corrective actions: See management’s response on page 181.

2025 – 008. Period of Performance Federal Agency: Department of Defense Federal Program Title: National Guard Military Operations and Maintenance (O&M) Projects Assistance Listing: 12.401 Federal Grant ID Number: Various Pass-Through Entity: Not applicable Award Period: Various Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 2 CFR § 200.403(h) requires that all costs, excluding administrative costs, be incurred during the approved budget period. 2 CFR § 200.303 requires that the recipient and subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition: Expenditures were incurred and charged to the grant both before and after the authorized period of performance. Cause: Office controls failed to prevent costs incurred outside the applicable period of performance from being charged to the grant. Effect: Costs charged outside the period of performance may be unallowable. Questioned Costs: Questioned costs totaled $33,061 for expenditures incurred outside the authorized period of performance. Context: Two of twenty transactions selected for testing costs recorded during the first period of the grant were for costs incurred prior to the applicable period of performance, totaling $30,490. One of five transactions selected for testing costs for which the obligation had not been paid as of the end of period of performance was incurred after the period of performance ended, totaling $2,571. Prior Year Single Audit Report Finding Number: Not applicable Recommendation: We recommend that the Office strengthen its internal controls to ensure that expenditures charged to federal grants are incurred within the applicable period of performance. Views of responsible officials and planned corrective actions: See management’s response on page 184.

2025 – 022. Period of Performance Federal Agency: Environmental Protection Agency Federal Program Title: Performance Partnership Grants Assistance Listing: 66.605 Federal Grant ID Number: Various Pass-Through Entity: Not Applicable Award Period: Various Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 2 CFR § 200.403(h) requires costs must be incurred during the approved budget period. 2 CFR § 200.303 requires that the recipient and subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. Condition: The Department charged costs to a grant after the grant period ended. Cause: The Department lacked sufficient internal controls to ensure all costs to grants occurred during the grant period. Effect: Costs charged outside the period of performance may not be allowable. Questioned Costs: $2,771. The six transactions that occurred outside of the Period of Performance totaled this amount. Context: We tested the one journal entry transaction that occurred during the liquidation period for a grant that ended 9/30/2024. We determined that six of the transactions involved with the journal entry occurred after the grant period ended. Prior Year Single Audit Finding Numbers: Not applicable Recommendation: We recommend that the Department strengthen its controls to ensure that costs are incurred within the grant period. Views of responsible officials and planned corrective actions: See management’s response on page 195.

2025 – 031. Period of Performance Federal Agency: Department of Health and Human Services Federal Program Title: CCDF Cluster Assistance Listing: 93.575, 93.596, and 93.489 Federal Grant ID Number: 2201SCCCDD Pass-Through Entity: Not applicable Award Period: October 1, 2021, through September 30, 2024 Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 45 CFR § 98.60(d)(1) requires that discretionary funds (Assistance Listing 93.575) be obligated in the fiscal year in which funds are awarded or in the succeeding fiscal year. Unliquidated obligations as of the end of the succeeding fiscal year shall be liquidated within one year. 2 CFR § 200.303 requires that the recipient and subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations and the terms and conditions of the federal award. 2 CFR § 200.403(h) requires costs be incurred during the approved budget period. Condition: Expenditures were incurred after the end of the grant’s period of performance. Cause: The Department’s internal controls failed to identify and prevent charging costs incurred outside the applicable period of performance. Effect: Costs charged outside the period of performance may not be allowable. Questioned Costs: $11 is based on the sum of the three transactions that incurred program expenditures that were outside of the period of performance Context: Three of sixty expenditure transactions tested had incurred program expenditures at the end of the obligation period that were not obligated and expended in accordance with program requirements. Prior Year Single Audit Finding Number: Not applicable Recommendation: We recommend the Department review and update internal controls to ensure all expenditures charged to federal awards are incurred within the grant's period of performance. Views of responsible officials and planned corrective actions: See management’s response on page 200.

2025 – 041. Period of Performance Federal Agency: Department of Health and Human Services Federal Program Title: Maternal and Child Health Services Block Grant to the States Assistance Listing: 93.994 Federal Grant ID Numbers: B04MC47445 and B04MC54575 Pass-Through Entity: Not Applicable Award Period: October 1, 2022, through September 30, 2026 Type of Finding: Significant deficiency in internal control over compliance, other matters Criteria: 2 CFR § 200.403(h) requires costs to be incurred during the approved budget period. Criteria: 2 CFR § 200.303(a) requires that the recipient and subrecipient establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Expenditures were incurred and charged outside of the period of performance. Cause: The Department’s internal controls failed to identify and prevent charging costs incurred outside the applicable period of performance. Effect: Costs charged outside the period of performance may not be allowable. Questioned Costs: $1,338. The amount is based on the sum of the five transactions that had incurred program expenditures outside of the applicable period of performance date. Context: For a total of sixty expenditure transactions tested, one transaction had costs that were incurred before the start of the period of performance date and four transactions had incurred program expenditures that were not obligated and expended in accordance with program requirements. Recommendation: We recommend the Department review and update its internal controls to ensure that all expenditures charged to federal awards are incurred within the grant's period of performance. Prior Year Single Audit Finding Number: Not applicable Views of responsible officials and planned corrective actions: See management’s response on page 209.

Children’s Health Insurance Program—Reconciliation of Vaccine Purchases Background: The U.S. Department of Health and Human Services provides funding to DHS for CHIP. Funding under this program provides financial assistance to states in maintaining and expanding healthcare coverage to children residing in low-income families. CHIP is funded by both the state and federal government, with the federal portion determined by the enhanced FMAP rate. Under CHIP, Wisconsin has a separate CHIP program (SCHIP) that provides health insurance to uninsured low-income children as well as certain pregnant women through a postpartum period. Under SCHIP, participants are eligible to receive vaccinations. DHS also administers the Vaccine for Children (VFC) program, which is a fully federally funded program in which eligible participants, including those eligible for the Medical Assistance program, may receive vaccines through authorized providers. Under the VFC program, DHS orders vaccines and providers administer the vaccines to eligible participants. Criteria: Under 2 CFR 200.403, costs that are charged to federal awards must meet allowable criteria, including that the costs be necessary, reasonable, and adequately documented. Further under 2 CFR 200.406, any applicable credits that offset or reduce a cost charged to a federal program must be credited to the program as either a cost reduction or cash refund, as appropriate. Because SCHIP participants are not eligible to receive vaccines under the VFC program, DHS follows federal guidance issued in 2014 that allows it to use CHIP funds to purchase vaccines through the VFC program for SCHIP participants. DHS uses an estimate to determine the amount of SCHIP vaccines that are needed annually, based upon the federal fiscal year. An estimated cost is then charged as an expenditure to the CHIP program, and DHS receives federal funds at the enhanced FMAP rate. These transactions result in both state and federal funds being transferred into a separate state appropriation that is used to purchase the vaccines for SCHIP participants. Federal guidance further provides that when using estimates to purchase vaccines, a reconciliation should be performed. When the reconciliation identifies any difference between the estimated cost and the actual cost of vaccines for SCHIP participants, DHS is required to adjust the estimate for future funding requests. Condition: In determining the SCHIP vaccine estimate for SCHIP participants for federal fiscal year (FFY) 2024-2025 (October 1, 2024 through September 30, 2025), DHS did not complete a reconciliation of prior periods to determine the difference between the estimated cost and the actual cost of vaccines for SCHIP participants. As a result, DHS did not consider whether it should adjust the estimated amount for SCHIP participants and the expenditure amount charged to CHIP. Context: During FY 2024-25, $5.7 million was charged to CHIP for the estimated cost of the SCHIP vaccines, which resulted in $4.1 million in federal reimbursement. DHS expended $5.2 million for SCHIP participant vaccines during FY 2024-25 that were charged to the separate state accounts used to purchase vaccines. At the beginning of FFY 2024-2025, there was a total balance of $3.6 million in the separate state accounts that represented the accumulated balance between the amount received and purchases made in prior years. DHS did not consider this accumulated balance when determining the amount needed from CHIP to make vaccine purchases for FFY 2024-2025. Questioned Costs: We question $2,626,695 which represents the federal share of the balance outstanding at the beginning of FFY 2024-2025. Effect: DHS was not in compliance with federal guidance in developing its estimates of costs to charge CHIP for SCHIP vaccines. Cause: DHS did not have a reconciliation process in place during FY 2024-25 to determine whether there was a difference between the estimated cost and the actual cost of vaccines for SCHIP participants. DHS reported that in August 2025 it began to complete the required reconciliation and reduced the estimated amount for FFY 2025-2026 by $3.0 million. Recommendation: We recommend the Wisconsin Department of Health Services comply with federal regulations and ensure it performs annual reconciliations to calculate any differences between the estimated cost and the actual cost of vaccines for SCHIP participants and then adjusts the estimate for vaccine purchases funded from the Children’s Health Insurance Program (CHIP). Finding 2025-306: Children’s Health Insurance Program—Reconciliation of Vaccine Purchases Children’s Health Insurance Program (Assistance Listing number 93.767) Award Numbers Award Years 2405WI15CHIP 2024 2505WI15CHIP 2025 Questioned Costs: $2,626,695 Type of Finding: Significant Deficiency, Noncompliance Response from the Wisconsin Department of Health Services: The Wisconsin Department of Health Services agrees with the audit finding and recommendation.

FINDING 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-054-PN01, 22619-054-PN01, 22611-054-ARP, 22619-054-ARP, 23611-054-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-009. INDIANA STATE BOARD OF ACCOUNTS 20 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The School Corporation is a member of the Wabash-Miami Area Program (Cooperative). During fiscal years 2023-2024 and 2024-2025, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The nonpublic expenditures spent did not meet the earmarking requirements for grant award number 22611-054-PN01, 22619-054-PN01, 22611-054-ARP, 22619-054-ARP, and 23611-054-PN01. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures for each member school were determined by applying a percentage based on the total grant award to the nonpublic school total expenditures. The lack of internal controls and noncompliance was isolated to 22611-054-PN01, 22619-054-PN01, 22611-054-ARP, 22619-054-ARP, and 23611-054-PN01 grant awards. 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 200.403 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 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." INDIANA STATE BOARD OF ACCOUNTS 21 WABASH CITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Through inquiry of management, they were unaware of the requirements to track the nonpublic proportionate share expenditures directly for each member school. The Cooperative did implement new processes and procedures to ensure expenditures were tracked by member school starting with the 2023-2024 grants, and these grants were still ongoing during the audit period. Effect Without the proper implementation of an effectively designed system of internal controls, the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. Questioned Costs There were no questioned costs identified. Recommendation Management of the Cooperative should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures by member school. Documentation should be maintained to show how these expenditures are being tracked to ensure compliance with the earmarking requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.

2025 – 003: Eligible Expenditures Federal Agency: Department of Health and Human Services Federal Program Title: Congressional Directives Assistance Listing Number: 93.493 Award Period: September 30, 2023 – September 29, 2026 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or Specific Requirement: The Code of Federal Regulations 2 CFR Part 200, Subpart E, requires that expenses be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles (200.403(a)) and allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to the Federal award or cost objective in accordance with relative benefits received (200.405). Condition: During our testing of 40 expenditures for cash disbursement testing, we noted 3 items for a total of $419.90 from the University of Maine Augusta were incorrectly coded to the grant. Questioned Costs: None Context: The University's review and controls around charging amounts to the grant did not catch an incorrectly coded expense. Cause: The University’s processes and controls did not ensure that all expenses charged to the grant were valid expenditures. Effect: Ineligible expenditures were charged to the grant. Repeat Finding: No. Auditors’ Recommendation: We recommend that the University reviews its procedures around review and approval of expenditures to ensure that only valid expenditures are reported. Views of Responsible Officials: There is no disagreement with the audit finding.

(2025-011) Title: Internal control over SNAP eligibility determinations and benefit calculations needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 10.551 $47,493 Likely Questioned Costs: Undeterminable; incorrectly calculated Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments or underpayments to clients. Due to the unique circumstances of each case, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.2 and .12 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP. State agencies shall verify information such as residency, identity, disability, and household composition. Changes reported during the certification period are subject to the same verification procedures as applied at initial certification, except that the State agency shall not verify changes in income less than $50 or actual medical or utility expenses less than $25, unless the information is incomplete, inaccurate, inconsistent, or outdated. The State agency shall take prompt action on all changes to determine if the change affects the household’s eligibility or allotment. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit calculations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system results to make eligibility determinations and related benefit calculations. The Office of the State Auditor (OSA) tested 40 household monthly benefit payments to verify the accuracy of SNAP operations utilizing ACES, and identified: • that OFI does not require verification or investigation of information that is unclear, incomplete, inaccurate, or outdated as required by Federal requirements. A total of 32 overpayments of monthly SNAP benefits were identified, including: o 29 benefit overpayments totaling $25,800 due to manual processing errors, including: • 9 benefit overpayments totaling $5,095 to clients whose household income or expenses were not verified. • 8 benefit overpayments totaling $6,084 to clients whose household income was incorrectly calculated. • 6 benefit overpayments totaling $6,209 to clients whose information was outdated but was not further investigated for verification. 1 of the 6 clients disclosed new living arrangements; however, documentation from 2014 was not updated. • 5 benefit overpayments totaling $6,656 to clients whose household composition was not verified. • 1 benefit overpayment of $1,756 to a client whose disability status, exempting the client from work requirements, was not verified. o 3 benefit overpayments due to automated processes errors in ACES, including: • 1 benefit overpayment of $442; income information was available in ACES, however, it was not utilized when the benefit amount was calculated. • 1 benefit overpayment of $292, resulting from an incorrect benefit suspension. OSA identified a material weakness/material noncompliance with questioned costs as issued in finding 25-1108-02, Internal control over automated SNAP eligibility certification periods needs improvement, for incorrect benefit suspensions. • 1 benefit overpayment of $266; the full standard utility allowance was utilized in the calculation of the monthly benefit, however, the only reported utility was a phone. ACES applied the full standard utility allowance based on a phone expense manually entered into ACES by an eligibility specialist. • 15 of the 40 clients tested whose ACES case file information did not include proper verification of identity or residency documentation, including: o 8 clients whose case file information did not include any verification of identity documentation. o 5 clients whose identification card was expired at the time it was presented and was accepted for verification by OFI. o 2 clients whose only identification was an out-of-state license or school identification card, which is not acceptable documentation to support residency. OSA utilized a risk-based approach to select 20 cases with the highest monthly benefits and selected a non-statistical random sample for the remaining 20 cases. OSA reviewed self-employment income information reported by SNAP clients in fiscal year 2025, identified 10 clients with reported losses greater than $10,000 for further review, and found the following: • 4 benefit overpayments totaling $19,462; self-employment income was incorrectly entered into ACES and did not match underlying documentation. Of the 4 clients, 1 client’s income information was from a 2021 tax return. • 1 benefit overpayment totaling $1,231; income information was calculated utilizing tax documentation that did not include all income sources. The Department does not have adequate policies and procedures in place to ensure that ACES case file modifications, whether manual or system interfaced, that result in adjustments to previously issued monthly SNAP benefits are appropriately processed. This includes a recalculation of previously issued benefits when case file modifications are processed, the establishment of corresponding overpayments or underpayments, and related follow-up actions by OFI. Context: In fiscal year 2025, the State provided approximately 169,000 SNAP clients with $355.9 million in Federal benefits. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits may be incorrectly calculated, resulting in households being underpaid or overpaid. • Noncompliance with Federal regulations Recommendation: We recommend that the Department implement additional policies and procedures to ensure that: • case information entered into ACES is accurate; • automated eligibility determinations and benefit calculations are processed in accordance with Federal regulations; • information that is unclear, incomplete, inaccurate, or outdated is investigated and verified with supporting documentation as required; and • recalculations of previously issued benefits and related follow-up actions occur when case file modifications are retroactive. Corrective Action Plan: See F-11 Management’s Response: The Department partially agrees with the finding. There are many instances of exceptions cited by the Office of State Auditor (OSA) in which there isn’t a specific requirement that exists or the requirement has been waived in unusual cases such as the 2 clients who could not provide proof of residency. The residency requirements state that they shall be verified “except in unusual cases like households newly arrived in a project area.” There is merit in each of the larger categories identified by OSA however, the extent of the issues is far less than those cited and many of the verification standards applied by OSA far exceed the requirements of Food and Nutrition Services (FNS). The Department agrees with the exception based on an expired certification period. Contact: Ian Yaffe, Director, OFI, DHHS, 207-592-1481 Auditor’s Concluding Remarks: The Department must comply with the following Federal requirements: • At initial certification and recertification, the State agency shall verify information that is incomplete, inaccurate, inconsistent, or outdated (7 CFR 273.2(e)(1), and 273.2(f)(8)(i)(A) and (D)), including: o residency (7 CFR 273.2(f)(1)(vi)); o identity (7 CFR 273.2(f)(1)(vii)); o disability (7 CFR 273.2(f)(1)(viii)); and o household composition (7 CFR 273.2(f)(1)(x)). • When a household reports a change in residence, the State agency must investigate and take action on potential changes in shelter costs arising from this reported change (7 CFR 273.12(c)(4)(i)). For the cases cited in the Condition, OFI could not provide documentation to support that information used to determine eligibility and benefits was verified or investigated. Therefore, OFI is not in compliance with Federal regulations. The finding remains as stated. (State Number: 25-1108-05)

(2025-012) Title: Internal control over automated SNAP eligibility certification periods needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Special tests and provisions Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 10.551 $7,658 Likely Questioned Costs: Undeterminable; incorrectly suspending Supplemental Nutrition Assistance Program (SNAP) benefits may result in overpayments and underpayments to households. Since there are known overpayments and underpayments in our sample, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.10; 7 CFR 273.10 and .12 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. All State agencies must sufficiently automate their SNAP operations and computerize their systems for obtaining, maintaining, utilizing and transmitting information concerning SNAP, which includes automatic cutoff of participation for households which have not been recertified at the end of their certification period. SNAP households must be assigned eligibility certification periods of at least 6 months, unless the household is classified as exempt based on program regulations. The State agency must have at least 1 contact with each SNAP household every 12 months. Submission of periodic eligibility reports is required by non-exempt households. Non-exempt households that are certified for longer than 6 months must file a periodic report between 4 months and 6 months, as required by the State agency. In addition, the State agency must not require the submission of periodic reports by households certified for 12 months or less in which all adult members are elderly or have a disability and no earned income. Condition: SNAP is administered by the Office for Family Independence (OFI) and provides monthly benefits to eligible households to purchase nutritious foods. OFI is required by Federal program regulations to utilize an automated information system for SNAP. The information system must maintain all case file information necessary to properly process eligibility determinations and benefit computations. The Automated Client Eligibility System (ACES) is the information system used by OFI to automate SNAP operations. ACES relies on the maintenance of a complex framework of system rules to make eligibility determinations, including notification letters to clients when 6-month reports and 12-month redeterminations of eligibility are required. All SNAP households, except for elderly and disabled cases with no earned income, are required to submit 6-month reports. In addition, all SNAP households must undergo an annual redetermination of eligibility. Each household’s recertification requirements are indicated by date fields in the ACES case file. If a required report or redetermination is not completed by the date indicated in the applicable field, the case’s monthly SNAP benefit is automatically suspended by the system. The Office of the State Auditor (OSA) tested a sample of 40 cases automatically suspended for failure to complete a required review in fiscal year 2025 to verify the accuracy of automated SNAP operations utilizing ACES. In 11 of the 40 cases tested, OSA identified that ACES incorrectly suspended benefits, as follows: • 8 cases were overpaid SNAP benefits totaling $7,543 because benefit suspensions occurred 1 to 4 months after the 6-month reporting requirement. • 2 cases were underpaid SNAP benefits totaling $873 because benefit suspensions occurred 1 to 2 months prior to the annual redetermination requirement. • 1 case was overpaid SNAP benefits totaling $115 because benefit suspension occurred 5 months after the annual redetermination requirement. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the State provided approximately 169,000 SNAP clients with $355.9 million in Federal benefits. 279 clients were automatically suspended by ACES during fiscal year 2025 due to recertification or redetermination requirements. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight • Automated SNAP eligibility system recertification and suspension criteria were not configured in accordance with Federal regulations. Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal regulations • Benefits may be incorrectly suspended, resulting in households being underpaid or overpaid. Recommendation: We recommend that the Department enhance policies and procedures to ensure that automated SNAP eligibility certification periods and related ACES case file fields are properly configured to process benefits in accordance with Federal regulations. In addition, we recommend that the Department identify underpayments and/or overpayments resulting from recertification period errors and take action as warranted. Corrective Action Plan: See F-11 Management’s Response: The Department agrees with this finding. OFI has had a number of technological challenges with the automatic setting of renewal and six-month report dates related to the suspension of Medicaid renewals during the pandemic, the extension of certification periods during the unwinding period, and the application of the new passive Medicaid renewal technology. Contact: Michael E. Downs, Public Service Coordinator II – SNAP, OFI, DHHS, 207-592-4850 (State Number: 25-1108-02)

(2025-015) Title: Internal control over SNAP deceased client cases needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Agriculture Assistance Listing Title: SNAP Cluster Assistance Listing Number: 10.551, 10.561 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 272.8 and .14 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. State agency action on information items about recipient households shall include review of information and comparison of it to case record information. State agencies must initiate and pursue actions on recipient households within 45 days of the receipt of the information items. States shall establish a system to verify and ensure that benefits are not issued to individuals who are deceased. Condition: The Office for Family Independence (OFI) manages the Automated Client Eligibility System (ACES) used to determine eligibility for Federal assistance programs, including the Supplemental Nutrition Assistance Program (SNAP). Information maintained in ACES is relied upon by OFI for determining monthly SNAP benefits issued to client Electronic Benefit Transaction (EBT) cards. OFI relies on numerous data sources for identifying and providing client date of death (DOD) information for input into ACES, including monthly data exchanges with the Maine Center for Disease Control & Prevention’s (MeCDC) Vital Records, which includes Social Security Administration data. Federal program regulations require OFI to act on client cases within 45 days of receipt of DOD information. This includes review and comparison of DOD information to ACES case file information, and suspension of program participation and related benefits as warranted. OFI policies for SNAP require deactivation of the client’s EBT card as well as expungement of authorized benefits from the EBT card. If activity occurs on the client’s EBT card subsequent to the DOD, the case must be reported as potential fraud and referred for investigation. The Office of the State Auditor (OSA) obtained DOD information from MeCDC Vital Records and compared it to clients who received SNAP benefits during fiscal year 2025. OSA identified 29 cases where SNAP benefits were issued more than 75 days following the client’s DOD; this benchmark was applied to denote the 45-day Federal program regulation related to monthly receipt of DOD information. OSA tested all 29 cases and identified the following: • Single-member household clients should not have EBT card purchase activity after DOD; however, 7 single-member household clients had $4,335 in total EBT card purchase activity after DOD that occurred in fiscal year 2025: o 6 clients were identified as potential fraud in the ACES case file between 3 and 6 months after the DOD information was received by MeCDC Vital Records. o 1 client’s DOD was not properly recorded in ACES until 11 months after the DOD information was received by MeCDC Vital Records. OFI recorded an incorrect DOD in ACES and did not identify EBT purchase activity after the DOD as potential fraud until OSA notified OFI. • 1 client’s DOD was not recorded in ACES until the client’s family informed OFI of the client’s death 268 days after the DOD information was received by MeCDC Vital Records. As a result, SNAP benefits were calculated based on incorrect income and household composition information, resulting in an overpayment of $2,359. • 14 single-member household clients had benefits loaded to their cards more than 75 days after DOD information was received by MeCDC Vital Records. Of those 14 clients: o 11 clients’ cases remained open 77 to 305 days after DOD information was received by MeCDC Vital Records, resulting in 2 to 11 months of unauthorized SNAP benefit issuances. Of these 11 clients, 5 clients’ benefits were not expunged upon receipt of DOD information as required by OFI policies; benefits remained open and available for spending up to 274 days after the last issuance when they were expunged by the system-automated process based on inactivity. o 2 clients were not identified as deceased by OFI until OSA notified OFI. As of June 30, 2025, MeCDC Vital Records received DOD information 644 days and 587 days prior, respectively; benefits were expunged by the system-automated process based on inactivity after 274 days. o 1 client was not identified as deceased by OFI until July 2025. As of June 30, 2025, DOD information was on file for 196 days. Context: In fiscal year 2025, the State provided approximately 169,000 SNAP clients with $355.9 million in Federal benefits. Of the 169,000 SNAP clients, 1,970 had a DOD in fiscal year 2025. Cause: • Monthly data exchanges with MeCDC Vital Records did not alert OFI of DOD information in 27 of the 29 cases tested. • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Benefits issued to deceased clients may result in unauthorized EBT card purchase activity. • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department enhance policies and procedures to ensure that DOD information is received, reviewed, and updated in ACES on a more frequent basis to prevent unauthorized SNAP benefit issuances and EBT card purchase activity. In addition, we recommend that the Department review all client cases noted in the Condition of this finding to ensure that: • ACES case file DOD information is accurate, including verifying that all DOD information is received timely from MeCDC Vital Records; • SNAP benefits are expunged and EBT cards are deactivated in accordance with existing policies; • cases are identified as potential fraud and referred for investigation as warranted; and • unallowable costs are identified and reported to Federal oversight agencies and required recoupment activities are pursued. Corrective Action Plan: See F-12 Management’s Response: The Department agrees with this finding. The data matching failed because there were inconsistencies in the data between the two systems, specifically in the spelling of names. The Department acted timely on all deaths that were reported correctly. Contact: Michael E. Downs, Public Service Coordinator II – SNAP, DHHS, 207-592-4850 (State Number: 25-1108-03)

(2025-019) Title: Internal control over CNC claim reimbursements needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Education State Bureau: Child Nutrition Services Federal Agency: U.S. Department of Agriculture Assistance Listing Title: Child Nutrition Cluster Assistance Listing Number: 10.553, 10.555, 10.556, 10.559, 10.582 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Reporting Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 10.559 $61,336 ALN 10.582 $12,215 Likely Questioned Costs: Undeterminable; due to the variety of exceptions in the test population, an error rate cannot be applied to the population, and a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 7 CFR 210.7 and .8; 7 CFR 225.6, .9, and .16; Richard B. Russell National School Lunch Act (NSLA), Section 19 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. 7 CFR 210.7 and .8 for the National School Lunch Program (NSLP) require: • claims for reimbursement (CFRs) to be based on lunch counts taken daily at the point of service, which correctly identify the number of free, reduced price, and paid lunches served to eligible children. • the Department to compare, on a monthly basis, the number of free and reduced price lunches claimed to the number of children approved for free and reduced price lunches enrolled in the School Food Authority (SFA) for the month of October and multiply that number by the days of operation and the attendance factor employed by the SFA. At its discretion, the Department may conduct this comparison against data which reflects the number of children approved for free and reduced price lunches for a more current month(s). 7 CFR 225 for the Summer Food Service Program (SFSP) requires: • information that must be on a site information sheet provided by the sponsor for approval by the Department prior to participation in SFSP, including estimated meal counts, types of meals, meal service times, and procedures to ensure duplicate meals are not distributed at non-congregate sites. In order to approve a site, the area where the site proposes to serve is not or will not be served in whole or in part by another site. • payments to a sponsor must equal the amount derived by multiplying the number of eligible meals, by type, actually served under the sponsor’s program to eligible children by the current applicable reimbursement rate for each meal type. Sponsors must be eligible to receive additional reimbursement for each meal served to participating children at rural or self-preparation sites. Section 19 of the Richard B. Russell NSLA states that the per-pupil grant provided to a school under the Fresh Fruit and Vegetable Program (FFVP) shall be not less than $50, nor more than $75. Condition: The Child Nutrition Cluster (CNC) includes the School Breakfast Program, NSLP, Special Milk Program for Children, SFSP, and FFVP. The objectives of the programs are to provide nutritious meals to eligible children in schools and summer food programs; to foster healthy eating habits by providing fresh fruits and vegetables to children attending elementary schools; and to encourage the consumption of nutritious agriculture commodities. The Department of Education (DOE) is responsible for the administration of CNC programs for the State. DOE provides benefits to each SFA or sponsor on a reimbursement basis. SFAs and sponsors must submit CFRs based on actual meals served for the month utilizing the Child Nutrition Program (CNPWeb) system. Claims pass through a system of edit checks built into the CNPWeb system, are automatically approved after those edit checks, and are processed based on rates programmed in the system. DOE does not verify the allowability or accuracy of monthly CFRs prior to payment, and edit checks built into the CNPWeb system are not routinely monitored. There are no monthly procedures in place that operate as controls over the allowability of claims. As a result, DOE has no assurance that SFA and sponsor monthly claim submissions are accurate or complete, or that the resulting CFR is allowable prior to payment. For SFSP, DOE requires applications from sponsors that include individual site sheets. The information on the sheet must include the estimated number of meals, types of meals to be served, and meal service times. Non-congregate sites must provide enough detail to ensure the area where the site proposes to serve meets certain criteria, including verification that the site is rural; is not or will not be served in whole or in part by another site; serves an area in which poor economic conditions exist or is approved for reimbursement only for free meals served to enrolled children who meet income standards; and has procedures to ensure that duplicate meals are not served to any child. Residential and non-residential camps must include in their site sheets the number of children enrolled in each session who meet income standards prior to filing the camp’s CFR for each session. The Office of the State Auditor (OSA) tested 44 SFSP CFRs and found: • 4 residential or non-residential camp CFRs that did not include the number of children enrolled in each session who met income standards prior to filing their CFR, resulting in questioned costs totaling $31,647. Additionally, of these 4 CFRs: o 2 were missing non-congregate site plan attestations; and o 1 did not include a site classification type on its site sheet, which determines the appropriate reimbursement rate. • 1 CFR to a non-congregate site that did not have documented procedures to prevent duplicate meal service on the site sheet and had census data contained within the non-congregate plan that did not match U.S. Census Bureau data, resulting in questioned costs totaling $29,689. OSA selected a non-statistical random sample. Furthermore, for each month of operation, DOE must report the number of meals served by meal type and sponsor type to the United States Department of Agriculture’s Food Nutrition Services (FNS) on the FNS-418 report. DOE does not have assurance that the CNPWeb system’s default classification of urban sites as self-prep when the field is left blank results in accurate FNS-418 reporting. DOE initiated a request to the CNPWeb system vendor to correct this system error in April 2025; however, the issue persisted for the entirety of fiscal year 2025. For FFVP, allocations made by DOE must result in a per-pupil grant not less than $50 nor more than $75 to participating SFAs and sponsors. OSA tested 18 SFAs and sponsors that participated in FFVP in fiscal year 2025 and found that 11 SFAs and sponsors had per-pupil allocations that were not between $50 and $75 per pupil, ranging from $15 per pupil to $104 per pupil. The allocation of funds over $75 per pupil resulted in questioned costs of $12,215. OSA selected a non-statistical random sample. Context: In fiscal year 2025, DOE processed SFA and sponsor CFRs totaling: • $58.5 million under NSLP; • $2.8 million under SFSP; and • $2.7 million under FFVP. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Noncompliance with Federal regulations • Known questioned costs • Potential future questioned costs and disallowances • Potential incorrect rates of reimbursement paid to SFAs and sponsors • Inaccurate FNS-418 reports submitted to FNS Recommendation: We recommend that the Department enhance policies and procedures and increase oversight to: • review CFRs on a monthly basis to provide assurance that SFA and sponsor payments are accurate and complete; • ensure all required information is included in SFA and sponsor applications and CFR submissions prior to payment, including site classification types and non-congregate plan information on site information sheets; and • ensure FFVP per pupil allocation amounts comply with Federal regulations. Corrective Action Plan: See F-14 Management’s Response: The Department agrees with this finding. The exceptions referenced in this finding are from the program FY23 audit. All identified exceptions have been addressed in the 2025 program year and the upcoming 2026 program year with the strengthening of program software and provided training to the program sponsors. During program years 2020–2023, the Summer Food Service Program (SFSP) operated under emergency authorities in response to COVID-19, during which the USDA implemented numerous program flexibilities and temporarily waived certain regulatory requirements. In subsequent years, many of these flexibilities continued but were reintroduced with additional regulatory requirements, expanded data collection, and ongoing updates to program guidance. As a result, program regulations and administrative requirements have evolved rapidly, with federal guidance frequently being released throughout the program year. The Child Nutrition team has worked to remain current with these evolving requirements and implement updates as changes occur. In some instances, updated regulations or federal guidance are issued after the program year has begun, which can result in necessary system changes or corrections to the Child Nutrition software system being implemented after the operating period has already started. At the request of School Administrative Units, Child Nutrition re-allocated funds for the FFVP from schools with unexpended balances, to schools requesting additional funds. A procedure has been implemented for SFY 2026 to ensure school allocations remain within the $50-75/student allocation range. Contact: Jane McLucas, Director of Child Nutrition, DOE, 207-624-6880 Auditor’s Concluding Remarks: Management’s Response stating “the exceptions referenced in this finding are from the program FY23 audit” is incorrect. All exceptions identified relate to payments made to SFAs and sponsors and Federal reporting submissions during fiscal year 2025. The finding remains as stated. (State Number: 25-1203-02)

(2025-029) Title: Internal control over National Guard payroll costs needs improvement Prior Year Findings: None State Department: Defense, Veterans and Emergency Management Administrative and Financial Services State Bureau: Military Security and Employment Service Center Federal Agency: U.S. Department of Defense Assistance Listing Title: National Guard Military Operations and Maintenance (O&M) Projects Assistance Listing Number: 12.401 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403, .430 and .431; 5 MRSA 7065 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Compensation for personal services includes all renumeration, paid 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. Compensation for personal services may also include fringe benefits. Costs of compensation are allowable to the extent that they are reasonable for the services rendered and conform to the established written policy of the recipient. Salary increases are based on merit. Salary advancements within an established range shall not be automatic, but shall be dependent upon specific recommendation of the appointing officer and approval of the commissioner. The recommendation shall be based upon standards of performance as indicated by merit ratings or other pertinent data. No advancements in salary may be made until the employee has completed the probationary period. Condition: The National Guard Military Operations and Maintenance Projects (National Guard O&M Projects) program supports the Army and Air National Guard in minor construction, maintenance, repair, or operation of facilities, and provides mission operational support to be performed by the State. Performance Management Forms (PMFs) document an employee’s overall performance rating; identify the pay grade and step for the employee, including whether a merit increase should be applied based on performance; and document management approval, which includes the supervisor and the agency head. The Department of Defense, Veterans and Emergency Management is responsible for completing PMFs and submitting them to the Security and Employment Service Center for processing. The Office of the State Auditor (OSA) tested payroll costs for 24 employees charged to the National Guard O&M Projects program during fiscal year 2025 and found that 8 PMFs did not have evidence of the agency head approval; 7 of the 8 PMFs resulted in merit increases in fiscal year 2025. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the National Guard O&M Projects program expenditures totaled $30.1 million, of which $11.1 million was expended for payroll. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential unauthorized salary adjustments could result in future questioned costs • Noncompliance with State regulations Recommendation: We recommend that the Department enhance policies and procedures and increase oversight to ensure that PMFs properly support the National Guard O&M Projects program’s payroll costs in accordance with Federal and State regulations. Corrective Action Plan: See F-18 Management’s Response: DVEM Response: The Department partially agrees with this finding. The Department agrees that eight positions lacked an agency head signature. As a result, we have taken steps to ensure appropriate agency heads are identified for each of those positions and the agency heads are aware of the need to sign off on the relevant forms. However, we disagree that there is lack of adequate policies and procedures that could result in future questioned costs. All of the PMFs were completed and signed by a supervisor and employee indicating that performance was properly assessed to support the employee’s pay grade, step and merit increase. DVEM Contact: Michelle Lenihan, Deputy Commissioner, DVEM, 207- 430-5997 DAFS Response: The Bureau of Human Resources partially agrees with this finding. The Bureau of Human Resources agrees that the positions identified lacked agency head signatures. BHR disagrees with OSA as to the effect of those missing signatures. As OSA indicates “Performance Management Forms (PMFs) document an employee’s overall performance rating, identify the pay grade and step for the employee, including whether a merit increase should be applied based on performance.” The performance management forms are developed and updated centrally by BHR and all Departments are required to use the same forms. The Agency Head will often not have any direct knowledge of a specific employee’s actual performance. The purpose of the Agency Head signature is not as a control to whether an employee is meeting performance expectations, rather it is because the Agency Head is responsible for the budget of their respective agency, including personnel services. Due to other controls at the Finance Service Center and Controller’s Office, all positions were appropriately budgeted for, and employees received their appropriate pay. DAFS Contact: Michael J. Dunn, Esq., Acting State Human Resources Officer, BHR, 207-215-2951 Auditor’s Concluding Remarks: 2 CFR 200.303 requires the Department to establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. State internal control procedures require review and approval of the PMF by both the supervisor and agency head, as evidenced by their signatures, to ensure an employee’s pay grade and step are appropriate based on performance. Both signatures on the PMF support that payroll costs of the National Guard O&M Projects program have been adequately reviewed for allowability purposes in accordance with Federal and State regulations. The finding remains as stated. Contact: (State Number: 25-1503-02)

(2025-033) Title: Internal control over Health Disparities program payments to subrecipients needs improvement Prior Year Findings: None State Department: Health and Human Services State Bureau: Maine Center for Disease Control & Prevention Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Assistance Listing Number: 93.391 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of the award. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. Condition: The Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises (Health Disparities) program was implemented to address disparities in access to healthcare in populations that are at high-risk and underserved, including racial and ethnic minority groups and people living in rural communities. The Health Disparities program is administered by the Maine Center for Disease Control & Prevention’s (MeCDC) Division of Population Health Equity. MeCDC has a memorandum of understanding in place with the Department of Public Safety’s Emergency Medical Services (EMS) Bureau to assist in administering the Health Disparities program. The Office of the State Auditor (OSA) tested 27 payments issued by MeCDC to subrecipients and found: • 2 payments totaling $69,535 to 1 subrecipient against a contract for which a cash surplus existed at the time of payment. • 1 payment of $40,621 based on a quarterly financial report that contained detailed expense information that did not match approved contract expenditures. • 2 payments totaling $252,824 to 1 subrecipient to close out a contract were issued prior to receipt by the Department of the required final progress reports. Therefore, MeCDC does not have policies and procedures in place to prevent payments to subrecipients that do not meet the criteria set forth in 2 CFR 200.303 at the time of payment. Subsequently, MeCDC was able to provide reports to demonstrate that the funds had been used in accordance with the terms and conditions of the award. OSA utilized a risk-based approach to select 9 payments issued by MeCDC and selected a non-statistical random sample of subrecipient contracts to test all payments made in fiscal year 2025 that were related to those contracts. Context: MeCDC provided $3.2 million from a total of $6.2 million to Health Disparities program subrecipients during fiscal year 2025. Cause: • Lack of adequate policies and procedures • Lack of supervisory oversight Effect: • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that MeCDC implement procedures and enhance oversight to ensure payments made to subrecipients are accurate, allowable, and adequately supported at the time of payment. Corrective Action Plan: See F-20 Management’s Response: The Department disagrees with this finding. The conditions noted do not support that costs were unallowable. Furthermore, the Department demonstrated that the funds had been used in accordance with the terms and conditions of the award. The Department’s processes provide reasonable assurance that payments are appropriate. Contact: Eden Hale, Associate Director, Division of Population Health Equity, Maine CDC, 207-441-1090 Auditor’s Concluding Remarks: OSA acknowledges that subsequent information demonstrated that the funds were used for allowable purposes; however, this does not absolve the Department of responsibility to ensure accuracy and appropriateness at the time of payment. The Department did not demonstrate that controls are in place to ensure that all payments to subrecipients are allowable at the time of payment. The finding remains as stated. (State Number: 25-1123-04)

(2025-041) Title: Internal control over TANF client payments needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office for Family Independence Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Temporary Assistance for Needy Families (TANF) Assistance Listing Number: 93.558 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Activities allowed or unallowed Allowable costs/cost principles Type of Finding: Significant deficiency Questioned Costs: None Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 263.11 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The Department must use Federal Temporary Assistance for Needy Families (TANF) funds for expenditures that are reasonably calculated to accomplish the purposes of TANF. Use of funds in violation of this is considered misuse of funds. Condition: The TANF program provides time-limited assistance to needy families with children so that the children can be cared for in their own homes or in the homes of relatives; to end dependence of needy parents on government benefits by promoting job preparation, work, and marriage; to prevent out-of-wedlock pregnancies, including establishing prevention and reduction goals; and to encourage the formation and maintenance of two-parent families. The Department issues monthly cash benefits to TANF clients while they work towards self-sufficiency. The Department also issues TANF support service payments directly to TANF clients for various items and services, and to providers on behalf of TANF clients for services rendered such as childcare and transportation. The Office of the State Auditor (OSA) tested 60 cash benefits and 60 support service payments and found: • 1 cash benefit issued in March 2025 did not include all members of the household, resulting in an underpayment of $395. Upon further review, OSA found an additional $3,843 underpaid to the client during fiscal year 2025. • 2 support service payments issued for transportation were calculated by the Department using a distance other than the most direct route as required. The payments included: o one payment issued in November 2024 that overpaid a TANF client $3. Upon further review, OSA found an additional $15 overpaid to the client during fiscal year 2025. o one payment issued in September 2024 that underpaid a TANF client $3. Upon further review, OSA found an additional $11 underpaid to the client during fiscal year 2025. • 1 support service payment overpaid a childcare provider by $2. Upon further review, OSA found an additional $8 that was overpaid to the provider during fiscal year 2025. OSA selected non-statistical random samples. Context: In fiscal year 2025, $51.7 million from a total of $104.9 million was paid to TANF clients for services and direct cash benefits. Cause: • Lack of adequate procedures • Lack of supervisory oversight Effect: • Potential future questioned costs and disallowances • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made to TANF clients are accurate, allowable, and adequately documented; • increase monitoring procedures over these payments; • establish recoupments for the identified overpayments; and • issue benefits/payments to clients or providers for identified underpayments. Corrective Action Plan: See F-23 Management’s Response: The Department agrees with this finding. Actions have been taken to issue corrective payments for benefits that were underpaid and benefits that were overpaid have been referred for recoupment. The Corrective Action Plan will mitigate the agreed upon errors from reoccurring. Contact: Ian Yaffe, Director, Office for Family Independence, DHHS, 207-592-1481 (State Number: 25-1111-06)

(2025-055) Title: Internal control over the Foster Care and Adoption Assistance eligibility and benefit determination process needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Foster Care – Title IV-E Adoption Assistance – Title IV-E Assistance Listing Number: 93.658; 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Material weakness Material noncompliance Questioned costs Known Questioned Costs: ALN 93.658 $51,247 ALN 93.659 $42,689 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during fiscal year 2025 and identified known questioned costs associated with 11 clients based on various eligibility attributes. Since each exception is unique to the client, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.21 and .40; 42 USC 671; Department of Health and Human Services (DHHS) 10-148 Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children; Office for Child and Family Services’ (OCFS) Financial Resource Specialist (FRS) Policy and Procedure Manual The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. 45 CFR 1356.21 outlines eligibility criteria which, if met, allows the State to pay foster care maintenance payments on behalf of eligible children, in accordance with the Title IV-E agency’s foster care maintenance payment rate schedule, to individuals serving as foster family homes, to childcare institutions, or to public or private child-placement or childcare agencies. 45 CFR 1356.40 outlines eligibility criteria which, if met, allows the State to pay a portion of the Federal Adoption Assistance maintenance payments and claim Federal financial participation for the payment. 42 USC 671 requires that prospective foster parents and any other adult living in the home who has resided in the provider home in the preceding 5 years satisfactorily meet a child abuse and neglect registry check. The requirement applies to foster care maintenance payments made on behalf of the foster child. DHHS 10-148 Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children states that an application may be denied if the applicant(s) have an open Child Protective Services case or a closed substantiated and/or indicated Child Protective Services case. In addition, applications for renewal of a license shall be made 60 days prior to the date of expiration to ensure that necessary licensing procedures may be completed for the continuity of the license. The OCFS FRS Policy and Procedure Manual defines Supplemental Security Income (SSI) as unearned income; documentation to support unearned income includes benefit award letters, copies of checks, child support printouts, Automated Client Eligibility System (ACES) printouts or other documentation. In addition, a child may be eligible for both SSI and Title IV-E. The Department, through an FRS, must make a decision as to which would yield greater financial benefits for the State. Condition: OCFS administers the Foster Care – Title IV-E (Foster Care) and Adoption Assistance – Title IV-E (Adoption Assistance) programs for the State as outlined below: • The Foster Care program is designed to help states provide safe and stable out-of-home care for children under its jurisdiction until the children are returned home safely, placed with adoptive families, or placed in other planned arrangements for permanency. • The Adoption Assistance program provides Federal funds to states to facilitate the timely placement of children, whose special needs or circumstances would otherwise make them difficult to place, with adoptive families. Funds are available for a one-time payment to assist with the costs of adopting a child, as well as for subsidies to adoptive families for the care of the eligible child on an ongoing basis. An FRS determines program eligibility and initiates benefits through completion of a determination checklist. The FRS reviews program eligibility factors, gathers required supporting documentation, and documents the certification decision on the checklist. The FRS enters the information into the child welfare information system for processing. Once the client is determined eligible in the child welfare information system, a level of benefits is assigned. OCFS relies on this information and the related system coding to ensure that benefits are accurately provided to eligible clients. OSA tested 60 initial client eligibility determinations and found 1 client’s prospective foster parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671 and DHHS Rules Providing for the Licensing of Family Foster Homes for Children. The Resource Family Home (RFH) received $12,566 in Federal Foster Care benefits on behalf of 2 clients, resulting in questioned costs of the entire amount. OSA tested 60 Adoption Assistance benefit payments and 60 Foster Care benefit payments, along with the related eligibility determination for those clients, and found: • 5 clients who were placed in a RFH that the foster/adoptive parent did not satisfactorily meet a child abuse and neglect registry check in accordance with 42 USC 671 and DHHS Rules Providing for the Licensing of Family Foster Homes for Children. The RFHs received benefits from both Federal programs on behalf of multiple clients, resulting in questioned costs for the Foster Care and Adoption Assistance programs of $7,629 and $42,689, respectively. • 2 clients determined to be ineligible by OCFS due to a conversion issue within the newly implemented child welfare information system continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs of $11,768. • 1 client who received Federal benefits for both Title IV-E and SSI during the fiscal year. OCFS could not provide documentation of their consideration of the SSI documented in ACES, or their decision regarding claiming Title IV-E benefits instead of SSI benefits, resulting in questioned costs for the Foster Care program of $12,687. • 1 client determined ineligible due to an inactive license for 6 months past the initial renewal period, continued to receive Foster Care benefit payments during the fiscal year, resulting in questioned costs for the Foster Care program of $6,447. • 1 client received a one-time payment to adjust Adoption Assistance childcare benefits; however, it was paid out of Foster Care benefits, resulting in questioned costs of $150. OSA selected non-statistical random samples. Context: In fiscal year 2025, the State provided approximately: • 1,000 Foster Care clients with $5.3 million in Federal benefits; and • 4,500 Adoption Assistance clients with $25.5 million in Federal benefits. Identified Cause: • Lack of adequate policies and procedures • Lack of appropriate oversight over eligibility and benefit determinations Potential Effect: • Known questioned costs • Potential future questioned costs and disallowances • Benefits were provided to ineligible clients. • Noncompliance with Federal regulations Recommendation: We recommend that the Department: • implement additional procedures to ensure that payments made on behalf of clients are accurate and allowable in accordance with program regulations; • establish recoupments for the overpayments identified; and • strengthen licensing practices for background screening of potential and current RFHs. Corrective Action Plan: See F-28 Management’s Response: The Department partially agrees with this finding. OCFS disagrees with the condition that child abuse and neglect registry checks for RFH require a denial. According to State of Maine Department of Health and Human Services Chapter 16 Rules Providing for the Licensing of Family Foster Homes for Children: Section 9: Licensing Requirements for Family Foster Homes for Children, Sect A. (9): An application may be denied if the applicant(s) have an open Child Protective Services Case or a closed substantiated and/or indicated Child Protective Services case. An open Child Protective Services Case includes a pending disposition of an open report, a case open for assessment or a case open for services. OCFS also disagrees with the condition that Title IV-E was claimed in error during their foster care placement, since the Social Security Administration (SSA) did not stop SSI payments to the biological parent, and is requiring OCFS to pay back the Title IV-E funding that was received to help pay for the child's care. This is an error of the SSA office that DHHS has no responsibility over. DHHS reports all children removed from their parents’ custody to SSA through a monthly federally required reporting process. SSA would be responsible for taking any action based on that reporting. DHHS does not agree that Maine taxpayers should be penalized for the federal agency's failure to take action and stop benefits to the parent. OCFS agrees to the remaining conditions noting that: Changes were made to the Katahdin system (User story 3002158) that were released on 8/3/2025 to avoid overlapping payments for childcare in both Foster Care and Adoption. Changes were made to the OCFS Licensing policy in July 2025, removing the 60-day time limit on the license renewal process. Contact: Robert Blanchard, Associate Director, OCFS, DHHS, 207-624-7955 Auditor’s Concluding Remarks: Regarding the exceptions related to child abuse and neglect registry checks for RFHs, OCFS is only citing State policy and omitting the Federal requirement (42 USC 671) which states that prospective foster parents and any other adult living in the home who has resided in the provider home in the preceding 5 years satisfactorily meet a child abuse and neglect registry check. For all 5 clients in the Condition, the foster/adoptive parent did not satisfactorily meet a child abuse and neglect registry check; 2 of the 5 clients were subsequently removed from the RFH as a result of the child abuse and neglect registry checks. Regarding the client who received both SSI and Federal Title IV-E benefits, though OCFS states that this exception is SSA’s responsibility, the FRS did not properly identify that the client was receiving SSI benefits when determining Foster Care eligibility. As a result, the FRS did not decide which benefit would yield greater financial benefits for the State, and the client received Federal benefits from both Title IV-E and SSI during fiscal year 2025. The finding remains as stated. (State Number: 25-1109-03)

(2025-060) Title: Internal control over the Adoption Assistance – Title IV-E eligibility and benefit determination process needs improvement Prior Year Findings: See Schedule of Findings and Questioned Costs for chart/table State Department: Health and Human Services State Bureau: Office of Child and Family Services Federal Agency: U.S. Department of Health and Human Services Assistance Listing Title: Adoption Assistance – Title IV-E Assistance Listing Number: 93.659 Federal Award Identification Number: See E-65 to E-66 Compliance Area: Allowable costs/cost principles Eligibility Type of Finding: Significant deficiency Questioned costs Known Questioned Costs: $1,645 Likely Questioned Costs: Undeterminable; the Office of the State Auditor (OSA) selected a sample of clients who received Title IV-E benefits during fiscal year 2025 and identified known questioned costs for 1 client based on various eligibility attributes. Since each exception is unique to the client, a projection of questioned costs cannot be reasonably estimated. Criteria: 2 CFR 200.303; 2 CFR 200.403; 45 CFR 1356.40 The Department must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the Department is managing awards in compliance with Federal statutes, regulations, and the terms and conditions of awards. To be allowable under Federal awards, costs must be necessary and reasonable for the performance of the Federal award and be adequately documented. The State is allowed to pay a portion of the Federal Adoption Assistance maintenance payments and claim Federal financial participation for Title IV-E eligible clients. Condition: The Adoption Assistance – Title IV-E (Adoption Assistance) program provides Federal funds to states to facilitate the timely placement of children, whose special needs or circumstances would otherwise make them difficult to place, with adoptive families. Funds are available for a one-time payment to assist with the costs of adopting a child as well as for subsidies to adoptive families to assist with the care of the eligible child on an ongoing basis. The Office of Child and Family Services (OCFS) administers the Adoption Assistance program for the State. OCFS financial resource specialists (FRS) are responsible for determining program eligibility and initiating benefits. The FRS uses the Adoption Assistance Checklist to ensure that program eligibility factors, required supporting information, and final determination for Federal Adoption Assistance benefits are obtained and documented. Once the client is determined eligible in the child welfare information system, a daily rate is negotiated by OCFS and the adoptive parents at a rate that does not exceed what the client would qualify for under the Foster Care – Title IV-E program. OSA tested 60 client benefit payments and identified that: • 1 adoptive parent continued to receive Adoption Assistance maintenance payments after OCFS was informed that the client moved out of the home. In addition, the client’s clothing allowance payment was erroneously sent to the individual they were living with at the time of issuance instead of the adoption placement. The client received a daily Adoption Assistance rate of $26.25, resulting in questioned costs of $1,645 during fiscal year 2025. • 1 client, who was eligible for Adoption Assistance, erroneously received a State-funded Foster Care childcare payment while also receiving Federally-funded Adoption Assistance childcare payments during fiscal year 2025. • 1 client, who was eligible for Adoption Assistance, erroneously received 2 weeks of State-funded Foster Care maintenance payments while also receiving Federally-funded Adoption Assistance maintenance payments during fiscal year 2025. OSA selected a non-statistical random sample. Context: In fiscal year 2025, the State provided approximately 4,500 Adoption Assistance clients with $25.5 million in Federal benefits. Cause: • Lack of adequate policies and procedures over verification and accuracy of benefit determinations and associated Adoption Assistance payments • Lack of supervisory oversight Effect: • Known questioned costs • Potential future questioned costs and disallowances • Noncompliance with Federal and State regulations Recommendation: We recommend that the Department enhance policies and procedures and increase oversight to ensure the accuracy of eligibility and benefit determinations, and verify that benefit payments are made in accordance with Federal regulations. Corrective Action Plan: See F-29 Management’s Response: The Department agrees with this finding. The Department will develop training information for distribution to child welfare staff defining steps for them to take when they discover that a child in an adoption assistance agreement is no longer receiving support from the adoptive parents. These steps will raise the information to the OCFS Adoption Unit Manager's attention so they can take appropriate actions. Contact: Denise Merrill, Manager of Child Welfare Statewide Programs, DHHS, 207-822-2255 (State Number: 25-1110-01)

Condition: For FAL 10.185, all 40 vendor disbursements tested lacked evidence of supervisory approval, as the payment request forms were not signed by the designated approver prior to payment. For FAL 10.558, 27 of thirty-two vendor disbursements tested lacked documented supervisory approval prior to payment. Finally for FAL 84.010A, two of the ten vendor disbursements tested lacked documented supervisory approval prior to payment. In each noted instance, payments were processed without evidence that the School performed and documented a review in accordance with established internal control procedures. 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 §§200.403, Factors Affecting Allowability of Costs, and 200.405, Allocable Costs, costs charged to federal awards 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 consistently enforce established approval procedures, and monitoring controls were not operating effectively to ensure payment request forms were reviewed and signed prior to disbursement. Effect: Failure to document supervisory approval increases the risk that unallowable, inaccurate, or unsupported expenditures could be processed and charged to federal programs without detection. Recommendation: We recommend that the School enforce existing policies requiring documented supervisory approval prior to processing payments and implement monitoring procedures to ensure approval documentation is completed and retained. In addition, the School should strengthen pre-payment review procedures to ensure expenditures are evaluated for allowability, necessity, reasonableness, and proper allocation in accordance with 2 CFR Part 200 and applicable program requirements. Training should be provided to personnel responsible for processing and approving federal program expenditures to reinforce compliance responsibilities. 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.