COUNTY OF ESSEXLocal Government

Finding 2025-011 – Child Nutrition Cluster – Inadequate Payroll Support and Documentation Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Compliance Requirement: Activities Allowed and Allowable Costs/Cost Principles Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria Pursuant to 2 CFR §200.430, compensation for personal services charged to Federal awards must be based on records that accurately reflect the work performed and must be supported by a system of internal controls that provides reasonable assurance that charges are accurate, allowable, and properly allocated. Additionally, 2 CFR §200.302 requires non-Federal entities to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should include procedures to ensure payroll costs charged to Federal awards are supported by approved timesheets, approved compensation rates, supervisory review, and adequate documentation retention practices. Condition During testing of payroll expenditures charged to the Child Nutrition Cluster, UHY identified instances where required payroll documentation was not available for review. Specifically, management was unable to provide approved timesheets for certain employees selected for testing and was unable to provide approved compensation documentation for other employees. In addition, UHY identified payroll instances where the approved hourly rate did not agree to the effective hourly rate calculated from payroll records, and management was unable to provide supporting documentation explaining the differences. Context The Child Nutrition Cluster reported approximately $788,550 in Federal expenditures during the fiscal year ended June 30, 2025. UHY tested payroll expenditures charged to the program as part of its procedures over Activities Allowed and Allowable Costs/Cost Principles. The exceptions identified were not isolated to a single payroll transaction and included multiple instances of missing support and unsupported payroll rate variances. Because required documentation was not maintained or available for review, UHY was unable to verify that all payroll costs tested were properly supported, approved, and allowable under the Child Nutrition Cluster. Cause Management did not maintain complete payroll documentation and did not have procedures in place to ensure approved timesheets, compensation authorizations, and payroll calculations were consistently retained and available for review. Existing review procedures were not sufficient to ensure that payroll charges to the Child Nutrition Cluster were adequately documented and supported in accordance with Federal requirements. Effect Because supporting documentation was not available, UHY was unable to verify that certain payroll costs charged to the Child Nutrition Cluster were properly supported, approved, and allowable. The lack of documentation increases the risk that payroll expenditures may be misstated, unauthorized, inaccurately calculated, or charged to Federal programs inappropriately. Furthermore, the inability to produce required payroll documentation impairs management's ability to demonstrate compliance with Uniform Guidance requirements and constitutes a material weakness in internal control over compliance because there is a reasonable possibility that material noncompliance could occur and not be prevented or detected on a timely basis. Identification as a Repeat Finding, if Applicable No. Questioned Costs None identified. UHY was unable to determine questioned costs for all items selected for testing because supporting documentation was not available. Recommendation Management should strengthen controls over payroll documentation and record retention to ensure that approved timesheets, compensation authorizations, and payroll support are maintained and readily available for audit and review. Management should also implement procedures requiring supervisory review of payroll calculations and verification that payroll charges agree to approved compensation rates prior to processing and charging costs to Federal awards. Documentation supporting payroll charges should be retained in accordance with established record retention policies and Uniform Guidance requirements. Responsible Official Superintendent of Schools and Finance Director Views of Responsible Official The County concurs with the recommendation. The personnel action process as described in Section II of this document was implemented to correct this finding for the proper pay rates. Internal controls should be enhanced to ensure that all payroll charges are supported by approved timesheets prior to processing. School Management should review procedures to be implemented to verify payroll calculations and compensation rates, and documentation retention practices will be strengthened to ensure all required support is maintained and readily available for audit purposes.

Finding 2025-012 – Child Nutrition Cluster - Inadequate Procurement Policies and Procedures Federal Agency: U.S. Department of Agriculture Federal Program: Child Nutrition Cluster Assistance Listing Numbers: 10.553, 10.555, 10.559 Compliance Requirement: Procurement, Suspension, and Debarment Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria Pursuant to 2 CFR §§ 200.318 through 200.326, non-Federal entities are required to establish and maintain documented procurement procedures that comply with Federal procurement standards applicable to Federal awards. Additionally, 2 CFR § 200.303 requires non-Federal entities to establish and maintain effective internal controls over Federal awards that provide reasonable assurance that the entity is managing Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of Federal awards. Written procurement policies should incorporate applicable Federal procurement methods, competition requirements, documentation standards, and suspension and debarment requirements to facilitate compliance with Uniform Guidance. Condition During testing of procurement and suspension and debarment requirements for the Child Nutrition Cluster, UHY noted that the County's procurement policy did not fully incorporate all requirements prescribed by Uniform Guidance, including certain Federal procurement standards and documentation requirements outlined in 2 CFR §§ 200.318 through 200.326. Although procurements tested during the audit were generally conducted in accordance with applicable requirements, the written procurement policy had not been updated to fully reflect all Federal procurement requirements applicable to federally funded procurements. Context During testing of procurement and suspension and debarment requirements for the Child Nutrition Cluster, UHY noted that the County's procurement policy did not fully incorporate all requirements prescribed by Uniform Guidance, including certain Federal procurement standards and documentation requirements outlined in 2 CFR §§ 200.318 through 200.326. Although procurements tested during the audit were generally conducted in accordance with applicable requirements, the written procurement policy had not been updated to fully reflect all Federal procurement requirements applicable to federally funded procurements. Cause Management had not updated the County's procurement policy to incorporate all applicable Federal procurement requirements prescribed by Uniform Guidance. Existing procedures relied upon management's knowledge and application of procurement requirements rather than a procurement policy that fully documented Federal requirements. Effect Because the County's procurement policy does not fully align with Uniform Guidance requirements, there is an increased risk that procurements charged to Federal awards may not be conducted or documented in accordance with applicable Federal requirements. The absence of a procurement policy that fully incorporates Federal procurement standards increases the likelihood that instances of noncompliance could occur and not be prevented or detected on a timely basis. Accordingly, this matter represents a significant deficiency in internal control over compliance. Identification as a Repeat Finding, if Applicable No. Questioned Costs None identified. Recommendation Management should revise and update the County's procurement policy to incorporate all applicable requirements prescribed by 2 CFR §§ 200.318 through 200.326, including Federal procurement methods, competition requirements, documentation standards, and suspension and debarment requirements. Management should also implement procedures to periodically review changes in Federal grant requirements and update policies and procedures accordingly. Responsible Official Superintendent of Schools and Finance Director Views of Responsible Official The County concurs with the recommendation and will review and revise its procurement policy to incorporate all applicable Federal procurement requirements under Uniform Guidance. Management will also implement procedures to periodically monitor changes to Federal grant requirements and update procurement policies and procedures as necessary to ensure continued compliance with Federal requirements.

Finding 2025-013 – Delay in Single Audit Reporting Package Submission Criteria Pursuant to 2 CFR 200.512(a)(1), the audit, the data collection form, and the reporting package must be submitted within 30 calendar days after the auditee receives the auditor's report(s) or nine months after the end of the audit period (whichever is earlier). The cognizant agency for audit or oversight agency for audit (in the absence of a cognizant agency for audit) may authorize an extension when the nine-month timeframe would place an undue burden on the auditee. If the due date falls on a Saturday, Sunday, or Federal holiday, the reporting package is due the next business day. Condition The reporting package has not yet been submitted, which is after the March 31, 2026 deadline. Context The County expended federal awards requiring a Single Audit and was therefore subject to the reporting requirements of 2 CFR 200.512(a)(1). The required reporting package, including the audit reports and data collection form, was due no later than March 31, 2026. At the time of our audit, the reporting package had not yet been submitted to the Federal Audit Clearinghouse. Cause Management was unable to timely perform the year-end financial reporting and close process due to turnover in the finance department. Effect Late submission can affect the County's risk profile with federal agencies and pass-through entities and may impact future funding decisions. Identification as a Repeat Finding, if Applicable No. Questioned Costs None Recommendation Management should implement procedures to ensure future Single Audit reporting packages are submitted by the earlier of 30 days after receipt of the auditor's reports or nine months after year-end. Responsible Official County Administrator

Reference Number: 2020-001 Prior Year Finding: N/A Federal Agency: U.S. Department of Agriculture (USDA) Federal Program: Child Nutrition Cluster (CNC) Program Pass-through Agency: Commonwealth of Virginia CFDA Number: 10.553/10.555 Award Number and Period: Not Available / 2019-2020 Compliance Requirement: Eligibility Type of Finding: Significant Deficiency / Non-Material Non-Compliance Criteria or specific requirement: Compliance ? Any child enrolled in a participating school or summer camp, or attending a SFSP meal service site, who meets the applicable program?s definition of ?child,? may receive meals under the applicable program. In the case of the NSLP and SBP, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price, set by the SFA, for their meals. Children attending SFSP meal service sites receive their meals at no charge (7 CFR sections 225.15(f), 245.1(a), and245.3(c); definition of ?subsidized lunch (paid lunch)? at 7 CFR section 210.2; and definitions of ?camp,? ?closed enrolled site,? ?open site,? and ?restricted open site? at 7 CFR section 225.2). A child?s eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies (LEAs), institutions, and sponsors determine eligibility by comparing the data reported by the child?s household to published income eligibility guidelines. In addition to publishing income eligibility information in the Federal Register, FNS makes it available on the FNS website at http://www.fns.usda.gov/school-meals/income-eligibility-guidelines. Children from households with incomes at or below 130 percent of the federal poverty level are eligible to receive meals or milk free under the School Nutrition Programs. Children from households with incomes above 130 percent but at or below 185 percent of the federal poverty level are eligible to receive reduced price meals. Persons from households with incomes exceeding 185 percent of the poverty level pay the full price (7 CFR sections 245.2, 245.3, and 245.6; section 9(b)(1) of the NSLA (42 USC 1758 (b)(1)); sections 3(a)(6) and 4(e) of the CNA (42 USC 1772(a)(6) and 1773(e))). Control ? Per 2 CFR section 200.303(a), a 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 comply with the 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). Condition: For one out of forty samples selected for eligibility testing, the beneficiary was improperly determined eligible to receive free meals based on the household size, annual income and the USDA published income eligibility guidelines. Questioned costs: Unknown Context: N/A Cause: The County did not adhere to its existing policies and procedures to properly determine and verify the student was eligible to receive the appropriate program benefits based on the household size, annual income and the USDA published income eligibility guidelines. Effect: Lack of adherence to internal controls regarding eligibility determination may result in material program benefits being provided to ineligible participants. Recommendation: We recommend the County adhere to its existing policies and procedures to properly determine and verify the student is eligible to receive the appropriate program benefits based on the household size, annual income and the USDA published income eligibility guidelines. Management?s Response: We received notification that one of the forty applications you reviewed for Essex County Public Schools (ECPS) was improperly determined eligible to receive free meals based on the household size, annual income and the USDA published income eligibility guidelines. In response, we would like to information you of our next steps. First, Essex County Public Schools became a part of the Community Eligibility Provision (CEP) during the 2019-2020 school year. We agreed to serve all students in our schools? breakfast and lunch, at no cost, for four successive years. Therefore, we are not processing any applications while participating in this program. Secondly, we do want to ensure policy and procedures are followed correctly and adhered to if and when we return to accepting applications. We will follow up with our employees to provide remediation and training, as it relates to understanding the process to determine if a student is eligible to receive free meals based on the required guidelines. Finally, once we return back to receiving applications, we will.