Preparation of Schedule of Expenditures of Federal Awards (SEFA) Federal Agency Name: Department of Agriculture / Forest Service / Rural Business- Cooperative Service Assistance Listing Numbers: 10.720 (Infrastructure Investment and Jobs Act Community Wildfire Defense Grant) Finding Summary: Audit adjustments were made to reportable expenditure amounts on two of the four programs listed on the draft Schedule of Expenditures of Federal Awards (SEFA), and there was no formally documented review or approval process over the client prepared schedule. Views of Responsible Officials & Management Response: Management partially agrees with the finding. Management acknowledges the SEFA preparation requires improvement. However, management respectfully disagrees with the classification of this deficiency as a Material Weakness and maintains that it is more accurately characterized as a Significant Deficiency based on the following facts: 1. Accuracy of General Ledger & Cost Record Integrity: The underlying project expenditures were completely accurate, fully recorded in the Cooperative's accounting records, and immediately available for review and audit. No unrecorded, unsupported, or unallowable expenditures occurred, and no questioned costs were identified. 2. Active Internal Control & Proactive Consultation: Management actively sought to ensure accurate reporting by reaching out via email for technical advice regarding reportable fiscal year expenditures prior to SEFA finalization (see Exhibit A). Eide Bailly offers SEFA preparation as an allowable non-attest service without impairing independence; however, Management prepared the draft schedule internally in good-faith reliance on the technical direction provided. Seeking expert technical advice reflects an active internal control process focused on compliance, rather than a failure of internal controls. 3. Isolated Allocation & Presentation Error: The general ledger was completely accurate and all underlying grant expenditures were valid; the core financial data and grant funds were never at risk. The variance was strictly limited to the post accounting allocation required for SEFA presentation. Under the CWDG grant structure, project invoices contained co-mingled expenses covering both federal and non-federal lands. While 100% of these valid project costs were properly recorded in the accounting system, the initial SEFA draft did not apply the required percentage allocation to isolate the federal portion. This represents an isolated technical reporting calculation rather than a fundamental breakdown in the Cooperative’s internal controls over financial reporting or grant administration. Corrective Action Planned: Management has refined its SEFA preparation methodology to distinguish general ledger project accounting from reportable federal expenditures. Rather than utilizing total GL account balances, internal review controls now ensure SEFA reporting is strictly derived from verified, net federally reimbursable costs after applying all applicable grant allocation formulas. Additionally, management has documented the preparation and review process for the SEFA to ensure appropriate documentation and oversight. Responsible Person(s): Stacie Dellamano, Chief Financial Officer Anticipated Completion Date: Immediately and for December 31, 2026, SEFA presentation Exhibit A From: Stacie Dellamano <s.dellamano@flathead.coop> Sent: Friday, December 12, 2025 10:32 AM To: Stacey Nelson <smnelson@eidebailly.com>; Julie Urban J.Urban@flathead.coop Cc: Parker Van Zee <pvanzee@eidebailly.com> Subject: Re: Flathead Electric - Single Audit Discussion Stacey, I'm working on updating a SEFA. This will be the first year for a single audit on some of these grants, BUT there were quite a few expenditures in 2024. My question is on the SEFA, what number do I enter under the "expenditure" column? Do I enter 2025 related expenditures only or "Grant-To- Date" expenditures? Stacie Dellamano Chief Financial Officer Flathead Electric Cooperative s.dellamano@flathead.coop | Direct (406) 751-4463 | Cell (406) 871--8993 Toll Free (800) 735-8489 2510 US Highway 2 East, Kalispell, MT 59901 www.flatheadelectric.com Exhibit A Continued From: Stacey Nelson <smnelson@eidebailly.com> Sent: Friday, December 12, 2025 11:12 AM To: Stacie Dellamano <s.dellamano@flathead.coop>; Julie Urban <J.Urban@flathead.coop> Cc: Parker Van Zee <pvanzee@eidebailly.com> Subject: RE: Flathead Electric - Single Audit Discussion It should be the expenditures under your fiscal year only. Do not include expenditures from a prior year. Do you have any FEMA Disaster funds? As those have a little different process. If so, we can set up a call to discuss. If not applicable, you can ignore. Thanks! Stacey Nelson Assurance Partner Sioux Falls, SD T 605.367.6746