Agate Housing and Services, Inc.

2025-003 Allowability of Rental Assistance Payments – Landlord Verifications U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Material Weakness in Internal Control over Compliance Criteria: 2 CFR 200.303 requires non-Federal entities to establish and maintain effective internal control over Federal awards to provide reasonable assurance that the entity is managing the awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Agate Housing and Services, Inc.’s internal control policies require landlord verifications to be completed prior to submitting a rental assistance payment, as evidenced by a completed and filed W- 9 form. Condition: Documentation to support that Agate Housing and Services, Inc.’s landlord verification process was completed prior to the disbursement of rental assistance payments was not available for nine of the forty sampled transactions. Cause: During 2025, Agate Housing and Services, Inc. digitized its inventory of W-9 forms and retained only the most recent W-9 for each vendor. Older versions of W-9 forms were purged, and any missing W-9 documentation was likely lost during this conversion process. Effect: The landlord verification process is a key internal control to ensure the legitimacy and existence of landlords and to help prevent fraud or mismanagement in the disbursement of Federal funds. As a result of missing documentation, there is insufficient evidence to demonstrate that landlord verifications were performed prior rental assistance payments being made. Context: A statistically valid sample of 40 rental assistance payment transactions totaling $52,138 was selected for testing from a population of 393 transactions totaling $561,523. The audit identified nine payments to landlords that were disbursed prior to documentation evidencing completion of landlord verification. Known Questioned Costs: None. In five of the nine instances, landlord verification documentation was obtained after-the-fact, supporting the legitimacy of the payments. In the remaining four instances, the landlords were well-established business entities. No concerns regarding allowability were identified. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend that Agate Housing and Services, Inc. strengthen internal controls to ensure landlord verifications are completed and required documentation, including W-9 forms, is obtained and retained for all vendors prior to the disbursement of rental assistance funds. Management should implement a procedure to verify that required documentation is present before payment approval. Views of Responsible Officials and Planned Corrective Actions: Agate Housing and Services, Inc. agrees with the finding and is in the process of strengthening its controls over the verification of landlords.

2025-004 Special Tests and Provisions - Rent Reasonableness U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Material Weakness in Internal Control over Compliance Criteria: 2 CFR 578.51(g) requires that rents charged under the Continuum of Care Program not exceed rents currently being charged by the same owner for comparable unassisted units. Internal controls should be in place to document compliance with this requirement. Condition: Internal controls are not adequately designed or implemented to ensure compliance with rent reasonableness requirements under the Continuum of Care Program, specifically that rents charged do not exceed amounts charged by the same owner for comparable unassisted units. Cause: Agate Housing and Services, Inc. does not currently require formal documentation to be maintained in tenant files demonstrating that rents charged were compared to rents for comparable unassisted units owned by the same landlord. Effect: The consideration and documentation of rent comparisons are critical to ensure rents charged are not in excess of those charged by the same owner for comparable unassisted units. Without documented support, there is an increased risk of noncompliance and potential fraud or mismanagement related to the disbursement of Federal funds. Context: During the audit, documentation was requested to demonstrate that rents charged by the same owner for comparable unassisted units were considered during the initial rent determination process. Based on discussions with management and staff, this comparison is performed through conversations with property owners; however, no documentation is maintained in tenant files to evidence that this compliance requirement was validated. Known Questioned Costs: None. In all cases reviewed, the total rent charged was consistent with rents for comparable units within the same geographic area. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend that Agate Housing and Services, Inc. implement internal controls requiring program staff to validate compliance with rent reasonableness requirements and maintain adequate documentation to support final rent determinations. Views of Responsible Officials and Planned Corrective Actions: Agate Housing and Services, Inc. agrees with the finding and is in the process of strengthening its controls over the verification of landlords.

2025-005 Allowability of Payroll Expenditures U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Material Weakness in Internal Control over Compliance, Noncompliance Other Matter Criteria: 2 CFR 200.430(g)(1)(i) states charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed, supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Refer to financial statement finding 2025-002 for further context. Condition: Payroll controls were not adequately designed or implemented to accurately account for payroll expenditures charged to the Continuum of Care Program for the first half of fiscal year 2025 (July 1, 2024 through December 31, 2024). In addition, supporting payroll documentation was missing or incomplete for certain individual payroll allocations charged to the program during this period. Refer to financial statement finding 2025-002 for further context. Cause: Refer to financial statement finding 2025-002. Effect: Refer to financial statement finding 2025-002. Context: A statistically valid sample of 41 payroll entries by employee totaling $67,977 was selected for testing from a population of more than 250 individual payroll entries totaling $208,015. The audit identified nine instances in which payroll controls were not followed. Refer to Financial Statement Finding 2025-002 for further context. Extrapolated likely questioned costs total $16,525, representing 2.9% of total payroll costs allocated to this program. Known Questioned Costs: Total known questioned costs of $4,940. Identification of Repeat Finding: 2024-001 - Lack of Documentation in Personnel Files Recommendation: Refer to financial statement finding 2025-002. Views of Responsible Officials and Planned Corrective Actions: Refer to financial statement finding 2025-002.

2025-006 Allowability of Rental Assistance Payments - Unallowable Program Expenditure U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Significant Deficiency in Internal Control over Compliance, Noncompliance Other Matter Criteria: 2 CFR 200.403(a) requires that costs charged to Federal awards be necessary, reasonable, and allocable to the performance of the Federal award. In addition, expenditures under the Continuum of Care Program must meet program allowability requirements. Cleaning costs are not explicitly identified as allowable rental assistance expenses under 24 CFR 578.51. Condition: One instance of unallowable program costs was noted during our testing of direct program expenses. Cause: Turnover within the accounting department during 2025 resulted in policies and procedures not being consistently followed. Effect: The questioned cost and related extrapolated costs may be disallowed. Context: A statistically valid sample of 40 rental assistance payment transactions totaling $52,138 was selected for testing from a population of 393 transactions totaling $561,523. The audit identified one transaction totaling $2,325 for cleaning costs paid to a landlord, which does not appear to be an allowable expenditure under the Continuum of Care Program. In addition, the cleaning costs exceeded one month’s rent. Total extrapolated questioned costs were $25,040. Known Questioned Costs: Total known questioned costs of $2,325. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend that Agate Housing and Services, Inc. strengthen internal controls to ensure all expenditures charged to the Continuum of Care Program are allowable and comply with applicable federal and program requirements. Views of Responsible Officials and Planned Corrective Actions: Agate Housing and Services, Inc. agrees with the finding and is in the process of strengthening its controls over its review of program expenditures prior to submitting requests for reimbursement.

2025-007 Special Tests and Provisions - Rent Reasonableness U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Continuum of Care Program—Assistance Listing No. 14.267 Hennepin County Contract HS00001366; Grant Period – Year ended June 30, 2025 Significant Deficiency in Internal Control over Compliance Criteria: 2 CFR 578.51(g) requires recipients and subrecipients to determine whether rent charged for units receiving rental assistance is reasonable in relation to rents charged for comparable unassisted units, taking into consideration factors such as location, size, type, quality, amenities, facilities, and management and maintenance. Internal controls should be in place to document this determination. Condition: Documentation supporting one rent reasonableness determination could not be located for one direct program expense tested. Cause: Turnover within the program department during 2025 resulted in policies and procedures not being consistently followed. Effect: The rent reasonableness verification process is a key internal control to ensure rental assistance payments are reasonable and compliant with program requirements, which helps reduce the risk of fraud or mismanagement in the disbursement of Federal funds. Context: A statistically valid sample of 40 rental assistance payment transactions totaling $52,138 was selected for testing from a population of 393 transactions totaling $561,523. The audit identified one transaction totaling $1,300 that could not be substantiated with documentation supporting a rent reasonableness determination. Known Questioned Costs: None. The rental assistance payment reviewed was consistent with payments made for comparable transactions, and no concerns regarding allowability were identified. Identification of Repeat Finding: Not a repeat finding. Recommendation: We recommend that Agate Housing and Services, Inc. strengthen internal controls to ensure rent reasonableness determinations are completed and documented for all program participants prior to the disbursement of rental assistance funds. Management should implement a procedure to verify that required documentation is present before payment approval. Views of Responsible Officials and Planned Corrective Actions: Agate Housing and Services, Inc. agrees with the finding and is in the process of strengthening its controls over maintaining documentation of all rent reasonableness verifications.

Finding 2024-001 – Lack of Documentation in Personnel Files Material Weakness Criteria – Management is responsible for establishing and maintaining internal controls over the payroll process, including maintaining proper documentation in personnel files. Uniform Guidance specifically require adequate documentation of pay rates, benefit elections, time allocations, proof of ongoing qualification, etc. to provide reasonable assurance that the amounts paid and deducted are accurate, allowable, and properly allocated. Condition – During our audit, we noted that pay rates for employees were not documented in a consistent, systematic manner. Additionally, we noted that there was missing evidence of recent training, program allocation documentation, and recent annual performance evaluations. Cause – The Organization’s policies and procedure around maintaining personnel file documentation were not followed by the Human Resources department. Context – The number of deviations noted below for personnel file testing are as follows: • Missing approved payrate letters for 7 of 18 employees selected. • 14 of the 18 employees selected did not have signed and dated performance evaluations. Effect – Effects could include: • Employees may be paid using an inappropriate rate or using a rate that is disputed by the employee or employer. • Salaries or wages may be overcharged or undercharged to grants if the proper program allocation is not documented. • Management cannot develop expectations or standards for the program if employee performance is not being reviewed timely. Recommendation – We recommend that the Organization implement policies and procedures around maintaining and reviewing personnel files to ensure consistent and appropriate documentation for approvals of all pay rates and performance evaluations in individual personnel files to ensure that all wage rate approvals are documented in employee personnel files and performance evaluations are performed and documented. Auditee's comments and response – Management has reviewed the current practice for approval of raises and are implementing a new payroll system that will have authorizations built into the software which will correct this issue. Responsible party for corrective action: Laura Straw, Director of Finance and Morcine Scott-Warren, Deputy Director of HR and DEI. Repeat Finding: Yes, 2023-004

2023-001 Audit Adjustments and Oversight of the Financial Reporting Process Material Weakness Criteria – Nonprofit organizations are required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). Management is responsible for establishing and maintaining internal controls, including monitoring, for the fair presentation in the consolidated financial statements including the notes to consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America. Condition – During the audit for the year ended June 30, 2023, 12 audit adjustments were made that, in the aggregate, were material to the financial statements. The entries mostly were to correct errors that occurred in the accounting system transition which occurred in early 2023. Management reviewed, approved, and accepted responsibility for the audit adjustments before the financial statements were issued. The need for us to record significant audit adjustments indicates a break down in the internal controls related to preparing the Organization’s financial statements. We consider this to be a material weakness because a misstatement of financial statements could occur and not be prevented or detected. Cause – Changes in the accounting systems along with several temporary employees and the change in HR director resulted in some unusual adjustments during the year that were not recorded correctly and not identified before the audit began. Effect – A material misstatement of the financial statements could occur and not be prevented or detected. Recommendation – We recommend management develop and implement a financial statement review and approval process to ensure that necessary adjustments and reconciliations are performed for the consolidated financial statements. This process should include reconciling significant statement of financial position line items to supporting schedules each month, such as bank reconciliations, receivable aging’s, depreciation schedules, etc. Auditee's comments and response – Management agrees with the finding. Management developed and implemented a new financial review process as of February 1, 2024. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: Yes, 2022-001

2023-002 Lack of Review on Payroll Transactions/Payroll Files Significant Deficiency Criteria – Management is responsible for establishing and maintaining internal controls over the payroll process. A key element of internal control for payroll is the review of biweekly payroll transactions and the periodic review of personnel files. Condition – Management discovered after the termination of a former Human Resources employee that there were significant errors in benefits. These were all corrected by year-end, but were not discovered and corrected until after her termination (i.e. Employee Benefit Plan errors, health insurance errors, life insurance errors, etc.). These errors crossed multiple years. Cause – The HR Director the Organization inherited in the merger with House of Charities in 2021 was not qualified to do her job, but this was not obvious to management until after she left the Organization. Effect – As a result of this condition, the Organization is exposed to an increased risk that misstatements (whether caused by error or fraud) may occur and not be prevented or detected by management on a timely basis. For example, incorrect costs may be paid due to not properly terminating benefits for former employees or not properly applying pay rate changes, or employees may not be receiving the benefits they are due because new employees were not added properly. Recommendation – We encourage the Organization’s management to review their processes related to payroll and benefits to ensure the individual responsible for reviewing this information is qualified to perform the function and that the reviews take place timely and are documented appropriately. Auditee's comments and response – Management agrees with the finding. Management is reviewing and assessing all of the payroll and human resources functions, and HR plans to hire additional staff. They expect to fully implement the new process by July 1, 2024. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No

2023-003 Lack of Support for Credit Card Charges for Former Employees Significant Deficiency Criteria – Management is responsible for establishing and maintaining internal controls over organizational credit cards in order to safeguard the assets of the Organization. A key element of internal control is the review and approval of supporting documentation submitted by employees for credit card transactions. Condition – The Organization designed a control which required documentation, review and approval for credit card charges. However, this control was not enforced and credit card charges were paid by the Organization without any support showing the costs related to the Organization. Cause – During the transition between Executive Directors, the Interim Executive Director waived this requirement to increase morale. Effect – The Organization may have reimbursed costs that were not for the benefit of the Organization. Recommendation – We recommend the Organization reinstate the policy and educate its employees regarding Organization credit card charges, and then make sure to enforce the policy. The Organization should consider reviewing and updating their policies and procedures. Auditee's comments and response – Management agrees with the finding. Management has re-instated the credit card receipt policy and has begun to enforce this policy. Management is also taking action to review current policies and procedures surrounding employee credit cards and reimbursements. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No

Finding 2023-004 – Lack of Documentation in Payroll Files Material Weakness Criteria – Management is responsible for establishing and maintaining internal controls over the payroll process, including maintaining proper documentation in personnel files. Uniform Guidance and the employee benefit plan audit specifically require adequate documentation of pay rates, benefit elections, time allocations, etc. to provide reasonable assurance that the amounts paid and deducted are accurate, allowable, and properly allocated. Condition – During our audit, we noted that pay rates for employees were not documented in a consistent, systematic manner. Additionally, we noted that there was missing evidence of recent training, program allocation documentation, and recent annual performance evaluations. Cause – The Organization’s policies and procedure around maintaining personnel file documentation were not followed by the Human Resources department. Context – The number of deviations noted below for personnel file testing are as follows: • Missing approved payrate letters for 4 of 7 employees selected. • 2 of 7 employee selected did not have recent training in their file. • 3 of the 7 employees did not have a program allocation documented in their file. • 4 of the 7 employees selected did not have recent performance evaluations. Effect – Effects could include: • Employees may be paid using an inappropriate rate or using a rate that is disputed by the employee or employer. • Salaries or wages may be overcharged or undercharged to grants if the proper program allocation is not documented. • Benefits due to employees may not be appropriately paid or deducted, violating applicable laws and/or regulations • Employees may not receive the proper training to execute program functions effectively. • Management cannot develop expectations or standards for the program if employee performance is not being reviewed timely. Recommendation – We recommend that the Organization implement policies and procedures around maintaining personnel files to ensure consistent and appropriate documentation for approvals of all pay rates, recent trainings, program allocations, and performance evaluations in individual personnel files to ensure that all wage rate approvals are documented in employee personnel files, recent training documentation is maintained, approved program allocations are documented, performance evaluations are performed and documented and proper benefits are paid or deducted. Auditee's comments and response – Management has reviewed the current practice for approval of raises and are implementing a new payroll system that will have authorizations built into the software which will correct this issue. Responsible party for corrective action: Laura Straw, Director of Finance and Morcine Scott-Warren, Deputy Director of HR and Dei. Repeat Finding: Yes, 2022-003

2023-005 Allocation of Costs Based on Budgeted Numbers Federal Program – Continuum of Care Assistance Listing # 14.267 Compliance & Significant Deficiency Category of Finding – Allowable Costs/Cost Principles Criteria – Uniform guidance cost principals require that amounts charged to federal grants be based on actual costs. These can be estimated allocations, but the estimates must be based on actual current information. The regulations specify that budget estimates may be used for interim accounting purposes, provided that they are later trued up to actuals. Condition – The Organization’s current method of charging some indirect costs to grants is based on budgeted allocations. Specifically, the allocation of workers compensation and facilities charges are based on budgeted allocations. Also, several individuals who work on multiple programs allocate their time to grants based on a budget allocation. The Organization did not true up these budgeted costs to actual during the year as required. The dollar value effect of this is difficult to determine. Cause – Due to the change in the accounting system, the true up of these costs was not performed as required in the financial policies. Effect – Some of the programs and related federal grants may have been overcharged. Recommendations – The Organization should review their policies for allocating these costs and apply allocations during the year that are based on actual costs rather than budgeted or implement a process to true up allocated costs periodically during the year. Based on current grant periods, we recommend at least quarterly reconciliations to avoid overcharging a grant which has closed. Auditee's comments and response – Management agrees with the finding and plans to true up budgeted allocations with actual allocations annually effective fiscal year 2024. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: Yes, 2022-002

2023-006 Reasonable Rents Documentation Federal Program – Continuum of Care Assistance Listing # 14.267 Compliance & Significant Deficiency Category of Finding – Special Tests and Provisions Criteria – Assistance Listing 14.267 requirements state that a non-federal entity using grant funds for rents must insure the rents be reasonable in relation to rents being charged in the area for comparable space (i.e. not exceeding the HUD-determined fair market rents). Good controls around this process would ensure that the process be documented and that a review be performed by someone other than the preparer. Condition – During our procedures for testing the reasonable rent rates, we noted files that did not have the proper compliance documentation for controls. Cause – This occurred because there was no procedure in place to document the source of the reasonable rent check, when the reasonable rent check was performed, or who reviewed the results. Context – We tested 4 of a population of 40 case files. None of the files had documentation of when review was performed of the rental rate check. Additional, 2 of the 4 case files tested did not have documentation around when the reasonable rent check was run. Effect – Participants of this program may receive rents in excess of the HUD-determined fair market rents or receive rent payments that are not comparable to units in the applicable area. As a result, the Organization may be overcharging the grant for ineligible costs. Recommendation – We recommend that the Organization adopt a policy to consistently document the source of the reasonable rent check, when the reasonable rent check was performed, and who reviewed the results of the rent check. Auditee's comments and response – Management has reviewed the current practice and has implemented a new form for documenting the determination and approvals in the case files. Responsible party for corrective action: Laura Straw, Finance Director and Elizabeth Machart, Director of Contracts, Compliance, & Special Initiatives Repeat Finding: No

2022-001 Audit Adjustments and Oversight of the Financial Reporting Process Material Weaknesses Criteria ? Nonprofit organizations are required to prepare financial statements in accordance with generally accepted accounting principles (GAAP). Management is responsible for establishing and maintaining internal controls, including monitoring, for the fair presentation in the consolidated financial statements including the notes to consolidated financial statements, in conformity with accounting principles generally accepted in the United States of America. Condition ? During the audit for the year ended June 30, 2022, 5 audit adjustments were made that, in the aggregate, were material to the financial statements. The entries were to correct the recording the House of Charities beginning of year balances. Net assets were adjusted by approximately $800,000. Management reviewed, approved, and accepted responsibility for the audit adjustments before the financial statements were issued. The need for us to record significant audit adjustments indicates a break down in the internal controls related to preparing the Agate?s financial statements which we consider a material weakness because a misstatement of financial statements could occur and not be prevented or detected. Cause ? Turnover in the Finance Director position and increased complexity of accounting due to merging with another nonprofit organization contributed to the misstatements. Effect ? A material misstatement of the financial statements could occur and not be prevented or detected. Recommendation ? We recommend management develop and implement a financial statement review and approval process to ensure that necessary adjustments and reconciliations are performed for the consolidated financial statements. Auditee's comments and response ? Agate hired a new Finance Director during the year who was learning the intricacies of the Organization through year-end. During this she discovered that the entries from the merger were missing but did not have all the necessary information to adjust the financials. By the end of the audit, she had a thorough understanding of the Organization and is aware of what adjustments need to be made going forward. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No

Finding 2022-002 ? Allocation of Costs Based on Estimates Federal Program ? Emergency Solutions Grants Program Assistance Listing # 14.231 Significant Deficiency Category of Finding ? Allowable Costs/Cost Principles Criteria ? Uniform guidance cost principals require that amounts charged to federal grants be based on actual costs. These can be estimated allocations, but the estimates must be based on actual current information. The regulations specify that budget estimates may be used for interim accounting purposes, provided that they are later trued up to actuals. Condition ? Agate?s current method of charging indirect costs, which consist of administrative, development, facility use and meal costs, to grants, is based on allocating budgeted costs. During 2022, these costs were not adjusted to match actual costs incurred. Agate did not true up these budgeted costs to actual during the year as required. The dollar value effect of this is difficult to determine. Cause ? Due to turnover in the finance department, the true up of these costs was not performed as requires in the financial policies. Also due to other turnover and program changes, the variances from budget to actual were more significant than they have been in the past. The meals costs allocations were new this year due to changes caused by the merger with House of Charities. Effect ? Some of the programs and related federal grants may have been overcharged. Recommendations ? Agate should review their policies for allocating these costs and apply allocations during the year that are based on actual costs rather than budgeted, or implement a process to true up allocated costs periodically during the year. Based on current grant periods, we recommend at least quarterly reconciliations to avoid overcharging a grant which has closed. Auditee's comments and response ? Agate is aware of the Uniform guidance regulations and will follow them in the future. The Director of Finance has implemented changes to allow for adjustments to actual periodically throughout the fiscal year and at year end to accurately account for the distribution of allocations based on actual costs. Additionally, a new accounting system that includes a module to allocate indirect costs was implemented in fiscal year 2023. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No

2022-003 Payroll Rates Approval Documentation Federal Program ? Emergency Solutions Grants Program Assistance Listing # 14.231 Significant Deficiency Category of Finding ? Allowable Costs/Cost Principles Criteria ? 2 CFR ? 200.430 requires that compensation for individual employees be reasonable for the services rendered, be consistently applied to both federal and non-federal activities, follows all of the Organizations written policies, and is adequately documented. Adequately documented as defined by the standard requires the charges must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition ? During our audit, we noted that pay rates for employees were not documented in a consistent, systematic manner. Context ? 7 of 11 employees selected did not have appropriately documented approved payrates. Cause ? This occurred because no procedure was in place in the personnel department to ensure that all wage rates get approvals and are documented in employee personnel files. Unique wage rate changes, such as promotions, or merit based rases for individual are documented in personnel files, but annual company wide raises are not documented in individual personnel files. Effect ? Employees may be paid using an inappropriate rate or using a rate that is disputed by the employee or employer. Recommendation ? We recommend that the Agate adopt a policy to consistently and appropriately document approvals of all pay rates in individual personnel files. Auditee's comments and response ? Management has reviewed the current practice for approval of raises and are implementing a new payroll system that will have authorizations built into the software which will correct this issue. Responsible party for corrective action: Laura Straw, Finance Director Repeat Finding: No

2021-001 Lack of timely reconciliation and review of HOC financial statements. Significant Deficiency Criteria - Management is responsible for establishing and maintaining internal controls in order to safeguard the assets of the Organization. A key element of internal control is the segregation of incompatible duties and regular review of financial statements by individuals other than the preparer. Condition - Management of the Organization has had difficulty obtaining and reviewing meaningful financial information and supporting reconciliations and other documents in a timely manner for the House of Charities books kept by a contract accountant. Cause - The Organization combined with House of Charities on January 1, 2021. House of Charities books were kept by a contract accountant who has continued this work as the merger progressed. The merger process has been more difficult than originally anticipated, due to turn-over of key staff and unexpected complexity. Management of the Organization regularly tried to obtain financial statements and supporting documentation for review and had difficulty obtaining meaningful information from the contract accountant. Recommendation - Management must work to either establish and enforce good timely processes with the existing contract accountant, or to exit the relationship with the contract account and bring the accounting in-house under the existing internal control processes which have historically been considered well designed and implemented. Auditee's comments and response ? The Organization acknowledges that they had some difficulty performing a meaningful review of the HOC financial statements due to some past difficulties obtaining information from the contract accountant. This has now been resolved and information is being exchanged freely and in a timely manner. Effective July 1, 2021 the accounting for HOC has been merged into the ongoing operations of the Organization. Responsible party for corrective action: Carol Hood, Director of Finance (retired) and Laura Straw, Director of Finance