Criteria: §200.516(a)(6) The auditor must report known or likely fraud affecting a Federal award as an audit finding in the schedule of findings and questioned costs. Condition: In 2025, in performing their core duties and position responsibilities aligned with role assignments, Pact employees detected, reported and resolved instances of financial misconduct occurring during the implementation of federally funded programs. These incidents were promptly reported by Pact to the U.S. Office of the Inspector General of the related federal granting agency. o In the Zambia office – USAID Contract No. 72061123C00003: o A former employee remained on payroll for approximately six months after resignation due to delayed termination processing. Improper timesheets were submitted and approved, enabled by shared system credentials and limited audit trail visibility. In fiscal year 2025, the matter resulted in a $2,716 loss to the contract, which was subsequently removed from project costs. Pact separately established a repayment plan with the former employee. o An employee misused project vehicles for personal purposes. The employee was terminated, and the matter resulted in a financial loss to the contract in fiscal year 2025 of approximately $78. The related costs were subsequently removed from project expenses. o An employee submitted an altered vendor receipt to inflate costs (ZMW 2,200, approximately $83). The employee was terminated. The related costs did not result in a financial loss to the contract. o An employee submitted a falsified receipt for services, resulting in an improper claim of approximately ZMW 1,020 (approximately $38). The employee was terminated, and the matter resulted in a financial loss to the contract in fiscal year 2025 of approximately $38. The related costs were subsequently removed from project expenses. o In the South Africa office – USAID Grant No. 7200AA19CA00006: o An employee misused a project vehicle, including unauthorized trips that were not recorded in official vehicle logbooks. The employee was terminated, and approximately $105 of related costs were recovered through payroll deductions. The matter did not result in a financial loss to the contract. For the instances that resulted in a fiscal year 2025 financial loss, the associated transactions were corrected and reversed from project costs, resulting in no net financial loss to the contracts. Pact currently has three ongoing investigations related to U.S. Federal funding, where the full facts, circumstances, and potential impacts of the misused of funds are still under review and have not yet been fully determined. Cause: Individuals attempted to bypass Pact’s established internal controls. Effect or potential effect: Unallowable expenses could be reimbursed from U.S. Government awards. Questioned Costs: None meeting the reporting threshold. Context: These conditions were uncovered through Pact’s internal processes and were reported to us while conducting the single audit for the year ended September 30, 2025. This matter represents a repeat finding, as similar conditions identified in the prior year, (Finding 2024-001) were present in the current year. Recommendation: We recommend that management continue to strengthen and enforce internal controls designed to prevent and detect misuse of funds, including enhancements to payroll processing controls (e.g., timely termination procedures and system access restrictions), as well as system functionality to ensure complete and auditable approval trails. In addition, management should reinforce supervisory review and segregation of duties across payroll and expense processes. Views of Responsible Officials: Pact takes compliance very seriously and appreciates the recommendation; we have prepared a corrective action plan accordingly. Pact is committed to compliance with applicable laws, regulations, and donor requirements and has a zero-tolerance policy for fraud. As an international development non-profit organization, Pact implements projects in high-risk operating environments — such as Zambia, and other foreign countries—where there is a high prevalence of potential fraud. To prevent, mitigate and minimize incidents of fraud in these environments while ensuring delivery of results, Pact employs a comprehensive four-pronged approach that includes: (1) strong internal controls, (2) robust compliance requirements, (3) ongoing employee training, and (4) the promotion of a culture rooted in ethics, integrity, and transparency. These measures are supported by standardized tools for risk assessments, monitoring checklists, and toolkits as well as anonymous reporting mechanisms. In their day to-day activities, Pact staff in country offices review potential procurements, transactions, vendor payments, and staff reimbursements for errors as well as for potential instances of fraud. In addition, project teams perform routine risk assessments and monitoring activities to detect irregularities. Due to these ingrained policies and practices, Pact’s employees, in performing their regular responsibilities, identified, reported, and swiftly resolved the above incidents, preventing any financial impact to the USG. As a result, there were no losses to the U.S. Government. The early identification, reporting, investigation, and resolution of these incidents demonstrate that Pact’s internal controls are well-designed and effectively implemented by staff worldwide. These controls provide reasonable assurance that Pact’s financial reporting is reliable, its operations are effective and efficient, and that the organization is in compliance with applicable laws and regulations.