Findings Citing § 200.403

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.

Reference Number: 2025-009 Prior Year Finding: 2024-011 Federal Agency: U.S. Department of Labor State Department Name: Department of Labor State Division: Division of Unemployment Insurance Federal Program: Unemployment Insurance, COVID-19 – Unemployment Insurance Assistance Listing Number: 17.225 Award Number and Year: 24A55UI000067 (10/1/2023 – 12/31/2026) 25A55UI000116 (10/1/2024 – 12/31/2027) Compliance Requirement: Allowable Cost/Cost Principles – General Disbursements Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matters 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 Documentation to support General Disbursement transactions was not readily available for review. States are required to develop and implement internal controls to ensure proper supporting documentation is maintained and readily available for audit, but the Division of Unemployment Insurance (Division) was unable to provide supporting documentation to auditors on a timely basis. Context For three of sixty general disbursement transactions selected for testing, the Division was initially unable to provide supporting documentation and confirmed lack of support for these items to auditors. After the conclusion of audit test work, the Division provided support for the sample selections, however, it was not submitted for audit review in a timely manner. Questioned Costs None noted. Cause The Division’s procedures and controls are not sufficient to ensure timely submission of requested audit documentation. Effect Lack of effective controls could cause the Division to incur program charges without supporting documentation. Recommendation The Division should review and enhance its procedures and controls regarding general disbursements to ensure that supporting documentation is readily available upon audit request. Views of Responsible Officials We acknowledge that audit ready evidence was not produced in a timely fashion but respectfully disagree that the Division did not maintain this evidence. The lack of timely production can be attributed to lack of awareness of the proper repository where such audit evidence was maintained and/or could be easily retrieved, as opposed to no maintenance at all. We also maintain that the division was able to substantiate all expenses queried. Auditor Rejoinder On October 1, 2025, auditors sent a request to the Division for supporting documentation for sixty samples selected for testing. Documentation was provided to auditors on November 10, 2025, but for three of the sixty samples it was deemed insufficient for testing. Auditors followed up with the Division, requesting additional support for these samples, but it was not provided. On February 17, 2026, auditors met with Fiscal Management regarding the status of the outstanding supporting documentation and were informed it was not available and would not be provided. After this meeting, auditors finalized audit test work, drafted the audit finding, and sent it to the Division for a written response. On March 11, 2026, the Division provided additional support to auditors after the conclusion of audit test work. Auditors acknowledge that support was eventually provided but maintain that the Division’s procedures and controls are insufficient to ensure that adequate supporting documentation is readily available for audit.

Reference Number: 2025-021 Prior Year Finding: No Federal Agency: U.S. Department of Health and Human Services State Department Name: Department of Health and Social Services State Division: Division of Medicaid and Medical Assistance Federal Program: Children’s Health Insurance Program Assistance Listing Number: 93.767 Award Number and Year: SAI000005399 (10/1/2023 – 9/30/2024) 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 Division of Medicaid and Medical Assistance (Division) was unable to provide evidence that expenditures were incurred during the grant’s allowable period of performance. Context Forty disbursement transactions recorded during September and October 2024 were selected for testing. For forty of forty transactions selected, the Division was unable to provide documentation that the costs were incurred during the grant’s period of performance. Cause The Division’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. Effect Costs could be deemed unallowable by the awarding agency if funds are expended and/or obligated outside of the allowable period of performance. Questioned Costs Undetermined. Recommendation The Division should review and enhance its procedures and internal controls to ensure that it maintains documentation that expenditures charged to the program are incurred within an award’s allowable period of performance. Views of Responsible Officials To prevent recurrence, we are implementing the following actions: 1. Enhanced Monitoring Controls o Establish a centralized tracking system for all awards, including start and end dates. 2. Staff Training and Accountability o Conduct mandatory training for program and finance staff on compliance with period of performance requirements. o Assign clear responsibility for monitoring award timelines to designated personnel. 3. Pre-Closeout Review Process o Introduce a formal pre-closeout review 60 days before the award end date to identify and resolve outstanding obligations. o Require certification from both program and finance leads confirming that all expenditures fall within the allowable period. 4. Post-Expenditure Review o Perform monthly reconciliation of expenditures against the period of performance. o Immediately flag and correct any discrepancies identified.

Allowable Costs/Cost Principles – Consultant Payments Program Name: Federal-State Partnership for Intercity Passenger Rail (Assistance Listing 20.326) Federal Award Agency: Department of Transportation Award Years: Federal Fiscal Years 2024 and 2025 Federal Award Number: 69A36524520310FSPCT Background The Department of Transportation (DOT) Consultant Design Administration Manual defines extra work as work the department orders beyond the scope of the agreement when such work is not reflected in the fee payments specified in the agreement. Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200.317 requires that when conducting procurement transactions under a federal award, a state must follow the same policies and procedures it uses for procurements with non-federal funds. Title 2 CFR Part 200.403(c) and (g) provides that to be allowable under federal awards, costs must be consistent with established policies and procedures and adequately documented. The DOT Consultant Design Administration Manual requires consultants to obtain written authorization from the department before they begin any extra work; otherwise, DOT is not obligated to compensate the consultant for that work. Condition Our review of 11 transactions totaling $46,543,994 disclosed that DOT made a $47,870 payment for extra work performed by a consultant that it did not authorize before work began. Context During the fiscal year ended June 30, 2025, non-payroll expenditures totaled $105,024,824. We randomly selected ten payments to review, as well as one manual journal adjustment. The sample was not statistically valid. Questioned Costs $47,870 Effect Failure to comply with DOT’s policies regarding extra work performed by consultants may result in unauthorized costs. Cause A lack of management oversight contributed to this condition. Prior Audit Finding We have not previously reported this finding. Recommendation The Department of Transportation should strengthen internal controls over consultant payments for extra work. Views of Responsible Officials “We agree with this finding.”

Activities Allowed or Unallowed – Benefit Payments Program Name: Money Follows the Person Rebalancing Demonstration (MFP) (Assistance Listing 93.791) Federal Award Agency: United States Department of Health and Human Services Award Years: Federal Fiscal Years 2024 and 2025 Federal Award Number: 1LICMS300142 Background The Department of Social Services (DSS) is the designated single state agency to administer the Medicaid program in accordance with Title 42 U.S. Code of Federal Regulations (CFR) 431. Connecticut administers benefit payments for the Money Follows the Person Rebalancing Demonstration (MFP) program the same way it administers Medicaid benefit payments. Criteria Title 2 CFR Part 200.403 provides that to be allowable under federal awards, costs should be adequately documented. The DSS Provider Enrollment Agreement requires the medical provider to only submit claims for medical goods and services they provided to the MFP recipient. Condition Our review of 40 MFP benefit payments totaling $49,144, of which $36,858 was federally reimbursed, disclosed that one medical provider submitted a claim with $146 of services that the provider did not perform, of which $110 was federally reimbursed. Context During the fiscal year ended June 30, 2025, DSS processed $18,243,599 in MFP benefit payments and received $13,682,699 in federal reimbursement. The sample was not statistically valid. Questioned Costs We computed questioned costs of $110 by applying the applicable federal financial participation rate to the unallowed expenditures. Effect DSS received federal reimbursement for unallowed expenditures. Cause The medical provider billed for eight hours of services when they only performed two hours of services. Prior Audit Finding We have not previously reported this finding. Recommendation The Department of Social Services should conduct an audit of the medical provider in accordance with Section 17b-99 of the Connecticut General Statutes to ensure integrity of the Money Follows the Person Rebalancing Demonstration program. The Department of Social Services should recoup any improper payments issued to medical providers and refund the corresponding federal reimbursements to the Centers for Medicare and Medicaid Services. Views of Responsible Officials “The Department agrees with the finding. The improper payment has been recouped and the DSS Audit Division will open an audit of the provider.”

Activities Allowed or Unallowed – Individual Plans and Service Records Program Name: Money Follows the Person Rebalancing Demonstration (MFP) (Assistance Listing 93.791) Federal Award Agency: United States Department of Health and Human Services Award Years: Federal Fiscal Years 2024 and 2025 Federal Award Number: 1LICMS300142 Background The Department of Social Services (DSS) is the designated single state agency to administer the Money Follows the Person Rebalancing Demonstration (MFP) program. Connecticut administered certain aspects of MFP through several state agencies including the Department of Developmental Services (DDS). Criteria Title 2 U.S. Code of Federal Regulations (CFR) Part 200.403 provides that to be allowable under federal awards, costs should be adequately documented. Title 2 CFR Part 200.303 requires the non-federal entity to establish, document, and maintain effective internal controls over the federal award that provides reasonable assurance that it is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Procedure No. I.C.1.PR.002.a. of the DDS Operation Manual states that DDS should obtain agreements and approvals for the individual plan during the planning process. The case manager should document who participated in the planning process and obtain signatures on the individual plan. Participants typically include the recipient, parent, guardian, advocate, case manager, support brokers, private agency designee, and other DDS staff. Condition Our review of 25 MFP benefit payments totaling $11,000, of which $8,250 was federally reimbursed, disclosed that DDS did not have signatures of agreement and approval for six individual plans. Additionally, DDS could not obtain service records from one medical provider to support one $46 payment, for which DSS received $35 in federal reimbursement. Context During the fiscal year ended June 30, 2025, DSS processed $4,978,654 in MFP benefit payments on behalf of 36 DDS recipients. DSS received $3,733,990 in federal reimbursement. The sample was not statistically valid. Questioned Costs $0 Effect The lack of signatures to indicate agreement and approval of an individual plan by relevant participants increases the risk of inadequate services for the recipient. DSS received federal reimbursement for an unallowed expenditure. Cause Lack of management oversight contributed to the condition. Prior Audit Finding We have not previously reported this finding. Recommendation The Department of Developmental Services should strengthen internal controls to ensure it obtains the required signatures for the individual plan for all Money Follows the Person Rebalancing Demonstration recipients. The Department of Social Services should conduct an audit of the medical provider in accordance with Section 17b-99 of the Connecticut General Statutes to ensure integrity of the Money Follows the Person Rebalancing Demonstration program. Views of Responsible Officials Response provided by the Department of Developmental Services: “DDS agrees with the finding. The errors were attributed to current manual processes and case management oversight regarding documenting signatures when individual plan (IP) meetings are held remotely rather than in-person. Most of the deficiencies (5 of 6) were isolated to one case manager. The MFP division is small with 3-4 case managers, causing a higher error rate when extrapolated against the sample size. The missing support service records have been forwarded to the Department of Administrative Services for research. There are plans to improve the individual plan process to enhance internal controls through automation. In the interim, case managers and case manager supervisors will be reminded of the IP signature requirements.” Response provided by the Department of Social Services: “The Department agrees with this finding and the response provided by the Department of Developmental Services. Additional research is needed to determine whether the missing documentation was the provider's responsibility or was due to a billing issue. The Department of Developmental Services is coordinating with the Department of Administrative Services to research this further.”

Eligibility Program Name: Money Follows the Person Rebalancing Demonstration (MFP) (Assistance Listing 93.791) Federal Award Agency: United States Department of Health and Human Services Award Years: Federal Fiscal Years 2024 and 2025 Federal Award Number: 1LICMS300142 Background The Department of Social Services (DSS) uses several systems to administer the Money Follows the Person Rebalancing Demonstration (MFP) program. The My Community Choices web portal is the primary system that maintains data about MFP applicants and participants, including client start and end dates. The DSS eligibility management system maintains client eligibility determinations for the program. The Medicaid Management Information System (MMIS) processes medical services payments and provides financial reports for federal reimbursement claims. Since the My Community Choices web portal does not interface with other systems, DSS staff must manually input client MFP program start and end dates into the DSS eligibility management system. The DSS eligibility management system interfaces with MMIS daily. Criteria Section 6071(b)(2) of Public Law 109-171 defines an eligible individual for the MFP demonstration project as a person who, immediately before beginning participation in the MFP demonstration project, resides in an inpatient facility, receives Medicaid benefits for inpatient services, continues to require the level of care provided in an inpatient facility, and who resides in a qualified residence beginning on the initial date of participation in the demonstration project. Section 6071(b)(7) of Public Law 109-171 defines qualified expenditures by the state under its MFP demonstration project as home and community-based long-term care services for an eligible individual participating in the MFP demonstration project. However, this is only with respect to services furnished during the 12-month period beginning with the individual's discharge date from an inpatient facility. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.403 provides that to be allowable under federal awards, costs should conform to any limitations or exclusions set forth in the federal award. Title 2 CFR Part 200.303 requires the non-federal entity to establish and maintain effective internal controls over the federal award that provides reasonable assurance that it is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the award. Title 42 CFR Part 431.420 requires the state to comply with the terms and conditions of the MFP demonstration project. MFP terms and conditions require the state to ensure the availability of adequate resources for implementation and monitoring of the demonstration project including tracking participant enrollment, maintaining eligibility systems, and administering effective transition coordination. MFP terms and conditions require the state to develop and amend an operational protocol that details how the state will adhere to statutory and program requirements. Section B of the MFP Operational Protocol includes the following policies and procedures. • Determining MFP eligibility includes ensuring an individual’s annualized cost of care in the community is equal to or less than the annualized rate paid for residing in an institution. • The state will not provide an administrative hearing to an applicant for denied services due to the applicant’s care plan exceeding the allowable cost of care in the community. • The state will suspend MFP participation and services during any inpatient stay. Suspended MFP participants may continue MFP participation upon discharge from the inpatient facility. Condition We reviewed 40 MFP claims, totaling $49,144, of which $36,858 was federally reimbursed, to determine if DSS properly granted eligibility. Our review disclosed the following: 1. DSS did not terminate MFP participation for two clients. DSS processed $918 for the selected claims for these clients. DSS processed $184,088 in additional claims in fiscal year 2025 and $270,274 in claims in prior fiscal years for periods when these clients were no longer eligible under the MFP program. DSS should have ended participation on April 5, 2018, and July 30, 2020, respectively. 2. DSS processed $7,724 of ineligible MFP expenses for two clients during inpatient hospital or nursing facility stays ranging from 14 to 21 days. DSS did not properly track MFP participation dates for these clients in its systems. Additionally, DSS did not properly track participation dates for a third client for seven days of hospitalization. 3. DSS approved two applicant care plans that exceeded the cost of institutional care by $1,530 (19%) and $3,507 (39%) per month. 4. DSS did not perform or document a comparative cost analysis for one client to demonstrate that care plan costs did not exceed nursing facility costs. Context During the fiscal year ended June 30, 2025, DSS processed $18,243,599 in payments on behalf of 824 MFP clients and received $13,682,699 in federal reimbursement. The sample was not statistically valid. Questioned Costs We computed questioned cost of $347,253 by applying the applicable federal financial participation rate to the ineligible expenditures. Questioned costs were $144,548 for fiscal year 2025 and $202,705 for prior fiscal years. Effect DSS provided MFP benefits to ineligible individuals. DSS received federal reimbursement for unallowed expenditures. Cause The My Community Choices web portal did not interface with DSS eligibility and financial systems. DSS relied on staff to manually input client participation start and end dates in multiple systems. Management oversight did not identify input errors of client participation dates. DSS management overrode applicant care plan costs. The MFP Operational Protocol has no written procedures to override program policies or federal regulations. Prior Audit Finding We have not previously reported this finding. Recommendation The Department of Social Services should strengthen internal controls to ensure that only eligible recipients receive Money Follows the Person Rebalancing Demonstration services in accordance with federal laws, award terms and conditions, and the Money Follows the Person Operational Protocol. Views of Responsible Officials “The Department agrees in part with this finding. Condition #1: DSS agrees that participation end dates were not updated timely due to cross-system manual entry limitations. Reconciliation procedures and supervisory oversight will be strengthened. Condition #2: DSS agrees that participation suspensions were not consistently reflected across systems due to timing delays. Monitoring and real-time reconciliation controls will be enhanced. Condition #3: DSS agrees approved costs exceeded institutional thresholds in limited cases. Variances were clinically justified, reviewed, and authorized. DSS will strengthen documentation and internal protocols to ensure clearer policy alignment. Condition #4: DSS agrees that the documentation was incomplete in one instance. Internal review standards will be reinforced to ensure comparative cost analyses are consistently documented. Please note, the Department will not be returning the questioned costs associated with this finding. According to federal regulations, recoveries based on eligibility errors can only be pursued when identified by programs operating under Centers for Medicare and Medicaid Services’ (CMS) Payment Error Rate Measurement program, per section 1903(u) of the Social Security Act and regulations at Title 42 CFR Part 431, Subpart Q.” Auditors’ Concluding Comments The Department of Social Services should amend its MFP Operational Protocol and seek approval from the Centers of Medicare and Medicaid Services if the department plans to continue to use management overrides of care plan costs.

Finding Reference: 2025-002 Federal Agency: U.S. Department of Homeland Security Pass-Through Entity: California Governor's Office of Emergency Services Federal Program Title: Disaster Grants - Public Assistance (Presidentially Declared Disasters) Assistance Listing Number: 97.036 Federal Grant Number: FEMA 4482DR-CA-01387 FEMA 4482DR-CA-01680 FEMA 4482DR-CA-02974 FEMA 4482DR-CA-03269 FEMA-4482-DR-CA-PW-00265(2) FEMA-4482-DR-CA-PW06047(3932) FEMA DR-4683 FEMA DR-4699 Category of Finding: Activities Allowed or Unallowed Allowable Costs/Cost Principles Classification of Finding: Significant Deficiency in Internal Control over Compliance Instance of Noncompliance Criteria The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR §200.403 and §200.430, require that costs charged to federal awards be allowable, reasonable, allocable, and adequately supported. Payroll costs charged to federal programs must be based on accurate payroll records and may not be duplicated or claimed more than once for reimbursement. In addition, management is responsible for establishing and maintaining effective internal control over compliance to ensure federal awards are administered in accordance with applicable laws, regulations, and grant provisions. Condition During our audit, we selected a statistically valid sample of 40 payroll transactions and identified 5 duplicate payroll transactions that were included in amounts submitted for reimbursement under the program. Specifically, certain payroll costs were charged more than once to the federal program, resulting in unallowable costs being claimed for reimbursement. These duplicate charges were not identified or corrected by management prior to submission of reimbursement requests. The City subsequently performed a detailed review of the payroll charges included in the reimbursement submissions, identified duplicate payroll charges of $113,551, and reduced the reported expenditure in the Schedule of Expenditure of Federal Awards for the year ended June 30, 2025. Cause The condition was caused by ineffective internal controls over submission of reimbursement requests, including inadequate review procedures to ensure payroll costs were not duplicated prior to submission, lack of reconciliation between payroll records and reimbursement requests, and insufficient supervisory review over payroll charges included in the reimbursement requests. Identification of Repeat Finding This is not a repeat finding in the immediate prior audit period. Effect As a result of these control deficiencies, unallowable payroll costs were claimed for federal reimbursement. This noncompliance could result in the City being required to repay the federal awarding agency and increase the risk of additional unallowable costs being claimed in future periods if not corrected. Questioned Costs Known questioned costs totaling $113,551 were identified related to duplicate payroll charges included in the reimbursement submission for grant number FEMA-4482-DR-CA-PW06047(3932). Recommendations We recommend that the City strengthen internal controls over payroll cost allocation and reimbursement processes to ensure payroll costs are not duplicated; implement reconciliations between payroll records and reimbursement requests prior to submission; and provide additional training to personnel responsible for grant accounting on federal cost allowability requirements. View of Responsible Officials and Planned Corrective Action See separately prepared Corrective Action Plan.

Compliance Requirement: Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: 10.553 – School Breakfast Program 10.555 – National School Lunch Program Federal Award Number: 255GA324N1199 (Year: 2025) Questioned Costs: $7,474 Repeat of Prior Year Finding: FA 2024-001, FA 2023-004 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over the employee compensation process as it relates to the Child Nutrition Cluster. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $60,051,234.81 were expended and reported on the DeKalb County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2025. Criteria: As a recipient of federal awards, the School District is required to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the recipient or subrecipient… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements… and that the total compensation for individual employees: (1) Is reasonable for the services rendered and conforms to the established written policy of the recipient or subrecipient consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a recipient’s or subrecipient’s laws, rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (g)…, [as follows:] (g) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the recipient or subrecipient…” Condition: A sample of 60 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were properly functioning, and applicable compliance requirements were met. The following deficiencies were noted: • One employee was paid on the incorrect pay scale and thus was overpaid by $4,903. • Two employees were paid on the incorrect pay scale and thus were underpaid by $1,287. • Additional pay totaling $967 for 2 employees was incorrectly charged to the federal program. • Documentation of retrospective pay totaling $317 could not be located for 1 employee. Questioned Costs: Upon testing a sample of $1,643,657 in personnel services expenditures, known questioned costs of $7,474 were identified for payroll charges not supported by adequate documentation. Using the total personnel services expenditure population of $20,618,901 (excluding benefits payments), we project the likely questioned costs to be approximately $93,759. The following Assistance Listing Numbers were affected by known and likely questioned costs: 10.553 and 10.555. Cause: A lack of oversight by personnel in the Office of Federal Grants and Program Compliance led to noncompliance with the requirements of the Uniform Guidance in relation to charging of personnel costs to a federal program. Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to pay employees with CNC funds the appropriate amount and/or maintain documentation supporting those payments could result in the expenditure of funds for unallowable purposes. This may also expose the School District to unnecessary financial strains and shortages within the CNC funds as ED or GaDOE may require the School District to return funds associated with improperly documented expenditures. Recommendation: The School District should evaluate their internal control process related to the approval and retention of documentation to support employee compensation payments. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that CNC employees are paid appropriately. Furthermore, management should develop and implement a monitoring process to ensure that these procedures are functioning properly. Views of Responsible Officials: The District acknowledges the audit team’s findings regarding undocumented additional pay and the isolated instances of overpayment identified during the testing of School Food Nutrition program. While the District remains committed to absolute fiscal accuracy, we believe the following context is essential for a complete understanding of the program’s scale and the nature of the identified error. • Scale of Operations: The District’s School Food Nutrition program is a massive operation, serving over 90,000 students across 124 separate kitchens. This decentralized environment requires the management of approximately 900 personnel and a total salary expenditure of $20,618,901. • Statistical Significance vs. Actual Error: The audit identified actual errors totaling $7,474. While the District understands that federal auditing standards (Uniform Guidance) require this amount to be extrapolated across the entire $20.6M population-resulting in a projected error exceeding the $25,000 mandatory reporting threshold-it is important to note that the actual identified discrepancy represents only 0.036% of the program’s personnel budget. • Accuracy Rate: Even when utilizing the extrapolated figure of $25,000, the District maintains a 99.64% accuracy rate in payroll processing for this program. We believe this demonstrates a robust internal control environment, particularly given the complexities of managing 124 distinct points of service. • Disproportionate Reporting Thresholds: The District notes that the $25,000 reporting threshold is a fixed statutory limit that does not scale with the size of the Local Educational Agency (LEA). Consequently, a District of our size is held to a significantly more compressed margin of error (less than one-eighth of one percent) than a smaller district with fewer employees and sites. Auditor’s Concluding Remarks: While the questioned costs identified by auditors appear to be relatively small in the context of the School District’s overall School Nutrition expenditures, the amounts exceed the reporting threshold established by the Uniform Guidance. This threshold is designed to ensure consistent reporting of noncompliance across entities of all sizes. Given the information reflected above, we reaffirm our finding and will review the status of the finding during our next audit.

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

2025-002 – Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance and Noncompliance Federal Agencies: Department of Agriculture Federal Assistance Listing Numbers: 10.182 Programs: Pandemic Relief Activities: Local Food Purchase Agreements with States, Tribes, and Local Governments Award/Pass-Through Entity Identifying Numbers: F4303 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Per 2 CFR §200.403(e), costs must be in accordance with Generally Accepted Accounting Procedures (GAAP) to be allowable under federal awards. Condition: During the testing of non-payroll related costs for the year ended June 30, 2025, two of 20 transactions selected for testing within the program were incurred in the year ended June 30, 2024. This practice is not in accordance with GAAP, which requires that costs be recorded in the period in which they are incurred. Both transactions were incurred and reported within the grant’s period of performance. Cause: The Organization did not have adequate policies and procedures in place to ensure that federal expenditures are properly accrued and recorded in the fiscal year in which the costs are actually incurred. Effect or Potential Effect: Failure to accrue costs in accordance with GAAP may result in expenditures being materially misstated on the schedule of expenditures of federal awards that could lead to inaccurate reporting to the federal agencies. Questioned Costs: Known Questioned Costs: $5,095 Likely Questioned Costs: $31,125 Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Known questioned costs are $5,095 out of the total non-payroll related costs during the year ended June 30, 2025, which were $443,033. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization implement policies and procedures to accrue for federal expenditures in the period the costs were incurred to ensure costs are being recorded in accordance with GAAP and the schedule of expenditures of federal awards is representative of all federal expenditures incurred in the reporting year. Views of Responsible Officials: Management agrees with the finding. Management is formalizing and enhancing policies and procedures over cutoff and accruals.

Federal Agency: Federal Government Federal Program Name: Research & Development and Economic Development Cluster Assistance Listing Number: Multiple Federal Award Identification Number and Year: Multiple Pass-Through Agency: Multiple Pass-Through Number: Multiple Award Period: July 1, 2024 to June 30, 2025 Type of Finding: - Material Weakness in Internal Control over Compliance Criteria or specific requirement: 2 CFR 200.403: Factors affecting allowability of costs; 2 CFR 200.413: Direct costs; 2 CFR 200.414: Indirect costs, OSU Policy 4-0135. Per Uniform Guidance 2 CFR 200.303, nonfederal entities receiving federal awards are required to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements. Condition: Oklahoma State University’s (OSU) policies were not consistently followed related to Professional Engineering Service (PES) rates charged by Oklahoma Aerospace Institute for Research and Education (OAIRE), a department within OSU. Questioned costs: Up to $2,853,832 of which approximately $935,974 occurred in FY2025. Of this $2,853,832, $1,333,596 was related to cost-reimbursable agreements, $1,159,037 to time and materials agreements, $221,613 to fixed price agreements, and $139,586 to undefined agreements. Context: OAIRE developed (PES) rates, which are the types of hourly rates typically used by contractors in time-and-materials type federal agreements. In some instances, OAIRE charged these fixed hourly rates for PES work in cost-reimbursable federal agreements, which resulted in OAIRE charging more than its actual costs incurred for such PES work. In addition, the PES rates were not consistent with OSU’s facilities and administration (F&A) rate agreement in that they included costs typically charged as indirect in its direct cost labor rates without justification and defining special circumstances when bidding contract rates. Certain labor rates were also calculated based on an understated number of available hours, which resulted in an overstated PES rate. Cause: Professional services rates were developed without documented review or attestation by subject matter experts in research administration or sponsored programs. Effect: Failure to adhere to costing principles may result in questioned costs and overbilling to sponsors. Repeat Finding: No Recommendation: We recommend that OSU should notify the applicable sponsors and federal agencies regarding the calculated questioned costs and make any necessary repayments or adjustments. Further, OSU should develop and document a process to ensure the PES rates are developed and billed in accordance with OSU Policy, applicable federal regulations, and the requirements of OSU’s Federal Agreements. Views of responsible officials: Management agrees with the finding and has developed a plan to correct the finding.

Improper Calculation of Modified Total Direct Cost (MTDC) Base for Indirect Cost Allocation Federal Programs Workforce Innovation and Opportunity Act Cluster ALN 17.258, 17.259, and 17.278 Federal Agency U.S. Department of Labor (DOL) Compliance Requirement Indirect Cost Finding Type Significant deficiency in Internal Control over Compliance Criteria The Department’s indirect cost calculations were required to comply with the applicable provisions of the Uniform Guidance and the Department’s negotiated indirect cost rate agreement (“NICRA”). Specifically: 2 CFR §200.68 defines Modified Total Direct Cost (“MTDC”) as including “all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward,” and expressly excludes “the portion of each subaward in excess of $25,000.” 2 CFR §200.403 provides that costs charged to federal awards must be necessary, reasonable, allocable to the federal award, and must conform to any limitations or exclusions set forth in the Uniform Guidance or the federal award. 2 CFR §200.414 establishes the federal framework for indirect (F&A) costs and requires the use of the negotiated indirect cost rate methodology approved by the cognizant agency. The Department’s NICRA further established the approved indirect cost base as MTDC. Accordingly, when calculating indirect costs, the Department was required to apply its negotiated indirect cost rate to an MTDC base that excluded the portion of each subaward or subcontract in excess of $25,000. Condition The Department recorded indirect cost transactions using an incorrect Modified Total Direct Cost (MTDC) base for the year ended June 30, 2025. The approved indirect cost methodology establishes the base as total direct costs excluding subawards and subcontracts in excess of $25,000. However, the Department did not apply the $25,000 limitation when calculating the MTDC base and included the full amount of certain subgrants and subcontracts in the base used to allocate indirect costs. As a result, the MTDC base used by the Department to calculate indirect costs was overstated, which affected the allocation of indirect costs charged to the programs. Cause The deficiency occurred because the Department did not implement adequate review controls over the calculation and application of the Modified Total Direct Cost (MTDC) base used to allocate indirect costs. Specifically, the Department did not ensure that the MTDC base excluded the portion of subawards and subcontracts in excess of $25,000, as required by the Negotiated Indirect Cost Rate Agreement (NICRA) and Uniform Guidance. As a result, indirect costs were calculated using an incorrect cost base. Effect As a result of applying an incorrect Modified Total Direct Cost (MTDC) base, the Department overstated the cost base used to calculate indirect costs. This condition may have resulted in indirect costs being improperly allocated to federal programs. Consequently, amounts charged to federal awards may not comply with the limitations established in the Uniform Guidance and the Department’s Negotiated Indirect Cost Rate Agreement (NICRA). If not corrected, this condition increases the risk of misallocation of costs among programs and potential disallowance of indirect costs by the federal awarding agency. Questioned Costs The error was detected before the issuance of the basic financial statements and therefore, the transaction was adjusted and recorded correctly. Therefore, there is no questioned cost. Identification as a Repeated Finding This is not a repeat finding from the immediate previous audit. Recommendation We recommend that the Department strengthen its internal controls over the calculation and application of indirect costs to ensure compliance with the requirements of the Negotiated Indirect Cost Rate Agreement (NICRA) and Uniform Guidance. Specifically, the Department should establish procedures to verify that the Modified Total Direct Cost (MTDC) base is calculated in accordance with federal regulations, including the exclusion of the portion of subawards and subcontracts in excess of $25,000. The Department should also implement a formal supervisory review of the MTDC base and indirect cost calculations prior to charging indirect costs to federal programs. In addition, the Department should provide guidance or training to personnel responsible for grant accounting to ensure consistent application of NICRA requirements and federal cost principles. Views of responsible officials and planned corrective actions Management of the Department agrees with this finding. Refer to the corrective action plan on pages 114-119.

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

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

Finding Number: 2025-008 State/Educational Agency(s): Arkansas Department of Education Pass-Through Entity: Not Applicable AL Number(s) and Program Title(s): 21.027 – COVID 19: Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Federal Awarding Agency: U.S. Department of the Treasury Federal Award Number(s): SLFRP3627 Federal Award Year(s): 2021 Compliance Requirement(s) Affected: Allowable Costs / Cost Principles Type of Finding: Noncompliance and Significant Deficiency Repeat Finding: Not applicable Criteria: In accordance with 2 CFR § 200.403(g), costs must be adequately documented to be allowable under federal awards. Condition and Context: ALA staff selected five payments to literacy coaching contractors who provide services under the Literacy Empowerment Accountability Readiness Networking and School Safety (LEARNS) Act to determine if sufficient, appropriate documentation was maintained to support that reimbursements were made for allowable literacy coaching expenses. ALA review revealed the following: • Of the 32 schools that received literacy coaching services from a contractor, 3 were randomly selected for testing. The Agency did not have adequate supporting documentation, including a description of daily activities performed by the contracted coach (e.g., a daily log), for two of the three schools. Questioned costs for this contractor totaled $109,557. • Of the 22 schools that received literacy coaching services from a different contractor, 2 were randomly selected for testing. The Agency did not have adequate supporting documentation, including a description of daily activities performed by the coach (e.g., a daily log), for either of the schools. Questioned costs for this contractor totaled $36,000. Statistically Valid Sample: Not a statistically valid sample Questioned Costs: $145,557 – SLFRP3627 Cause: Discussion with Arkansas Department of Education (ADE) management indicates they were unaware of uniform guidance documentation requirements for costs charged to federal programs. In addition, the Agency did not have controls in place to ensure a review of documentation supporting invoices was properly performed prior to issuing payments. Effect: Payments to literacy coaching contractors may have been issued without the contractor performing the contractual obligations. Recommendation: ALA staff recommend the Agency strengthen controls by providing training to Agency personnel approving disbursements to literacy coaching contractors, as well as to literacy coaching contractors, to ensure all costs are adequately documented. Views of Responsible Officials and Planned Corrective Action: During the audit, initial evidence was submitted, including monthly and daily logs from vendor coaches to verify coaching activities. Additional documentation, including daily logs obtained from vendors, is available for review. Adjustments and recommendations that have resulted from this audit will be incorporated into future processes and requirements for vendor coaches, to further strengthen our oversight and ensure ongoing adherence to required standards. There are procedures put into place to monitor vendor adherence to scheduled coaching days, with vendors consistently held to a high standard and expectation to fully complete contracted days by requiring vendors to do the following: • Submit monthly evidence of coaching activities that align with contracted days. The Division Received monthly summaries from vendors detailing coaching support, activities, and specific dates when coaching was provided. • Conduct scheduled site visits with state content leaders • Complete monthly walkthroughs with school leaders, with consistency of walkthrough data being outcomes-based and providing tangible evidence that coaching actions directly supported the improvement of instructional programs. Data is collected through Jot Form and displayed on an Air Table Dashboard. This has been maintained since 2023. • Hold ongoing meetings with district staff to review outcomes and address improvement areas, ensuring fulfillment of literacy coaching contracts under Agency requirements Transparency and compliance remain a priority. Required documentation will continue to be accessible to support any future reviews. Anticipated Completion Date: Continuous. Contact Person: Greg Rogers Chief Fiscal Officer DESE 4 Capitol Mall, Room 204-A Little Rock, AR 72201 (501) 682-4475 Greg.Rogers@ade.arkansas.gov

Finding Number: 2025-010 State/Educational Agency(s): Arkansas Department of Commerce – Arkansas Economic Development Commission Pass-Through Entity: Not applicable AL Number(s) and Program Title(s): 21.029 – Coronavirus Capital Project Funds Federal Awarding Agency: U.S. Department of the Treasury Federal Award Number(s): CPFFN0186 Federal Award Year(s): 2022 Compliance Requirement(s) Affected: Allowable Cost/Cost Principles Type of Finding: Material Noncompliance Repeat Finding: Not applicable Criteria: In accordance with 2 CFR § 200.403(g), allowable costs must be adequately documented. Arkansas State Broadband Office (ASBO) Administrative Procedures require reimbursement requests to be specific to the project and to be for incurred costs documented by attached source documentation, such as receipts, vouchers, bills, invoices, etc. All subaward expenditures must be allowable, necessary, and reasonable for the proper and efficient administration of the grant; be allocable to the grant; be authorized or not prohibited under state or local laws; and conform to the limits of exclusions in federal laws and regulations. Condition and Context: ALA selected five broadband infrastructure projects, totaling $39,789,080, for testing, from a total of 20 broadband infrastructure projects totaling $127,227,854. During testing, ALA reviewed 247 invoices totaling $20,486,786 and identified issues with 212 invoices totaling $6,666,409. The invoices with issues did not have appropriate documentation to identify the items purchased, to support proof of payment by the subrecipient for the items, and/or to determine the expense was related to the specific project. Also, ALA discovered duplicate invoices and invoices associated with other projects. Many invoices had a combination of these various issues. Statistically Valid Sample: Not a statistically valid sample Questioned Costs: $6,666,409 Cause: ASBO management did not properly review invoices submitted by subrecipients for appropriate supporting documentation. Effect: Failure to obtain proper supporting documentation for invoices may result in the reimbursement of unallowable expenses. Recommendation: ALA staff recommend the Agency follow established procedures for review of reimbursement requests. Invoices should have appropriate source documentation enabling the reviewer to determine the cost meets the criteria for allowability. Views of Responsible Officials and Planned Corrective Action: ASBO respectfully notes that Treasury’s SLFRF and CPF Supplementary Broadband Guidance provides that ISPs receiving fixed amount subawards for broadband infrastructure projects are not required to comply with the cost principles of 2 CFR Part 200, Subpart E (see U.S. Department of the Treasury, SLFRF and CPF Supplementary Broadband Guidance, available at: https://home.treasury.gov/system/files/136/SLFRF-and-CPF-Supplementary-Broadband-Guidance.pdf) Further, the guidance states, “...[m]ore specifically, subawards that provide for a maximum payment amount that is calculated based on a reasonable estimate of actual cost (see 2 CFR 200.201(b)(1)) will be considered fixed amount subawards even if the subaward agreement also provides that payments to the ISP subrecipient will be limited to actual costs after review of evidence of costs.” Arkansas’ CPF subawards meet these criteria. In short, relative to the applicability of cost principles under the Uniform Guidance, U.S. Treasury treats Arkansas’ CPF subawards as fixed amount subawards, exempting cost principles. Accordingly, ALA’s citation to §200.403(g) under Subpart E is not directly applicable to Arkansas’ CPF Program. Nevertheless, while ASBO maintains that the cost principles standard noted above does not apply to the awards in question, the office conducted a detailed review of the invoices identified. That review determined the following: • A substantial portion of the invoices were specific to approved CPF projects and included subrecipient certification statements affirming project use. • Certain invoices flagged as insufficiently detailed included annotations or supporting documentation sufficient to trace costs to the relevant project. • Invoices identified as potential duplicates were, in several cases, attributable to mixed inventory usage (allowed under GAAP) or subsequent credit/refund adjustments. • A limited subset of invoices (approximately $47,047.79) may require further reconciliation due to a known calculation variance. This funding may be returned, if deemed necessary. ASBO does not concur that the invoices totaling $6,666,409 represent unallowable expenditures. Rather, the observation reflects differences in documentation presentation, invoice formatting, and inventory accounting practices. The office maintains that the costs were associated with eligible broadband infrastructure activities under CPF. Further, in accordance with 2 CFR § 200.201(b)(1), the CPF broadband projects reviewed were monitored through routine oversight and reporting. To strengthen documentation consistency and audit traceability, ASBO is implementing a standardized reimbursement checklist requiring clearer identification of project attribution and supporting documentation prior to approval. Anticipated Completion Date: June 30, 2026 Contact Person: Glen Howie State Broadband Director Arkansas State Broadband Office 1 Commerce Way Little Rock, AR 72202 (501) 683-6000 broadband@arkansas.gov

Significant Deficiencies Federal Program: U.S. Department of Treasury Pass-Through from Maryland Department of Labor Major Program: Coronavirus State and Local Fiscal Recovery Funds (21.027) Finding 2025 - 002: Transactions Improperly Recorded - Allowable Costs Criteria: 2 CFR Part 200.403(e) requires that costs should be determined in accordance with generally accepted accounting principles for such charges to be allowable under federal awards. Generally accepted accounting principles require expenses to be recognized when incurred. Prepaid annual services should be recognized ratably over the contract period. 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 that were improperly expensed in their entirety in the fiscal year. Context: A review of 40 disbursements totaling $570,943 noted three transactions totaling $4,291 that were improperly expensed entirely in the current year. A portion of these transactions should have been accrued as prepaid expenses. Cause: The three invoices were not properly reviewed for the effective term of the contract. Management therefore did not consider the portion of the contract that extended into the next fiscal year to determine which amounts should have been deferred into the upcoming year. Effect: Costs could be deemed unallowable by the awarding agency if not recorded in the proper period in accordance with generally accepted accounting principles. Questioned Costs: $2,182 of known costs charged to federal awards outside of the proper period. Recommendation: We recommend that management adequately review service contracts paying particular attention to the service period. When the contract extends into the subsequent fiscal year an adjustment should be made to reclassify as a prepaid any portion of the contract that falls outside the current fiscal year end. View of Responsible Officials and Planned Corrective Action: We are in agreement with the finding and will extra care to review service invoices to ensure expenses are allocated between periods properly.

FINDING 2025-002 Subject: Child Nutrition Cluster - 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): FY2024, FY2025 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 the Allowable Costs/Cost Principles compliance requirement. Form 9 Expenditures The School Corporation submits a Form 9 to the Indiana Department of Education (IDOE) every six months. The expenditures reported on the Form 9 are used by the IDOE to calculate the School Corporation's indirect cost rate. The rate represents the percentage of indirect costs (overhead, administration) that can be recovered from federal grant funds, derived from the cost incurred in a previous fiscal year. As such, the amounts submitted to the IDOE in fiscal year 2022-2023 are to be used in the indirect costs computation for 2024-2025 and are tested to ensure they were recorded properly in the School Corporation's records as to the account or object codes. A test of 53 disbursement line items were sampled from the IDOE Form 9 submitted for 2022-2023 totaling $935,432 and 3 line items were not properly supported by the School Corporation's records. The School Corporation's ledger was filtered for the fund, account, and object code reported on the Form 9, and we determined 3 line item expense variances as follows: INDIANA STATE BOARD OF ACCOUNTS 17 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued)  There were 2 expense line items under reported on the Form 9 by a total of $1,604.  There was 1 expense line item over reported on the Form 9 by $8. The lack of internal controls and noncompliance over the Form 9 expenditures was isolated to 2024-2025. School Corporation Expenditures - Indirect Cost Rate In a test of 50 School Corporation expenditures, we were unable to determine if 9 expenditures totaling $29,948.32 were posted to the proper account and object codes within the accounting records to ensure the underlying data used by the IDOE to calculate the indirect cost rate was accurate. Records to support these 9 expenditures could not be located for audit. The lack of internal controls and noncompliance over the School Corporation expenditures were a systemic issue 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: . . . (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 . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance. The School Corporation did not ensure that supporting documentation was maintained and made available for audit, as related to the Allowable Costs/Cost Principles compliance requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation cannot ensure compliance with the Allowable Costs/Cost Principles compliance requirement. As a result, amounts reported to the oversight agency were not accurately reported. INDIANA STATE BOARD OF ACCOUNTS 18 MICHIGAN CITY AREA 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 data submitted on the Form 9's and underlying expenditures are properly documented and retained for audit. 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: Special Education Cluster (IDEA) - Level of Effort/Maintenance of Effort Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Number and Year (or Other Identifying Number): 24611-036-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, 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. Level of Effort - Maintenance of Effort Maintenance of Effort (MOE) 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. A test of 53 disbursement line items were sampled from the IDOE Form 9 submitted for fiscal year 2022-2023 totaling $935,432, and 3 line items were not properly supported by the School Corporation's records. The School Corporation's ledger was filtered for the fund, account, and object code reported on the Form 9, and we determined the 3 line item expense variances as follows:  There were 2 expense line items under reported on the Form 9 by a total of $1,604.  There was 1 expense line item over reported on the Form 9 by $8. INDIANA STATE BOARD OF ACCOUNTS 19 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The ineffective internal controls and noncompliance were isolated to the 2022-2023 Form 9 information used to calculate the MOE for the 2023-2024 grant award. 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 . . ." Cause The School Corporation's management had not developed a system of internal controls that would have ensured compliance. The School Corporation did not ensure that supporting documentation was 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 Matching, Level of Effort, Earmarking compliance requirement. As a result, amounts reported to the oversight agency were not accurately reported. 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 data submitted on the Form 9's and underlying expenditures are properly documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.