Population Services InternationalNon-Profit

Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, §200.303 Internal Controls states that a non-federal entity must (a) 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. Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed. PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures: BDO tested 120 payroll and non-payroll expenditures. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period. o BDO identified one of the 80 payroll and non-payroll transactions tested totaling $860 was improperly recorded on the Schedule as it related to a prior period (calendar year 2023). o For indirect cost pool testing, one of the 40 transactions tested totaling $180 was recorded in error as it related to a prior period (2023). Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report. Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method. Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed. Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs. Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2023-001 in the 2023 schedule of findings and questioned costs. Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.

2023-002 Internal Control over Compliance and Compliance with Procurement Requirements See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320. In accordance with §200.320(c), Noncompetitive Procurement, there are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Condition: During the audit, we tested a total of 19 procurements noting the following matters: o For one procurement sample under award 72038620CA00002, management did not provide supporting documentation for the procurement transaction. BDO was only provided a copy of the authorized contract between the procured entity and country office. Therefore, BDO was unable to conclude that PSI complied with the required procurement regulations. o For one procurement sample under award 72061224CA00005, management renewed a lease agreement in Malawi without performing any procurement procedures to determine the renewal complied with the requirements of §200.318(a). o For one procurement sample under award 72061224CA00005, BDO noted that management utilized a single source or sole source justification for the selection rationale; however, that rationale did not conform to the requirements of limited competition per §200.320(c). Questioned Costs: There are no questioned costs. Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of this finding is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking procurements, for ensuring complete documentation of the history of the procurement, and for ensuring proper suspension and debarment validations were performed. Effect: Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.

Internal Control over Compliance and Compliance with Cash Management Requirements See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS). Condition: During our testing of compliance, we identified the following matters: During our testing of advance payments received for awards AID-654-A-17-00003 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs. For award AID-654-A-17-00003, PSI requested an advance payment in June 2024 of $1,291,991; however $351,749 remained available from this advance in July 2024 exceeding the cash needs. For award 72061220CA00003, PSI requested an advance payment in January 2024 of $463,615; however $234,678 remained available from the prior cash advance. In February 2024, PSI returned funding of $52,193 but an outstanding advance of $679,619 still remained on hand for this award that exceeded the cash needs. Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However PSI does not track the amount of interest earned on these advance payments. After year-end PSI prepared a schedule to estimate what the amount of interest earned would have been in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $3,151.81 of interest during the year ended December 31, 2024 on cash advances, PSI owed the United States Government $2,651.81 of interest. Questioned Costs: There are no questioned costs related to this finding. Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: For the advance payments, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures for any changes in spending levels to adequately adjust the spending projection of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year. Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements. Repeat Finding: This is a repeat finding and was reported as finding 2023-003 in the 2023 schedule of findings and questioned costs. Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.

Allegations of Fraud See Schedule of Findings and Questioned Costs for chart/table. Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor. Condition: During 2024, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI. • In Sierra Leone, records for mobile money batch payments to Community Health Workers were manipulated to divert payments to the wrong phone numbers. The total loss to award 7200AA18C00014 was $244 and to award 7200AA19CA00002 was $365. • In Cote d’Ivoire, a fraudulent invoicing system involving fraudulent service providers, suspicious use of billers and potential conflict of interests resulting in $8,221 of questioned costs to award 7206242CA00003. • In Angola, allegations regarding the improper receipt of per diem was substantiated. The total loss to award AID-654-A-17-00003 was $129. • In Mozambique, a whistleblower report revealed that a staff member had defrauded the Organization through the theft of cash payments made by staff remitting their federal sick leave salary refunds from the government. The total financial loss to award 72065622CA00009 was $174 and to award 7200AA20CA00007 was $102. • In Sierra Leone, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 7200AA19CA000032 was $106. • In Mali, an internal audit conducted on a subrecipient noted that there were differences in salaries charged to donor funds and actual salary received by the employees as well as fictitious competition and manipulation of expenses vouchers on behalf of the subrecipieint. The total financial loss to award 7200AA20CA00007 was $63,660. • In Zimbabwe, medical records were doctored and members of the public were bribed to misrepresent circumcision information. The total financial loss to award 72061318CA0009 was $41,307.50. PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency. Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency. Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2024. Cause: Individuals intentionally circumvented PSI’s established internal controls. Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions. Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2023-004 in the December 31, 2023 schedule of findings and questioned costs. Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.

Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71. Condition: We identified two instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $298 for award AID- 654-A-17-00003 and $99 for award 72069523CA00002. Questioned Costs: We identified $397 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award. Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. BDO also performed specific period of performance procedures on those awards that began or ended during 2024. A total of 25 samples were selected across the awards that began or ended during 2024. As a result of that testing two compliance matters were identiifed. Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award. Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program. Repeat Finding: This finding is a repeat finding and was reported as finding 2023-005 in the 2023 schedule of findings and questioned costs. Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.

Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, §200.303 Internal Controls states that a non-federal entity must (a) 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. Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed. PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures: For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period. o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table. o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table. o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022). Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report. Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method. Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed. Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs. Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs. Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.

2023-002 Internal Control over Compliance and Compliance with Procurement Requirements See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320. Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs. Questioned Costs: There are no questioned costs. Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI. Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing. Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Repeat Finding: This is not a repeat finding. Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.

Internal Control over Compliance and Compliance with Cash Management Requirements See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS). In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency. Condition: During our testing of compliance, we identified the following matters: During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs. For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures. For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures. Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest. During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred: • For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369. Questioned Costs: There are no questioned costs related to this finding. Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year. In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns. Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements. Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs. Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.

Allegations of Fraud See Schedule of Findings and Questioned Costs for chart/table. Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor. Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI. • In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834. • In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371. • In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001. • In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400. • In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524. • In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476. PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency. Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency. Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023. Cause: Individuals intentionally circumvented PSI’s established internal controls. Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions. Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs. Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.

Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71. Condition: We identified three instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $85 for award 72052020CA00002 and $2 for award AID-OAA-A-11-00012. Questioned Costs: For Award 72052020CA00002, we identified $85 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award. Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2023. A total of 25 expenses for AL# 98.001 were selected across the awards that began or ended during 2023, and the two compliance matters identified above resulted from those specific 25 items tested for AL# 98.001. Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award. Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program. Repeat Finding: This finding is a repeat finding and was reported as finding 2022-006 in the 2022 schedule of findings and questioned costs. Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.

2022-001 Internal Control over Compliance and Compliance with the Reporting Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.303(a), Internal Controls, 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. ?200.328, Monitoring and Reporting Program Performance, documents that the non-federal entity is responsible for oversight of the operations of the federal award supported activities. The non-federal entity must monitor its activities under federal awards to assure compliance with applicable federal requirements and performance expectations are being achieved. Monitoring by the non-federal entity must cover each program, function or activity. The non-federal entity must submit performance reports at the interval required by the federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the federal award or could significantly affect program outcomes. In accordance with the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the ?Transparency Act? that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The prime awardee is required to file a Transparency Act sub-award report by the end of the month following the month in which the prime recipient awards any sub-grant greater than or equal to $30,000. Condition: During BDO?s testing of the performance reporting requirements, BDO noted management continues to rely upon a manual process related to tracking and monitoring performance reporting. Programmatic Report Testing For one of six performance reports tested for major program AL# 93.067, a report was submitted after the due date without approval for late submission. Federal Funding Accountability and Transparency Act Reporting Testing We also performed testing over the Transparency Act reporting requirements outlined in the criteria section above. The OMB Compliance Supplement requires certain information be included in the finding when non-compliance exists. Of the 72 subaward original agreements and modifications totaling $10,993,519 (award amounts) for award 7200AA18C00014 that were tested, nine of the 72 reports with award amounts totaling $505,573 were not submitted timely. Of the four subaward original agreements and modifications totaling $731,250 (award amounts) for award NU2GGH002295 that were tested, one of the four reports with an award amount totaling $166,250 was not submitted timely. Questioned Costs: There are no questioned costs as the items described above are all related to late submission of reports. Context: This is a condition identified during BDO?s testing of performance reports and Transparency Act reports. Our sample for performance reporting was selected through a non-statistical sample. Our sample for Transparency Act reporting was selected based on a population of Transparency Act reports provided by management as well as through our subrecipient monitoring testing at the subrecipient level. We tested all Transparency Act report submissions in 2022 for the subrecipients selected for testing. Our sample for Transparency Act reporting was selected through non-statistical sampling. Cause: The quasi-manual performance reporting continues to challenge PSI given the number of awards under management and the number of reports required. PSI programmatic personnel have been unable to ensure the timely submission of reports because of this manual process. Effect: Failure to properly track all performance reporting requirements and Transparency Act reporting requirements impacts the Federal agency from obtaining performance information required to assess award performance on a macro level. Such non-compliance also increases the risk of loss of future awards if compliance with award terms are not met. Repeat Finding: This is a repeat finding from the prior year. This was reported as finding 2021-001 in the 2021 schedule of findings and questioned costs. Recommendation: In order to facilitate accurate and timely reporting and compliance with the terms and conditions of federal awards, BDO recommends management ensure all performance reporting requirements are maintained, updated, and available in a central location. BDO also recommends management implement a process by which approvals, submission considerations and supporting documentation for programmatic reports and Transparency Act reports is maintained in a centralized location. Views of Responsible Officials: Management agrees with the finding and recommendations set forth within and will work with project teams to review and confirm the accuracy of reporting deadlines. Refer to management?s corrective action plan for additional information.

2022-002 Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) 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. In accordance with ?200.475(e) Travel Costs states that airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations meet certain criteria. Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed. PSI?s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures: ?For AL# 98.NoAL, we tested 60 payroll samples and identified one sample for which management was unable to provide the suspension and debarment check for the employee selected for testing for award 7200AA18C00014. ?For AL# 98.NoAL, we tested 60 non-payroll samples and identified three samples, whereby, the underlying documentation did not support the expense recorded for 2022, representing $872 in questioned costs for award 7200AA18C00014. ?For AL# 93.067, we tested 60 non-payroll samples and identified the following errors. o For two samples for award NU2GGH002138, the expenses incurred deviated from the established contract terms resulting in $1,146 in questioned costs. o The PSI management team?s reconciliation process for Value Added Tax did not provide sufficient detail to identify differences in amounts refunded and amounts credited in awards in the general ledger. This internal control matter was related to one sample for award NU2GGH002138. ?For AL# 93.067 and AL# 98.NoAL, BDO tested 120 payroll and non-payroll expenditures for each major program. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid grant expenditures within the overall grant period. See Schedule of Findings and Questioned Costs for chart/table. Additionally, during our testing of the allowability of the expenses included within the pool of indirect costs, BDO identified one instance of 40 samples tested, where an employee took a business class flight, which was not the most basic least expensive unrestricted accommodations class offered by commercial airline. The cost of the airfare totaling $10,665 is unallowable. This overstatement of expenses affects all awards with period of performance end dates of 2022 or later included within the schedule of expenditures of federal awards because they are included in the pool of costs that are allocated across all Federal awards. BDO tested six donations of commodities as part of our allowable cost procedures in order to test the accuracy of the amounts reported on the schedule of expenditures of federal awards for AL# 93.067. For one of the six samples, PSI used an incorrect price per unit resulting in award NU2GGH001935 being undercharged in the amount of $2,955. Questioned Costs: The summation of the items above represent questioned costs totaling $872 for AL# 98.NoAL, $(1,848) for AL# 93.067, and $10,665 across all federal programs related to indirect costs. Context: This is a condition identified per review of PSI?s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method. Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred in accordance with accounting principles generally accepted in the United States. However, as identified above, the review and approval process did not operate as designed resulting in errors noted. Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major programs. Repeat Finding: This finding is a repeat finding from the two previous years. This was reported as finding 2021-002 in the 2021 schedule of findings and questioned costs and 2020-002 in the 2020 schedule of findings and questioned costs. Recommendation: BDO recommends that PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. PSI acknowledges the debarment check for the sample identified above was performed late; however, there were no issues noted in the results of the debarment and suspension check. Refer to management?s corrective action plan for additional information.

2022-003 Internal Control over Compliance with Subrecipient Monitoring Requirements See Schedule of Findings and Questioned Costs for chart/table Criteria or Specific Requirement: ?200.303 Internal Controls states that a non-federal entity must (a) 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. Condition: During the audit, we tested PSI?s monitoring of the only subrecipient within the major program AL# 93.067. We noted that PSI has documented policies and procedures in addition to a multitude of tools to comply with the subrecipient monitoring process. However, in the single sample tested, PSI obtained the statutory audit report from the subrecipient and reviewed the contents of that audit report. However, the subrecipient?s audit was not performed in accordance with 2 CFR 200, Subpart F. The Centers for Disease Control and Prevention (CDC) mandates a foreign-based subrecipient is required to conduct a single audit or program specific audit if expenditures are $300,000 or greater in a given fiscal year. The subrecipient?s statutory report did not comply with the CDC guidelines. PSI management provided email communication between PSI and the subrecipient inquiring about the need for an audit in accordance with 2 CFR 200, Subpart F; however, the email documentation did not document PSI management?s considerations and conclusions regarding the fact that the subrecipient had a statutory audit performed, instead of an audit in accordance with 2 CFR 200, Subpart F. Questioned Costs: There are no questioned costs. Context: This is a condition identified based on our review of the internal control documentation used to support the monitoring of the subrecipient selected for testing. No sampling was required as there was only one subrecipient for the major program AL# 93.067. Cause: PSI?s subrecipient monitoring policies and procedures contain requirements for PSI to obtain subrecipient audit reports and review those reports. However, based on the matter identified, the policies and procedures do not contain adequate guidance to address a subrecipient?s noncompliance with the audit requirements of 2 CFR 200, Subpart F. Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major federal program. Repeat Finding: This is not a repeat finding. Recommendation: BDO recommends that PSI implement specific documentation requirements related to PSI management?s considerations and conclusions regarding subrecipient noncompliance with a particular federal statue or condition of an award. While PSI?s procedures may address risk associated with subrecipient noncompliance, the maintenance of written documentation to evidence considerations and conclusions is imperative to PSI?s risk management process. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will work with program management teams to provide guidance and training related to non-U.S. subrecipient organization audit requirements. Refer to management?s corrective action plan for additional information.

2022-004 Internal Control over Compliance and Compliance with Cash Management Requirements See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, ?200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. Also in accordance with ?200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS). In accordance with the 2022 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be paid using non-federal entity funds before submitting a payment request to the federal awarding agency. Condition: During our testing of compliance, we identified the following matters: During our testing of advance payments received for major program AL# 93.067 - Award NU2GGH002005, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs. In October 2022, PSI requested an advance payment of $168,477 even though $170,259 remained available from a previous cash advance. Additionally, in November 2022, PSI requested an additional advance payment of $59,000 when an outstanding advance of $276,230 still remained. As of December 31, 2022, PSI had $348,287 in cash available from advance payments with no disbursements for direct expenditures. We noted that PSI provided a refund to the U.S. Department of Health and Human Services in February totaling $250,600 and in May totaling $56,103 related to the amount of cash available without actual disbursements as of December 31, 2022. The cash balance remaining as of the date of this report is being reconciled as part of PSI?s close out process. During our cash management testing, we identified instances where expenses were paid after the invoice to the federal government was submitted for reimbursement: ?For major program AL# 93.067, two instances of 10 samples tested, expenses totaling $1,092 were paid after the invoice to the federal government was submitted ? award NU2GGH002170. Questioned Costs: For major program AL# 93.067, PSI earned interest on the available cash for the funds advanced for Award NU2GGH002005. We calculated an estimate of interest earned and determined the likely questioned costs are $2,133 as of December 31, 2022. Interest continued to accrue on the available fund balance subsequent to year end and is estimated to be an additional $2,448 of likely questioned costs. There are no questioned costs related to the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement. Context: This is a condition based on testing of PSI?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: For the advance payments for Award NU2GGH002005, PSI?s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated. Furthermore, as of December 31, 2022, the PSI management team did not review open deferred revenue balances in sufficient detail to identify the need to reimburse the federal agency for overpayment of funds. In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with documented review and approval policies to ensure timely payment of local office expenditures incurred. Effect: Failure to perform cash management procedures in accordance with PSI?s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements. Repeat Finding: This finding is a repeat finding from 2020 and was reported as finding 2020-004 in the 2020 schedule of findings and questioned costs. Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management?s corrective action plan for additional information.

2022-005 Allegations of Fraud See Schedule of Findings and Questioned Costs for chart/table. Criteria: ?200.516(a) Audit findings requires known or suspected fraud be reported by the auditor. Condition: During 2022, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI. ?In the Republic of Malawi, a demand creation supervisor knowingly assigned walk-in clients to an external party through a contract that was wrongfully issued with the intention to defraud PSI Malawi. The total financial loss to award 72061220CA00003 was $112. ?In the Democratic Republic of the Congo, allegations of possible manipulation of procurement of COVID-19 personal protective equipment led to an expanded investigation of procurements and unsupported transactions related to task order #14 of the COVID-19 funding for award 7200AA18C00014. This investigation resulted in the disallowance of $216,227. ?In the Republic of Tanzania, a clinical advisor breached mentorship protocols and did not visit health facilities as required in the approved activities plan. The costs incurred related to the unapproved mentorship activities totaled $12,749 for award 7200AA18C00014. ?In the Republic of Zimbabwe, enhanced peer mobilizers overclaimed the number of clients who were successfully referred to the program. The attributable financial loss to award 72061318CA00009 is $1,314. The falsification of information from the enhanced peer mobilizers did not affect the accuracy of actual clients who received services because the actual client service delivery records are maintained by an independent service provider based on actual clients served. ?In the Republic of Sierra Leone, a third-party vendor used by PSI Sierra Leone to obtain motorcycle registration and licensing fees colluded with PSI Sierra Leone staff to inflate the charges levied by the relevant authority and administration fee payable to the vendor. The total financial loss to award 7200AA18C00014 was $1,335. ?In the Republic of Zimbabwe, two employees misappropriated project cash advances meant for training and beneficiary payments. One of those same employees improperly accounted for mileage and fuel use. Both of these matters resulted in a total financial loss to award 72061318CA00009 of $1,758. ?In Washington D.C. at PSI?s headquarters, a technical advisor fraudulently reported lodging costs on an expense report. The expense was not reimbursed to the technical advisor and no amounts were charged to award AID-OAA-I-17-00008. Therefore, there was no financial loss to the award. ?In the Republic of Sierra Leone, an administrative officer received a 5% kickback on certain procurement transactions. There were 46 total transactions totaling $116,005 for which kickbacks were received. The financial loss to award 7200AA18C00014 was determined by calculating 5% of the total transactions, totaling $5,800. ?In the Republic of Zimbabwe, an investigation revealed that certain program ambassadors working on award 72061318CA00009 claimed unusually high mobilization fees due to data falsification. The data falsification did not impact the reportable outputs because different controls were in place for the final output data. There was also no loss to the award because payments to the program ambassadors were withheld until the investigation was completed. ?In the Kingdom of Lesotho, certain employees falsified travel expense report records resulting in a financial loss to award NU2GGH002005 totaling $185. ?In the Republic Cameroon, payment records for reimbursement of certain expatriate education benefits were falsified. This falsification of records resulted in the overpayment of tuition of $38,607 related to award 7200AA18C00014. ?In the Republic of Niger, certain employees falsified expense reports related to per diem amounts for activities that did not occur. This resulted in a financial loss to award 7200AA18C00014 totaling $2,942. ?In the Republic of Zimbabwe, data falsification related to circumcisions in the Makoni district resulted in a financial loss to award 72061318CA00009 totaling $2,644. ?In the Kingdom of Lesotho, certain fixed assets including computers, chairs, tables, and gas cylinders were stolen. Upon filing of a police report, certain assets were recovered. The value of items that were unable to be recorded totaled $3,326 for award NU2GGH002005. ?In the Republic of Zimbabwe, an employee falsified documentation related to fuel usage totaling $30 for award 72061318CA00009. ?In the Kingdom of Cambodia, an employee falsified expense records for meeting refreshments which resulted in a loss to award 72044218CA00006 of $665. PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency. Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency. Context: These conditions were identified through PSI?s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2022. Cause: Individuals intentionally circumvented PSI?s established internal controls. Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions. Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior three years as findings 2021-005 in the December 31, 2021 schedule of findings and questioned costs, 2020-005 in the December 31, 2020 schedule of findings and questioned costs, and 2019-004 in the December 31, 2019 schedule of findings and questioned costs. Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management?s correction action plan for additional information.

2022-006 Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table Criteria or Specific Requirement: In accordance with ?200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by ?200.344(b). When used in connection with a non-Federal entity?s utilization of funds under a Federal award, ?obligations? means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in ?200.71. Condition: We identified 12 instances out of 162 sample items selected, whereby expenses were incurred after the end of the award period of performance. These expenses totaled $1,725 for Award NU2GGH002005. Questioned Costs: For Award NU2GGH002005, we identified $1,557 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award. Further analysis of the population of expenses incurred during the close-out period resulted in the identification of an additional $16,690 in known questioned costs that were outside of the period of performance and not permitted to be charged to the award based on the terms of the close-out budget. In addition, we identified $168 in known questioned costs as a result of our testing procedures for the period of performance of the original term of Award NU2GGH002005. Likely questioned costs associated with expenses incurred outside the period of performance of the original award totaled $83,585. Context: BDO?s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of those 120 expenses for AL# 93.067 resulted in one exception totaling $33 related to Award NU2GGH002005 (included in the questioned costs of $168 above), and testing of 120 expenses for AL# 98.NoAL resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2022. A total of 42 expenses for AL# 93.067 were selected across the awards that began or ended during 2022, and the compliance matters identified above resulted from those specific 42 items tested for AL# 93.067. No specific period of performance procedures were required for AL# 98.NoAL based on the individual grant period(s) of the awards. Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award. Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Department of Health and Human Services. Continued noncompliance with federal statutes, regulations, and the provisions of the grant agreements could ultimately result in additional disallowed costs for the major programs. Repeat Finding: This finding is a repeat finding from 2021 and was reported as finding 2021-006 in the 2021 schedule of findings and questioned costs. Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters. Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management?s corrective action plan for additional information.

2021-001 Internal Control over Compliance and Compliance with the Reporting Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table. Criteria: In accordance with ?200.303(a) Internal Controls, 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 award. Additionally, ?200.302 Financial Management, provides that a non-federal entity?s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions. ?200.329 Monitoring and reporting program performance, provides that the non-Federal entity is responsible for oversight of the operations of the Federal award supported activities. The non-Federal entity must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring by the non-Federal entity must cover each program, function or activity. In accordance with the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Public Law 110-252, hereafter referred as the ?Transparency Act? that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Condition: During our testing of the financial and programmatic reporting requirements, BDO noted that management?s internal monitoring and review controls did not allow for timely reporting to the Federal awarding agency or pass-through entity. The following reports were submitted after the required due date in accordance with the Federal award: See Schedule of Findings and Questioned Costs for chart/table. We also performed testing over the Transparency Act reporting requirements outlined in the criteria section above. The results of that testing are outlined in the chart below. See Schedule of Findings and Questioned Costs for chart/table. Questioned Costs: None. Context: Of the eight performance/special reports tested for assistance listing number (?AL#?) 12.350, two reports were delinquent. Of the 25 performance/special reports tested for AL# 98.001, five reports were delinquent; and for two of the 24 financial reports tested for AL# 98.001, the reports were delinquent. Of the 19 modifications to subaward agreements tested for Transparency Act requirements, one was not correctly reported in the FSRS. The specific details of the finding are included in the condition section above. Cause: The internal controls established for submission of reporting requirements did not fully operate as designed causing late submission and a missing Transparency Act report to the Federal awarding agency or pass-through entity. Effect: Failure to properly track all reporting requirements, including the due dates of those reports, could result in missed or late reporting. This could also lead to a reduction in funding due to noncompliance with the terms of the Federal award.

2021-002 Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) 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. Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed. PSI?s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures: ? For AL# 12.350 (Award number N00244-21-1-0001), BDO tested 60 payroll samples identifying four errors. For two identified errors, the allocation performed was based on budgeted information, not actual costs. One of the samples totaled $16 and the other sample was a credit to the Federal award of $1,288. For the other two samples, the underlying documentation did not support the expense recorded for 2021, representing $303 in questioned costs. ? For AL# 12.350 (Award number N00244-21-1-0001), we tested 60 non-payroll samples and identified one error. The underlying documentation did not support the expense recorded for 2021, representing $66 in questioned costs. ? For AL# 98.001, BDO tested 60 non-payroll expenditures and identified two errors in which the expenditures were reported within the incorrect period on an accrual basis though the expenditures were valid grant expenditures within the overall grant period. One expenditure for award 72068718CA00001 totaled $114 and the other expenditure totaled $64 for award 72061318CA00009. Additionally, during our testing of the allowability of the expenses included within the pool of indirect costs, BDO identified one instance of 40 samples tested, where the expense should have been recorded in a prior fiscal year, resulting in an overstatement of 2021 expenses totaling $1,808. This overstatement of expenses affects all awards with period of performance end dates of 2021 or later included within the schedule of expenditures of federal awards because they are included in the pool of costs that are allocated across all Federal awards. BDO tested eight donations of commodities as part of our allowable cost procedures in order to test the accuracy of the amounts reported on the schedule of expenditures of federal awards. For two of the eight samples, the donated commodities totaling $73,912 should have been recorded in the prior fiscal year. The schedule of expenditures of federal awards has been adjusted to remove these donated commodities for 2021. BDO was able to determine that the donation of commodities occurred within the period of performance for the award affected ? Award Number 72066318CA00001 related to AL# 98.001. This does not represent a questioned cost as the amount was a valid donation. Questioned Costs: The summation of the items above the represent questioned costs totaling $369. Context: This is a condition identified per review of PSI?s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method. Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred in accordance with accounting principles generally accepted in the United States. However, as identified above, the review and approval process did not operate as designed resulting in errors noted. Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major programs.

2021-003 Internal Control over Compliance and Compliance with Procurement, Suspension and Debarment See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, ?200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with ?200.319 and must be performed using the appropriate procurement method as outlined in ?200.320. In accordance with ?200.320(c), Noncompetitive Procurement, there are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. In accordance with ?200.213 and ?180.300, Suspension and Debarment, non-federal entities cannot enter into awards, subawards, or contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. Non-federal entities must either check for exclusions in the System for Award Management (SAM); collect a certification from the entity, or add a clause or condition to the covered transaction with the entity prior to entering into a covered transaction with a non-federal entity. In addition, in accordance with ?180.415(b), non-federal entities cannot renew or extend covered transactions (other than no-cost time extension) with any excluded person, or under which an excluded person is a principal, unless the non-federal entity obtains an exception under ?180.135. Condition: During our testing of compliance, we identified the following matters: ? PSI management has actively worked with its country offices to address the importance of tracking transactions that require procurement procedures to be completed, using a systematic approach. A purchase order tracking method exists; however, it is not a standardized process across all of PSI?s country offices. During our testing procedures, we identified a total of four sample selections spanning both major programs were included in management?s procurement population listing for fiscal year 2021; however, the procurement activities occurred in a previous year or were ultimately cancelled. As a result, we selected additional samples in order to test procurement actions that occurred in 2021. ? For one procurement sample of a total of nine items sampled for the Department of Defense HIV/AIDS Prevention Program (AL# 12.350), management did not provide supporting documentation for the procurement transaction. BDO was only provided a copy of the authorized contract between the consultant and country office. Therefore, BDO was unable to conclude that PSI complied with the required procurement regulations, including the suspension and debarment regulations. A consultant was hired to provide programmatic support services to the PSI Cote d?Ivoire office as a whole; therefore, this procurement item totaling $11,225 affected the following awards: AID-624-A-14-00005, AID-OAA-I-17-00008, 7200AA18C00014, AID-OAA-I-14-00059, N00244-21-1-0001, 7200AA19CA00041, 72062421CA00003. ? For one procurement sample of a total of 60 items sampled for the USAID Foreign Assistance for Programs Overseas Program (AL# 98.001), management was not able to provide a signed purchase order; additionally, BDO was not able to reconcile the unit price in the signed contract to the unit price in the purchase order provided as audit support. Therefore, BDO was unable to conclude whether PSI complied with the required procurement regulations. Additionally, BDO is not able to determine the amount of the potential error. This related to Award AID-624-A-14-00005 impacting the country of Cote d?Ivoire. ? For four procurement samples of a total of 60 items sampled for the USAID Foreign Assistance for Programs Overseas Program (AL# 98.001), BDO noted that management utilized a single source or sole source justification for the selection rationale; however, that rationale did not conform to the requirements of limited competition per ?200.320(c). This related to Award numbers: AID-654-A-17-00003, 7200AA18CA00052, AID-OAA-A-16-00084, and 7200AA19CA00002. ? For one procurement sample of a total of 60 items sampled for the USAID Foreign Assistance for Programs Overseas Program (AL# 98.001), the amount paid to a consultant was in excess of the contract ceiling, causing approximately $304 in unallowable costs for Award 72061220CA00003. In addition, the contract addendum was signed after the services were already performed. ? For one procurement sample of a total of 60 items sampled for the USAID Foreign Assistance for Programs Overseas Program (AL# 98.001), the amount management recorded as the total purchase order in the purchase order tracking system was less than the actual amount of the purchase order. This was for Award 72061318CA00009 and is considered to be an internal control matter as BDO concluded that the procurement was a valid procurement. Questioned Costs: Total known questioned costs are $11,529. There are no likely questioned costs as the amounts were not determinable. Context: This is a condition based on testing of PSI?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: PSI personnel did not adhere to PSI?s documented policies and procedures for tracking purchases, for ensuring complete documentation of the history of the procurement, and for ensuring proper suspension and debarment validations were performed. Effect: Failure to perform procurement procedures in accordance with PSI?s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Failure to timely verify that a vendor is not suspended or debarred could result in transactions involving unreasonable costs or result in unintentionally entering into a contract with an entity that is barred from performing work for the Federal government.

2021-004 Internal Control over Compliance with the Matching, Level of Effort, and Earmarking Compliance Requirement Information on the Major Federal Program: See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.303, Internal Controls, a non-federal entity must (a) 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) and (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. Condition: BDO tested management?s internal controls over the tracking and reporting of the amounts used to satisfy matching requirements by examining management?s internal tracking documentation as well as the reports submitted to the Federal awarding agency and pass-through entities indicating either current period matching amounts or cumulative matching amounts. When comparing the population of cost share totals provided by management for the year ended December 31, 2021 to the amounts reported to the Federal awarding agencies and pass-through entities for the same period, we identified discrepancies. Based on testing, BDO concluded that the amount of cost-share reported to the Federal awarding agencies and pass-through entities for 2021 was accurate, but the cost-share population provided for audit sampling was inaccurate. Additionally, we identified one specific instance in which the internal controls did not identify the inaccuracy of the amount of reported cost share remaining as of December 31, 2021 for award number 72052020CA00002. Questioned Costs: None. Context: There were ten awards that contained matching requirements for the year ended December 31, 2021. BDO tested management?s internal controls related to the review of the matching funds for each of the ten awards as part of our testing of completeness of awards with matching requirements and our testing of internal controls over compliance. The prevalence of the findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: PSI?s non-compliance with its documented policies and procedures for tracking and reporting of cost share information did not allow management to provide a fully accurate population for purposes of the audit. Effect: Failure to effectively review both the expenses used to achieve the matching requirements and the reporting of those amounts could result in inaccurate or unallowable costs used to meet the matching requirements of Federal awards and inaccurate reporting to the Federal awarding agency or pass-through entity. Ultimately, inaccurate tracking and reporting could result in management not meeting the matching requirements and therefore, not complying with the terms and conditions of the Federal award or pass-through award.

2021-005 Allegations of Fraud See Schedule of Findings and Questioned Costs for chart/table. Criteria: ?200.516(a) Audit findings(6) requires known or suspected fraud be reported by the auditor. Condition: During 2021, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI. ? In Angola, irregularities related to procurement vendor selection by the local procurement coordinator was reported. While no monetary losses were identified for awards AID-654-A-17-00003 and AID-OAA-I-15-00004, there were approximately $33,000 in potentially inflated procurement transactions. ? In Democratic Republic of the Congo, the financial officer and chief of party for a subrecipient colluded to falsify documents and inflate expenditures reported on travel expense reports. This resulted in fraudulent subrecipient expenditures totaling $55,673 for which the subrecipient reimbursed PSI subsequent to the year ended December 31, 2021 for award number 7200AA18C00014. ? In Cote d?Ivoire, five employees falsified patient records and data. There was no direct financial loss for award N00244-21-1-0001 related to the fraudulent patients as health centers and staff are not paid on a per client basis. ? In Benin, records and data were falsified to inflate sales and gain additional commissions resulting in a net loss of $1,677 for award AID-624-A-14-00005. ? In South Africa, there was an allegation of solicitation and data falsification by six service providers for award NU2GGH002138. The falsification lead to total disallowance of costs of $306,509; however, after the amounts owed by service providers are netted from the amounts due from them, the actual loss to PSI is approximately $48,000. ? In Zimbabwe, there were misappropriation of field advances which resulted in unpaid amounts to community mobilizers totaling $356 for award 72061318CA00009. ? In Zimbabwe, there were reports of bribery/solicitation for kickbacks from a supplier that did not result in any losses to award 72061318CA00009. ? In Cameroon, fictitious mobile payments of $11,653 were reported for award 7200AA18C00014 which were credited back to the award. ? In Cameroon, payments totaling $1,661 were made to fictitious supervisors and mobilizers for award 7200AA18C00014. ? In Niger, the review of logbooks of rental vehicles revealed that vehicle rental companies charged PSI Niger for the use of government-owned vehicles. The losses related to this matter totaled $2,040 for award 7200AA18C00014 and $172 for award AID-OAA-A-14-00037. Additionally, for award 7200AA18C00014, there are $14,268 in likely questioned costs resulting from insufficient information and reporting related to rental cars. ? In Sierra Leone, there was a conflict of interest related to a particular vendor on the preferred supplier list. The loss associated with this improper conflict of interest for award 7200AA18C00014 totaled $526. ? In Malawi, there were allegations of fictitious customers and sales; however, PSI was unable to obtain conclusive evidence as to whether the allegation resulted in fraud. There was no loss associated with this allegation for award. ? In Mozambique, an employee worked for PSI and another company on the same Federal program, thus collecting a salary from both. PSI?s losses totaled $550 for award AID-656-A-16-00005. PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full affect of the fraud have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency. Questioned Costs: There are no questioned costs as the questioned amounts have been or are in the process of being reimbursed to the respective Federal agency. Context: These conditions were identified through PSI?s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2021. Cause: Individuals intentionally circumvented PSI?s established internal controls. Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.

2021-006 Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement See Schedule of Findings and Questioned Costs for chart/table. Criteria or Specific Requirement: In accordance with ?200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by ?200.344(b). When used in connection with a non-Federal entity?s utilization of funds under a Federal award, ?obligations? means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in ?200.71. Condition: For AL# 12.350, we identified two instances out of five sample items selected specifically for grants that began or ended during 2021, whereby expenses were incurred after the end of the period of performance. These expenses totaled $75 and related to two awards (Awards N00244-19-1-0006 and N00244-17-1-0002). We also identified one instance of the 60 payroll samples selected as part of our testing of allowable costs and allowable activities, whereby expenses totaling $5 were not recorded with the correct period of performance (Award N00244-18-1-0008). For AL# 98.001, we identified two instances out of 16 sample items selected specifically for grants that began or ended during 2021, whereby expenses were incurred after the end of the period of performance. These expenses totaled $763 and related to two awards (Awards AID-624-A-14-00005 and AID-656-A-16-00005). Questioned Costs: Expenditures incurred after the end of the period of performance totaled $843 and are considered to be known questioned costs. Context: BDO?s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of those 120 expenses for AL# 12.350 resulted in one exception as outlined in the condition section above, and 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2021. A total of five expenses for AL# 12.350 and 16 expenses for AL# 98.001 were selected across the awards that began or ended during 2021, and the compliance matters identified above resulted from those specific five items tested for AL# 12.350 and 16 items testing for AL# 98.001. Samples were selected using a non-statistical approach. Cause: PSI management has procedures in place to review expenditures; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award. Effect: While the known questioned costs that resulted from the conditions identified above were minimal, the lack of adherence to the established internal control procedures around the period of performance of the award can lead to noncompliance with federal statutes, regulations, and the provisions of the grant agreements. This could ultimately result in disallowed costs for the major program.

2020-001 Internal Control over Compliance with Reporting (Preparation of the Schedule of Expenditures of Federal Awards)?See Schedule of Findings and Questioned Costs for chart/table?Criteria: CFR Section ?200.510(b) states in part: ?The auditee must also prepare a schedule of expenditures of federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section ?200.502 Basis for determining Federal awards expended.? The schedule must provide total Federal awards expended for each individual Federal program.In accordance with ?200.302 Financial Management, a non-federal entity?s financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:(1)Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.(2)Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance.(3)Records that identify adequately the source and application of funds for federally-funded activities.(4)Effective control over, and accountability for, all funds, property, and other assets.Condition: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed. BDO identified the following matters during our testing of the SEFA:?The donated commodities reported by PSI required balance adjustments between PSI?s federal programs within the U.S. AID sub-category. This resulted from a keying error identified during the audit procedures. Donated commodities, in total, were correctly presented on an aggregate basis for U.S. AID. The SEFA presentation has been corrected to present donated commodities by federal program, as required.?A reconciliation was required to address inconsistencies between the population tested for subrecipient monitoring as compared to amounts presented on the initial SEFA provided to BDO. BDO concluded, and management agreed, that the SEFA balance initially presented subrecipient and vendor expenditures on a combined basis. The subrecipient population provided for detailed compliance testing was accurately presented. The SEFA presentation has been corrected to present subrecipient expenditures separately, as required.?During our testing of management?s preparation of the SEFA, BDO identified 22 grants whose grant end date had not been updated on the underlying supporting schedules. In each case, the grant periods, as initially presented, ended in prior years. Management subsequently updated those contract end dates to coincide with the contract modifications which extended those dates into the current SEFA period.Questioned Costs: None.Context: The nature of these findings is detailed in the condition section above. Any samples selected as part of the overall SEFA review and testing of expenses and subrecipients were performed using a non-statistical method.Cause: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not fully operate as designed. PSI only prepares the SEFA once per year in conjunction with the annual audit. This annual process lends itself to less familiarity with the processes necessary to provide a complete SEFA reporting package due to the multiple steps required to address ?200.510(b).Effect: The SEFA provided to BDO required several clerical modifications to present all elements in accordance with Section ?200.510(b). Failure to present the SEFA correctly can result in incorrect major program selection and incorrect reporting to federal agencies. The findings identified were not of a magnitude to impact BDO?s selection of major programs.

2020-002 Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles?See Schedule of Findings and Questioned Costs for chart/table?Criteria or Specific Requirement: In accordance with ?200.302 Financial Management, a nonfederal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:(1)Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.(2)Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance.(3)Records that identify adequately the source and application of funds for federally-funded activities.(4)Effective control over, and accountability for, all funds, property, and other assets.Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) 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.Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed resulting in errors noted. PSI?s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording on the accrual basis of accounting. Our testing in various compliance areas identified instances where the expenses were not recorded in the correct financial reporting period in accordance with the accrual basis of accounting. We were able to conclude that the expenses fell within the period of performance of the underlying awards and valid award expenditures. The prevalence of the accrual basis matters are outlined below:?For major program CFDA 93.067, for four of 60 samples tested, expenditures were incurred in prior years yet reported in in fiscal year 2020. This resulted in an overstatement of expenses totaling $1,561:?See Schedule of Findings and Questioned Costs for chart/table? For major program 98.noCFDA, for two of 61 samples tested, expenditures were incurred in prior years yet reported in fiscal year 2020. This resulted in an overstatement of expenses totaling $339. ?See Schedule of Findings and Questioned Costs for chart/table??For major program 98.noCFDA, we identified one instance of 61 samples tested where an expense was misclassified in a different budgetary account. The expenditure was an allowable expenditure under the grant agreement 7200AA18C00014.?During our testing of the period of performance compliance requirement for CFDA 93.067, we identified one instance of 10 samples tested where an expense should have been recorded in a prior fiscal year, resulting in an overstatement of fiscal year 2020 expenses of $660 for award number NU2GGH002046. The expenditure was an allowable expenditure under the grant agreement.?During our testing of the allowability of the expenses included within the pool of indirect costs, we identified three instances of 60 samples tested, where expenses should have been recorded in a prior fiscal year, resulting in an overstatement of 2020 expenses totaling $68. This overstatement of expenses affects all awards with period of performance end dates of 2020 or later included within the schedule of expenditures of federal awards because they are included in the pool of costs that are allocated across all Federal awards.Questioned Costs: None.Context: This is a condition identified per review of PSI?s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process did not operate as designed resulting in errors noted.Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major programs.

2020-003 Internal Controls over Compliance and Compliance with Procurement, Suspension and Debarment?See Schedule of Findings and Questioned Costs for chart/table?Criteria or Specific Requirement: In accordance with ?200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, ?200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with ?200.319 and must be performed using the appropriate procurement method as outlined in ?200.320.In accordance with ?200.213 and ?180.300, Suspension and Debarment, non-federal entities cannot enter into awards, subawards, or contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. Non-federal entities must either check for exclusions in the System for Award Management (SAM); collect a certification from the entity, or add a clause or condition to the covered transaction withthe entity prior to entering into a covered transaction with a non-federal entity. In addition, in accordance with ?180.415(b), non-federal entities cannot renew or extend covered transactions (other than no-cost time extension) with any excluded person, or under which an excluded person is a principal, unless the non-federal entity obtains an exception under ?180.135.Condition: During our testing of compliance, we identified the following matters:?PSI management has actively worked with its country offices to address the importance of tracking transactions that require procurement procedures to be completed, using a systematic approach. A purchase order tracking method exists; however, it is not a standardized process across all of PSI?s country offices. As a result, during our population completeness testing, BDO identified 16 instances where management?s listing of reported fiscal year 2020 procurement transactions provided to the auditors included non-procurement federal expenditures. Those 16 transactions were removed from presentation within the schedule of expenditures of federal awards.?For one procurement sample of 25 sampled, management completed the debarment check five days after the purchase order was issued for award number NU2GGH002138.?For one procurement sample of 25 sampled, management was not able to provide a sole source memorandum or other notation concerning limitation of competition for the procurement for award number NU2GGH002005.?For one procurement transaction of 62 sampled, PSI was not able to provide certain evidence of the competitive bidding process associated with award 7200AA18C00014 due to document retention issues.?For one procurement sample of 62 sampled, the field office was unable to provide a copy of the procurement supporting documentation that occurred in 2019 due to document retention issues. This related to award number 7200AA18C00014. A signed master services agreement was provided as this car rental vendor has been a preferred vendor for some time.Questioned Costs: None.Context: This is a condition based on testing of PSI?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.Cause: PSI personnel did not adhere to PSI?s documented policies and procedures for tracking purchases, for ensuring complete documentation of the history of the procurement, and for ensuring proper suspension and debarment validations were performed.Effect: Failure to perform procurement procedures in accordance with PSI?s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Failure to timely verify that a vendor is not suspended or debarred could result in transactions involving unreasonable costs or result in unintentionally entering into a contract with an entity that is barred from performing work for the federal government.

2020-004 Cash Management?See Schedule of Findings and Questioned Costs for chart/table?Criteria or Specific Requirement:In accordance with ?200.305, Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means.Condition: During our cash management testing for both major programs, we identified instances where expenses were paid after the invoice to the federal government was submitted for reimbursement:?For major program 93.067, in one instance of 16 samples tested, the expense totaling $60 was paid after the invoice to the federal government was submitted. This occurred on award NU2GGH002005.?For major program 98.noCFDA,in one instance of 41 samples tested, the expense totaling $275 was paid after the invoice to the federal government was submitted. This occurred on award AID-OAA-I-17-00008.Questioned Costs: None.Context: This is a condition based on testing of PSI?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.Cause: PSI personnel at two of its foreign field offices did not adhere to PSI?s documented review and approval policies to ensure timely payment of field expenditures incurred.Effect: Failure to perform cash management procedures in accordance with PSI?s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.

2020-005 Allegations of Fraud?See Schedule of Findings and Questioned Costs for chart/table?Criteria: ?200.516 Audit findings (1)(6) requires known or suspected fraud be reported by the auditor.Condition: During 2020, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its? federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.?In Angola, irregularities related to procurement vendor selection by the subrecipient's procurement coordinator was reported. No monetary loss were identified for award AID-654-A-17-00003.?In Ethiopia, an employee attempted to defraud workers on a project by withholding payment to the workers; however, no losses to award AID-663-A-17-00003 were reported.?In Liberia, a terminated employee was charged with theft of fuel and other items from the warehouse totaling $5,705 for award AID-OAA-A-14-00037 which were credited back to the award.?In South Africa, there was an allegation of fraud/collusion in the procurement services by an employee; however, this did not result in any monetary loss for award NU2GGH002138.?In South Africa, there was an allegation of solicitation and data falsification; however, this did not result in any monetary loss for award NU2GGH002138.?In Ethiopia, an employee of a subrecipient inflated/falsified reported client figures that resulted in a monetary loss of $10,715 for award 72066318CA00001 which were credited back to the award.?In Zimbabwe, there were falsification of programmatic records and data, falsification of procurement documents, and reports of bribery/solicitation for kickback from a supplier. However, no monetary losses were reported for award 72061318CA00009.?In Angola, PSI identified $8,025 in fraudulent travel expenses incurred by an employee. These expenses for award AID-654-A-17-00003 were credited back to the award.?In Cameroon, a vendor was identified to have falsified procurement records but the investigation did not show any collusion between the vendor and employee. This matter did not result in a monetary loss to award 7200AA18C00014.?In Cameroon, fictitious mobile payments of $11,818 were reported for award 7200AA18C00014 that were credited back to the award.PSI has ongoing investigations involving U.S. federal funding pending in multiple countries for which the facts and circumstances and full affect of the fraud have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.Questioned Costs: There are no questioned costs as the amounts have been fully reimbursed to the respective federal agency.Context: These conditions were identified through PSI?s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2020.Cause: Individuals intentionally circumvented PSI?s established internal controls.Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.

2020-006: Key Personnel?See Schedule of Findings and Questioned Costs for chart/table?Criteria or Specific Requirement: PSI is required to comply with the terms of the grant award in relation to key personnel provisions.Condition: During BDO?s testing of key personnel requirements as required under the special tests and provisions compliance attribute of the OMB Compliance Supplement, one instance was identified where an individual listed as a key person in the role of contracts and budget controller in the award document worked on the award during the year but did not charge time to the program activities based upon examination of the employee?s timesheets.Questioned Costs: There are no questioned costs related to the item described above.Context: This is a condition identified per examination of five key personnel requirements for the program identified above. PSI did not comply with the requirements of the award documents for this key person.Cause: PSI?s internal monitoring system for tracking and reporting time charges for key personnel did not identify the noncompliance outlined above.Effect: PSI did not comply with the requirements of the award. Failure to comply with federal statues and the terms of grant agreements can result in noncompliance and reductions in Federal funding.

2020-007: Compliance with Cost Accounting Standards Disclosure Statement Reporting?See Schedule of Findings and Questioned Costs for chart/table?Criteria or Specific Requirement: 48 CFR 9903.202-3: ?Contractors and subcontractors are responsible for maintaining accurate Disclosure Statements and complying with disclosed practices.? Additionally, 48 CFR 9904.402-50 (b) states: ?The Disclosure Statement to be submitted by the contractor will require that he set forth his cost accounting practices with regard to the distinction between direct and indirect costs. In addition, for those types of cost which are sometimes accounted for as direct and sometimes accounted for as indirect, the contractor will set forth in his Disclosure Statement the specific criteria and circumstances for making such distinctions. In essence, the Disclosure Statement submitted by the contractor, by distinguishing between direct and indirect costs, and by describing the criteria and circumstances for allocating those items which are sometimes direct and sometimes indirect, will be determinative as to whether or not costs are incurred for the same purpose.?Condition: During BDO?s testing of Cost Accounting Standards (CAS) compliance in conjunction with its major program testing of 98.NoCFDA, BDO identified the following compliance matters:?PSI?s CAS disclosure statement contained three incomplete sections:o In section 0.4(B) of the disclosure statement, the effective date of the Disclosure Statement states, "5/16/". The effective date does not state the year in which the disclosure statement became effective.o Additionally, in section 3.2.3 of the Disclosure Statement, any costs with treatment code "E" Sometimes direct/sometimes indirect or treatment code "Y" Other(s) should include an explanation on the disclosure statement continuation sheet documenting the circumstances under which both direct and indirect allocations are made. PSI did not include an explanation on the Part III Continuation Sheet for the following types of costs which were classified with treatment codes ?E? or ?Y?:?(d) Contract Administration?(j) Departmental Supervision?(w) Employee Severance Pay.o In Section 4.3.0 of the disclosure statement, contractors are required to provide information on their service centers and expense pools, other than the ?general and administrative? pool or ?overhead? pools. PSI only disclosed its fringe pool in that section. PSI maintains numerous international branch offices and network members. The majority of the branch offices or network members have direct cost service centers which allocate a variety of in-country costs to projects performed in those countries. PSI did not disclose any of these service centers in their disclosure statement.?BDO identified an inconsistency between PSI's actual capitalization practices and its disclosed practices in the Disclosure Statement. Per PSI's Asset Management Policy, the capitalization threshold varies from $500-$5,000 depending upon the type of asset. Additionally, the service life criterion is generally listed as greater than one year. In the case of USAID assets, the service life is stated as greater than two years. Furthermore, a capital asset is defined in the policy as, "a single asset that has a useful life of more than one year, with a value greater than or equal to USD 5,000." However, in section 5.6.0 of the Disclosure Statement, the minimum dollar amount capitalized is $5,000 and the minimum service life years threshold is two years. Per the instructions in Section 5.6.0 of the Disclosure Statement, if more than one service life period or dollar applies to different categories of assets, the information should be enumerated on a continuation sheet.Questioned Costs: None.Context: This is a condition identified per review of PSI?s compliance with the allocability provisions of Cost Accounting Standards.Cause: PSI?s external reporting compliance function did not fully address CAS Disclosure Statement requirements outlined within 48 CFR 9903.202-3.Effect: As noted in the Condition section above, the CAS Disclosure Statement has incomplete information in the noted sections. Additionally, certain disclosed practices in the CAS Disclosure Statement are not consistent with actual practices.

2019-001 Internal Control over Compliance and Compliance with Reporting (Preparation of the Schedule of Expenditures of Federal Awards) ?See Schedule of Findings and Questioned Costs for chart/table? Criteria: CFR Section ?200.510(b) states in part: ?The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section ?200.502 Basis for determining Federal awards expended.? The schedule must provide total Federal awards expended for each individual Federal program. In accordance with ?200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition: During 2019, PSI experienced turnover in certain accounting and finance positions with the responsibility for reviewing the accuracy of the schedule of expenditures of federal awards (SEFA). As a result of these changes in staffing, PSI management was unable to fully execute on its documented internal control policies regarding SEFA preparation. The SEFA review and approval process did not detect and correct the following errors that were identified during the audit procedures performed: During our major program grant population completeness procedures, we identified five federal awards that were included in the incorrect program on the SEFA prepared by management. Upon examination of the underlying grant agreements, these awards are domiciled with CFDA 98.001,USAID Foreign Assistance for Programs Overseas. The SEFA, as presented in these consolidated financial statements has been adjusted to include the following awards in CFDA 98.001: (1) AID-663-A-16-0007; (2) AID-674-F-16-00001; (3) AID-656-A-16-00005; (4) AID-367-A-16-00005; and (5) AID-OAA-A15-00067. During our compliance testing, we tested a sample of donated commodities. One of the samples selected was a subsequent period adjustment to donated commodities that related to commodities received during a prior fiscal year. This adjustment should not have been reflected on the SEFA for the year ended December 31, 2019. An adjustment to reduce donated commodities for 2019 in the amount of $723,188 related to award AID-OAA-A-14-00037 was required to report donated commodities correctly in 2019. During our individually significant items testing, two tested transactions were adjustments made to the SEFA related to subrecipient expenditures for award N00244-09-1-0029. The initial SEFA reported a credit balance of $146,458, thus indicating a refund due to the Federal awarding agency. Upon further examination, this credit balance was adjusted and removed from the SEFA as it was an internal reclassification that should not have been included on the SEFA. Therefore, this award is not included on the final SEFA as presented. During the reconciliation of U.S. government revenue to federal expenditures reported on the SEFA, we noted that the SEFA originally prepared by management reported expenditures in excess of the total award obligation for certain awards. Expenditures in excess of the award obligation are not federal expenditures; as such expenditures are not reimbursed by the respective federal awarding agency. The schedule of expenditures of federal awards, as reported in these financial statements, was adjusted for these errors. PSI received final indirect cost rates or ?NICRA? rates during 2019 for their 2014, 2015, 2016, and 2017 fiscal years. PSI also received revised provisional indirect cost rates for their 2018 and 2019 fiscal years. As a result of these revised indirect rates, PSI management calculated revised indirect costs for all awards with expenditures dating back to 2014. On the original SEFA provided by management, there were 27 awards with expenditures totaling $11,499 related to adjustments to final indirect cost rates. For these awards, the full obligation had been spent by PSI in a prior fiscal year. Therefore, no federal funds remained on these awards for additional reimbursement as a result of the final indirect cost rates. These expenditures and awards were removed from the SEFA as presented in these consolidated financial statements. Additionally, there were 45 awards, as listed below by CFDA, whereby PSI incurred expenditures in excess of the obligated value of the award either due to final indirect cost rate adjustments or due to overspend on the award. These adjustments reduced total federal expenditures by $1,660,873, and are now correctly reflected in the final SEFA as presented. CFDA Number 98.001: AID-596-A-10-00001; 674-A-00-10-00081-00; 621-A-00-10-00020-00; AID-517-A-10-00002; AID-486-A-11-00004; AID-654-A-11-00002; AID-674-A-00-12-00001; AID-687-A-13-00001; AID-669-A-15-00001; AID-OAQA-A-14-00029; AID-OAA-A-14-00028; AID-OAA-A-14-00057; AID-674-A-14-0006; AID-OAA-A-12-00057; AID-OAA-A-13-00088; AID-386-A-12-00003; AID-OAA-A-15-00042; AID-OAA-A15-00067 CFDA Number 98.NoCFDA: AID-OAA-I-14-00039; AID-OAA-I-13-00056; AID-GHH-I-00-07-00062-00; AID-GPO-I-00-06-00007-00; AIDGHAG000300007; AID-OAA-I-17-00008; AID-674-H-17-00002 CFDA Number 12.350: N00244-15-1-0022; N00244-15-1-0072; N00244-16-1-0046; N00244-15-1-0073; N00244-17-1-0002; N00244-11-1-0048; N00244-12-1-0043; N00244-14-1-0061; N00244-14-1-0059; N00244-15-1-0020 CFDA Number 93.067: 52GGH001391-02; 5U2GGH000216-04; NU2GGH001935-01-00; NU2GGH002005-01-00; NU2GGH002138-01-00; 1U2GPS002951-01; 1U2GGH000248-01; 1U2GGH000243-01; U2GGH000268-01; NU2GGH002046-01-00. Questioned Costs: There are no questioned costs related to the items described above. Context: The conditions outlined above are based on our testing of PSI?s major programs and our overall testing of the accuracy of the SEFA, our testing of certain expenses that were considered to be individually significant, and our testing of a sample of the donated commodities included on PSI?s SEFA. The nature of these findings is detailed in the condition section above. Any samples selected as part of the overall SEFA review and testing of expenses and donated commodities were performed using a non-statistical method. Cause: The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed due to personnel changes in the accounting and finance department responsible for the SEFA. Effect: The SEFA provided for the audit was inaccurate for the reasons outlined in the condition section above. Failure to accurately report expenditures and programs on the SEFA result in audit adjustments.

2019-002 Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles ?See Schedule of Findings and Questioned Costs for chart/table? Criteria or Specific Requirement: In accordance with ?200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following: (1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in ?200.327 Financial Reporting and ?200.328 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally-funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Additionally, ?200.303 Internal Controls states that a non-federal entity must (a) 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 the guidance in ?Standards for Internal Control in the Federal Government? issued by the Comptroller General of the United States or the ?InternalControl Integrated Framework?, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO); (b) comply with federal statutes, regulations, and the terms and conditions of the federal awards; (c) evaluate and monitor the non-federal entity?s compliance with statutes, regulations, and the terms and conditions of federal awards. Additionally, ?200.4 Allocation is the process by which a non-federal entity assigns a cost or group of costs, to one or more cost objectives, in reasonable proportion to the benefit provided or other equitable relationship. The process may entail assigning a cost directly to a final cost objective or through one or more intermediate cost objectives. In accordance with ?200.423, Alcoholic beverages, costs for alcoholic beverages are unallowable. In accordance with ?200.438, Entertainment costs, costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the Federal awarding agency. In accordance with ?200.474(e), Travel costs, airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations would: (i) require circuitous routing; (ii) require travel during unreasonable hours; (iii) excessively prolong travel; (iv) result in additional costs that would offset the transportation savings; or (v) offer accommodations not reasonably adequate for the travelers? medial needs. In accordance with ?200.474(e), Travel costs, airfare costs in excess of the basic least expensive unrestricted accommodations class offered by commercial airlines are unallowable except when such accommodations would: (i) require circuitous routing; (ii) require travel during unreasonable hours; (iii) excessively prolong travel; (iv) result in additional costs that would offset the transportation savings; or (v) offer accommodations not reasonably adequate for the travelers? medial needs. In accordance with ?200.470(c), Taxes (including Value Added Tax), foreign taxes charged for the purchase of goods or services that a non-Federal entity is legally required to pay in country is an allowable expense under Federal awards. Foreign tax refunds or applicable credits under Federal awards refer to receipts, or reduction of expenditures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs. To the extent that such credits accrued or received by the non-Federal entity relate to allowable cost, these costs must be credited to the Federal awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the non-Federal entity may reduce the Federal share of costs by the amount of the foreign tax reimbursement, or where the Federal award has not expired, use the foreign government tax refund for approved activities under the Federal award with prior approval of the Federal awarding agency. Condition: PSI?s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording on the accrual basis of accounting. Our testing in various compliance areas identified instances where the expenses or adjustments were not recorded in the correct financial reporting period in accordance with the accrual basis of accounting. We were able to conclude that the expenses fell within the period of performance of the underlying awards. The prevalence of the accrual basis matters are outlined below. During our testing of the period of performance compliance requirement, we identified one instance of 14 samples tested for major program 98.001, USAID Foreign Assistance for Programs Overseas, where expenses should have been recorded in in a prior fiscal year, resulting in an overstatement of 2019 expenses totaling $2,442 for award number 674-A-00-10-00081-00. During our testing of the allowable cost compliance requirement for major programs 98.001, USAID Foreign Assistance for Programs Overseas and 12.350, Department of Defense HIV/AIDS Prevention Program, we identified instances where expenses were reported in the incorrect period. ?See Schedule of Findings and Questioned Costs for chart/table? During our testing of the allowability of the expenses included within the pool of indirect costs, we identified four instances of 60 samples tested, where expenses should have been recorded in a prior fiscal year, resulting in an overstatement of 2019 expenses totaling $18,761. This overstatement of expenses effects all awards with period of performance end dates of 2019 or later included within the schedule of expenditures of federal awards because they are included in the pool of costs that are allocated across all Federal programs. The following awards are affected, outlined by CFDA Number: CFDA Number 98.001: AID-OAA-A-14-00037; AID-596-A-10-00001; 674-A-00-10-00081-00; AID-654-A-17-00003; 72044-218-CA-00004; AID-176-C-16-00001-00; 72066318CA00001; AID-663-A-17-00003; AID-386-A-15-00007; 72068718CA00001; 7200AA18CA00052; AID-624-A-14-00005; AID-611-A-15-00001; 72061318CA00009; 687-A-00-08-00032-00; AID-663-A-16-0007; AID-656-A-16-00005; AID-367-A-16-00005; AID-OAA-A15-00067; AID-669-A-15-00001; AID-OAQA-A-14-00029; AID-OAA-A-14-00028; AID-OAA-A-14-00057; AID-674-A-14-0006; AID-OAA-A-13-00088; AID-OAA-A-15-00042; AID-388-A-16-00004; 72044218CA00006; AID-615-A-16-00005; 72052018CA00004; 72068718CA00003; AID-688-A-15-00002; AID-OAA-A-11-00012; AID-482-A-17-00002; AID-OAA-A-17-00014; AID-674-A-15-00001; 72069519CA00001; 7200AA19CA00041; 7200AA19CA00002 CFDA Number 98.NoCFDA: AID-OAA-I-14-00039; AID-OAA-I-13-00056; AID-OAA-I-17-00008; AID-442-A-00-08-00001-00; AIDGHAG000300007; AID-OAA-I-17-00008; AID-388-C-17-00001; AID-OAA-A-12-00058; 72048218C00003; AID-OAA-I-15-00004; AID 685-TO-16-00001; AID-OAA-I-14-00059; CFDA Number 93.067: 52GGH001391-02; NU2GGH001935-01-00; NU2GGH002005-01-00; NU2GGH002138-01-00; NU2GGH002046-01-00; NU2GGH001981-01; NU2GGH001981-03 CFDA Number 12.350: N00244-15-1-0022; N00244-15-1-0072; N00244-16-1-0046; N00244-15-1-0073; N00244-17-1-0002; N00244-16-1-0050; N00244-18-1-0008; N00244-19-1-0006; N00244-19-1-0004; N00244-15-1-0018 CFDA Number 19.703: SINLEC17GR0155 PSI?s approval procedures did not identify certain unallowable costs that were improperly included in the pool of PSI?s indirect cost rates. Of the 60 expense samples tested in the pool of the indirect cost rate, there were three instances of business class or first-class airfare in violation of ?200.474(e), Travel costs, totaling $11,159. In addition, there was one instance in which management?s review did not identify unallowable entertainment costs in violation of ?200.438, Entertainment costs, totaling $959. These errors effect all awards with period of performance end dates of 2019 or later included within the schedule of expenditures of federal awards because the expenses are included in the pool of costs that are allocated across all Federal programs. The award numbers affected are listed by CFDA Number directly above this paragraph. PSI?s global accounting policies require retention of adequate transaction documentation to support the accuracy of the amounts charged to the Federal award. In four instances, PSI was unable to provide adequate documentation to support the allowability of the cost and the activity for awards: (1) N00244-17-1-0002 totaling $189 for CFDA 12.350; (2) award N00244-19-1-0006 totaling $39 for CFDA 12.350; (3) award AID-OAA-A-14-00037 totaling $15 for CFDA 98.001; (4) award AID-OAA-A-14-00037 totaling $9 for CFDA 98.001. PSI?s review and approval process did not identify errors in the calculations of recorded personnel expenses related to staff cell phone usage, which resulted in likely questioned costs of $13 for award AID-OAA-A-14-00037 for CFDA 98.001. We identified one instance of 164 samples selected, during our testing of allowable costs for major program 98.001, USAID Foreign Assistance for Programs Overseas, in which value added tax totaling $5 was incorrectly billed to award 72068718CA00001. Questioned Costs: Known questioned costs totaled $964. Likely questioned costs associated with the expenses with improper or lack of supporting documentation for the costs totaled $265, assuming disallowance of the full amount of the samples selected. Likely questioned costs associated with business class and first-class airfare totaled $11,159. Context: This is a condition identified per review of PSI?s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method. Cause: PSI has documented expenditure policies and procedures, as well as document retention requirements. However, as identified above, the review and approval process did not operate as designed resulting in errors noted. Further, the retention of evidence to substantiate expenditures did not comply with internal document retention policies. Effect: The lack of adherence to the established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of grant agreements which could ultimately lead to disallowed costs for the major programs.

2019-003 Internal Controls over Compliance and Compliance with Procurement, Suspension and Debarment ?See Schedule of Findings and Questioned Costs for chart/table? Criteria or Specific Requirement: In accordance with ?200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided that the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, ?200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with ?200.319 and must be performed using the appropriate procurement method as outlined in ?200.320. In accordance with ?200.213 and ?180.300, Suspension and Debarment, non-federal entities cannot enter into awards, subawards, or contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities. Non-federal entities must either check for exclusions in the System for Award Management (SAM); collect a certification from the entity, or add a clause or condition to the covered transaction with the entity prior to entering into a covered transaction with a non-federal entity. In addition, in accordance with ?180.415(b), non-federal entities cannot renew or extend covered transactions (other than no-cost time extension) with any excluded person, or under which an excluded person is a principal, unless the non-federal entity obtains an exception under ?180.135. Condition: During our testing of compliance, we identified the following matters: PSI management has actively worked with its country offices to address the importance of tracking transactions that require procurement procedures to be completed, using a systematic approach. A purchase order tracking method exists; however, it is not a standardized process across all of PSI?s country offices. As a result, there were certain instances identified during our testing where management?s listing of 2019 procurement transactions provided to the auditors was not accurate. There was one instance, allocated between award numbers 7200AA18CA00052 and AID-OAA-A-14-00037, for CFDA 98.001 where a valid procurement transaction occurred in a prior year but was reported as a procurement in the current year. A second instance was identified where an item was reported as a procurement for an award that should not have been included in our testing population, but was actually a donation of goods, not a purchase. Lastly, in relation to our testing of non-payroll expenses, we selected a judgmental sample to determine whether management?s procedures for identifying procurement-related transactions was operating effectively. We identified three instances for awards (a) N00244-19-1-0006, (b) AID-OAA-A-14-00028, and (c) AID-OAA-A-14-00037 in which the selected transaction was omitted from the listing of procurement transactions for 2019. The expenses for the three items were valid program expenses. For one procurement transaction related to award N00244-15-1-0072, PSI management determined that a different type of item was necessary, after the conclusion of the bidding process. This revised requisition with a different per-unit price was not competitively priced in accordance with PSI?s policies and in accordance with ?200.320. Due to lack of competitive bidding, there may be associated likely questioned costs related to this item; however, the amount of likely questioned costs could not be determined. For one procurement transaction, management was unable to reconcile the goods received to the payment, as the goods received report indicated the receipt of fewer items for award AID-OAA-A-14-00037. This resulted in likely questioned costs of $1,029. PSI was not able to provide documentation of the competitive bidding process associated with award N00244-16-1-0050 for one procurement transaction in South Africa due to COVID-19 restrictions impacting access to the file location. All other procurement documentation was provided during the course of the audit. For one subrecipient for award AID-596-A-10-00001, we noted that management issued a modification to increase the funded value of the subaward; however, management did not verify that the subrecipient was not suspended or debarred at the time of the modification, though it had done so previously when awarding the subaward. Subsequent validations indicated that the subrecipient was not suspended or debarred. Questioned Costs: While no known questioned costs were identified, likely questioned costs of $1,029 were noted within the finding above. Context: This is a condition based on testing of PSI?s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method. Cause: PSI personnel did not adhere to PSI?s documented policies and procedures for tracking purchases, for ensuring complete documentation of the history of the procurement, and for ensuring proper suspension and debarment validations were performed. Effect: Failure to perform procurement procedures in accordance with PSI?s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed. Failure to verify that a vendor is not suspended or debarred could result in transactions involving unreasonable costs or result in unintentionally entering into a contract with an entity that is barred from performing work for the federal government.

2019-004 Allegations of Fraud ?See Schedule of Findings and Questioned Costs for chart/table? Criteria: ?200.516 Audit findings (1)(6) requires known or suspected fraud be reported by the auditor. Condition: During 2019, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its? federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI. ?See Schedule of Findings and Questioned Costs for chart/table? Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency. Questioned Costs: There are no questioned costs as the amounts have been fully reimbursed to the respective federal agency. Context: These conditions were identified through PSI?s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2019. Cause: Individuals intentionally circumvented PSI?s established internal controls. Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.

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