Management Response: Management acknowledges Finding 2025-003 and agrees that the control deficiency related to allocation of expenses within the WIOA Cluster constitutes a material weakness in internal control over compliance. This finding is distinct from Finding 2025-002 because it concerns the methodology, approval, and monitoring of cost allocations affecting WIOA programs, including restrictions applicable to the Youth program, rather than the allowability of costs based on timing or period of performance. Although the identified costs were corrected, the deficiency increased the risk that shared or allocable costs could be assigned to restricted programs in a manner inconsistent with federal requirements if not detected and prevented in a timely manner. Management determined that the root causes were insufficiently detailed written procedures for allocating shared costs within the WIOA Cluster, lack of explicit documentation addressing the prohibition on transfers to or from the Youth program under 20 CFR 683.130, and inconsistent supervisory review of allocation entries before posting. Existing practices addressed cost charging generally, but they did not provide enough direction on how shared expenditures benefiting multiple WIOA funding streams should be allocated, documented, reviewed, and restricted when Youth funds were involved. To address this material weakness, management is implementing four control improvements. First, it will formalize written cost allocation policies and procedures for the WIOA Cluster that define approved methodologies, documentation standards, proportional benefit requirements, and restrictions applicable to the Youth program. Second, it will require documented supervisory review and approval of all allocation entries affecting WIOA programs before posting to the general ledger. Third, it will provide targeted training to finance, grants, and program management personnel on WIOA-specific allocation requirements, with particular emphasis on Youth program restrictions. Fourth, it will implement periodic monitoring to verify that allocations follow the approved methodology and remain consistent with federal requirements. Under the revised process, each allocation affecting WIOA programs will be supported by contemporaneous documentation identifying the nature of the cost, the programs benefiting from the expenditure, the basis used to distribute the cost, and the calculation of the amounts charged to each program. When a cost benefits multiple programs and proportional benefit can be reasonably determined, the allocation will be based on that proportional benefit. When proportional benefit cannot be determined precisely, the allocation will be supported by a reasonable documented method that is applied consistently. Allocation support must also include a compliance checkpoint confirming that no allocation results in an impermissible transfer to or from the Youth program. No allocation entry affecting WIOA programs will be recorded without documented preparer support and written supervisory review evidencing compliance with internal policy and applicable regulations. Management will also establish recurring monitoring controls to test allocations recorded during the year. On at least a quarterly basis, the Finance Director or designee will review a sample of WIOA allocation entries to confirm that the approved methodology was followed, supporting documentation was retained, supervisory approval was completed, and Youth program restrictions were observed. Exceptions identified through this monitoring process will be documented, investigated, and corrected promptly, with any necessary retraining or policy revisions implemented to prevent recurrence. Results of the monitoring process will be communicated to senior management as part of ongoing oversight of federal awards compliance. Management believes these corrective actions directly address the auditors’ recommendations and strengthen controls over allocation of expenses within the WIOA Cluster without duplicating the corrective actions described in Finding 2025-002. Responsibility for implementation will rest primarily with the Finance Director, in coordination with grants and program leadership. Management expects the enhanced policy framework, approval requirements, training, and monitoring activities to reduce the risk of noncompliant allocations, improve documentation of shared cost methodologies, and support sustained compliance with 2 CFR 200.405 and 20 CFR 683.130. Corrective Action Plan Summary Corrective Action Responsible Staff/Role Target Completion Date Evidence of Completion Revise and adopt written WIOA cost allocation policies and procedures that define approved allocation methodologies, documentation requirements, proportional benefit standards, and explicit restrictions applicable to the Youth program. Finance Director; Grants Manager June 30, 2026 Approved policy and procedure document; distribution to applicable staff; retained version history. Implement a standardized allocation worksheet and review checklist for all shared costs charged to WIOA programs, including a compliance checkpoint for Youth program restrictions. Accounting Manager; Finance Director July 15, 2026 Standard allocation template; completed review checklist; sample completed allocation packages. Require documented supervisory review and approval of all allocation entries affecting WIOA programs before posting to the general ledger. Finance Director Effective immediately Signed allocation entries; reviewer signoff; journal entry support retained with monthly close documentation. Provide targeted training to finance, grants, and program personnel on 2 CFR 200.405, WIOA allocation principles, and the prohibition on transfers to or Finance Director; Compliance Officer August 31, 2026 Training materials; attendance logs; completed acknowledgements or assessments. from the Youth program under 20 CFR 683.130. Perform quarterly monitoring of a sample of WIOA allocation entries to verify adherence to the approved methodology, adequacy of support, supervisory approval, and compliance with Youth program restrictions. Finance Director; Compliance Officer Quarterly, beginning September 30, 2026 Quarterly monitoring reports; exception logs; documented corrective follow-up. Evaluate the effectiveness of the revised allocation controls and update policies, training, or monitoring procedures if deficiencies or exceptions are identified. Finance Director; Executive Leadership Semi-annually during fiscal year 2027 Management review memoranda; updated procedures; remediation tracking documentation.