Finding 2025-002: Allowable Costs and Activities – Material Weakness in Internal Controls over Compliance Management Response: Management acknowledges the finding and agrees that improvements are necessary in the design and execution of internal controls related to allowable costs and activities for federal programs. The audit identified inconsistencies in how grant expenditures were reviewed, approved, and supported, as well as gaps in ensuring costs charged to grants were fully aligned with applicable requirements. This condition arose during a period of organizational transition, including changes in financial leadership, combined with increased volume and complexity of federal funding. These factors contributed to inconsistencies in control execution, documentation, and oversight. To address this finding, management is implementing the following corrective actions: • Enhancing policies and procedures governing allowable costs to ensure alignment with federal grant requirements • Strengthening pre- and post-expenditure review processes to verify that all costs charged to grants are allowable, properly supported, and accurately recorded • Implementing formal, documented reconciliation procedures for grant expenditures on a monthly basis • Establishing secondary review controls involving both the Controller and CFO to ensure compliance and accuracy • Providing targeted training to program and finance staff on allowable cost principles and grant compliance requirements • Improving documentation standards to ensure all approvals and supporting evidence are complete and audit-ready. Responsible party: Brenda Colon, CFO Expected Completion Date: October 2026.