CENTRO LEGAL DE LA RAZA INCNon-Profit

Finding 2025-001: Subrecipient Monitoring Information on the Federal Programs: Department of Treasury, Assistance Listing Number 21.023 Criteria: Compliance requires a debarment search to be completed for subrecipients and to verify with the subrecipients if they are expected to obtain a financial audit. Condition: Centro Legal de la Raza, Inc. has indicated a debarment search was completed for each subrecipient awarded during the current period, however there was no retention of the search or a review of the search results. In addition, staff did not verify with subrecipients if they were expected to obtain a financial and/or compliance audit. Cause: Centro Legal de la Raza, Inc. staff were not aware that retention of the search or the review of its results was required or that as part of their compliance they should be verifying the subrecipient’s expectation for a financial and/or compliance audit. Context: Without retention, there is no support for the completion of the search or the review of its results. Failure to be aware and following through to obtain (if expected) financial or compliance audits does not allow the Organization to ensure their subawards comply with federal rules. Effect: Centro Legal de la Raza, Inc. may have missed completing a search on a subrecipient or missed reviewing a financial or compliance audit of a subrecipient to ensure compliance of the subaward. Questioned Costs: None noted. Identification as a Repeat Finding: n/a Recommendation: We recommend Centro Legal de la Raza, Inc. staff retain the debarment searches and they develop a procedure in which the searches are reviewed before accepting subrecipients. In addition, Centro Legal de la Raza, Inc. staff should inquire and document of subrecipients their expectation of a financial and/or compliance audit and follow through if one is expected to ensure subawards are complying with federal rules. Management Views and Corrective Action Plan: Management agrees with the finding and recommendation. All relevant staff have also undergone training to ensure compliance at all stages of the debarment process. Name and Title of Responsible Official: Brenda Orellana, Grants Director Planned Completion Date: March 31, 2026.

CORRECTIVE ACTION PLAN Summary Schedule of Current Year Audit Findings In accordance with Title 2 CFR 200 Uniform Administrative Requirements, Cost Principles and Audit Requirements under Section 200.511, Audit Findings follow-up, the following detail the summary of current year audit findings (and the related corrective action plan) is presented below: Finding 2023-001: Inadequate Financial Reporting Condition: The tracking of eligible (billable) costs within the accounting system was inadequate and required a significant amount of work to generate reconciliations of billable costs to contract billings. In additional certain grants were inconsistently reflected as restricted or conditional compared to similar grants. As part of the process to review year end, management identified errors which required adjustments, the most common of which was adjusting revenue between restricted and conditional revenue. Criteria: CFR 200.303, Internal Controls, states that the non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Additionally, management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Cause: The Organization did not have in place a formal, clear system which reconciled the billings to the funders and related eligible costs or releases related to certain restricted grants. Effect: Significant adjustments were proposed by management during the audit, principally between conditional and restricted revenue. Recommendation: We strongly recommend that all costs are coded directly to a contract within the accounting system and on a monthly or quarterly (at a minimum) basis there is a reconciliation of the billings between the funders and the revenue/costs related to the contracts to assure that all costs have been capture for billings and releases from restrictions. We also recommend detailed reviews/approvals of such reconciliations be performed. Questioned Costs: None identified. Context: While performing initial audit procedures, we requested management to perform a reconciliation of billings and related costs and review its recording of restricted and conditional grants. During management review, errors were identified by management and requested to be corrected. The condition noted is deemed to be systemic in nature. We did not identify any misstatements during our audit once the review was completed by management. Identification as a Repeat Finding: This is not a repeat finding. Management Views and Corrective Action Plan: Management agrees with the finding and recommendation. The Organization implemented a new accounting system effective July 1, 2023, in which substantially all costs are now coded to respective contracts which will provide much easily generatable support for billings. Management is working with the accounting team to implement a new process as part of the monthly closing procedures in which for cost reimbursement contacts there will be a review of revenue compared to costs to ascertain that the billing is accurate and complete. Name and Title of Responsible Official: Eos de Feminis, Interim CFO Planned Completion Date: Completed